Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the
fourth quarter and twelve months ended December 31, 2011.
Sales for the fourth quarter 2011 were $128.5 million, compared
with $100.7 million in the fourth quarter 2010. Net income for the
fourth quarter 2011 increased to $20.8 million, or $0.85 per fully
diluted share, on 24,345,961 shares, compared to a net income of
$13.2 million, or $0.53 per fully diluted share on 24,968,532
shares in the fourth quarter 2010. On a non-GAAP basis, net income
for the fourth quarter 2011 increased to $13.6 million, or $0.56
per fully diluted share, compared to a net income of $10.9 million,
or $0.44 per fully diluted share in the fourth quarter 2010.
Sales for the twelve months ended December 31, 2011 were $572.0
million, compared with $402.9 million for 2010. Net income for the
twelve months ended December 31, 2011 was $83.9 million, or $3.38
per fully diluted share, on 24,786,106 shares, compared to net
income of $29.3 million, or $1.15 per fully diluted share on
25,370,229 shares in the prior year period. On a non-GAAP basis,
net income for the twelve months ended December 31, 2011 was $78.1
million, or $3.15 per fully diluted share compared to net income of
$27.6 million, or $1.09 per fully diluted share.
Net income included special charges and special credits that
when combined had a positive impact by increasing diluted earnings
per share by approximately $0.29 for the fourth quarter of 2011.
The special charges totaled $8.7 million during the fourth quarter
of 2011, which included a pre-tax $0.9 million restructuring charge
for the closure of our facility in Billerica, Massachusetts and a
pre-tax $7.8 million charge to write down the value of goodwill
related to our acquisition of VIOX Corporation. The write down of
goodwill was to reflect the current economic environment as a
result of the recent downturn in the solar industry. The special
credits totaled $19.4 million during the fourth quarter and were
associated with the adjustment of economic assumptions regarding
our purchase of the assets of Diaphorm, LLC in 2009, and our
acquisitions of SemEquip in 2008 and VIOX in January 2011. During
the fourth quarter, we revised the estimated future sales and
earnings of Diaphorm, which caused an increase to the estimated
acquisition liability and a charge to pre-tax earnings for the
quarter and the year ended December 31, 2011 of $1.0 million. Also
during the fourth quarter of 2011, we revised the estimated future
sales and earnings of VIOX and SemEquip, which caused a decrease to
the estimated acquisition liability and a credit to pre-tax
earnings for the quarter and the year ended December 31, 2011 of
$11.5 million for VIOX and $6.9 million for SemEquip.
Gross profit margin was 32.6% of net sales in the fourth quarter
2011, compared to 32.8% in the same period in 2010. The provision
for income taxes was 36.2% in the fourth quarter 2011, compared to
a benefit from income taxes in the same period in 2010.
Gross profit margin was 36.1% of net sales in the twelve months
ended December 31, 2011 compared to 26.8% in 2010. The provision
for income taxes was 34.4% in the twelve months ended December 31,
2011, compared to a benefit from income taxes in 2010.
New orders for the three months ended December 31, 2011 were
$58.1 million, compared to $151.3 million for the same period last
year. For the year ended December 31, 2011, new orders were $670.6
million, compared to $455.3 million for 2010.
Total backlog as of December 31, 2011 was $284.9 million,
compared to total backlog at December 31, 2010 of $185.8
million.
Total cash, cash equivalents and short-term investments
increased to $275.0 million at December 31, 2011 compared to $246.3
million at December 31, 2010.
Ceradyne's initial 2012 guidance is for sales to range from $590
million to $625 million and earnings to range from $2.30 to $2.65
per fully diluted share. These projections are based on our current
backlog plus projected new 2012 orders. Our guidance assumes
receipt of an initial low rate production order on the enhanced
combat helmet (ECH) within the next several weeks with full-scale,
multi-year ECH production contracts executed in Q2 this year. We
also anticipate a soft first half of 2012 for our photovoltaic
solar crucibles, increasing throughout 2012.
Ceradyne's development pipeline of PetroCeram® ceramic sand
screens, ceramic thrust bearings for oil and gas drilling, and
several proprietary industrial and pharmaceutical products will all
be in limited production in 2012.
Joel P. Moskowitz, Ceradyne president, chief executive officer
and chairman of the board, commented, "In general, we are very
pleased with our fourth quarter performance and the 2011 full-year
performance. Our diversification strategy of products, markets and
geography demonstrated its relevance in 2011. As the year
progressed, our solar business declined as the result of
significant over capacity and excessive inventory levels of our
customers, particularly in China. Yet other areas of Ceradyne, such
as defense, nuclear and industrial, showed additional strength
which allowed us to meet our internal goals and continue to
implement our 'Ceradyne $1 Billion' strategy."
Mr. Moskowitz further stated, "2012 should reflect continuation
of certain trends we saw in 2011. Although we expect our solar
business to exhibit weakness early this year, we believe our
customers will work off their inventories with resultant firming of
Ceradyne solar related business levels later this year. We also
expect a strong defense sector in 2012, particularly in Ceradyne's
lightweight ceramic body armor. Although the enhanced combat helmet
(ECH) qualification process has taken longer than originally
expected, we are very optimistic about this program."
Mr. Moskowitz continued, "A high priority for future new
business at Ceradyne is our R&D pipeline of new advanced
technical ceramics covering a wide range of our areas of interest.
Continuing outstanding results in the oil field of our PetroCeram®
ceramic sand screen has encouraged us to expand our internal
capacity and increase our technology and marketing team in Kempten,
Germany. We are substantively increasing our manufacturing capacity
of the isotope B10 in Quapaw, Oklahoma in response to what we
believe are increasing opportunities in the nuclear power plant
industry, particularly in China."
Furthermore, Mr. Moskowitz stated, "Our strong balance sheet
with $275 million in cash and short term investments will enable us
to invest internally, pursue our acquisition strategy, and increase
shareholder value through opportunistic stock buybacks."
Non-GAAP Financial Measures
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.
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 ended December 31, 2011. To participate in the
teleconference, please call toll free 888-378-0320 (or 719-325-2343
for international callers) approximately 10 minutes prior to the
above start time and provide Passcode 4527399. In a previous press
release, incorrect dial-in numbers were distributed; please use the
numbers as disclosed in this press release. 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. PST on February
16th through 12:00 p.m. PST on February 18th. The playback can be
accessed by calling 888-203-1112 (or 719-457-0820 for international
callers) and providing Passcode 4527399.
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, 2011,
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 Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
NET SALES $ 128,530 $ 100,719 $ 571,982 $ 402,938
COST OF GOODS SOLD 86,656 67,686 365,337 295,078
---------- ---------- ---------- ----------
Gross profit 41,874 33,033 206,645 107,860
OPERATING EXPENSES
Selling, general and
administrative 16,782 17,993 74,325 61,940
Research and development 3,191 2,961 12,446 11,692
Restructuring - plant
closure and severance 914 3,498 914 3,505
Acquisition related
(credits) charges (19,422) 1,655 (17,298) 1,567
Goodwill impairment 7,797 - 7,797 -
---------- ---------- ---------- ----------
9,262 26,107 78,184 78,704
---------- ---------- ---------- ----------
INCOME FROM OPERATIONS 32,612 6,926 128,461 29,156
---------- ---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest income 1,247 2,793 3,991 5,355
Interest expense (1,782) (1,534) (6,620) (6,247)
Gain (loss) on auction
rate securities 630 - 630 (978)
Miscellaneous (177) 592 1,494 1,085
---------- ---------- ---------- ----------
(82) 1,851 (505) (785)
---------- ---------- ---------- ----------
INCOME BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES 32,530 8,777 127,956 28,371
PROVISION (BENEFIT) FOR
INCOME TAXES 11,777 (4,409) 44,068 (905)
---------- ---------- ---------- ----------
NET INCOME $ 20,753 $ 13,186 $ 83,888 $ 29,276
========== ========== ========== ==========
BASIC INCOME PER SHARE $ 0.86 $ 0.53 $ 3.41 $ 1.16
========== ========== ========== ==========
DILUTED INCOME PER SHARE $ 0.85 $ 0.53 $ 3.38 $ 1.15
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING:
BASIC 24,169 24,713 24,614 25,191
DILUTED 24,346 24,969 24,786 25,370
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
December 31,
---------------------
2011 2010
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 50,275 $ 53,436
Short term investments 224,772 192,860
Accounts receivable, net of allowances for doubtful
accounts of $1,547 and $685 in 2011 and 2010,
respectively 73,646 53,019
Other receivables 6,040 17,553
Inventories 117,273 94,258
Production tooling, net 11,792 10,037
Prepaid expenses and other 43,860 38,653
Deferred tax asset 5,782 6,808
---------- ----------
Total current assets 533,440 466,624
Property, plant and equipment, net 243,376 243,681
Long term investments 15,026 26,187
Intangible assets, net 100,690 83,475
Goodwill 42,926 43,219
Other assets 12,673 2,127
---------- ----------
Total assets $ 948,131 $ 865,313
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 29,191 $ 25,738
Accrued expenses and other liabilities 30,470 24,603
Income taxes payable 5,331 1,869
Short-term debt 89,294 -
---------- ----------
Total current liabilities 154,286 52,210
Long-term debt - 85,599
Employee benefits 24,462 22,269
Other long term liabilities 37,224 41,902
Deferred tax liability 23,461 11,124
---------- ----------
Total liabilities 239,433 213,104
---------- ----------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common Stock, $0.01 par value: 100,000,000
authorized; 24,175,051 and 24,713,126 shares issued
and outstanding at December 31, 2011 and 2010,
respectively 242 247
Additional paid in capital 121,940 141,973
Retained earnings 583,420 499,532
Accumulated other comprehensive income 3,096 10,457
---------- ----------
Total stockholders' equity 708,698 652,209
---------- ----------
Total liabilities and stockholders' equity $ 948,131 $ 865,313
========== ==========
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twelve Months Ended
December 31,
----------------------
2011 2010
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 83,888 $ 29,276
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization 38,750 36,148
Amortization of bond premium 985 620
Non cash interest expense on convertible debt 3,695 3,436
Deferred income taxes 16,209 9,773
Stock compensation 4,146 3,844
(Gain) losses on auction rate securities (630) 978
Loss on other securities 80 328
Goodwill impairment 7,797 -
Loss on equipment disposal 382 2,992
Change in operating assets and liabilities (net of
effect of businesses acquired):
Accounts receivable, net (18,038) 814
Other receivables 11,875 (1,724)
Inventories, net (21,284) (611)
Production tooling, net 3,640 1,952
Prepaid expenses and other assets (19,557) (18,541)
Accounts payable and accrued expenses 8,702 1,789
Income taxes payable 2,932 1,193
Other long term liability (17,048) 2,280
Employee benefits 2,168 1,588
---------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 108,692 76,135
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (31,262) (44,220)
Changes in restricted cash - 3,130
Purchases of marketable securities (78,622) (122,927)
Proceeds from sales and maturities of marketable
securities 52,466 39,489
Cash paid for acquisitions (27,673) -
Proceeds from sale of equipment 1,781 969
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES: (83,310) (123,559)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of stock due to exercise of
options 1,163 362
Excess tax benefit due to exercise of stock
options 740 472
Shares repurchased (25,775) (19,766)
---------- ----------
NET CASH USED IN FINANCING ACTIVITIES (23,872) (19,876)
---------- ----------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
EQUIVALENTS (4,671) (1,418)
---------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (3,161) (68,718)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 53,436 122,154
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 50,275 $ 53,436
========== ==========
CERADYNE, INC.
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands)
The financial information for all segments is presented below
(in thousands):
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 2011 2010
---------- ---------- ---------- ----------
Revenue from External
Customers
Advanced Ceramic Operations $ 60,233 $ 28,838 $ 277,541 $ 152,578
ESK Ceramics 37,685 35,904 163,592 130,747
Thermo Materials 14,260 28,952 98,895 98,770
Boron 22,714 11,857 55,430 35,010
Inter-segment elimination (6,362) (4,832) (23,476) (14,167)
---------- ---------- ---------- ----------
Total $ 128,530 $ 100,719 $ 571,982 $ 402,938
========== ========== ========== ==========
Depreciation and
Amortization
Advanced Ceramic Operations $ 2,034 $ 2,340 $ 9,790 $ 9,238
ESK Ceramics 3,087 3,208 12,742 12,625
Thermo Materials 2,167 1,617 8,015 6,176
Boron 2,032 2,004 8,203 8,109
---------- ---------- ---------- ----------
Total $ 9,320 $ 9,169 $ 38,750 $ 36,148
========== ========== ========== ==========
Segment Income (Loss) from
Operations and Income
Before Provision for Income
Taxes
Advanced Ceramic Operations $ 14,576 $ (12,872) $ 60,253 $ (23,113)
ESK Ceramics 6,886 7,429 30,865 21,133
Thermo Materials (2,857) 12,026 20,029 33,951
Boron 13,990 82 16,822 (2,385)
Inter-segment elimination 17 261 492 (430)
---------- ---------- ---------- ----------
Income from Operations 32,612 6,926 128,461 29,156
Other Income (Expense) (82) 1,851 (505) (785)
---------- ---------- ---------- ----------
Income before Provision for
Income Taxes $ 32,530 $ 8,777 $ 127,956 $ 28,371
========== ========== ========== ==========
Segment Assets
Advanced Ceramic Operations $ 474,633 $ 414,425 $ 474,633 $ 414,425
ESK Ceramics 170,193 173,387 170,193 173,387
Thermo Materials 172,806 149,960 172,806 149,960
Boron 130,499 127,541 130,499 127,541
---------- ---------- ---------- ----------
Total $ 948,131 $ 865,313 $ 948,131 $ 865,313
========== ========== ========== ==========
Expenditures for Property,
Plant & Equipment
Advanced Ceramic Operations $ 1,312 $ 1,333 $ 6,276 $ 6,811
ESK Ceramics 1,573 1,081 5,278 2,497
Thermo Materials 2,414 10,713 13,780 32,087
Boron 2,123 428 5,928 2,825
---------- ---------- ---------- ----------
Total $ 7,422 $ 13,555 $ 31,262 $ 44,220
========== ========== ========== ==========
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 Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2011 2010 Change 2011 2010 Change
------- ------- ------ ------- ------- ------
Defense $ 51.1 $ 19.1 167.2% $ 225.3 $ 117.3 92.0%
Industrial 38.3 39.4 (3.0%) 163.2 138.6 17.8%
Energy 25.1 30.7 (18.4%) 129.0 99.9 29.1%
Automotive/Diesel 9.8 8.8 12.8% 40.1 35.9 11.7%
Commercial 4.2 2.7 55.7% 14.4 11.2 28.8%
------- ------- ------ ------- ------- ------
Total $ 128.5 $ 100.7 27.6% $ 572.0 $ 402.9 42.0%
======= ======= ====== ======= ======= ======
Percentage Contribution:
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Defense 39.8% 19.0% 39.4% 29.1%
Industrial 29.7 39.1 28.6 34.4
Energy 19.5 30.5 22.5 24.8
Automotive/Diesel 7.7 8.7 7.0 8.9
Commercial 3.3 2.7 2.5 2.8
--------- --------- --------- ---------
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,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
GAAP income from operations $ 32,612 $ 6,926 $ 128,461 $ 29,156
1. Acquisition related charge
(credit) (19,422) 1,655 (17,298) 1,567
2. Restructuring, plant closure
and severance 914 3,498 914 3,505
3. Goodwill impairment 7,797 - 7,797 -
--------- --------- --------- ---------
Non-GAAP income from operations
before acquisition,
restructuring and goodwill
impairment charges $ 21,901 $ 12,079 $ 119,874 $ 34,228
========= ========= ========= =========
GAAP net income $ 20,753 $ 13,186 $ 83,888 $ 29,276
Reconciling items:
Special charges (credits)
1. Acquisition related
charge (credit) (19,422) 1,655 (17,298) 1,567
2. Restructuring, plant
closure and severance 914 3,498 914 3,505
3. Goodwill impairment 7,797 - 7,797 -
4. (Gain) loss on auction
rate securities (630) - (630) 978
--------- --------- --------- ---------
Total special charges (credits) (11,341) 5,153 (9,217) 6,050
--------- --------- --------- ---------
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
Tax effect on other non-GAAP
adjustments 4,166 2,033 3,386 2,387
Total tax effect on non-GAAP
adjustments (A) 4,166 7,419 3,386 7,773
--------- --------- --------- ---------
Non-GAAP net income $ 13,578 $ 10,920 $ 78,057 $ 27,553
========= ========= ========= =========
Diluted non-GAAP income per
share $ 0.56 $ 0.44 $ 3.15 $ 1.09
Increase (decrease) due to non-
GAAP adjustments 0.29 0.09 0.23 0.06
--------- --------- --------- ---------
Diluted GAAP income per share $ 0.85 $ 0.53 $ 3.38 $ 1.15
========= ========= ========= =========
(A) The tax effect on pre-tax non-GAAP adjustments is calculated using the
relevant tax jurisdictions' statutory tax rates.
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