SOURCE: Ceradyne, Inc.

Ceradyne, Inc.

July 26, 2011 06:05 ET

Ceradyne, Inc. Reports Second Quarter, Six-Month 2011 Financial Results

Reiterates 2011 Full Year Guidance

COSTA MESA, CA--(Marketwire - Jul 26, 2011) - Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the second quarter and six months ended June 30, 2011.

Sales for the second quarter 2011 were $145.4 million, compared with $100.4 million in the second quarter 2010. Net income for the second quarter 2011 increased to $19.1 million, or $0.76 per fully diluted share, compared to a net income of $6.6 million, or $0.26 per fully diluted share in the second quarter 2010. Net income for the second quarter 2011 included a pre-tax charge of $4.2 million for temporary production issues that were identified and corrected in the quarter. The net income for the second quarter 2010 included a pre-tax gain on auction rate securities of $0.9 million or an increase of approximately $0.03 to fully diluted earnings per share. Fully diluted average shares outstanding for the second quarter 2011 were 25,223,757 compared to 25,596,968 in the same period in 2010.

The Company 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.

Gross profit margin was 36.4% of net sales in the second quarter 2011 compared to 25.7% in the same period in 2010. The provision for income taxes was 34.8% in second quarter 2011, compared to a provision for income taxes of 18.2% in the same period in 2010.

Sales for the six months ended June 30, 2011 were $295.5 million, compared with $210.5 million in the same period last year. Net income for the six months ended June 30, 2011 was $42.7 million, or $1.70 per fully diluted share, on 25,171,897 shares, compared to net income of $11.6 million, or $0.45 per fully diluted share, on 25,575,889 shares in the prior year period.

Gross profit margin was 37.6% of net sales in the six months ended June 30, 2011, compared to 24.3% in the same period in 2010. The provision for income taxes was 33.4% in the six months ended June 30, 2011, compared to a provision for income taxes of 20.5% in the same period in 2010.

New orders for the three months ended June 30, 2011 were $108.8 million, compared to $87.6 million for the same period last year. For the six months ended June 30, 2011, new orders were $340.5 million, compared to $193.3 million for the comparable period last year.

Total backlog as of June 30, 2011 was $230.8 million, compared to total backlog at June 30, 2010 of $118.0 million.

Total cash, cash equivalents and short-term investments increased to $273.2 million at June 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: "As stated above, management remains comfortable with, and reiterates its guidance for the full year 2011 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 as announced by the Company on April 26, 2011. Although we experienced somewhat less than expected shipments of photovoltaic related ceramic crucibles in Q2 and anticipate some reduction in crucible shipments from our original plan for the last half of 2011, the recently announced $36.2 million ESAPI ceramic body armor award along with continued strength in other parts of Ceradyne are anticipated to allow us to meet our guidance.

"We are continuing to execute our stock buyback program. In Q2, we bought back 100,000 Ceradyne shares for approximately $3.9 million or $38.89/share. Thus far, we have bought back 3,099,371 shares for $78.1 million or $25.20/share, leaving approximately $21.9 million remaining in the original stock buyback plan."

Mr. Moskowitz further stated: "I am particularly pleased with the implementation of our strategy of product, market and geographic diversity. The continued strength of our German operation, ESK Ceramics, contributed over 26% of our pre-tax profits for the six months ended June 30, 2011. On August 8, ESK will officially open its 40,000 square foot Tianjin, China facility. This will be ESK's initial production facility in China, and is anticipated to allow a stronger presence of its industrial ceramic product line in China and Southeast Asia.

"We continue to view opportunities in oil and gas, nuclear related boron, neutron absorbing ceramics for nuclear power plants, defense related products and photovoltaic products as core growth product lines."

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 second quarter ended June 30, 2011. To participate in the teleconference, please call toll free 888-417-8516 (or 719-325-2359 for international callers) approximately 10 minutes prior to the above start time and provide Passcode 1694045. 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 July 26th through 12:00 p.m. PDT on July 28th. The playback can be accessed by calling 888-203-1112 (or 719-457-0820 for international callers) and providing Passcode 1694045.

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     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------
                                    (Unaudited)           (Unaudited)
NET SALES                       $ 145,376  $ 100,415  $ 295,478  $ 210,453
COST OF GOODS SOLD                 92,419     74,570    184,431    159,242
                                ---------  ---------  ---------  ---------
  Gross profit                     52,957     25,845    111,047     51,211
OPERATING EXPENSES
  Selling, general and
   administrative                  19,456     15,632     38,294     29,529
  Acquisition related charge
   (credit)                           838        (31)     1,422       (119)
  Research and development          3,214      3,174      6,281      6,118
  Restructuring - plant
   closure and severance                -          -          -          7
                                ---------  ---------  ---------  ---------
                                   23,508     18,775     45,997     35,535
                                ---------  ---------  ---------  ---------
INCOME FROM OPERATIONS             29,449      7,070     65,050     15,676
                                ---------  ---------  ---------  ---------
OTHER INCOME (EXPENSE):
  Interest income                     877        728      1,675      1,627
  Interest expense                 (1,669)    (1,609)    (3,117)    (3,195)
  Gain (loss) on auction
   rate securities                      -        949          -       (978)
  Miscellaneous                       677        881        590      1,410
                                ---------  ---------  ---------  ---------
                                     (115)       949       (852)    (1,136)
                                ---------  ---------  ---------  ---------
INCOME BEFORE PROVISION FOR
 INCOME TAXES                      29,334      8,019     64,198     14,540
PROVISION FOR INCOME TAXES         10,203      1,456     21,472      2,987
                                ---------  ---------  ---------  ---------
NET INCOME                      $  19,131  $   6,563  $  42,726  $  11,553
                                =========  =========  =========  =========
BASIC INCOME PER SHARE          $    0.77  $    0.26  $    1.72  $    0.45
                                =========  =========  =========  =========
DILUTED INCOME PER SHARE        $    0.76  $    0.26  $    1.70  $    0.45
                                =========  =========  =========  =========
WEIGHTED AVERAGE SHARES
 OUTSTANDING:
BASIC                              24,898     25,431     24,869     25,421
DILUTED                            25,224     25,597     25,172     25,576




                              CERADYNE, INC.
                        CONSOLIDATED BALANCE SHEETS
                (Amounts in thousands, except share data)

                                                  June 30,    December 31,
                                                    2011          2010
                                                ------------  ------------
                                                        (Unaudited)
CURRENT ASSETS
  Cash and cash equivalents                     $     44,463  $     53,436
  Short-term investments                             228,710       192,860
  Accounts receivable, net of allowances of
   $4,682 and $685 at June 30, 2011 and
   December 31, 2010, respectively                    55,914        53,019
  Other receivables                                   16,443        17,553
  Inventories, net                                   111,241        94,258
  Production tooling, net                             18,314        10,037
  Prepaid expenses and other                          43,624        38,653
  Deferred tax asset                                   6,917         6,808
                                                ------------  ------------
  TOTAL CURRENT ASSETS                               525,626       466,624
                                                ------------  ------------

PROPERTY, PLANT AND EQUIPMENT, net                   256,059       243,681
LONG TERM INVESTMENTS                                 16,903        26,187
INTANGIBLE ASSETS, net                               103,870        83,475
GOODWILL                                              51,021        43,219
OTHER ASSETS                                           2,436         2,127
                                                ------------  ------------
TOTAL ASSETS                                    $    955,915  $    865,313
                                                ============  ============

CURRENT LIABILITIES
  Accounts payable                              $     28,877  $     25,738
  Accrued expenses                                    29,665        24,603
  Income taxes payable                                 5,456         1,869
                                                ------------  ------------
  TOTAL CURRENT LIABILITIES                           63,998        52,210
LONG-TERM DEBT                                        87,394        85,599
EMPLOYEE BENEFITS                                     24,034        22,269
OTHER LONG TERM LIABILITY                             56,189        41,902
DEFERRED TAX LIABILITY                                11,687        11,124
                                                ------------  ------------
TOTAL LIABILITIES                                    243,302       213,104
                                                ------------  ------------

COMMITMENTS AND CONTINGENCIES (Note 13)
SHAREHOLDERS' EQUITY
  Common stock, $0.01 par value, 100,000,000
   authorized, 24,852,780 and 24,713,126
   shares issued and outstanding at June 30,
   2011 and December 31, 2010, respectively              248           247
  Additional paid-in capital                         143,025       141,973
  Retained earnings                                  542,258       499,532
  Accumulated other comprehensive income              27,082        10,457
                                                ------------  ------------
  TOTAL SHAREHOLDERS' EQUITY                         712,613       652,209
                                                ------------  ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY      $    955,915  $    865,313
                                                ============  ============




                              CERADYNE, INC.
                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                          (Amounts in thousands)

                                                 Six Months Ended June 30,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
                                                       (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                    $     42,726  $     11,553
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
 CASH PROVIDED BY OPERATING ACTIVITIES:
  Depreciation and amortization                       19,678        18,237
  Amortization of bond premium                           661             -
  Non cash interest expense on convertible debt        1,795         1,670
  Deferred income taxes                                  249           644
  Stock compensation                                   2,026         1,969
  Loss on marketable securities                          103           978
  Loss on equipment disposal                             178           104
  Change in operating assets and liabilities
   (net of effect of businesses acquired):
      Accounts receivable, net                           914         9,069
      Other receivables                                1,638        (9,261)
      Inventories, net                               (11,287)       16,340
      Production tooling, net                         (2,866)          598
      Prepaid expenses and other assets               (9,600)        3,219
      Accounts payable and accrued expenses            6,001        (4,667)
      Income taxes payable                             3,384            49
      Other long term liability                        2,762          (906)
      Employee benefits                                  422           292
                                                ------------  ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES             58,784        49,888
                                                ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment         (17,055)      (19,172)
  Changes in restricted cash                               -         3,130
  Purchases of marketable securities                 (63,053)      (95,380)
  Proceeds from sales and maturities of
   marketable securities                              35,757         4,501
  Cash paid for acquisitions                         (27,673)            -
  Proceeds from sale of equipment                      1,442           406
                                                ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES                (70,582)     (106,515)
                                                ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of stock due to
   exercise of options                                   991            36
  Excess tax benefit due to exercise of
   stock options                                       1,827             7
  Shares repurchased                                  (3,889)       (3,379)
                                                ------------  ------------
NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES      (1,071)       (3,336)
                                                ------------  ------------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
 EQUIVALENTS                                           3,896        (3,275)
                                                ------------  ------------
DECREASE IN CASH AND CASH EQUIVALENTS                 (8,973)      (63,238)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD        53,436       122,154
                                                ------------  ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD        $     44,463  $     58,916
                                                ============  ============




                              CERADYNE, INC.
                      SEGMENT FINANCIAL INFORMATION
                          (Amounts in thousands)


The financial information for all segments is presented below
(in thousands):

                                 Three Months Ended     Six Months Ended
                                      June 30,              June 30,
                                --------------------  --------------------
                                  2011       2010       2011       2010
                                ---------  ---------  ---------  ---------
Revenue from External Customers
Advanced Ceramic Operations     $  66,637  $  41,375  $ 143,267  $  95,463
ESK Ceramics                       45,880     30,961     86,003     62,709
Thermo Materials                   29,295     23,513     60,406     43,360
Boron                              11,420      7,440     19,360     13,959
Inter-segment elimination          (7,856)    (2,874)   (13,558)    (5,038)
                                ---------  ---------  ---------  ---------
Total                           $ 145,376  $ 100,415  $ 295,478  $ 210,453
                                =========  =========  =========  =========
Depreciation and Amortization
Advanced Ceramic Operations     $   2,514  $   2,396  $   5,385  $   4,828
ESK Ceramics                        3,276      2,956      6,415      6,259
Thermo Materials                    2,094      1,691      3,778      3,036
Boron                               2,047      2,016      4,100      4,114
                                ---------  ---------  ---------  ---------
Total                           $   9,931  $   9,059  $  19,678  $  18,237
                                =========  =========  =========  =========
Segment Income (Loss) from
 Operations and Income Before
 Provision for Income Taxes
Advanced Ceramic Operations     $  14,041  $  (3,753) $  31,055  $    (930)
ESK Ceramics                        9,201      4,643     17,006      7,353
Thermo Materials                    6,066      7,561     16,920     12,814
Boron                                 726     (1,350)       726     (3,507)
Inter-segment elimination            (585)       (31)      (657)       (54)
                                ---------  ---------  ---------  ---------
Income from Operations             29,449      7,070     65,050     15,676
Other Income (Expense)               (115)       949       (852)    (1,136)
                                ---------  ---------  ---------  ---------
Income before Provision for
 Income Taxes                   $  29,334  $   8,019  $  64,198  $  14,540
                                =========  =========  =========  =========
Segment Assets
Advanced Ceramic Operations     $ 468,385  $ 410,987  $ 468,385  $ 410,987
ESK Ceramics                      190,440    164,567    190,440    164,567
Thermo Materials                  169,420    121,215    169,420    121,215
Boron                             127,670    128,272    127,670    128,272
                                ---------  ---------  ---------  ---------
Total                           $ 955,915  $ 825,041  $ 955,915  $ 825,041
                                =========  =========  =========  =========
Expenditures for Property,
 Plant & Equipment
Advanced Ceramic Operations     $   2,076  $   2,091  $   3,475  $   3,591
ESK Ceramics                        1,322        349      1,984        836
Thermo Materials                    4,672      9,289      9,622     12,678
Boron                               1,324        592      1,974      2,067
                                ---------  ---------  ---------  ---------
Total                           $   9,394  $  12,321  $  17,055  $  19,172
                                =========  =========  =========  =========




                              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:

                Three Months Ended June 30,    Six Months Ended June 30,
               ----------------------------  ----------------------------
                 2011      2010     Change     2011      2010     Change
               --------  --------  --------  --------  --------  --------
Defense        $   55.9  $   33.8      65.6% $  120.6  $   79.5      51.8%
Industrial         42.8      32.2      32.8%     82.3      65.5      25.5%
Energy             34.0      23.1      46.9%     67.1      41.9      60.5%
Automotive/Diesel  10.3       8.3      24.1%     20.0      17.7      12.9%
Commercial          2.4       3.0     (19.4%)     5.4       5.9      (8.0%)
               --------  --------  --------  --------  --------  --------
Total          $  145.4  $  100.4      44.8% $  295.4  $  210.5      40.4%
               ========  ========  ========  ========  ========  ========

Percentage Contribution:

                                   Three Months Ended   Six Months Ended
                                        June 30,            June 30,
                                   ------------------  ------------------
                                     2011      2010      2011      2010
                                   --------  --------  --------  --------
Defense                                38.5%     33.7%     40.9%     37.8%
Industrial                             29.4      32.1      27.8      31.2
Energy                                 23.3      23.0      22.7      19.9
Automotive/Diesel                       7.1       8.2       6.8       8.4
Commercial                              1.7       3.0       1.8       2.7
                                   --------  --------  --------  --------
Total                                 100.0%    100.0%    100.0%    100.0%
                                   ========  ========  ========  ========