UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2003 |
or
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 |
| For the transition period from to |
Commission File No. 000-13059
CERADYNE, INC.
(Exact name of Registrant as specified in its charter)
| Delaware |
33-0055414 | |
| (State or other jurisdiction of | (I.R.S. Employer Identification No.) | |
| incorporation or organization) |
| 3169 Redhill Avenue, Costa Mesa, CA |
92626 | |
| (Address of principal executive) | (Zip Code) |
Registrant’s telephone number, including area code (714) 549-0421
N/A
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).
Yes ¨ No x
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class |
Outstanding at June 30, 2003 | |
| Common Stock, $.01 par value | 8,715,981 Shares |
Page 1 of 25 Pages
CERADYNE, INC.
| INDEX |
PAGE NO. | |||
| PART I. |
FINANCIAL INFORMATION | |||
| Item 1. |
Financial Statements | |||
| Statement Regarding Financial Information | 3 | |||
| Consolidated Balance Sheets – June 30, 2003 and December 31, 2002 | 4-5 | |||
| Consolidated Statements of Income – Three and Six Months Ended June 30, 2003 and 2002 | 6 | |||
| Consolidated Statements of Cash Flows – Six Months Ended June 30, 2003 and 2002 | 7 | |||
| Condensed Notes to Consolidated Financial Statements | 8-15 | |||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16-22 | ||
| Item 3. |
Quantitative and Qualitative Disclosures About Market Risk | 22 | ||
| Item 4. |
Controls and Procedures | 22 | ||
| PART II. |
OTHER INFORMATION | |||
| Item 1. |
Legal Proceedings | 23 | ||
| Items 2, 3, |
N/A | 23 | ||
| Item 6. |
Exhibits and Reports on Form 8-K | 23 | ||
| 24 |
2
CERADYNE, INC.
FORM 10-Q
FOR THE QUARTER ENDED
June 30, 2003
| PART I. | FINANCIAL INFORMATION |
| Item 1. | Financial Statements |
The Financial Statements included herein have been prepared by Ceradyne, Inc. (the “Company”), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information normally included in the Financial Statements prepared in accordance with accounting principles generally accepted in the United States has been omitted pursuant to such rules and regulations. However, the Company believes the disclosures are adequate to make the information presented not misleading. All adjustments have been made which are, in the opinion of management, necessary to a fair statement of the results of the interim periods presented. The Financial Statements should be read in conjunction with the Financial Statements and notes thereto included in the Company’s Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 2002, as filed with the Securities and Exchange Commission on March 31, 2003.
3
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in thousands)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| CURRENT ASSETS |
||||||||
| Cash and cash equivalents |
$ | 644 | $ | 350 | ||||
| Accounts receivable, net of allowances for doubtful accounts of approximately $202 and $111 at June 30, 2003 and December 31, 2002, respectively |
14,344 | 11,599 | ||||||
| Other receivables |
242 | 271 | ||||||
| Inventories |
15,315 | 16,107 | ||||||
| Production tooling |
3,384 | 3,239 | ||||||
| Prepaid expenses and other |
2,206 | 2,200 | ||||||
| Deferred tax asset |
— | 1,357 | ||||||
| TOTAL CURRENT ASSETS |
36,135 | 35,123 | ||||||
| PROPERTY, PLANT & EQUIPMENT, at cost |
||||||||
| Land |
1,899 | 422 | ||||||
| Buildings and improvements |
3,784 | 1,857 | ||||||
| Machinery and equipment |
36,148 | 34,431 | ||||||
| Leasehold improvements |
4,484 | 4,386 | ||||||
| Office equipment |
3,675 | 3,418 | ||||||
| Construction in progress |
165 | 300 | ||||||
| 50,155 | 44,814 | |||||||
| Less accumulated depreciation and amortization |
(27,801 | ) | (26,154 | ) | ||||
| 22,354 | 18,660 | |||||||
| COSTS IN EXCESS OF NET ASSETS ACQUIRED |
1,511 | 1,511 | ||||||
| TOTAL ASSETS |
$ | 60,000 | $ | 55,294 | ||||
See accompanying condensed notes to Consolidated Financial Statements
4
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS’ EQUITY
(Amounts in thousands, except share data)
| June 30, 2003 |
December 31, 2002 | |||||
| (Unaudited) | ||||||
| CURRENT LIABILITIES |
||||||
| Bank line of credit |
$ | 1,615 | $ | 2,390 | ||
| Current portion of long-term debt |
100 | 100 | ||||
| Accounts payable |
6,012 | 5,441 | ||||
| Accrued expenses |
2,457 | 1,614 | ||||
| Income taxes payable |
1,026 | — | ||||
| Deferred revenue |
107 | 213 | ||||
| Warranty reserve |
— | 596 | ||||
| TOTAL CURRENT LIABILITIES |
11,317 | 10,354 | ||||
| LONG-TERM DEBT, NET OF CURRENT PORTION |
8 | 58 | ||||
| DEFERRED TAX LIABILITY |
897 | 1,794 | ||||
| SHAREHOLDERS’ EQUITY |
||||||
| Common stock, $.01 par value, Authorized – 12,000,000 shares, Outstanding – 8,715,981 shares and 8,521,034 shares at June 30, 2003 and December 31, 2002, respectively |
41,002 | 40,044 | ||||
| Retained Earnings |
6,776 | 3,044 | ||||
| TOTAL SHAREHOLDERS’ EQUITY |
47,778 | 43,088 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
$ | 60,000 | $ | 55,294 | ||
See accompanying condensed notes to Consolidated Financial Statements
5
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share data)
| THREE MONTHS June 30, |
SIX MONTHS June 30, |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| (Unaudited) | (Unaudited) | |||||||||||||||
| NET SALES |
$ | 22,106 | $ | 14,620 | $ | 41,288 | $ | 29,298 | ||||||||
| COST OF PRODUCT SALES |
15,812 | 11,619 | 30,077 | 23,409 | ||||||||||||
| Gross profit |
6,294 | 3,001 | 11,211 | 5,889 | ||||||||||||
| OPERATING EXPENSES |
||||||||||||||||
| Selling |
574 | 543 | 1,080 | 990 | ||||||||||||
| General and administrative |
1,869 | 1,142 | 3,505 | 2,280 | ||||||||||||
| Research and development |
460 | 549 | 931 | 1,031 | ||||||||||||
| 2,903 | 2,234 | 5,516 | 4,301 | |||||||||||||
| Income from operations |
3,391 | 767 | 5,695 | 1,588 | ||||||||||||
| OTHER INCOME (EXPENSE): |
||||||||||||||||
| Royalty income |
30 | 30 | 60 | 85 | ||||||||||||
| Interest income |
3 | 3 | 6 | 8 | ||||||||||||
| Interest expense |
(18 | ) | (20 | ) | (28 | ) | (32 | ) | ||||||||
| Miscellaneous |
10 | — | 9 | 22 | ||||||||||||
| 25 | 13 | 47 | 83 | |||||||||||||
| Income before provision for income taxes |
3,416 | 780 | 5,742 | 1,671 | ||||||||||||
| PROVISION FOR INCOME TAXES |
1,196 | 273 | 2,010 | 585 | ||||||||||||
| NET INCOME |
$ | 2,220 | $ | 507 | $ | 3,732 | $ | 1,086 | ||||||||
| BASIC INCOME PER SHARE |
$ | 0.26 | $ | 0.06 | $ | 0.43 | $ | 0.13 | ||||||||
| DILUTED INCOME PER SHARE |
$ | 0.25 | $ | 0.06 | $ | 0.42 | $ | 0.12 | ||||||||
See accompanying condensed notes to Consolidated Financial Statements
6
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| SIX MONTHS ENDED June 30, |
||||||||
| 2003 |
2002 |
|||||||
| (Unaudited) | (Unaudited) | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
| Net Income |
$ | 3,732 | $ | 1,086 | ||||
| ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: |
||||||||
| Depreciation and amortization |
1,647 | 1,360 | ||||||
| Deferred income taxes |
460 | 579 | ||||||
| Change in operating assets and liabilities: |
||||||||
| Accounts receivable, net |
(2,745 | ) | (1,179 | ) | ||||
| Other receivables |
29 | (28 | ) | |||||
| Inventories |
792 | (410 | ) | |||||
| Production tooling |
(145 | ) | (783 | ) | ||||
| Prepaid expenses and other |
(6 | ) | (297 | ) | ||||
| Accounts payable |
571 | 531 | ||||||
| Accrued expenses |
1,048 | 78 | ||||||
| Income taxes payable</ | ||||||||