Attached files
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| 8-K - CERADYNE, INC. - FORM 8-K - JULY 26, 2011 - CERADYNE INC | form8-k.htm |
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Jerrold J. Pellizzon
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Phil Bourdillon/Gene Heller
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Chief Financial Officer
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Silverman Heller Associates
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(714) 549-0421
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(310) 208-2550
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CERADYNE, INC. REPORTS SECOND QUARTER, SIX-MONTH
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2011 FINANCIAL RESULTS
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REITERATES 2011 FULL YEAR GUIDANCE
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Costa Mesa, Calif.–July 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.
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CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
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Three Months Ended
June 30,
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Six Months Ended
June 30,
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2011
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2010
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2011
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2010
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(Unaudited)
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(Unaudited)
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NET SALES
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$ | 145,376 | $ | 100,415 | $ | 295,478 | $ | 210,453 | ||||||||
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COST OF GOODS SOLD
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92,419 | 74,570 | 184,431 | 159,242 | ||||||||||||
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Gross profit
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52,957 | 25,845 | 111,047 | 51,211 | ||||||||||||
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OPERATING EXPENSES
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Selling, general and administrative
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19,456 | 15,632 | 38,294 | 29,529 | ||||||||||||
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Acquisition related charge (credit)
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838 | (31 | ) | 1,422 | (119 | ) | ||||||||||
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Research and development
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3,214 | 3,174 | 6,281 | 6,118 | ||||||||||||
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Restructuring - plant closure and severance
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- | - | - | 7 | ||||||||||||
| 23,508 | 18,775 | 45,997 | 35,535 | |||||||||||||
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INCOME FROM OPERATIONS
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29,449 | 7,070 | 65,050 | 15,676 | ||||||||||||
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OTHER INCOME (EXPENSE):
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Interest income
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877 | 728 | 1,675 | 1,627 | ||||||||||||
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Interest expense
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(1,669 | ) | (1,609 | ) | (3,117 | ) | (3,195 | ) | ||||||||
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Gain (loss) on auction rate securities
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- | 949 | - | (978 | ) | |||||||||||
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Miscellaneous
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677 | 881 | 590 | 1,410 | ||||||||||||
| (115 | ) | 949 | (852 | ) | (1,136 | ) | ||||||||||
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INCOME BEFORE PROVISION FOR INCOME TAXES
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29,334 | 8,019 | 64,198 | 14,540 | ||||||||||||
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PROVISION FOR INCOME TAXES
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10,203 | 1,456 | 21,472 | 2,987 | ||||||||||||
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NET INCOME
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$ | 19,131 | $ | 6,563 | $ | 42,726 | $ | 11,553 | ||||||||
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BASIC INCOME PER SHARE
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$ | 0.77 | $ | 0.26 | $ | 1.72 | $ | 0.45 | ||||||||
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DILUTED INCOME PER SHARE
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$ | 0.76 | $ | 0.26 | $ | 1.70 | $ | 0.45 | ||||||||
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WEIGHTED AVERAGE SHARES OUTSTANDING:
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BASIC
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24,898 | 25,431 | 24,869 | 25,421 | ||||||||||||
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DILUTED
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25,224 | 25,597 | 25,172 | 25,576 | ||||||||||||
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
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June 30,
2011
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December 31, 2010
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(Unaudited)
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CURRENT ASSETS
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Cash and cash equivalents
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$ | 44,463 | $ | 53,436 | ||||
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Short-term investments
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228,710 | 192,860 | ||||||
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Accounts receivable, net of allowances of $4,682 and $685 at June 30, 2011 and December 31, 2010, respectively
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55,914 | 53,019 | ||||||
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Other receivables
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16,443 | 17,553 | ||||||
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Inventories, net
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111,241 | 94,258 | ||||||
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Production tooling, net
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18,314 | 10,037 | ||||||
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Prepaid expenses and other
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43,624 | 38,653 | ||||||
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Deferred tax asset
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6,917 | 6,808 | ||||||
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TOTAL CURRENT ASSETS
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525,626 | 466,624 | ||||||
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PROPERTY, PLANT AND EQUIPMENT, net
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256,059 | 243,681 | ||||||
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LONG TERM INVESTMENTS
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16,903 | 26,187 | ||||||
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INTANGIBLE ASSETS, net
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103,870 | 83,475 | ||||||
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GOODWILL
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51,021 | 43,219 | ||||||
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OTHER ASSETS
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2,436 | 2,127 | ||||||
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TOTAL ASSETS
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$ | 955,915 | $ | 865,313 | ||||
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CURRENT LIABILITIES
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Accounts payable
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$ | 28,877 | $ | 25,738 | ||||
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Accrued expenses
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29,665 | 24,603 | ||||||
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Income taxes payable
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5,456 | 1,869 | ||||||
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TOTAL CURRENT LIABILITIES
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63,998 | 52,210 | ||||||
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LONG-TERM DEBT
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87,394 | 85,599 | ||||||
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EMPLOYEE BENEFITS
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24,034 | 22,269 | ||||||
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OTHER LONG TERM LIABILITY
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56,189 | 41,902 | ||||||
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DEFERRED TAX LIABILITY
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11,687 | 11,124 | ||||||
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TOTAL LIABILITIES
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243,302 | 213,104 | ||||||
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COMMITMENTS AND CONTINGENCIES (Note 13)
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SHAREHOLDERS’ EQUITY
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Common stock, $0.01 par value, 100,000,000 authorized, 24,852,780 and 24,713,126 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively
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248 | 247 | ||||||
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Additional paid-in capital
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143,025 | 141,973 | ||||||
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Retained earnings
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542,258 | 499,532 | ||||||
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Accumulated other comprehensive income
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27,082 | 10,457 | ||||||
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TOTAL SHAREHOLDERS’ EQUITY
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712,613 | 652,209 | ||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
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$ | 955,915 | $ | 865,313 | ||||
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
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Six Months Ended June 30,
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2011
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2010
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(Unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net income
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$ | 42,726 | $ | 11,553 | ||||
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ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES:
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Depreciation and amortization
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19,678 | 18,237 | ||||||
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Amortization of bond premium
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661 | - | ||||||
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Non cash interest expense on convertible debt
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1,795 | 1,670 | ||||||
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Deferred income taxes
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249 | 644 | ||||||
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Stock compensation
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2,026 | 1,969 | ||||||
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Loss on marketable securities
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103 | 978 | ||||||
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Loss on equipment disposal
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178 | 104 | ||||||
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Change in operating assets and liabilities (net of effect of businesses acquired):
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Accounts receivable, net
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914 | 9,069 | ||||||
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Other receivables
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1,638 | (9,261 | ) | |||||
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Inventories, net
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(11,287 | ) | 16,340 | |||||
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Production tooling, net
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(2,866 | ) | 598 | |||||
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Prepaid expenses and other assets
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(9,600 | ) | 3,219 | |||||
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Accounts payable and accrued expenses
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6,001 | (4,667 | ) | |||||
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Income taxes payable
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3,384 | 49 | ||||||
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Other long term liability
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2,762 | (906 | ) | |||||
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Employee benefits
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422 | 292 | ||||||
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NET CASH PROVIDED BY OPERATING ACTIVITIES
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58,784 | 49,888 | ||||||
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases of property, plant and equipment
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(17,055 | ) | (19,172 | ) | ||||
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Changes in restricted cash
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- | 3,130 | ||||||
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Purchases of marketable securities
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(63,053 | ) | (95,380 | ) | ||||
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Proceeds from sales and maturities of marketable securities
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35,757 | 4,501 | ||||||
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Cash paid for acquisitions
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(27,673 | ) | - | |||||
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Proceeds from sale of equipment
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1,442 | 406 | ||||||
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NET CASH USED IN INVESTING ACTIVITIES
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(70,582 | ) | (106,515 | ) | ||||
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from issuance of stock due to exercise of options
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991 | 36 | ||||||
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Excess tax benefit due to exercise of stock options
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1,827 | 7 | ||||||
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Shares repurchased
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(3,889 | ) | (3,379 | ) | ||||
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NET CASH PROVIDED (USED) IN FINANCING ACTIVITIES
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(1,071 | ) | (3,336 | ) | ||||
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EFFECT OF EXCHANGE RATES ON CASH AND CASH EQUIVALENTS
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3,896 | (3,275 | ) | |||||
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DECREASE IN CASH AND CASH EQUIVALENTS
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(8,973 | ) | (63,238 | ) | ||||
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CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
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53,436 | 122,154 | ||||||
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CASH AND CASH EQUIVALENTS, END OF PERIOD
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$ | 44,463 | $ | 58,916 | ||||
CERADYNE, INC.
SEGMENT FINANCIAL INFORMATION
(Amounts in thousands)
The financial information for all segments is presented below (in thousands):
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Three Months Ended June 30,
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Six Months Ended June 30,
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2011
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2010
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2011
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2010
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Revenue from External Customers
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Advanced Ceramic Operations
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$ | 66,637 | $ | 41,375 | $ | 143,267 | $ | 95,463 | ||||||||
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ESK Ceramics
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45,880 | 30,961 | 86,003 | 62,709 | ||||||||||||
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Thermo Materials
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29,295 | 23,513 | 60,406 | 43,360 | ||||||||||||
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Boron
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11,420 | 7,440 | 19,360 | 13,959 | ||||||||||||
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Inter-segment elimination
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(7,856 | ) | (2,874 | ) | (13,558 | ) | (5,038 | ) | ||||||||
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Total
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$ | 145,376 | $ | 100,415 | $ | 295,478 | $ | 210,453 | ||||||||
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Depreciation and Amortization
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||||||||||||||||
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Advanced Ceramic Operations
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$ | 2,514 | $ | 2,396 | $ | 5,385 | $ | 4,828 | ||||||||
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ESK Ceramics
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3,276 | 2,956 | 6,415 | 6,259 | ||||||||||||
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Thermo Materials
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2,094 | 1,691 | 3,778 | 3,036 | ||||||||||||
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Boron
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2,047 | 2,016 | 4,100 | 4,114 | ||||||||||||
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Total
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$ | 9,931 | $ | 9,059 | $ | 19,678 | $ | 18,237 | ||||||||
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Segment Income (Loss) from Operations and Income Before Provision for Income Taxes
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Advanced Ceramic Operations
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$ | 14,041 | $ | (3,753 | ) | $ | 31,055 | $ | (930 | ) | ||||||
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ESK Ceramics
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9,201 | 4,643 | 17,006 | 7,353 | ||||||||||||
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Thermo Materials
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6,066 | 7,561 | 16,920 | 12,814 | ||||||||||||
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Boron
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726 | (1,350 | ) | 726 | (3,507 | ) | ||||||||||
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Inter-segment elimination
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(585 | ) | (31 | ) | (657 | ) | (54 | ) | ||||||||
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Income from Operations
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29,449 | 7,070 | 65,050 | 15,676 | ||||||||||||
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Other Income (Expense)
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(115 | ) | 949 | (852 | ) | (1,136 | ) | |||||||||
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Income before Provision for Income Taxes
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$ | 29,334 | $ | 8,019 | $ | 64,198 | $ | 14,540 | ||||||||
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Segment Assets
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||||||||||||||||
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Advanced Ceramic Operations
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$ | 468,385 | $ | 410,987 | $ | 468,385 | $ | 410,987 | ||||||||
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ESK Ceramics
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190,440 | 164,567 | 190,440 | 164,567 | ||||||||||||
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Thermo Materials
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169,420 | 121,215 | 169,420 | 121,215 | ||||||||||||
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Boron
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127,670 | 128,272 | 127,670 | 128,272 | ||||||||||||
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Total
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$ | 955,915 | $ | 825,041 | $ | 955,915 | $ | 825,041 | ||||||||
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Expenditures for Property, Plant & Equipment
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Advanced Ceramic Operations
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$ | 2,076 | $ | 2,091 | $ | 3,475 | $ | 3,591 | ||||||||
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ESK Ceramics
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1,322 | 349 | 1,984 | 836 | ||||||||||||
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Thermo Materials
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4,672 | 9,289 | 9,622 | 12,678 | ||||||||||||
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Boron
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1,324 | 592 | 1,974 | 2,067 | ||||||||||||
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Total
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$ | 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:
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Three Months Ended June 30,
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Six Months Ended June 30,
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2011
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2010
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Change
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2011
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2010
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Change
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Defense
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$ | 55.9 | $ | 33.8 | 65.6 | % | $ | 120.6 | $ | 79.5 | 51.8 | % | ||||||||||||
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Industrial
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42.8 | 32.2 | 32.8 | % | 82.3 | 65.5 | 25.5 | % | ||||||||||||||||
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Energy
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34.0 | 23.1 | 46.9 | % | 67.1 | 41.9 | 60.5 | % | ||||||||||||||||
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Automotive/Diesel
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10.3 | 8.3 | 24.1 | % | 20.0 | 17.7 | 12.9 | % | ||||||||||||||||
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Commercial
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2.4 | 3.0 | (19.4 | %) | 5.4 | 5.9 | (8.0 | %) | ||||||||||||||||
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Total
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$ | 145.4 | $ | 100.4 | 44.8 | % | $ | 295.4 | $ | 210.5 | 40.4 | % | ||||||||||||
Percentage Contribution:
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
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2011
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2010
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2011
|
2010
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|||||||||||||
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Defense
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38.5 | % | 33.7 | % | 40.9 | % | 37.8 | % | ||||||||
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Industrial
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29.4 | 32.1 | 27.8 | 31.2 | ||||||||||||
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Energy
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23.3 | 23.0 | 22.7 | 19.9 | ||||||||||||
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Automotive/Diesel
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7.1 | 8.2 | 6.8 | 8.4 | ||||||||||||
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Commercial
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1.7 | 3.0 | 1.8 | 2.7 | ||||||||||||
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Total
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100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
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