October 25, 2011 at 06:30 AM EDT
Ceradyne, Inc. Reports Third Quarter, Nine-Month 2011 Financial Results

COSTA MESA, CA -- (Marketwire) -- 10/25/11 -- 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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