Ceradyne, Inc. Reports First Quarter 2012 Financial Results

COSTA MESA, CA -- (Marketwire) -- 04/24/12 -- Ceradyne, Inc. (NASDAQ: CRDN) reported financial results for the first quarter ended March 31, 2012.

Sales for the first quarter 2012 were $106.3 million, compared with $150.1 million in the first quarter 2011. Net income for the first quarter 2012 decreased to $3.8 million, or $0.16 per fully diluted share, on 24,360,450 shares, compared to a net income of $23.6 million, or $0.94 per fully diluted share on 25,129,924 shares in the first quarter 2011.

Gross profit margin was 27.4% of net sales in the first quarter 2012, compared to 38.7% in the same period in 2011. The provision for income taxes was 36.9% in the first quarter 2012, compared to 32.3% in the same period in 2011.

New orders for the three months ended March 31, 2012 were $80.8 million, compared to $231.7 million for the same period last year.

Total backlog as of March 31, 2012 was $259.5 million, compared to total backlog at March 31, 2011 of $267.4 million.

Total cash, cash equivalents and short-term investments were $270.1 million at March 31, 2012 compared to $275.0 million at December 31, 2011.

Joel P. Moskowitz, Ceradyne president, chief executive officer and chairman of the board, commented: "Ceradyne's practice is not to provide quarterly guidance but to provide its best outlook for full-year performance. Although we had previously stated an expected soft first quarter, we are disappointed with the above reported results.

"The unusually sharp decline in solar photovoltaic crucible shipments to levels less than 20% of Q1 2011 was a substantial reason for the Q1 2012 results. This decline flies in the face of increasing global solar installation demand from 2010's 22 gigawatts to 2011's estimated 26.7 gigawatts. We believe the problem is the significant over capacity and excessive inventory build by our customers, the Chinese solar module manufacturers. As our customers 'work off' their inventory of silicon wafers and require our ceramic crucibles for new silicon ingot melting, we anticipate very gradual improvement of this market later in 2012.

"Furthermore, the final government approval (after successful First Article Testing) for shipping our large ESAPI body armor sustainment award was not received until very late in March, pushing scheduled ESAPI shipments into Q2.

"We believe our financial performance will improve for the balance of 2012 beginning in Q2."

Mr. Moskowitz further stated: "In February this year, we issued our initial guidance for 2012 of sales ranging from $590 million to $625 million with earnings of $2.30 to $2.65 per fully diluted share. We now feel that the weaker than expected Q1 and the uncertainty of the solar market recovery may result in reduced operating performance and, thus, we are revising the above guidance to a sales range of $540 million to $565 million and fully diluted earnings per share of $1.40 to $1.65. This guidance assumes a very gradual improvement in the solar market later this year, a 'catch up' on our delayed Q1 ESAPI shipments, but reduced helmet revenues due to the delays in receiving the initial low rate production orders."

Mr. Moskowitz continued: "We are continuing to focus on our longer term 'Ceradyne $1 Billion' revenue strategy. Recent positive events in our early stage product introduction should be noted. The Ceradyne/ESK Petro CeramĀ® ceramic sand screens, which are in place since 2010, continue to perform well above expectations and recent quoting activities from potential new accounts in South America and Europe give us further confidence as to our future in the oil and gas business. Also, in the energy sector, Ceradyne Boron Products continues to establish relationships and partnering opportunities for nuclear reactor related materials for China, as well as with large nuclear reactor companies such as Westinghouse/Toshiba and France's Areva.

"Furthermore, we are currently evaluating several acquisition opportunities in Europe and the U.S.A. Our balance sheet puts us in a strong negotiating position as we look at potential acquisitions. Additionally, our cash position is expected to allow us to increase shareholder value through quarterly dividends, opportunistic share buybacks, as well as expanding our capacity internally with targeted capital expenditures."

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 first quarter ended March 31, 2012. To participate in the teleconference, please call toll free 877-440-5788 (or 719-325-4865 for international callers) approximately 10 minutes prior to the above start time and provide Passcode 8895154. 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 April 24th through 12:00 p.m. PDT on April 26th. The playback can be accessed by calling 888-203-1112 (or 719-457-0820 for international callers) and providing Passcode 8895154.

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
                                                            March 31,
                                                     ----------------------
                                                        2012        2011
                                                     ----------  ----------
                                                           (Unaudited)
NET SALES                                            $  106,309  $  150,102
COST OF GOODS SOLD                                       77,165      92,014
                                                     ----------  ----------
  Gross profit                                           29,144      58,088
OPERATING EXPENSES
  Selling, general and administrative                    17,510      18,836
  Research and development                                3,630       3,067
  Restructuring - plant closure and severance               673           -
  Acquisition related charge                                  -         584
                                                     ----------  ----------
TOTAL OPERATING EXPENSES                                 21,813      22,487
                                                     ----------  ----------
INCOME FROM OPERATIONS                                    7,331      35,601
                                                     ----------  ----------
OTHER INCOME (EXPENSE):
  Interest income                                         1,066         798
  Interest expense                                       (1,743)     (1,448)
  Miscellaneous                                            (658)        (87)
                                                     ----------  ----------
                                                         (1,335)       (737)
                                                     ----------  ----------
INCOME BEFORE PROVISION FOR INCOME TAXES                  5,996      34,864
PROVISION FOR INCOME TAXES                                2,214      11,269
                                                     ----------  ----------
NET INCOME                                           $    3,782  $   23,595
                                                     ==========  ==========
NET INCOME PER COMMON SHARE:
BASIC                                                $     0.16  $     0.95
                                                     ==========  ==========
DILUTED                                              $     0.16  $     0.94
                                                     ==========  ==========
SHARES USED IN COMPUTING PER COMMON SHARE AMOUNTS:
BASIC                                                    24,211      24,839
DILUTED                                                  24,360      25,130


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

                                                     March 31,  December 31,
                                                       2012         2011
                                                   ------------ ------------
                                                          (Unaudited)
CURRENT ASSETS
  Cash and cash equivalents                        $     40,285 $     50,275
  Short-term investments                                229,816      224,772
  Accounts receivable, net of allowances for
   doubtful accounts of $1,950 and $1,547 at March
   31, 2012 and December 31, 2011, respectively          61,377       73,646
  Other receivables                                       8,232        6,040
  Inventories                                           135,936      117,273
  Production tooling, net                                10,406       11,792
  Prepaid expenses and other                             44,355       43,860
  Deferred tax asset                                      4,960        5,782
                                                   ------------ ------------
  TOTAL CURRENT ASSETS                                  535,367      533,440
PROPERTY, PLANT AND EQUIPMENT, net                      244,046      243,376
LONG TERM INVESTMENTS                                    21,834       15,026
INTANGIBLE ASSETS, net                                   99,623      100,690
GOODWILL                                                 43,191       42,926
OTHER ASSETS                                             12,491       12,673
                                                   ------------ ------------
TOTAL ASSETS                                       $    956,552 $    948,131
                                                   ============ ============

CURRENT LIABILITIES
  Accounts payable                                 $     28,938 $     29,191
  Accrued expenses                                       26,713       30,470
  Income taxes payable                                    6,853        5,331
  Short-term debt                                        90,264       89,294
                                                   ------------ ------------
  TOTAL CURRENT LIABILITIES                             152,768      154,286
EMPLOYEE BENEFITS                                        24,931       24,462
OTHER LONG TERM LIABILITIES                              37,295       37,224
DEFERRED TAX LIABILITY                                   23,613       23,461
                                                   ------------ ------------
TOTAL LIABILITIES                                       238,607      239,433
                                                   ------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 12)
STOCKHOLDERS' EQUITY
  Common stock, $0.01 par value, 100,000,000
   authorized, 24,280,505 and 24,175,051 shares
   issued and outstanding at March 31, 2012 and
   December 31, 2011, respectively                          243          242
  Additional paid-in capital                            123,797      121,940
  Retained earnings                                     583,573      583,420
  Accumulated other comprehensive income                 10,332        3,096
                                                   ------------ ------------
  TOTAL STOCKHOLDERS' EQUITY                            717,945      708,698
                                                   ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $    956,552 $    948,131
                                                   ============ ============


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


                                                       Three Months Ended
                                                            March 31,
                                                     ----------------------
                                                        2012        2011
                                                     ----------  ----------
                                                           (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                         $    3,782  $   23,595
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH
 PROVIDED BY OPERATING ACTIVITIES:
  Depreciation and amortization                           9,143       9,749
  Amortization of bond premium                              109         375
  Non cash interest expense on convertible debt             971         889
  Deferred income taxes                                     (99)        382
  Stock compensation                                      1,225         972
  (Gain) loss on marketable securities                      (54)        113
  Loss on equipment disposal                                 22          49
  Change in operating assets and liabilities (net of
   effect of businesses acquired):
    Accounts receivable, net                             12,682     (16,694)
    Other receivables                                    (2,137)     (2,984)
    Inventories                                         (17,502)     (2,502)
    Production tooling, net                               1,399      (3,424)
    Prepaid expenses and other assets                      (298)        477
    Accounts payable and accrued expenses                (4,571)      4,222
    Income taxes payable                                  1,344       1,249
    Other long term liability                                73       1,086
    Employee benefits                                       325         205
                                                     ----------  ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                 6,414      17,759
                                                     ----------  ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property, plant and equipment             (5,924)     (7,677)
  Purchases of marketable securities                    (20,187)       (240)
  Proceeds from sales and maturities of marketable
   securities                                            11,019       7,000
  Proceeds from sale of equipment                            (1)      1,339
  Acquisition of business, net of cash acquired               -     (27,673)
                                                     ----------  ----------
NET CASH USED IN INVESTING ACTIVITIES                   (15,093)    (27,251)
                                                     ----------  ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of stock due to exercise of
   options                                                   85         897
  Common stock cash dividends paid                       (3,629)          -
  Excess tax benefit due to exercise of stock
   options                                                  203       1,771
                                                     ----------  ----------
NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES         (3,341)      2,668
                                                     ----------  ----------
EFFECT OF EXCHANGE RATES ON CASH AND CASH
 EQUIVALENTS                                              2,030       2,473
                                                     ----------  ----------
DECREASE IN CASH AND CASH EQUIVALENTS                    (9,990)     (4,351)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD           50,275      53,436
                                                     ----------  ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD             $   40,285  $   49,085
                                                     ==========  ==========


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

The financial information for all segments is presented below:

                                                       Three Months Ended
                                                            March 31,
                                                     ----------------------
                                                        2012        2011
                                                     ----------  ----------
Revenue from External Customers                            (Unaudited)
Advanced Ceramic Operations                          $   48,705  $   76,630
ESK Ceramics                                             42,408      40,123
Thermo Materials                                         14,866      31,111
Boron                                                     7,203       7,940
Inter-segment elimination                                (6,873)     (5,702)
                                                     ----------  ----------
Total                                                $  106,309  $  150,102
                                                     ==========  ==========

Depreciation and Amortization
Advanced Ceramic Operations                          $    2,293  $    2,871
ESK Ceramics                                              2,975       3,139
Thermo Materials                                          2,020       1,686
Boron                                                     1,855       2,053
                                                     ----------  ----------
Total                                                $    9,143  $    9,749
                                                     ==========  ==========

Segment Income (Loss) from Operations and Income
 before Provision for Income Taxes
Advanced Ceramic Operations                          $    3,395  $   17,014
ESK Ceramics                                              7,177       7,805
Thermo Materials                                         (1,783)     10,854
Boron                                                      (876)          -
Inter-segment elimination                                  (582)        (72)
                                                     ----------  ----------
Total segment income from operations                 $    7,331  $   35,601
Other expense                                            (1,335)       (737)
                                                     ----------  ----------
Total Income before Provision for Income Taxes       $    5,996  $   34,864
                                                     ==========  ==========

Segment Assets
Advanced Ceramic Operations                          $  489,861  $  453,886
ESK Ceramics                                            172,755     185,070
Thermo Materials                                        171,672     161,065
Boron                                                   122,264     126,509
                                                     ----------  ----------
Total                                                $  956,552  $  926,530
                                                     ==========  ==========

Expenditures for Property, Plant & Equipment
Advanced Ceramic Operations                          $    1,823  $    1,400
ESK Ceramics                                              2,183         678
Thermo Materials                                            559       4,949
Boron                                                     1,359         650
                                                     ----------  ----------
Total                                                $    5,924  $    7,677
                                                     ==========  ==========


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

We categorize our products into five market applications. The table below
shows our sales by market application and the percentage contribution to our
total sales of each market application in the different time periods.

                                          Three Months Ended March 31,
                                     --------------------------------------
                                            2012                2011
                                     ------------------  ------------------
                                       Sales       %       Sales       %
                                     --------- --------  --------- --------
Defense                              $    36.6     34.4  $    64.8     43.1
Industrial                                40.1     37.7       39.5     26.3
Energy                                    14.9     14.0       33.1     22.1
Automotive/Diesel                          9.8      9.3        9.7      6.5
Commercial                                 4.9      4.6        3.0      2.0
                                     --------- --------  --------- --------
Total                                $   106.3    100.0% $   150.1    100.0%
                                     ========= ========  ========= ========

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