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Fully diluted average shares outstanding for the second quarter of 2008 were 26,539,000 compared to 27,786,000 in the same period in 2007. The lower average shares outstanding in the current period is due primarily to the repurchase of 1,128,000 shares under the company’s stock repurchase program announced on March 4, 2008.
Sales for the six months ended June 30, 2008, were $373.5 million, down slightly from $373.8 million in the same period last year. Net income for the first six months of 2008 was $66.1 million, or $2.45 per fully diluted share, on 26,984,000 shares, down from $76.4 million, or $2.77 per fully diluted share, on 27,585,000 shares, for the six-month period in 2007.
“During the first half of 2008, Ceradyne continued to implement its strategy of global diversification in markets and products while continuing its commitment to lightweight ceramic personnel armor and emerging vehicle armor requirements,” said Joel P. Moskowitz, president and chief executive officer. “I am pleased to report several recent events that demonstrate Ceradyne’s vertical integration strategic direction:
- Acquisition of Oil Drilling Bearing Technology. On June 6, 2008, Ceradyne announced that it had acquired certain patents and intellectual property covering a proprietary technical ceramic bearing solution for ‘down hole’ oil drilling. This technology utilizes silicon carbide advanced technical ceramics produced by the company’s German subsidiary, ESK Ceramics. The company also announced that one of the inventors of this system, Russell Ide, Jr., has joined Ceradyne.
- Ceradyne, Inc. to Acquire SemEquip, Inc. On July 9, 2008, Ceradyne announced that it had signed a definitive agreement and plan of merger to acquire SemEquip, Inc. of North Billerica, Mass., pending SemEquip’s shareholder approval. SemEquip is a leader in the development of cluster ion implantation sub-systems and advanced ion source chemicals for the manufacture of logic and memory chips, including the B18H22 ‘cluster boron’ molecule that uses Ceradyne Boron Products’ enriched boron isotope 11B as its starting material. SemEquip’s cluster ion beam implantation systems achieve next-generation performance in semiconductor ion implantation applications. Ceradyne intends to manufacture and market B18H22 and related cluster chemicals for this new semiconductor market.
- China Expansion. Ceradyne has signed agreements to acquire an additional 13.7 acres of land in Tianjin, China, subject to certain approvals. The company intends to build out approximately 330,000 square feet of manufacturing facilities to house additional solar ceramic crucible expansion as well as manufacturing plans for other Ceradyne products. We anticipate these new facilities will be complete later in 2009.
However, Ceradyne recently received information on both the XSAPI/ESAPI five-year proposal as well as the MRAP II BULL testing status that permits the company to provide revised guidance. Based on information it believes to be accurate, Ceradyne has qualified both its ESAPI and its XSAPI lightweight ceramic body armor systems for the upcoming ID/IQ (indefinite delivery, indefinite quantity) five-year procurement. In anticipation of an award in Q3 2008, the company is planning to ship product in Q4 2008.
Secondly, based on informal input regarding testing of the Team BULL MRAP II (Ceradyne, Oshkosh Truck, Ideal Innovations), Ceradyne believes that the most critical ballistic survivability and mobility requirements have been passed. The company also continues to believe that the BULL’s anti-EFP (explosively formed penetrator) performance, plus its independent suspension that provides “offroad” capabilities, results in a combat vehicle that may be suited for specific theatres. However, based on shifting requirements, Ceradyne believes that the government currently plans to purchase smaller, more mobile MRAPs; the company does not believe there will be a significant 2008 BULL delivery order against the current ID/IQ contract in time to allow Ceradyne to make 2008 BULL shipments.
Therefore, based in part on its better-than-expected first half 2008 performance, anticipated fourth quarter XSAPI/ESAPI shipments, and assuming no 2008 BULL shipments, Ceradyne has provided the following revised 2008 guidance: sales range from $740 million to $750 million, and earnings range from $4.70 to $4.80 per diluted share. The earnings range does not include the effect of the estimated $9.0 million to $11.0 million pre-tax charge that the company expects to record in the third quarter of 2008 upon the closure of the SemEquip acquisition.
Additional information, including an archive of a recent teleconference regarding these results, is available at www.ceradyne.com.