Ceramic Industry News

Ceradyne Reports Fourth Quarter, Full Year 2008 Results (posted 2/27/09)

February 27, 2009
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Ceradyne, Inc. recently reported its financial results for the fourth quarter and 12 months ended December 31, 2008. Sales for the fourth quarter of 2008 were $138.9 million, compared with $191.4 million in the fourth quarter of 2007. Net income for the fourth quarter of 2008 decreased by $13.9 million, or 39.7%, to $21.3 million, or $0.81 per fully diluted share, compared to $35.2 million, or $1.28 per fully diluted share, in the fourth quarter of 2007. Net income for fourth-quarter 2008 includes a pre-tax charge of $2.3 million from an other-than-temporary reduction in the value of investments in auction rate securities. This charge had a negative impact on net income of approximately $0.06 per fully diluted share in the fourth quarter of 2008.

Gross profit margin was 37.1% of net sales in the 2008 fourth quarter, compared to 39.6% in the same period in 2007. The provision for income taxes was 30.3% in the fourth quarter of 2008, compared to 33.7% in the same period in 2007.

Sales for the 12 months ended December 31, 2008, were $680.2 million, compared with $756.8 million for the 12 months ended December 31, 2007. Net income for the full 2008 year was $106.8 million, or $4.00 per fully diluted share, on 26.7 million shares, down from $144.3 million, or $5.20 per fully diluted share, on 27.7 million shares, for the 12-month period in 2007. Net income for the 12 months ended December 31, 2008, includes a pre-tax acquisition-related compensation charge of $9.8 million associated with a pre-closing commitment by SemEquip, Inc., which Ceradyne acquired in August 2008, to pay incentive compensation to certain employees and advisors, and a pre-tax charge of $5.9 million from an other-than-temporary reduction in the value of investments in auction rate securities. These charges had a combined negative impact on net income of approximately $0.38 per fully diluted share in the year ended December 31, 2008.

New bookings for the fourth quarter of 2008 were $90.2 million, compared to $258.0 million for the same period last year. For the 12 months ended December 31, 2008, new bookings were $566.8 million, compared to $651.3 million for the 12 months ended December 31, 2007. Total backlog as of December 31, 2008, was $126.4 million, compared to total backlog at December 31, 2007, of $238.9 million.

“We are pleased that even as we entered the significant global economic downturn, our company was able to meet its revised 2008 earnings guidance with full-year 2008 financial results of $4.00 per fully diluted share on sales of $680 million,” said Joel P. Moskowitz, president and chief executive officer. “Perhaps as important as our income statement in this economic environment is our strong year-end balance sheet, with cash and cash equivalents and short-term investments of $221.4 million. With over $8 per share in cash and cash equivalents and short-term investments, and a book value exceeding $23 per share, we are comfortable in our ability to continue to invest in our future, take advantage of acquisition targets of opportunity and maintain our strong liquidity position in an uncertain global economy.

“Although as of today we have not received the XSAPI production armor order, we have received the draft of the amended production Request for Quotation and believe the orders will be released later in Q1 or early Q2 2009, with related XSAPI sets to be delivered in calendar 2009.

“However, Ceradyne is concerned about the delays in armor orders, as well as what we view as uncertainty in our industrial markets, particularly our European markets headed by ESK Ceramics in Kempten, Germany. Therefore, because the situation is unclear, we believe it is advisable to revise the 2009 guidance we provided in December 2008 of $2.30 per fully diluted share on sales of approximately $600 million to a range of sales of $465 million to $500 million, with earnings of $1.60 to $2.00 per fully diluted share.

“We have recently committed to the acquisition of an additional 13.7 acres in Tianjin, China, on which we plan to build a production plant of approximately 200,000 square feet for the production of our ceramic crucibles used in the manufacturing of polysilicon photovoltaic solar cells. We anticipate we will spend $22 million on this state-of-the-art factory, which will include our proprietary ‘pre-coating’ technology. Although we expect a modest increase in solar demand early in 2009, we believe the combination of lower-cost silicon, worldwide demand for clean alternative energy, and U.S. and other country’s subsidies and stimulus investments will result in an improving 2009 picture and robust 2010 demand. Our newest factory will be located near our current Tianjin factory and is expected to be up and running later this year.

“Ceradyne management is aware of the uncertainties the current global economy is presenting. In the short run, we intend to bring our costs and headcount into line with actual sales. However, we will continue to invest in the future while preserving our strong cash position and liquidity.”

Additional details are available at www.ceradyne.com.

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