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Ceradyne, Inc. recently reported its financial results for the second quarter and six months ended June 30, 2009. Sales for the second quarter of 2009 were $95.3 million, compared with $185.0 million in the second quarter of 2008. Net loss for the three months ended June 30, 2009, was $11.2 million, or $0.44 per basic share.
The loss included special charges that had a negative impact by reducing earnings per share by approximately $0.48 for the second quarter. The special charges totaled $15.3 million during the second quarter and included a pre-tax $10.9 million restructuring charge for the closure of a plant in Bazet, France, and other severance expenses, a non-cash pre-tax impairment charge of $3.8 million to write down the value of goodwill of its Ceradyne Canada reporting unit to reflect the current industry and economic environment, and accelerated depreciation of $0.6 million resulting from a revision of the estimated useful lives of certain assets.
The company believes that it will meet its most recent guidance issued on June 9, 2009, of approximately $0.70 per fully diluted share on sales of $420 to $440 million. The forward-looking, estimated, fully-diluted earnings per share guidance does not include the restructuring and impairments described above. The company estimates that the impact of the anticipated total restructuring and impairment pre-tax charges for all of 2009 will be $0.55 per fully diluted share.
Gross profit margin for the 2009 second quarter was 24.2% of net sales, compared to 40.8% in the 2008 period. The benefit for income taxes was 18.2% in the second quarter of 2009, compared to a provision for income taxes of 36.3% in the same period in 2008.
Sales for the six months ended June 30, 2009, were $195.0 million, compared with $373.5 million in the same period last year. Net loss for the six months ended June 30, 2009, was $10.5 million, or $0.41 per basic share. The loss included special charges that had a negative impact by reducing earnings per share by approximately $0.51 for the six months ended June 30, 2009.
Gross profit margin was 23.9% of net sales in the six months ended June 30, 2009, compared to 39.4% in the same period in 2008. The benefit for income taxes was 16.2% in the first six months ended June 30, 2009, compared to a provision for income taxes of 36.2% in the same period in 2008.
New bookings for the second quarter of 2009 were $79.5 million, compared to $145.4 million for the same period last year. For the first six months of 2009, new bookings were $230.1 million, compared to $395.3 million for the comparable period last year. Total backlog as of June 30, 2009, was $163.8 million, compared to total backlog in the previous year period of $223.3 million.
“Although Ceradyne reported a quarterly loss for the first time since 1994, this loss was caused by restructuring charges such as the anticipated Bazet, France, plant closure, severance expenses, and impairment charges,” said Joel P. Moskowitz, president and CEO. “Without these charges, the quarter would have been modestly profitable. We continue to believe that we will meet our June 9, 2009, guidance of approximately $0.70 per fully diluted share on sales of $420 to $440 million. This guidance does not include certain restructuring and impairment charges, such as the closure of our French operation, other severance expenses and the write off of goodwill.
“Although we continue to see weakness in many of our markets on a year-over-year comparison, we are guardedly optimistic that we have seen the worst of the recessionary downturn. Our more positive outlook is based on the significantly reduced inventory levels of our customers and what we believe is the initial acceptance of certain new non-defense products. However, we continue to be concerned with the lack of visibility regarding possible 2010 XSAPI releases.
“During the second quarter, the company achieved several milestones:
- On June 9, 2009, we announced the acquisition of substantially all of the business and assets of the ballistic helmet manufacturer Diaphorm Technologies, LLC, based in Salem, New Hampshire. On the same day, we submitted our proposal to the U.S. Marine Corps for a state-of-the-art enhanced combat helmet (ECH) for both the Marines and the Army.
- On July 23, 2009, we announced the award to Ceradyne of developmental test helmets (ECH) from the U.S. Marine Corps Systems Command (MARCORSYSCOM).
- Ceradyne’s ESK Ceramics is in final discussions with local employee representatives regarding the terms of closing its Bazet, France, operation. Pending certain final approvals, we anticipate ceasing all production there toward the end of 2009 and relocating the majority of the operation to our Kempten, Germany, facility with the possibility of establishing a China operation in conjunction with our Tianjin plant. For the first six months of 2009, the Bazet, France, operation lost approximately $1.6 million on a pre-tax basis.
- In the second quarter of 2009, we continued Ceradyne’s ‘right-sizing’ strategy with some further headcount reductions and operational consolidation.
- In Q2, we continued our stock buyback announced last year, as well as initiated a program to buy back our convertible debentures at a discount. In Q2, we bought back 207,000 common shares for $3.8 million, and $24.5 million worth of our bonds at a discounted amount of $20.3 million.”