Ceradyne, Inc. has reported financial results for the second quarter and six months ended June 30, 2010. Sales for the quarter were $100.4 million, compared with $95.3 million in the second quarter of 2009. Net income for the second quarter of 2010 increased to $6.6 million, or $0.26 per fully diluted share, compared to a net loss of $11.2 million, or $0.44 per basic share in the second quarter 2009.
The net income for the second quarter of 2010 included a pre-tax gain on auction rate securities of $0.9 million, or an increase of approximately $0.03 to fully diluted earnings per share. The loss in the second quarter 2009 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, which included a pre-tax $10.9 million restructuring charge for the closure of the company’s 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.
“I am particularly pleased with the second quarter 2010 financial results reported above,” said Joel P. Moskowitz, Ceradyne president, CEO and chairman of the board. “The company continues to successfully pursue its strategy of implementing a wider range of technical ceramic industrial products, which is more than offsetting the decline in first half 2010 for lightweight ceramic body armor inserts, which had been anticipated. We believe this trend will continue in the short run while the company is discussing various substantive defense opportunities with the U.S. government. The chief military areas that are currently under discussions with Ceradyne include various lightweight ceramic body armor systems, including improved areas of protection, next generation ballistic helmets, and future ceramic missile radomes.
“Of note in Q2 2010 is the dramatic turnaround in the company’s ESK Ceramics operation in Kempten, Germany. Most of the improvements in the ESK operation are due to cost reduction and the closing of the Bazet, France, facility, coupled with increasing demand in ESK’s strong traditional industrial ceramic product lines. Additionally, ESK continues to pursue its R&D efforts and, where appropriate, patent new ceramic products for oil and gas sand and proppant filtration; pharmaceutical micro-reactors; refractory coatings for steel oxygen furnaces; and new, future applications in advanced state-of-the-art structural components for next-generation lithium-ion batteries for the automobile industry.
“We continue to see well above average growth in the polycrystalline photovoltaic solar industry related to our high-purity, large ceramic crucibles. Our new 218,000-square-foot solar factory in Tianjin, China, is well underway, with a tentative opening date of February 2011. This new China manufacturing facility will substantially increase Ceradyne solar capacity and become the Chinese corporate and sales office for Ceradyne U.S.A., as well as its non-American operations.
“The recent $8.3 million order from the French nuclear power plant utility (Electricite de France, EDF) for Ceradyne Boron Products’ boron-ten (B10) nuclear absorbing isotope is anticipated to be an order in a series of procurements, not only in France but also the U.S., China, Japan and other countries. We view the proprietary nuclear waste containment and other nuclear chemicals produced in our Quapaw, Okla., plant as a future core Ceradyne alternative energy product line.
“The Q2 2010 financial statements show continuing profitability and positive cash flow with over $270 million in cash, cash equivalents and short-term investments. This cash position is anticipated to be used for capex and plant expansion (e.g., Tianjin, China plant), acquisitions and share buyback (approximately $42 million remaining on original authorization)."
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