Ceradyne Inc. Small Arms Protective Inserts -- SAPI -- to Undergo Retesting; Company and Government to Review Discrepancies

    COSTA MESA, Calif.--April 3, 2002--Ceradyne Inc. (Company) has recently been informed by the Defense Logistics Agency (DLA) that three lots of Ceradyne's small arms protective inserts (SAPI) for lightweight ceramic armor originally shipped in January 2002 may have a quality issue. The government has stated that they will perform additional "reverification" testing on the remaining ten lots of Ceradyne SAPI ceramic armor shipped in the last three months. Ceradyne has shipped approximately $4.3 million on its SAPI contract to date.
    Ceradyne has notified DLA that it believes all lots of SAPI meet all government specifications. Every lot, or shipment, from Ceradyne was ballistically tested in Ceradyne's own shooting range prior to each week's shipment. Parts are selected at random by a government inspector who witnesses each ballistic shot, witnesses the evaluation of the SAPI and, if satisfied, stamps and signs shipping and quality documents. This process was performed satisfactorily on all 14 lots prior to Ceradyne shipment. (Ceradyne's initial First Article Qualification and its first shipment (Lot 1) not only passed Ceradyne's testing under government supervision, but also passed the independent testing laboratory's evaluation.)
    The government's recent testing was performed by an approved independent commercial testing laboratory. Ceradyne has requested that DLA reviews certain aspects of the testing procedures. DLA has also agreed to retest certain of the three lots. Ceradyne and DLA are working to understand the discrepancy in results.
    Joel Moskowitz, Ceradyne's CEO, stated: "Discrepancies in test results are not uncommon in the ballistic armor industry among good faith testing facilities. This particular issue involves the amount of bulge or back-face deformation after the armor successfully stops a bullet. This difficult-to-analyze requirement has been a subject of discussion in the industry, and we believe that several of Ceradyne's competitors have had similar issues. We have temporarily reduced production of SAPI ceramic armor plates while we work with DLA to resolve these issues. We anticipate that we will be able to resolve the test discrepancies in a timely manner and resume shipments of SAPI ceramic armor to DLA under our existing contract. However, should issues remain, the Company may have liability if any lots of SAPI are rejected."
    Ceradyne develops, manufactures and markets advanced technical ceramics for industrial, electronic, defense and consumer applications. Additional information about the Company can be found at www.ceradyne.com.

    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. These risks and uncertainties are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, as filed with the Securities and Exchange Commission.