Ceradyne, Inc. Reports Second-Quarter and Six Month 2002 Results, Record Sales for Third Consecutive Quarter, Gross Margins Improve from First Quarter
COSTA MESA, Calif.--July 29, 2002--Ceradyne, Inc. today reported financial results for the second quarter and six months ended June 30, 2002, including record second-quarter sales, the third consecutive quarter of record-level sales, and improving gross margins compared to first quarter.Sales for the quarter rose 31% to a second-quarter record of $14.6 million from $11.1 million in second quarter 2001. As previously announced, the Company established a $650,000 (pre-tax), warranty reserve charge in the second quarter to cover potential costs of upgrading certain lots of small arms protective inserts (SAPI) military armor shipped early in first quarter 2002.
Excluding the warranty reserve charge, second-quarter gross margin improved to 25.0%, compared to 19.7% in the first quarter of 2002, and income from operations was $1.4 million, compared to $1.5 million in second quarter last year. Net income for second quarter, excluding the effect of the warranty reserve, was $930,000, or 11 cents per diluted share, compared to $1.26 million, or 15 cents per diluted share in second quarter 2001.
Including the warranty reserve of $650,000 (pre-tax), second quarter net income was reported at $507,000, or 6 cents per diluted share. Provision for income taxes in second quarter 2002 was 35% versus 20% in the year-earlier quarter.
Sales for six months 2002 reached a record $29.3 million, up 27% from $23.1 million in the comparable period last year.
Net income for the six-month period without the warranty reserve charge was $1.5 million, or 17 cents per diluted share, versus $2.4 million, or 28 cents per diluted share, for six months 2001.
Net income, including the effect of the one-time warranty reserve, was reported at $1.1 million, or 12 cents per diluted share for the six month period. Provision for taxes for six months 2002 was 35% compared to 25% for the same period in 2001. The higher tax rate of 35% in 2002 compared to the lower tax rates in quarter one and six months 2001 are a result of the complete utilization of the company's net operating loss in 2001.
New bookings for the second quarter were $13.9 million compared to $8.9 million in the year earlier quarter, and new bookings for six months rose to $28.1 million from $19.2 million in 2001. Total backlog as of June 30, 2002, was $26.4 million (including options of $1.7 million) compared to the June 30, 2001, backlog of $24.2 million (including options of $2.1 million).
Joel Moskowitz, Ceradyne president and chief executive officer, commented: "The improvement in gross margins in the second quarter 2002 compared to the first quarter 2002 is a result of greater efficiencies and higher yields in the company's ceramic diesel engine component product line as well as incremental widening of margins in armor. I am particularly encouraged that we achieved a 31% increase in second quarter sales, considering that the $14.6 million did not include any shipments of small arms protective inserts (SAPI). We began production and shipping the newly approved Ceradyne SAPI design this month. Our three core product lines of ceramic orthodontic brackets, military lightweight ceramic armor and diesel engine components continue to lead the way in current and projected growth."
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.
Except for the historical information contained herein, certain matters discussed in this news release, particularly related to the warranty reserve charge which is dependent on the ultimate approval of the company's proposed upgrade design, constitute forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected. The Company may use words such as "anticipates," "believes," "plans," "expects," "intends," "future," and similar expressions to identify forward-looking statements. Further risks and uncertainties are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2001, and in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, as filed with the Securities and Exchange Commission.
Below is a summary of unaudited comparative results. Amounts in thousands except per share data.
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
NET SALES $14,620 $11,137 $29,298 $23,086
Cost of Product Sales 10,969 7,844 22,759 15,998
Gross Profit excluding
warranty reserve 3,651 3,293 6,539 7,088
NET GROSS PROFIT
including warranty reserve 3,001 3,293 5,889 7,088
Operating expenses:
Selling 543 540 990 1,058
General and administrative 1,142 1,201 2,280 2,466
Research and development 549 89 1,031 536
2,234 1,830 4,301 4,060
INCOME FROM OPERATIONS
excluding warranty reserve 1,417 1,463 2,238 3,028
NET INCOME FROM OPERATIONS
including warranty reserve 767 1,463 1,588 3,028
Other Income (expense):
Other income 33 106 115 247
Interest (expense) (20) (7) (32) (14)
13 99 83 233
INCOME BEFORE PROVISION
FOR INCOME TAXES
EXCLUDING WARRANTY
RESERVE 1,430 1,562 2,321 3,261
Provision for income taxes 500 305 812 815
INCOME EXCLUDING
WARRANTY RESERVE $ 930 $ 1,257 $ 1,509 $ 2,446
INCOME BEFORE PROVISION
FOR INCOME TAXES
INCLUDING WARRANTY
RESERVE 780 1,562 1,671 3,261
Provision for income taxes 273 305 585 815
NET INCOME $ 507 $ 1,257 $ 1,086 $ 2,446
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
Earnings per share, basic
before warranty reserve $ 0.11 $ 0.15 $ 0.18 $ 0.29
Earnings per share, diluted
before warranty reserve $ 0.11 $ 0.15 $ 0.17 $ 0.28
Net earnings per share, basic
including warranty reserve $ 0.06 $ 0.15 $ 0.13 $ 0.29
Net earnings per share, diluted
including warranty reserve $ 0.06 $ 0.15 $ 0.12 $ 0.28
Avg. shares outstanding, basic 8,466 8,338 8,455 8,317
Avg. shares outstanding, diluted 8,849 8,668 8,823 8,642
Condensed Consolidated Balance Sheets (in thousands):
June 30, 2002 December 31, 2001
Cash and Cash Equivalents $ 329 $ 1,017
Other Current Assets 31,457 29,407
Net Property, Plant and Equipment 18,574 16,016
Other Assets 1,579 1,511
Total Assets $51,939 $47,951
Current Liabilities 9,161 7,257
Long Term Debt 108 158
Deferred Revenue 135 270
Warranty Reserve 650 0
Deferred Tax Liability 609 609
Stockholders' Equity 41,276 39,657
Total Liabilities and
Stockholders' Equity $51,939 $47,951