COSTA MESA, Calif. (Feb. 16, 2012) MARKET WIRE — Ceradyne Inc. (NASDAQ: CRDN) reported financial results for the fourth quarter and twelve months ended Dec. 31, 2011. Sales for the fourth quarter 2011 were $128.5 million, compared with $100.7 million in the fourth quarter 2010.
Net income for the fourth quarter 2011 increased to $20.8 million, or $0.85 per fully diluted share, on 24,345,961 shares, compared to a net income of $13.2 million, or $0.53 per fully diluted share on 24,968,532 shares in the fourth quarter 2010. On a non-GAAP basis, net income for the fourth quarter 2011 increased to $13.6 million, or $0.56 per fully diluted share, compared to a net income of $10.9 million, or $0.44 per fully diluted share in the fourth quarter 2010. Sales for the twelve months ended December 31, 2011 were $572.0 million, compared with $402.9 million for 2010.
Net income for the twelve months ended December 31, 2011 was $83.9 million, or $3.38 per fully diluted share, on 24,786,106 shares, compared to net income of $29.3 million, or $1.15 per fully diluted share on 25,370,229 shares in the prior year period. On a non-GAAP basis, net income for the twelve months ended December 31, 2011 was $78.1 million, or $3.15 per fully diluted share compared to net income of $27.6 million, or $1.09 per fully diluted share.
Net income included special charges and special credits that when combined had a positive impact by increasing diluted earnings per share by approximately $0.29 for the fourth quarter of 2011. The special charges totaled $8.7 million during the fourth quarter of 2011, which included a pre-tax $0.9 million restructuring charge for the closure of our facility in Billerica, Massachusetts and a pre-tax $7.8 million charge to write down the value of goodwill related to our acquisition of VIOX Corporation. The write down of goodwill was to reflect the current economic environment as a result of the recent downturn in the solar industry. The special credits totaled $19.4 million during the fourth quarter and were associated with the adjustment of economic assumptions regarding our purchase of the assets of Diaphorm, LLC in 2009, and our acquisitions of SemEquip in 2008 and VIOX in January 2011. During the fourth quarter, we revised the estimated future sales and earnings of Diaphorm, which caused an increase to the estimated acquisition liability and a charge to pre-tax earnings for the quarter and the year ended Dec. 31, 2011, of $1.0 million. Also during the fourth quarter of 2011, we revised the estimated future sales and earnings of VIOX and SemEquip, which caused a decrease to the estimated acquisition liability and a credit to pre-tax earnings for the quarter and the year ended Dec. 31, 2011, of $11.5 million for VIOX and $6.9 million for SemEquip.
Gross profit margin was 32.6% of net sales in the fourth quarter 2011, compared to 32.8% in the same period in 2010. The provision for income taxes was 36.2% in the fourth quarter 2011, compared to a benefit from income taxes in the same period in 2010.
Gross profit margin was 36.1% of net sales in the twelve months ended Dec. 31, 2011, compared to 26.8% in 2010. The provision for income taxes was 34.4% in the twelve months ended Dec. 31, 2011, compared to a benefit from income taxes in 2010.
New orders for the three months ended Dec. 31, 2011 were $58.1 million, compared to $151.3 million for the same period last year. For the year ended Dec. 31, 2011, new orders were $670.6 million, compared to $455.3 million for 2010.
Total backlog as of Dec. 31, 2011, was $284.9 million, compared to total backlog at Dec. 31, 2010 of $185.8 million.
Total cash, cash equivalents and short-term investments increased to $275.0 million at Dec. 31, 2011, compared to $246.3 million at Dec. 31, 2010.
Ceradyne’s initial 2012 guidance is for sales to range from $590 million to $625 million and earnings to range from $2.30 to $2.65 per fully diluted share. These projections are based on our current backlog plus projected new 2012 orders. Our guidance assumes receipt of an initial low rate production order on the enhanced combat helmet (ECH) within the next several weeks with full-scale, multi-year ECH production contracts executed in Q2 this year. We also anticipate a soft first half of 2012 for our photovoltaic solar crucibles, increasing throughout 2012.
Ceradyne’s development pipeline of PetroCeram® ceramic sand screens, ceramic thrust bearings for oil and gas drilling, and several proprietary industrial and pharmaceutical products will all be in limited production in 2012.
Joel P. Moskowitz, Ceradyne president, chief executive officer and chairman of the board, commented, “In general, we are very pleased with our fourth quarter performance and the 2011 full-year performance. Our diversification strategy of products, markets and geography demonstrated its relevance in 2011. As the year progressed, our solar business declined as the result of significant over capacity and excessive inventory levels of our customers, particularly in China. Yet other areas of Ceradyne, such as defense, nuclear and industrial, showed additional strength which allowed us to meet our internal goals and continue to implement our ‘Ceradyne $1 Billion’ strategy.”
Mr. Moskowitz further stated, “2012 should reflect continuation of certain trends we saw in 2011. Although we expect our solar business to exhibit weakness early this year, we believe our customers will work off their inventories with resultant firming of Ceradyne solar related business levels later this year. We also expect a strong defense sector in 2012, particularly in Ceradyne’s lightweight ceramic body armor. Although the enhanced combat helmet (ECH) qualification process has taken longer than originally expected, we are very optimistic about this program.”
Mr. Moskowitz continued, “A high priority for future new business at Ceradyne is our R&D pipeline of new advanced technical ceramics covering a wide range of our areas of interest. Continuing outstanding results in the oil field of our PetroCeram® ceramic sand screen has encouraged us to expand our internal capacity and increase our technology and marketing team in Kempten, Germany. We are substantively increasing our manufacturing capacity of the isotope B10 in Quapaw, Oklahoma in response to what we believe are increasing opportunities in the nuclear power plant industry, particularly in China.”
Furthermore, Mr. Moskowitz stated, “Our strong balance sheet with $275 million in cash and short term investments will enable us to invest internally, pursue our acquisition strategy, and increase shareholder value through opportunistic stock buybacks.”
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