<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
or
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from _____________ to ____________
Commission File No. 0-13059
CERADYNE, INC.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 33-0055414
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
3169 Redhill Avenue, Costa Mesa, CA 92626
- --------------------------------------------------------------------------------
(Address of principal executive) (Zip Code)
Registrant's telephone number, including area code (714) 549-0421
--------------
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO _____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 2, 1995
------------------------------ -------------------------------
Common Stock, $.01 par value 7,523,724 Shares
Page 1 of 17 Pages
<PAGE>
CERADYNE, INC.
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information................... 3
Consolidated Balance Sheets - September 30, 1995
and December 31, 1994....................................... 4-5
Consolidated Statements of Income -
Three months ended September 30, 1995 & 1994;
Nine months ended September 30, 1995 & 1994................. 6
Consolidated Statements of Cash Flow -
Nine months ended September 30, 1995 & 1994................. 7-8
Condensed notes to Consolidated Financial
Financial Statements........................................ 9-11
Item 2. Management's Discussion and Analysis of
Financial Condition & Results of Operations................. 12-15
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 16
Item 6. Exhibits and Reports on Form 8-K............................ 17
SIGNATURE............................................................. 17
</TABLE>
2
<PAGE>
CERADYNE, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
I. FINANCIAL INFORMATION
The Financial Statements included herein have been prepared by Ceradyne,
Inc. (the "Company"), without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information normally
included in the Financial Statements prepared in accordance with generally
accepted accounting principles has been omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. It is suggested
that the Financial Statements be read in conjunction with the Financial
Statements and notes thereto included in the Company's final Prospectus
dated October 30, 1995, which is included as part of the Company's
Registration Statement on Form S-1 (Registration No. 33-62345), as filed
with the Securities and Exchange Commission on October 30, 1995.
3
<PAGE>
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
9-30-1995 12-31-1994
(UNAUDITED) (AUDITED)
---------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $ 261 $ 0
Accounts receivable, net of allowances of
approximately $152 & $199 for doubtful
accounts at 9-30-1995 & 12-31-1994 $ 3,311 $ 2,891
Receivables from related parties $ 6 $ 6
Inventories $ 6,558 $ 5,736
Production Tooling $ 309 $ 243
Prepaid expenses and other $ 135 $ 21
---------- -----------
TOTAL CURRENT ASSETS $ 10,580 $ 8,897
---------- -----------
PROPERTY, PLANT & EQUIPMENT, AT COST:
Land $ 422 $ 422
Buildings & improvements $ 1,825 $ 1,825
Lease rights $ 2,659 $ 2,659
Machinery & equipment $ 14,669 $ 14,083
Leasehold improvements $ 1,136 $ 1,118
Office equipment $ 1,369 $ 1,344
Construction in progress $ 162 $ 0
---------- -----------
$ 22,242 $ 21,451
Less accumulated depreciation & amortization $ 17,382 $ 16,410
---------- -----------
$ 4,860 $ 5,041
COSTS IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization of $1,402
& $1,286 at 9-30-1995 & 12-31-1994 $ 2,273 $ 2,389
OTHER ASSETS, net of accumulated amortization
of $533 and $503 at 9-30-1995 & 12-31-1994 $ 505 $ 535
---------- -----------
TOTAL ASSETS $ 18,218 $ 16,862
========== ===========
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
9-30-1995 12-31-1994
(UNAUDITED) (AUDITED)
---------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,669 $ 1,029
Accounts payable $ 1,149 $ 1,930
Accrued expenses:
Payroll and payroll related $ 600 $ 433
Other $ 557 $ 452
---------- -----------
Total current liabilities $ 3,975 $ 3,844
---------- -----------
LONG-TERM DEBT $ 706 $ 905
---------- -----------
DEFERRED REVENUE $ 395 $ 511
---------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value:
Authorized - 12,000,000 shares;
Outstanding - 6,313,824 shares &
6,234,734 shares at 9-30-1995 &
12-31-1994, respectively $ 30,601 $ 30,429
Accumulated deficit $ (17,459) $ (18,827)
---------- -----------
TOTAL STOCKHOLDERS' EQUITY $ 13,142 $ 11,602
---------- -----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 18,218 $ 16,862
========== ===========
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED 9-30-1995 & 1994
AND NINE MONTHS ENDED 9-30-1995 & 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
------------------ ------------------
1995 1994 1995 1994
------ ------ ------- -------
UNAUDITED UNAUDITED
<S> <C> <C> <C> <C>
NET SALES $6,274 $4,323 $17,410 $13,051
COST OF PRODUCT SALES $4,679 $3,815 $12,904 $11,470
------ ------ ------- -------
Gross Profit $1,595 $ 508 $ 4,506 $ 1,581
------ ------ ------- -------
OPERATING EXPENSES:
Selling $ 365 $ 332 $ 1,116 $ 1,134
General & Administration $ 572 $ 586 $ 1,769 $ 1,681
------ ------ ------- -------
$ 937 $ 918 $ 2,885 $ 2,815
------ ------ ------- -------
Income (Loss) from operation $ 658 $ (410) $ 1,621 $(1,234)
------ ------ ------- -------
OTHER (INCOME) EXPENSE:
Other (income) expense $ -- $ 6 $( 2) $( 211)
Interest expense $ 94 $ 77 $ 255 $ 217
------ ------ ------- -------
$ 94 $ 83 $ 253 $ 6
------ ------ ------- -------
Income (Loss) before provision $ 564 $ (493) $ 1,368 $(1,240)
(credit) for income taxes
PROVISION FOR INCOME TAXES $ -- $ -- $ -- $ --
------ ------ ------- -------
NET INCOME (LOSS) $ 564 $ (493) $ 1,368 $(1,240)
====== ====== ======= =======
NET INCOME (LOSS) PER COMMON
AND EQUIVALENT SHARE
Primary $ .09 $ (.08) $ .21 $ (.20)
====== ====== ======= =======
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE>
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED 9-30-1995 & 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
----------------------
1995 1994
Unaudited Unaudited
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $1,368 $(1,240)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization $1,118 $ 1,116
(Increase) decrease in accounts receivable, net $ (420) $ (420)
Decrease in receivables from related parties $ -- $ 18
Increase in inventories $ (822) $ (760)
(Increase) decrease in production tooling $ (66) $ 121
(Increase) decrease in prepaid expenses & other $ (114) $ (72)
assets
Increase (decrease) in accounts payable $ (781) $ 706
Increase (decrease) in accrued expenses $ 272 $ 72
Increase (decrease) in deferred revenue $ (116) $ 515
------ -------
NET CASH PROVIDED FROM (USED IN) OPERATING
ACTIVITIES $ 439 $ 56
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment $ (791) $ (92)
------ -------
NET CASH USED IN INVESTING ACTIVITIES $ (791) $ (92)
------ -------
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
7
<PAGE>
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED 9-30-1995 & 1994
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30
---------------------
1995 1994
UNAUDITED UNAUDITED
--------- ---------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net $ 172 $ 25
Loan from Officer $ -- $ 100
Net borrowings (payments) on long-term borrowings $ 441 $ 119
----- -----
Net cash provided by financing activities $ 613 $ 244
----- -----
Increase (Decrease) in cash and cash equivalents $ 261 $ 208
Cash & cash equivalents, beginning of period $ 0 $ 94
Cash & cash equivalents, end of period $ 261 $ 302
===== =====
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 255 $ 217
Income taxes paid $ -- $ --
----- -----
</TABLE>
SEE ACCOMPANYING CONDENSED NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
8
<PAGE>
CERADYNE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. Basis of Presentation
---------------------
The consolidated financial statements include the financial statements of
Ceradyne, Inc. (the Company) and its subsidiaries. All material
intercompany accounts and transactions have been eliminated.
2. Inventories
-----------
Inventories are valued at the lower of cost (first in, first out) or
market. Inventory costs include the cost of material, labor and
manufacturing overhead. The following is a summary of the inventory
components as of September 30, 1995 and December 31, 1994:
<TABLE>
<CAPTION>
September 30, 1995 December 31, 1994
------------------ -----------------
<S> <C> <C>
Raw materials $2,740,000 $1,984,000
Work-in-process $3,210,000 $3,090,000
Finished goods $ 608,000 $ 662,000
---------- ----------
Total inventories $6,558,000 $5,736,000
========== ==========
</TABLE>
3. Net Income (Loss) Per Share
---------------------------
The number of shares used in computing primary net income (loss) per share
equals the total of the weighted average number of shares outstanding
during the periods plus common stock equivalents relating to options.
Common stock equivalents relating to options issued under the 1983 Stock
Option Plan (as amended), the 1994 Stock Incentive Plan (as amended), the
1985 Employee Stock Purchase Plan and the 1995 Employee Stock Purchase Plan
represent additional shares which may be issued in connection with their
exercise, reduced by the number of shares which could be repurchased with
the proceeds at the average market price per share. Common stock
equivalents relating to options are not included when their effect is
antidilutive.
9
<PAGE>
The following is a summary of the number of shares entering into the
computation of net income (loss) per common and common equivalent share for
the three and nine-month periods ended September 30, 1995 and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPT 30 NINE MONTHS ENDED SEPT 30
-------------------------- -------------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Weighted average number of
shares outstanding 6,288,900 6,242,500 6,265,400 6,235,900
Common stock equivalents:
Employee Stock Purchase
Plan 13,100 - 12,600 -
--------- --------- --------- ---------
Stock Options 238,000 - 162,000 -
--------- --------- --------- ---------
Number of shares primary &
fully diluted 6,540,000 6,242,500 6,440,000 6,235,900
========= ========= ========= =========
</TABLE>
4. Long-term Debt and Bank Borrowing Arrangements
----------------------------------------------
<TABLE>
<S> <C>
Long-term debt consisting of the following at September 30,
1995:
Note payable to asset-based lender, bearing interest at the
institution's prime rate (8.75 percent at September 30, 1995),
plus 3.6 percent, payable in monthly installments of $26,428. $2,288,000
Four contract capital leases, bearing interest between 5.38
percent and 11.64 percent, payable in monthly installments of
$14,432 expiring from November 1995 through September 1996,
secured by equipment with a net book value of $181,000. $ 87,000
$2,375,000
Less - Current portion $1,669,000
----------
Long-term debt $ 706,000
==========
</TABLE>
On September 22, 1994, the Company amended its existing revolving credit
agreement with an asset-based lender for the purpose of financing the
Company's working capital needs. The facility, now limited to $4,000,000,
is composed of two parts: a $1,585,600 (previously $1,553,300) five-year
term loan dated September 22, 1993 and a $2,414,400 (previously $2,446,700)
revolving line of credit expiring on November 29, 1996. Included in the
revolving line of credit is a foreign accounts sublimit which is the lesser
of $500,000 or 33.3% of the total outstanding borrowings against "eligible
domestic accounts." Borrowings under both sections of the facility are
tied to availability formulas - eighty percent (80%) of the appraised
10
<PAGE>
value of fixed assets for the term loan, and for the revolving line of
credit, seventy-five percent (75%) of eligible trade receivables and
twenty-five percent (25%) of eligible inventory (up to $250,000). The term
loan and the revolving line of credit are secured by all of the Company's
assets and require the Company, among other things, to maintain certain
financial ratios and limit capital expenditures. The interest rate under
this credit facility is equal to the lender's prime rate (eight and three-
fourths percent (8.75%) at September 30, 1995) plus three and six-tenths
percent (3.6%). A one and one-half percent (1.5%) facility fee is payable
annually on the total value of the credit facility.
5. Income Tax
----------
Effective the first quarter of 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109, "Accounting for Income
Taxes." The new standard provides revised criteria for the recognition of
net deferred tax assets. The Company's net deferred tax asset, which is
approximately $7,000,000, relates primarily to its net operating loss
carryforward and has been offset with a valuation allowance since there is
uncertainty regarding the Company's ability to recognize this tax benefit
since the benefit is dependent upon the Company's ability to continue to
generate future taxable income.
11
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
-------------------------------------------------
Reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, for an analysis and detailed discussion of the
Company's financial condition and result of operations for the period covered by
that report.
Results of Operations
- ---------------------
NET SALES. Net sales increased $1.9 million or 45.1% to $6.27 million for
the quarter ending September 30, 1995, from $4.32 million for the quarter ending
September 30, 1994. For the nine months ended September 30, 1995, net sales
increased $4.4 million or 33.4% to $17.4 million from $13.1 million shipped in
the first nine months of 1994.
The increase in sales in the three months ended September 30, 1995 was primarily
due to a $.6 million increase in sales of the Company's industrial products
(consisting of a $.3 million increase in fused silica ceramic products, and a
$.3 million increase in industrial wear products), a $.5 million increase in
sales of translucent ceramic orthodontic brackets, a $.5 million increase in
armor products, and revenue totaling $.4 million from sale of ceramic tiles
produced for a prototype heat exchange container program.
The increase in sales for the nine months ended September 30, 1995 was primarily
due to a $2.2 million increase in sales of the Company's industrial products
(consisting of a $1.3 million increase in fused silica ceramic products, and a
$.9 million increase in industrial wear products), a $.9 million increase in
sales of translucent ceramic orthodontic brackets, a $.4 million increase in
armor products, revenue totaling $.5 million from sale of ceramic tiles produced
for a prototype heat exchange container program, as well as an increase in sales
of substantially all of the Company's other product lines.
GROSS PROFIT. Gross profit increased 213.9% to $1.6 million for the quarter
ending September 30, 1995, from $.5 million for the quarter ending September 30,
1994. For the first nine months of 1995, gross profit increased 185.0% to $4.5
million from $1.6 million for the first nine months of 1994.
Of the $1.1 million increase in gross profit for the three months ended
September 30, 1995, $.2 million resulted from increased gross profit at the
Company's Semicon division in Lexington, Kentucky and
12
<PAGE>
$.1 million resulted from increased gross profit at the Company's Thermo
Materials division in Scottdale, Georgia. These increases were attributable
primarily to increased sales and improvements in manufacturing productivity at
those locations. Also contributing to the improvement in gross profit in the
three months ended September 30, 1995 was the absence of the Company's ceramic-
to-metal operation, which was divested in the fourth quarter of 1994 and which
had a negative gross profit of $.2 million for the three months ended September
30, 1994. Other factors contributing to the improvement in gross profit during
the three months ended September 30, 1995 included sales of products with
greater profit margins, increased manufacturing productivity, a 45.1% increase
in total net sales during the period, and absorption of fixed manufacturing
overhead over the increased sales volume.
Of the $2.9 million increase in gross profit for the nine months ended September
30, 1995, $.7 million resulted from increased gross profit at the Company's
Semicon division in Lexington, Kentucky and $.5 million resulted from increased
gross profit at the Company's Thermo Materials division in Scottdale, Georgia.
These increases were attributable primarily to increased sales and improvements
in manufacturing productivity at those locations. Also contributing to the
improvement in gross profit in the nine months ended September 30, 1995 was the
absence of the Company's ceramic-to-metal operation, which was divested in the
fourth quarter of 1994 and which had a negative gross profit of $.5 million for
the nine months ended September 30, 1994. Other factors contributing to the
improvement in gross profit during the nine months ended September 30, 1995
included sales of products with greater profit margins, increased manufacturing
productivity, a 33.4% increase in total net sales during the nine month period,
and absorption of fixed manufacturing overhead over the increased sales volume.
OPERATING EXPENSES. Operating expenses increased by $19,000 to $.937 million in
the quarter ending September 30, 1995 from $.918 million for the quarter ending
September 30, 1994; these expenses increased by $70,000 to $2.885 million for
the nine months ended September 30, 1995 from $2.815 million for the nine months
ended September 30, 1994.
Selling expenses were $.365 million for the three months ended September 30,
1995 and $1.116 million for the nine months ended September 30, 1995 vs $.332
million for the three months ended September 30, 1994 and 1.134 million for the
nine months ended September 30, 1994. The increase in expenses of $33 thousand
in the third quarter of 1995 vs the comparable prior year period results from
the fact that the Corporation incurred a higher level
13
<PAGE>
of commission expense in this quarter because of the increased level of bookings
and shipments. The decrease in expenses of $18,000 in the nine months ended
September 30, 1995 vs the comparable prior year periods mainly results from the
fact that in the fourth quarter of 1994 the Company sold its ceramic-to-metal
product line, which historically had required a relatively higher commitment of
selling expenses.
General and administrative expenses were $.572 million for the three months
ended September 30, 1995 and $1.769 million for the nine months ended September
30, 1995 vs $.586 million for the three months ended September 30, 1994 and
$1.681 million for the nine months ended September 30, 1994. The increase in
expenses of $88,000 in the nine months ended September 30, 1995 vs the
comparable prior year periods mainly results from the payment of employee
incentive bonuses indexed to the Company's profitability during the nine months
ended September 30, 1995.
OTHER INCOME. Other income decreased for the nine months ended September 30,
1995 to $2,000 from $.211 million for the comparable prior year period. During
the latter period, the Company had recorded other income from the finalization
of a contract cancellation, the settlement of a contract claim and license fees
received in excess of an amount accrued in prior periods.
INTEREST EXPENSE. Interest expense increased for the three and nine month
period ended September 30, 1995 vs the same periods in 1994. These increases
were the result of an increase in the rate of interest charged by the lender.
Liquidity and Capital Resources
- -------------------------------
The Company meets its operating and capital requirements from cash flow from
operating activities and borrowings under its credit facilities. The Company
produced $56,000 in cash flow from operating activities for the nine months
ended September 30, 1994 and $439,000 for the nine months ended September 30,
1995.
The Company has a revolving credit agreement with an asset-based lender for the
purpose of financing the Company's working capital needs. The credit facility,
which expires on November 29, 1996, is limited to $4.0 million, and is composed
of two parts - a $1,585,600 term loan and a $2,414,400 revolving line of credit.
Under both parts of the credit facility, borrowings are tied to availability
formulas: 80% of the appraised value of fixed assets for the term loan, 75% of
eligible trade receivables, and 25% of eligible inventory (up to $250,000) for
the revolving line of
14
<PAGE>
credit. The term loan and the revolving line of credit are secured by all of
the Company's assets and require the Company, among other things, to maintain
certain financial ratios and limit capital expenditures. Borrowings under the
credit facility totaled approximately $2.3 million at September 30, 1995.
On November 2, 1995, the Company completed a public offering of 1,200,000 shares
of its common stock from which it received net proceeds of approximately $5.2
million. Management believes that the net proceeds from the offering, together
with cash resources of $261,000 as of September 30, 1995, funds generated from
operations, and the ability to borrow under the revolving credit facility will
be sufficient to finance anticipated capital and operating requirements for at
least the next twelve months. However, the Company may find it necessary to
seek additional sources of financing to support its capital needs, for
additional working capital, potential investments, acquisitions or otherwise.
There is no assurance that such financing would be available on commercially
acceptable terms or at all. Total property and equipment expenditures for 1995
are expected to be approximately $1.0 million.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
The Company is, from time to time, involved in various legal and other
proceedings that relate to the ordinary course of operating its business,
including, but not limited to, employment-related actions and workers'
compensation claims.
Currently, the Company is involved in one action filed by a current employee in
the Superior Court of the State of California, County of Orange. The employee
and his wife filed suit in December 1994 alleging that he contracted chronic
beryllium disease during the course and scope of his employment. Defense of the
case has been tendered to the Company's insurance carriers. The Company has
been advised by its insurance carriers that coverage has been denied. The
Company believes, however, based on the advice of its insurance coverage
counsel, that coverage was improperly denied and it is currently disputing the
existence of coverage with its insurance carriers. This case is in the early
stages of discovery.
On October 26, 1995, the Company was served with a complaint that was filed by
four persons, and the spouses of two of those persons, who are employed by one
of the Company's customers. The complaint, filed in the United States District
Court, Eastern District of Tennessee, alleges that the plaintiffs contracted
chronic beryllium disease as a result of their exposure, during the course of
their employment by the Company's customer, to beryllium-containing products
sold by Ceradyne. The Company is one of four named defendants who allegedly
also sold products containing beryllium oxide to the plaintiffs' employer. The
complaint seeks compensatory damages in the amount of $3.0 million for each of
the four plaintiffs who were employed by the Company's customer, compensatory
damages of $1.0 million each for the two spouses, and punitive damages in the
amount of $5.0 million. Defense of this case has been tendered to the Company's
insurance carriers. The Company believes, based upon the advice of its
insurance coverage counsel, that its insurance carriers should accept the
defense of these claims. There can be no assurance, however, that insurance
coverage will be available or that, if available, the amount of insurance will
be sufficient to cover any potential adverse judgment, or that any adverse
outcome would not have a material adverse effect on the Company or its financial
condition.
16
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
None
(b) Reports on Form 8-K:
None
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CERADYNE, INC.
By: _______________________________
James F. Gardner
Vice President
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: November 10, 1995
17
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 261
<SECURITIES> 0
<RECEIVABLES> 3,463
<ALLOWANCES> 152
<INVENTORY> 6,558
<CURRENT-ASSETS> 10,580
<PP&E> 22,242
<DEPRECIATION> 17,382
<TOTAL-ASSETS> 18,218
<CURRENT-LIABILITIES> 3,975
<BONDS> 0
<COMMON> 30,601
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 18,218
<SALES> 17,410
<TOTAL-REVENUES> 17,410
<CGS> 12,904
<TOTAL-COSTS> 2,885
<OTHER-EXPENSES> (2)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 255
<INCOME-PRETAX> 1,368
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,368
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,368
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
