<PAGE>
UNITED STATES
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 June 30, 1997
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 June 30, 1997
- ------------------------------- ----------------------------------
Common Stock, $.01 par value 7,923,655 Shares
Page 1 of 15 Pages
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CERADYNE, INC.
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Statement Regarding Financial Information.................... 3
Consolidated Balance Sheets - June 30, 1997
and December 31, 1996....................................... 4-5
Consolidated Statements of Income -
Three and six months ended June 30, 1997 and 1996........... 6
Consolidated Statements of Cash Flow -
Six months ended June 30, 1997 and 1996..................... 7
Condensed Notes to Consolidated Financial Statements......... 8-9
Item 2. Management's Discussion and Analysis of Financial Condition
& Results of Operations..................................... 10-12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................... 13-14
Item 4. Submission of Matters to Vote of Security Holders........... 14
Items 2, N/A......................................................... 15
3 and 5
Item 6. Exhibits and Reports on Form 8-K............................ 15
SIGNATURE............................................................. 15
</TABLE>
2
<PAGE>
CERADYNE, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1997
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
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 Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 on Form 10-K for the fiscal year ended December 31, 1996,
as filed with the Securities and Exchange Commission on March 31, 1997.
3
<PAGE>
CERADYNE, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
(Amounts in thousands)
<TABLE>
<CAPTION>
6-30-1997 12-31-1996
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
CURRENT ASSETS:
Cash & cash equivalents $ 5,172 $ 4,643
Accounts receivable, net of allowances of
approximately $79 & $125 for doubtful accts
at 6-30-1997 & 12-31-1996, respectively $ 4,662 $ 4,854
Other receivables $ 21 $ 1,397
Inventories $ 8,645 $ 7,756
Production Tooling $ 687 $ 538
Prepaid expenses and other $ 703 $ 401
------- -------
TOTAL CURRENT ASSETS $19,890 $19,589
------- -------
PROPERTY, PLANT & EQUIPMENT, at cost:
Land $ 422 $ 422
Buildings & improvements $ 1,825 $ 1,825
Lease rights $ 2,659 $ 2,659
Machinery & equipment $17,127 $15,718
Leasehold improvements $ 1,713 $ 1,278
Office equipment $ 1,898 $ 1,829
Construction in progress $ 180 $ 600
------- -------
$25,824 $24,331
Less accumulated depreciation & amortization $18,683 $18,073
------- -------
$ 7,141 $ 6,258
COSTS IN EXCESS OF NET ASSETS ACQUIRED,
net of accumulated amortization of $1,674 & $1,595 at
6-30-1997 & 12-31-1996, respectively $ 2,000 $ 2,079
OTHER ASSETS, net of accumulated amortization
of $635 and $565 at 6-30-1997 & 12-31-1996,
respectively $ 402 $ 472
------- -------
TOTAL ASSETS $29,433 $28,398
======= =======
</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>
6-30-1997 12-31-1996
(Unaudited) (Audited)
- -------------------------------------------------------------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 1,000 $ 1,000
Accounts payable $ 1,762 $ 1,662
Accrued expenses:
Payroll and payroll related $ 666 $ 662
Other $ 252 $ 373
---------- ---------
Total current liabilities $ 3,680 $ 3,697
---------- ---------
LONG-TERM DEBT $ -0- $ -0-
---------- ---------
DEFERRED REVENUE $ 131 $ 261
---------- ---------
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value:
Authorized - 12,000,000 shares;
Outstanding - 7,923,655 shares &
7,901,790 shares at 6-30-1997 &
12-31-1996, respectively $ 37,276 $ 37,138
Accumulated deficit $ (11,654) $ (12,698)
---------- ---------
TOTAL SHAREHOLDERS' EQUITY $ 25,622 $ 24,440
---------- ---------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 29,433 $ 28,398
========== =========
</TABLE>
See accompanying condensed notes to
Consolidated Financial Statements.
5
<PAGE>
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED 6-30-1997 & 1996
AND SIX MONTHS ENDED 6-30-97 AND 1996
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30 JUNE 30
------------------- ------------------
1997 1996 1997 1996
------- ------- -------- --------
Unaudited Unaudited
<S> <C> <C> <C> <C>
NET SALES $ 7,280 $ 6,991 $ 13,901 $ 13,320
COST OF PRODUCT SALES $ 5,249 $ 5,041 $ 10,477 $ 9,550
Gross Profit $ 2,031 $ 1,950 $ 3,424 $ 3,770
OPERATING EXPENSES:
Selling $ 402 $ 391 $ 819 $ 824
General & Administration $ 704 $ 724 $ 1,376 $ 1,386
Other $ 127 -- $ 184 --
$ 1,233 $ 1,115 $ 2,379 $ 2,210
Income from operations $ 798 $ 835 $ 1,045 $ 1,560
OTHER (INCOME) EXPENSE:
Other (income)/expense $ (48) $ (196) $ (131) $ (324)
Interest expense $ 36 $ 57 $ 73 $ 122
$ (12) $ (139) $ (58) $ (202)
Income before provision
for income taxes $ 810 $ 974 $ 1,103 $ 1,762
PROVISION FOR INCOME
TAXES $ 51 $ 23 $ 60 $ 46
NET INCOME $ 759 $ 951 $ 1,043 $ 1,716
NET INCOME PER COMMON
& EQUIVALENT SHARE $ .10 $ .12 $ .13 $ .22
======= ======== ======== ========
</TABLE>
See accompanying condensed notes to
Consolidated Financial Statements.
6
<PAGE>
CERADYNE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 6-30 1997 & 1996
(Amounts in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
-------------------------
1997 1996
Unaudited Unaudited
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,043 $ 1,716
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES:
Depreciation and amortization $ 758 $ 640
(Increase) decrease in accounts receivable, net $ 1,578 $ (2,105)
Increase in other receivables $ (8) $ (2)
Increase in inventories $ (890) $ (1,537)
(Increase) decrease in production tooling $ (149) $ 28
Increase in prepaid expenses & other assets $ (305) $ (181)
Increase in accounts payable $ 99 $ 9
Increase (decrease) in accrued expenses $ (116) $ 176
Decrease in deferred revenue $ (131) $ -0-
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 1,879 $ (1,256)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment $ (1,490) $ (1,392)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES $ (1,490) $ (1,392)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock, net $ 140 $ 219
Net payments on long-term debt $ -0- $ (1,133)
-------- --------
Net cash provided by (used in) financing
activities $ 140 $ (914)
-------- --------
Increase (decrease) in cash and cash equivalents $ 529 $( 3,562)
Cash & cash equivalents, beginning of period $ 4,643 $ 6,219
Cash & cash equivalents, end of period $ 5,172 $ 2,657
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 73 $ 122
Income taxes paid $ 72 $ 92
</TABLE>
See accompanying condensed notes to
Consolidated Financial Statements.
7
<PAGE>
CERADYNE, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
(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 June 30, 1997 and December 31, 1996:
<TABLE>
<CAPTION>
JUNE 30, 1997 DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
Raw Materials $3,723,000 $2,742,000
Finished Goods $ 451,000 $ 483,000
Work-in-Process $4,471,000 $4,531,000
---------- ----------
Total Inventories $8,645,000 $7,756,000
========== ==========
</TABLE>
3. Net Income Per Share
--------------------
The number of shares used in computing primary net income per share equals
the total of the weighted average number of shares outstanding during the
periods and, 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, 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. This total is
reduced by the number of shares which could be repurchased with the
proceeds at the average market price per share. Also, warrants to purchase
common stock (issued to the underwriters of the Company's November 1995
public offering) have been included as common stock equivalents. Common
stock equivalents relating to options are not included when their effect is
antidilutive. The following is a summary of the number of shares entering
into the computation of net income per common and common equivalent share:
8
<PAGE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
--------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Weighted average number
of shares outstanding 7,913,689 7,796,000 7,909,630 7,762,000
Common stock equivalents 79,720 182,000 107,674 176,000
--------- --------- --------- ----------
Number of shares 7,993,409 7,978,000 8,017,304 7,938,000
========= ========= ========= =========
</TABLE>
4. Debt and Bank Borrowing Arrangements
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Long-term debt consisting of the following at June 30, 1997:
Credit facility with asset-based lender, bearing interest at $1,000,000
the institution's prime rate (8.50 percent at June 30, 1997)
plus 2.0 percent.
$1,000,000
Less - Current portion $1,000,000
----------
Long-term debt $ -0-
==========
</TABLE>
On January 30, 1996, the Company amended its revolving credit agreement set
forth above. The total credit facility with the Company's lender remains at
$4,000,000; however, the borrowings on the total facility has been reduced to
$1,000,000, which is the minimum borrowing requirement. The previous minimum
borrowing requirement was $2,000,000. The pay down of $1,000,000 was part of
the stated use of the proceeds from the public offering in November 1995.
Additionally, the interest rate was decreased from 3.6% over prime rate to 2.0%
over prime rate and all financial loan covenants were eliminated. Also, in
computing interest charges, the locbox account of the Company maintained by
lender will be credited with remittances and other payments 2.5 business days
after funds have been credited to lender's account at lender's bank. The
Company has delivered to the lender cash collateral in the sum of $1,000,000 as
security for the credit facility. The collateral has been invested as a
certificate of deposit at Sumitomo Bank. All interest for this certificate of
deposit is to be forwarded to the Company. The credit facility shall be
effective until November 29, 1997 and automatically renewed for successive terms
of two years thereafter unless terminated at the end of the initial term by
either party giving the other written notice at least sixty (60) days prior to
the end of the then-current term.
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 deferred tax asset, which is approximately $5,366,380,
relates 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.
9
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
Preliminary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements which may constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities and Exchange Act of 1934.
Forward-looking statements regarding future events and the future performance of
the Company 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, 1996, as filed
with the Securities and Exchange Commission, under "Item 1-Business," including
the section therein entitled "Certain Factors That May Affect the Company's
Business and Future Results," and "Item 7-Management's Discussion and Analysis
of Financial Condition and Result of Operations."
Results of Operations for Quarter Ended JUNE 30, 1997
- -----------------------------------------------------
Reference is made to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996, for an analysis and detailed discussion of the
Company's financial condition and results of operations for the period covered
by that report.
Net Sales. Net sales for the second quarter ended June 30, 1997 were $7.3
- ---------
million, which represents a 4.1% or $289,000 increase over the corresponding
quarter of the prior year. For the six months ended June 30, 1997, net sales
were $13.9 million, an increase of 4.4% or $581,000 over the same period last
year.
The following comments compare the increase in net sales for the quarter and
first six months of this year versus the prior year. Sales of orthodontic
translucent ceramic brackets (that are marketed by 3M's Unitek Division under
the brand name "Clarity") were increased to meet demand by Orthodontists.
Structural ceramics for use in semiconductor equipment is a new product line for
the Company this year. Sales of wear resistant ceramic components on rubbing
or cutting surfaces of industrial machinery also increased over last year's
periods, as did microwave cathodes and magnets. The increases above amounted to
$2,058,000 and $2,969,000 over the second quarter and six months of the prior
year, respectively.
The increases in net sales stated above were offset by decreases of $1,769,000
and $2,388,000 from the second quarter and six months of the prior year,
respectively. These decreases were in lightweight ceramic armor and cathodes
for televisions.
International sales have and are expected to continue to be a part of the
Company's business, representing 18.7% of the net sales for the quarter ending
June 30, 1997, down from 20.4% for the comparable period of the prior year. For
the six months ended June 30, 1997, international sales were 20.9% of net sales
compared to 22.8% for the comparable period last year. The main highlights for
the percentage decrease in international sales for the quarter and six months
ended June 30, 1997 versus last year periods were an increase in domestic sales
for this year and reduced shipments of CRT cathodes for television applications.
10
<PAGE>
Gross Profit. The Company's gross profit was $2.0 million or 27.8% of net sales
- ------------
for the second quarter ended June 30, 1997, compared to $1.9 million or 27.9% of
the prior year's second quarter. Although the product mix between the
comparable quarters differ, the outcome in gross margin was very slight.
Orthodontic translucent ceramic brackets and wear resistant ceramic components
had increased sales, and therefore, increased gross profit over the prior
quarter. However, this was offset by the semiconductor product line due to the
early start up nature and low volume. Also, the offset was due to a government
lightweight ceramic armor vest option not being exercised.
For the six months ended June 30, 1997, the gross profit was $3.4 million or
24.6% as compared to the prior year's period of $3.7 million or 28.3%. The
product mix between the six month periods above were different, and the gross
profit difference was higher last year. The comments for the gross profit
differences between the six month periods are the same as the above quarter
comments except the first quarter of this year had greater declines in gross
profit over the prior first quarter from the Company's Thermo Materials and
Semicon Associates Divisions. As stated in the March 30, 1997 10Q, these gross
profit declines were due to light volume for CRT applications for large screen
television and tempered glass furnace components.
Selling Expenses. Selling expenses were $402,000 for the quarter, and $819,000
- ----------------
for the six months ended June 30, 1997. The above compares to last year's total
of $391,000 for the quarter, and $824,000 for the six months ended June 30,
1996. There are no major highlights to report on in the selling expense
category.
General/Administrative & Other Expenses. General/administrative & other
- ---------------------------------------
expenses were $831,000 for the quarter and $1,560,000 for the six months ended
June 30, 1997. The above compares to last year's total of $724,000 for the
quarter, and $1,386,000 for the six months ended June 30, 1996. The main
variance between the quarter and year to date periods was the following:
Reclassifying the West Coast Personnel Department from the fixed overhead
category to G & A expense.
Other (Income)/Expense. Other income was $48,000 for the quarter, and $131,000
- ----------------------
for the six months ended June 30, 1997. This compares to other income of
$196,000 for the quarter, and $324,000 for the six months ended June 30, 1996.
The main variance between the quarter and year to date periods was the
reclassification of Research and Development funding to other revenue (which is
part of net sales) from its prior classification as other income.
Interest Expense. Interest expense was $36,000 for the quarter, and $73,000 for
- ----------------
the six months ended June 30, 1997. This compares to $57,000 for the quarter,
and $122,000 for the six months ended June 30, 1996. The decrease over last
year expenses was primarily attributable to paying down debt.
Income Taxes. The Company made a $51,000 provision for income taxes for the
- ------------
quarter, and $60,000 for the first six months ended June 30, 1997. The company
is utilizing net operating losses from prior years to offset normal tax
provisions. For federal income tax purposes, 90% of the Company's income before
tax provision may be offset by the available net operating losses carryforward
due to the assessment of alternative minimum income taxes.
11
<PAGE>
Net Income. Reflecting all of the matters discussed above, net income was
- ----------
$759,000 (or $.10 per share) for the quarter, and $1,043,000 (or $.13 per share)
for the six months ended June 30, 1997. This compares to $951,000 (or $.12 per
share) for the quarter, and $1,716,000 (or $.22 per share) for the six months
ended June 30, 1996.
Liquidity and Capital Resources
- -------------------------------
The Company generally meets its operating and capital requirements for cash flow
from operating activities and borrowings under its credit facilities. In
November 1995, the Company completed a public offering of 1,380,000 shares of
its common stock at $5.00 per share. After commissions and other related
expenses, Ceradyne netted approximately $6 million cash from the offering. As
of June 30, 1997, the Company had cash and cash equivalents of $5.2 million.
Management believes that its current cash and cash equivalents on hand, as well
as cash generated from operations and the ability to borrow under the existing
credit facility, will be sufficient to finance anticipated capital and operating
requirements for at least the next 12 months.
Statement of Accounting Pronouncements
- --------------------------------------
Statement of Financial Accounting Standards ("SFAS") No. 128 Earnings per Share
and SFAS No. 129 Disclosure of Information about Capital Structure were issued
in February 1997 and are effective for periods ending after December 15, 1997.
The Company will adopt SFAS No. 128 and SFAS No. 129 for the period ending
December 31, 1997 and anticipates that such adoption will not materially impact
the Company's financial statements. SFAS No. 130 Reporting Comprehensive Income
and SFAS No 131 Disclosures about Segments of an Enterprise and Related
Information were issued in June 1997. The Company will adopt SFAS No. 130 and
SFAS No. 131 in 1998 and anticipates that such adoption will not materially
impact the Company's financial statements.
12
<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.
In October 1995 the Company was served with a complaint that was filed by four
persons and the spouses of those persons, who are/were employed by one of the
Company's customers. The complaint, filed in the United States District Court,
Eastern District of Tennessee, alleges that the employees contracted chronic
beryllium disease as a result of their exposure, during the course of their
employment with the Company's customer, to beryllium-containing products sold by
Ceradyne. 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. The case is in the early stages
of discovery. Based upon information currently available, the Company believes
that the plaintiffs' claims are without merit and that the resolution of this
matter will not have a material adverse effect on the financial condition or
operations of the Company. Defense of this case has been tendered to the
Company's insurance carriers, some of which are providing a defense subject to a
reservation of rights. There can be no assurance, however, that this claim or
any of the claims related to exposure to beryllium oxide will be covered by
insurance, or that, if covered, the amount of insurance will be sufficient to
cover any potential judgment.
In February 1997 the Company was served with a complaint that was filed by a
former employee of one of the Company's customers and his wife. The complaint,
filed in the United States District Court, Eastern District of Tennessee,
alleges that the husband contracted chronic beryllium disease as a result of his
exposure to beryllium-containing products sold by Ceradyne. The complaint seeks
compensatory damages in the amount of $5.0 million for the husband, $1.0 million
for the wife, and punitive damages in the amount of $10.0 million. The Company
believes that the plaintiffs' claims are without merit and that the resolution
of this matter will not have a material adverse effect on the financial
condition or operations of the Company. Defense of this case has been tendered
to the Company's insurance carriers, some of which are providing a defense
subject to a reservation of rights. There can be no assurances, however, that
this claim will be covered by insurance, or that, if covered, the amount of
insurance will be sufficient to cover any potential judgment.
During the third quarter of 1996, an action was concluded regarding a current
employee and his wife who filed suit in 1994 alleging that he had contracted
chronic beryllium disease as a result of his employment with the Company.
Ceradyne was dismissed as a direct defendant in March 1996, but a cross-
complaint filed by a previous landlord remains. An arbitration is pending to
resolve the dispute. The Company believes that the resolution of this matter
will not have a material adverse effect on the financial condition or operations
of the Company.
13
<PAGE>
In July 1997 the Company was served with a complaint filed by an employee of one
of the Company's former parent companies and landlords. The complaint, filed in
the Los Angeles County Superior Court on behalf of the employee by his wife,
alleges that the husband contracted chronic beryllium disease as a result of his
exposure to beryllium through Ceradyne's products, equipment and premises. The
complaint seeks unspecified damages against the Company, its officers and its
directors. The Company believes that the plaintiffs' claims are without merit
and that the resolution of this matter will not have a material adverse effect
on the financial condition or operations of the Company. Defense of this case
has been tendered to the Company's insurance carriers. There can be no
assurances, however, that this claim will be covered by insurance, or that, if
covered, the amount of insurance will be sufficient to cover any potential
judgment.
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
The following matters were voted upon at the Annual Meeting of Stockholders held
on July 28, 1997.
A. The following seven persons were elected as Directors of the Company to
serve until the next annual meeting of stockholders or until their
successors are elected and have qualified:
<TABLE>
<CAPTION>
NUMBER OF SHARES
--------------------------------
FOR AUTHORITY WITHHELD
--------- ------------------
<S> <C> <C>
J.P. Moskowitz 6,686,714 59,295
L.M. Allenstein 6,689,756 56,253
R.A. Alliegro 6,682,756 63,253
P. Beardmore 6,683,756 62,253
F.Edelstein 6,683,731 62,278
M.A. Shader 6,683,756 62,253
M. Lohr 6,682,731 63,278
</TABLE>
B. The approval of an amendment to increase the number of shares of Common
Stock authorized for issuance by 100,000 shares to 550,000 shares of Common
Stock under the Company's 1994 Stock Incentive Plan
Votes:
For 6,579,840
Against 136,382
Abstain 29,787
Broker non votes -0-
14
<PAGE>
Items 2,3 and 5. N/A
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
27 Financial Data Schedule
(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: /s/ HOWARD F. GEORGE
-----------------------
Howard F. George
Vice President
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: August 14, 1997
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q - FIRST
AND SECOND QUARTER 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
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