Ceradyne, Inc. Reports 2004 Fourth Quarter and 12-Month Results; Sales

    Business Editors

    COSTA MESA, Calif.--(BUSINESS WIRE)--March 4, 2005--Ceradyne, Inc. (Nasdaq:CRDN) (Company) today reported results for the fourth quarter and twelve months ended December 31, 2004.
    Sales for the fourth quarter 2004 increased 151.6% to a record $83.4 million from $33.1 million in the fourth quarter of 2003. Net income for the fourth quarter 2004 increased 108.7% to a record $8.8 million, or $0.35 per diluted share, compared to net income of $4.2 million, or $0.17 per diluted share, in the fourth quarter of 2003. Fourth quarter net income included a $1.4 million ($0.06 per share) after tax expense incurred in connection with the acquisition of ESK Ceramics, which related primarily to the amortization of the backlog and expensing the step up of the inventory acquired. Fully diluted average shares outstanding for the fourth quarter were 24,823,000 compared to 24,264,000 in the same period in 2003. Operations of ESK Ceramics have been consolidated since September 1, 2004, and contributed $27.3 million to fourth quarter 2004 sales.
    Gross profit margin increased to 31.3% of net sales in the fourth quarter of 2004 from 30.1% of net sales in the fourth quarter of 2003. The acquisition-related expenses impacted the gross profit margin for the fourth quarter of 2004 by 2.6% of net sales.
    The provision for income taxes was 34.4% in the fourth quarter 2004, compared to 35.0% in the fourth quarter 2003.
    Sales for the year ended December 31, 2004, increased to a record $215.6 million, up 112.5% from $101.5 million in 2003. For the year ended December 31, 2004, net income increased to $27.6 million, or $1.12 per diluted share, on 24,598,000 average shares outstanding, from $11.2 million, or $0.51 per diluted share, on 21,900,000 shares, for the year ended December 31, 2003. Net income for the year ended December 31, 2004, was up 145.4% over last year, and earnings per diluted share for 2004 increased 119.6% compared to 2003. For the year, fully diluted average shares outstanding were 24,598,000 compared to 21,900,000 shares in 2003.
    Fourth quarter 2004 new orders were a record $145.1 million compared to $69.5 million in fourth quarter 2003. For the year 2004, new orders hit a record $276.0 million, a 62.4% increase from $170.0 million in 2003. Total order backlog on December 31, 2004, was a record $199.9 million compared to the prior year backlog of $104.2 million (including unexercised options for orders of $1.1 million).
    Joel P. Moskowitz, Ceradyne president and chief executive officer, commented: "The fourth quarter 2004 is the first full quarter of incorporating the Ceradyne acquisition of ESK Ceramics (Kempten, Germany) into our financial statements. We are very pleased with ESK's performance, as well as the continuing integration of ESK with Ceradyne.
    "The strong 2004 increase in new orders and year-end backlog provides support for continuing Ceradyne growth in 2005. Our new Lexington, Ky., plant is now "on stream," producing diesel engine components and ceramic armor plates. This new plant should permit us to meet new requirements for these products."
    Ceradyne's management will review the financial results for the quarter and the year ended December 31, 2004, and provide an outlook on Ceradyne's business in a conference call at 8:30 a.m. Pacific time today. Interested parties may listen to the teleconference live via the Internet at www.ceradyne.com or www.Fulldisclosure.com. These web sites will also host an archive of the teleconference. A telephone playback will be available beginning 11:30 a.m. PST today through midnight on March 10, 2005. The playback can be accessed by calling 800-642-1687 (or 706-645-9291 for international callers) and providing Conference ID 3993347.
    Ceradyne develops, manufactures and markets advanced technical ceramic products and components for defense, industrial, automotive/diesel and commercial applications. Additional information about the Company can be found at www.ceradyne.com.

    Except for the historical information contained herein, this news 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 from those projected. Words such as "anticipates," "believes," "plans," "expects," "intends," "future" and similar expressions are intended to identify forward-looking statements. These risks and uncertainties are described in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2003, and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004, 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 Year Ended December 31, December 31, 2004 2003 2004 2003 --------- -------- --------- ---------

NET SALES $83,372 $33,142 $215,612 $101,473 Cost of product sales 57,280 23,177 146,518 72,124 --------- -------- --------- --------- GROSS PROFIT 26,092 9,965 69,094 29,349 --------- -------- --------- ---------

Operating expenses: Selling 4,694 733 8,266 2,440 General and Administrative 5,103 2,310 14,131 7,799 Research and Development 1,460 605 3,341 2,111 --------- -------- --------- --------- 11,257 3,648 25,738 12,350 --------- -------- --------- ---------

INCOME FROM OPERATIONS 14,835 6,317 43,356 16,999 Other income (expense): Other income (167) 158 2,224 321 Interest (expense) (1,279) - (1,661) (32) --------- -------- --------- --------- (1,446) 158 563 289

INCOME BEFORE PROVISION FOR INCOME TAXES 13,389 6,475 43,919 17,288 Provision for income taxes 4,604 2,266 16,346 6,051 --------- -------- --------- --------- NET INCOME $8,785 $4,209 $27,573 $11,237 ========= ======== ========= =========

Earnings per share, basic $0.36 $0.18 $1.14 $0.52 Earnings per share, diluted $0.35 $0.17 $1.12 $0.51

Avg. shares outstanding, basic 24,395 23,805 24,170 21,442 Avg. shares outstanding, diluted 24,823 24,264 24,598 21,900

Condensed Consolidated Balance Sheets (in thousands):

December 31, 2004 December 31, 2003 ------------------ -----------------

Cash and Cash Equivalents $4,521 $11,462 Short Term Investments 10,041 19,202 Other Current Assets 118,220 44,407 Net Property, Plant and Equipment 162,278 27,625 Other Assets 19,640 1,511 ------------------ ----------------- Total Assets $314,700 $104,207 ================== =================

Current Liabilities $56,467 $14,552 Long Term Debt 108,625 - Non Current Liabilities 10,735 - Deferred Tax Liability 3,831 2,878 Stockholders' Equity 135,042 86,777 ------------------ ----------------- Total Liabilities and Stockholders Equity $314,700 $104,207 ================== =================

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CONTACT: Ceradyne, Inc. Jerrold J. Pellizzon, 714-549-0421 x262 jpellizzon@ceradyne.com or Silverman Heller Associates Dan Matsui/Gene Heller, 310-208-2550 dmatsui@sha-ir.com

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: AUTOMOTIVE AEROSPACE/DEFENSE GOVERNMENT TRANSPORTATION MANUFACTURING EARNINGS CONFERENCE CALLS SOURCE: Ceradyne, Inc.

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