-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WTO+lsHxFxcDXg6aAgoFVlvSeVj0djB7RTvU/5Yr9bAAJncvX6AUge4L212EFtuG G5GdPdLRYfb9uTeO01Q3Ww== 0000898430-95-002354.txt : 19951119 0000898430-95-002354.hdr.sgml : 19951119 ACCESSION NUMBER: 0000898430-95-002354 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CERADYNE INC CENTRAL INDEX KEY: 0000018937 STANDARD INDUSTRIAL CLASSIFICATION: ABRASIVE ASBESTOS & MISC NONMETALLIC MINERAL PRODUCTS [3290] IRS NUMBER: 330055414 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-13059 FILM NUMBER: 95591903 BUSINESS ADDRESS: STREET 1: 3169 RED HILL CITY: COSTA MESA STATE: CA ZIP: 92626 BUSINESS PHONE: 7145490421 MAIL ADDRESS: STREET 2: 3169 RED HILL CITY: COSTA MESA STATE: CA ZIP: 92626 10-Q 1 FORM 10-Q 09/30/95 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 CERADYNE, INC. INDEX -----
PAGE NO. -------- 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
2 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 CERADYNE, INC. CONSOLIDATED BALANCE SHEETS ASSETS (AMOUNTS IN THOUSANDS)
9-30-1995 12-31-1994 (UNAUDITED) (AUDITED) ---------- ----------- 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 ========== ===========
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4 CERADYNE, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
9-30-1995 12-31-1994 (UNAUDITED) (AUDITED) ---------- ----------- 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 ========== ===========
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5 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)
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 ------------------ ------------------ 1995 1994 1995 1994 ------ ------ ------- ------- UNAUDITED UNAUDITED 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) ====== ====== ======= =======
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6 CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED 9-30-1995 & 1994 (AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30 ---------------------- 1995 1994 Unaudited Unaudited --------- --------- 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) ------ -------
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 7 CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED 9-30-1995 & 1994 (AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30 --------------------- 1995 1994 UNAUDITED UNAUDITED --------- --------- 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 $ -- $ -- ----- -----
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 8 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:
September 30, 1995 December 31, 1994 ------------------ ----------------- 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 ========== ==========
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 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.
THREE MONTHS ENDED SEPT 30 NINE MONTHS ENDED SEPT 30 -------------------------- ------------------------- 1995 1994 1995 1994 --------- --------- --------- --------- 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 ========= ========= ========= =========
4. Long-term Debt and Bank Borrowing Arrangements ---------------------------------------------- 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 ==========
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 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 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 $.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 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 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 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 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 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 261 0 3,463 152 6,558 10,580 22,242 17,382 18,218 3,975 0 30,601 0 0 0 18,218 17,410 17,410 12,904 2,885 (2) 0 255 1,368 0 1,368 0 0 0 1,368 .21 .21
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