-----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, EDkJc1UTKQkdu7YuMWiCP7GTgh3XPOEJdgOdPn7cKv5cNxOdZ9beyRQWn23fuxOU SJwftPykIEigXYJvBL5WKA== 0001017062-96-000478.txt : 19961113 0001017062-96-000478.hdr.sgml : 19961113 ACCESSION NUMBER: 0001017062-96-000478 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961112 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: 96659210 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 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 September 30, 1996 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 incorporation or organization) Identification No.) 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 September 30, 1996 - ---------------------------- ----------------------------------------- Common Stock, $.01 par value 7,834,190 Shares Page 1 of 18 Pages CERADYNE, INC. INDEX ----- PAGE NO. -------- PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Statement Regarding Financial Information....................... 3 Consolidated Balance Sheets - September 30, 1996................ 4-5 and December 31, 1995 Consolidated Statements of Income -............................. 6 Three months ended September 30, 1996 and 1995 Nine months ended September 30, 1996 and 1995 Consolidated Statements of Cash Flow -.......................... 7-8 Nine months ended September 30, 1996 and 1995 Condensed Notes to Consolidated 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 4. Submission of Matters to Vote of Security Holders............... 17 Item 6. Exhibits and Reports on Form 8-K................................ 18 SIGNATURE................................................................. 18
2 CERADYNE, INC. FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 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. The Financial Statements reflect all adjustments (which are of a normal recurring nature) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. 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, 1995, as filed with the Securities and Exchange Commission on March 31, 1996. 3
CERADYNE, INC. CONSOLIDATED BALANCE SHEETS ASSETS (AMOUNTS IN THOUSANDS) 9-30-1996 12-31-1995 (UNAUDITED) (AUDITED) ============================================================================= CURRENT ASSETS: Cash & cash equivalents $ 3,099 $ 6,219 Accounts receivable, net of allowances of approximately $132 & $150 for doubtful accts at 9-30-1996 & 12-31-1995 $ 5,580 $ 3,759 Receivables from related parties $ 15 $ 12 Inventories $ 8,830 $ 6,749 Production Tooling $ 564 $ 366 Prepaid expenses and other $ 483 $ 323 ---------- ----------- TOTAL CURRENT ASSETS $ 18,571 $ 17,428 ---------- ----------- PROPERTY, PLANT & EQUIPMENT, AT COST: Land $ 422 $ 422 Buildings & improvements $ 1,825 $ 1,825 Lease rights $ 2,659 $ 2,659 Machinery & equipment $ 15,533 $ 14,907 Leasehold improvements $ 1,269 $ 1,141 Office equipment $ 1,713 $ 1,383 Construction in progress $ 1,012 $ 134 ---------- ----------- $ 24,433 $ 22,471 Less accumulated depreciation & amortization $ 18,571 $ 17,750 ---------- ----------- $ 5,862 $ 4,721 COSTS IN EXCESS OF NET ASSETS ACQUIRED, net of accumulated amortization of $1,556 & $1,441 at 9-30-1996 & 12-31-1995 $ 2,116 $ 2,233 OTHER ASSETS, net of accumulated amortization $ 433 $ 498 of $571 and $539 at 9-30-1996 & 12-31-1995 ---------- ----------- TOTAL ASSETS $ 26,982 $ 24,880 ========== =========== =============================================================================
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 4
CERADYNE, INC. CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY (AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA) 9-30-1996 12-31-1995 (UNAUDITED) (AUDITED) ======================================================================= CURRENT LIABILITIES: Current portion of long-term debt $ 464 $ 1,601 Accounts payable $ 1,494 $ 1,642 Accrued expenses: Payroll and payroll related $ 846 $ 588 Other $ 333 $ 381 ---------- ----------- Total current liabilities $ 3,137 $ 4,212 ---------- ----------- LONG-TERM DEBT $ 555 $ 555 ---------- ----------- DEFERRED REVENUE $ 261 $ 261 ---------- ----------- SHAREHOLDERS' EQUITY: Common stock, $.01 par value: Authorized - 12,000,000 shares; Outstanding - 7,834,190 shares & 7,715,624 shares at 9-30-1996 & 12-31-1995, respectively $ 37,030 $ 36,590 Accumulated deficit $ (13,938) $ (16,738) ---------- ----------- TOTAL SHAREHOLDERS' EQUITY $ 23,092 $ 19,852 ---------- ----------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 26,982 $ 24,880 ========== =========== =======================================================================
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 5
CERADYNE, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED 9-30-1996 & 1995 AND NINE MONTHS ENDED 9-30-1996 & 1995 (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) ============================================================================== THREE MONTHS NINE MONTHS ENDED SEPT. 30 ENDED SEPT. 30 - ------------------------------------------------------------------------------ 1996 1995 1996 1995 -------------- --------------- UNAUDITED UNAUDITED ============================================================================== NET SALES $7,385 $6,274 $20,706 $17,410 COST OF PRODUCT SALES $5,223 $4,679 $14,638 $12,904 ------ ------ ------- ------- Gross Profit $2,162 $1,595 $ 6,068 $ 4,506 OPERATING EXPENSES: Selling $ 388 $ 365 $ 1,212 $ 1,116 General & Administration $ 752 $ 572 $ 2,138 $ 1,769 ------ ------ ------- ------- Income from operation $1,022 $ 658 $ 2,718 $ 1,621 ------ ------ ------- ------- OTHER (INCOME) EXPENSE: Other (income) expense $( 103) $ 0 $( 292) $( 2) Interest expense $ 19 $ 94 $ 142 $ 255 ------ ------ ------- ------- $( 84) $ 94 $( 150) $ 253 ------- ------ ------- ------- Income (Loss) before provision for income taxes $1,106 $ 564 $ 2,868 $ 1,368 PROVISION FOR INCOME TAXES $ 22 $ - $ 68 $ - ------ ------ ------- ------- NET INCOME $1,084 $ 564 $ 2,800 $ 1,368 ====== ====== ======= ======= NET INCOME (LOSS) PER COMMON & EQUIVALENT SHARE Primary $.14 $.09 $.35 $.21 ====== ====== ======= ======= ==============================================================================
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 6
CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED 9-30-1996 & 1995 (AMOUNTS IN THOUSANDS) ============================================================================ NINE MONTHS ENDED SEPT. 30 - ---------------------------------------------------------------------------- 1996 1995 UNAUDITED UNAUDITED ============================================================================ CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,800 $ 1,368 ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES: Depreciation and amortization $ 939 $ 1,118 (Increase) in accounts receivable, net $(1,821) $( 420) (Increase) in receivables from related parties $( 2) $ -0- (Increase) in inventories $(2,081) $( 822) (Increase) in production tooling $( 198) $( 66) (Increase) in prepaid expenses & other assets $( 160) $( 114) (Decrease) in accounts payable $( 148) $( 781) Increase in accrued expenses $ 210 $ 272 (Decrease) in deferred revenue $ -0- $( 116) ------- ------- NET CASH PROVIDED FROM (USED IN) OPERATING ACTIVITIES $( 461) $ 439 ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant & equipment $(1,962) $( 791) ------- ------- NET CASH USED IN INVESTING ACTIVITIES $(1,962) $( 791) ------- -------- ==============================================================================
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 7
CERADYNE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED 9-30-1996 & 1995 (AMOUNTS IN THOUSANDS) =============================================================================== NINE MONTHS ENDED SEPT. 30 - ------------------------------------------------------------------------------- 1996 1995 UNAUDITED UNAUDITED =============================================================================== CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock, net $ 440 $ 172 Net (payments) on long-term debt $(1,137) $ 441 ------- ----- Net cash provided by (used in) financing activities $( 697) $ 613 ------- ----- Increase (decrease) in cash and cash equivalents $(3,120) $ 261 Cash & cash equivalents, beginning of period $ 6,219 $ -0- Cash & cash equivalents, end of period $ 3,099 $ 261 ======= ===== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest paid $ 142 $ 255 Income taxes paid $ 104 $ -0- ======= ===== ===============================================================================
SEE ACCOMPANYING CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. 8 CERADYNE, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (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, 1996 and December 31, 1995:
SEPTEMBER 30, 1996 DECEMBER 31, 1995 =============================================================== Raw Materials $3,793,000 $2,833,000 Work-in-Process $4,843,000 $3,378,000 Finished Goods $ 194,000 $ 538,000 Total Inventories $8,830,000 $6,749,000 ========== ========== ===============================================================
3. Net Income (Loss) 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, 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, 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. Also, warrants to purchase common stock (issued to the underwriters from the December 1995 public offering) have been included as common stock equivalents. Common stock equivalents 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: 9
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30 SEPTEMBER 30 1996 1995 1996 1995 ============================================================================= Weighted average number of shares outstanding 7,831,000 6,288,900 7,785,000 6,265,400 Common stock equivalents 207,000 251,100 188,000 174,600 --------- --------- --------- --------- Number of shares 8,038,000 6,540,000 7,973,000 6,440,000 ========= ========= ========= ========= =============================================================================
4. Long-Term Debt and Bank Borrowing Arrangements ----------------------------------------------
Long-term debt consisting of the following at September 30, 1996: Note payable to asset-based lender, bearing interest at the institution's prime rate (8.25 percent at September 30, 1996), plus 2.0 percent. $1,000,000 Four contract capital leases, bearing interest between 5.38 percent and 11.64 percent, payable in monthly installments of $18,948 expiring December 1996, secured by the equipment. $ 19,000 $1,019,000 Less - Current portion $ 464,000 ---------- Long-term debt $ 555,000 ========== ===============================================================================
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 debt 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 December 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 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. This 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 10 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 $7,651,000, 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. 11 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------- Results of Operations for Quarter Ended September 30, 1996 - ---------------------------------------------------------- Reference is made to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, for an analysis and detailed discussion of the Company's financial condition and results of operations for the period covered by that report. Ceradyne develops, manufactures and markets advanced technical ceramic products and components for industrial, defense, consumer and microwave applications. In many high performance applications, products made of advanced technical ceramics meet specifications that similar products made of metals or plastics cannot achieve. Advanced technical ceramics can withstand extremely high temperatures, combine hardness with light weight, are highly resistant to corrosion and wear, and have excellent electrical insulation capability and other special electronic properties. Net Sales. Net sales for the quarter ended September 30, 1996 were a record $7.4 million, which represents an 18% or $1.1 million increase in net sales compared with the corresponding period of the prior year. For the nine months ended September 30, 1996, net sales were $20.7 million, for an increase of 19% or $3.3 million over the same period last year. Highlighting the increase in sales for the third quarter 1996 were lightweight ceramic armor which accounted for 85% of the increase in sales. Industrial products accounted for 35% of the sales increase, primarily components for paper making equipment and centrifuges. There was a 10% decrease in sales of orthodontic products due to the late introduction of the new "Clarity" product by our marketing partner, 3M's Unitek division, in the third quarter. However, the initial demand for the new "Clarity" product is surpassing the Company's production capability; therefore, Ceradyne is hiring personnel and investing in equipment to increase production. There was a 10% timing decrease in sales for the Thermo Materials division; however, orders have increased for castable products to be shipped in the fourth quarter. Moreover, the increase in sales for the nine months ended September 30, 1996, as compared to the same period last year, was ceramic armor products accounting for approximately 60% of the increase, orthodontic sales 8%, other advanced technical ceramic products which consisted of nozzles, cutting tools, down hole drilling valves, and components for diesel engines, paper making equipment and centrifuges 19%, and 13% for microwave cathodes and ceramic-impregnated dispenser cathodes for large screen television and high definition television (HDTV). International sales for the three months ended September 30, 1996 were 19% of sales compared with 32% of sales for the same period last year. Furthermore, international sales for the nine months ended September 30, 1996 are at 21% of total sales. This has 12 decreased over last year's 29% for the corresponding period. This decrease in both the third quarter and nine months from last year was mainly for the completion in the third quarter of 1995 of a contract for ceramic armor shipped to a United Kingdom customer, partially offset by increased international shipments of ceramic-impregnated dispenser cathodes for large screen television and high definition television (HDTV), and fired industrial products. Gross Profit. Ceradyne's gross profit was $2.2 million or 29% of net sales for the quarter ended September 30, 1996, and this compares with gross profit of $1.6 million or 25% of net sales for the same quarter of last year. For the first nine months of 1996, the gross profit was $6.1 million or 29% of net sales and this compares with $4.5 million or 26% of net sales for the first nine months of last year. The increase in gross profit for the third quarter and first nine months of 1996 as compared to 1995 is $.6 million or 36% and $1.6 million or 35%, respectively. The Company's sales volume this period (mainly the California operations), versus the prior year period, had an impact on absorbing fixed manufacturing overhead, and, as a result, the Company's gross profit, in absolute dollars and as a percentage of net sales, was impacted positively. Highlighting the products that contributed to gross profit increases were armor products and other advanced technical products. The armor products contributed to the gross profit because of betterment in yields due to continuing favorable volume. Other advanced technical products had record shipments, combined with a favorable product mix, such as paper industry ceramic products and centrifuge ceramic components. Selling expenses were $.4 million for the quarter and $1.2 million for the nine months ended September 30, 1996. This represents an increase of 6% for the quarter and 9% for the nine months as compared to the prior year comparable periods. Selling expenses, as a percentage of sales, were 5.2% for the quarter and 5.9% for nine months ended September 30, 1996, as compared to 5.8% for the quarter and 6.4% for the first nine months of last year's comparative periods. The betterment, as a percent to sales for the first nine months ended September 30, 1996, is because of an increase in sales; however, the increase in real dollars for the quarter and year-to-date over last year's comparable periods is mainly due to sales commissions. General and administrative expense was $.8 million for the second quarter and $2.1 million for the nine months ended September 30, 1996; and this was a 31% increase for the quarter and 21% for nine months ended September 30, 1996 due to the payment of employee incentive bonuses indexed to the Company's profitability during the quarter and nine month year-to-date periods ended September 30, 1996. Other Income. Other income was $103,000 for the quarter and $292,000 for the nine months ended September 30, 1996; and this compares with income of $0 for the quarter and income of $2,000 for the nine months of the corresponding periods last year. The increase in income was mainly attributable to interest income (from cash proceeds from the public offering of December 1995), and to royalty income for orthodontic sales. 13 Interest Expense. Interest expense was $19,000 for the quarter and $142,000 for the nine months ended September 30, 1996; and this compares with $94,000 for the quarter and $255,000 for the same periods last year. The decrease over the comparable period of the prior year is primarily attributable to paying down the debt in February 1996. Income Taxes. The Company made a provision for the quarter of $22,000 and $68,000 for the nine months ended September 30, 1996 due to the assessment of alternative minimum income taxes. The Company was able to offset the balance of its federal and state income tax liability with net operating loss and tax credit carryforwards which totaled approximately $17.3 million as of September 30, 1996. Net Income. Reflecting all of the matters discussed above, net income was a record of $1,084,000 (or $.14 per share) and $2,800,000 (or $.35 per share) for the third quarter and nine months ended September 30, 1996, respectively. This compares to $564,000 (or $.09 per share) and $1,368,000 (or $.21 per share) for the same periods last year. 14 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. On December 4, 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 September 30, 1996, the Company had cash and cash equivalents of $3.1 million. On January 30, 1996, the Company amended its revolving credit agreement with a financial lending institution. The debt with this lender was reduced from $2.1 million to $1.0 million. The Company has delivered to the lender cash collateral, in the form of a bank certificate of deposit, in the sum of $1.0 million as security for the credit facility. The interest rate on the new debt of $1.0 million has decreased from 3.6% over prime rate to 2.0% over prime rate. The maximum overall credit facility with this lender is $4.0 million and the Company is only utilizing $1.0 million in borrowing at present. This credit facility will expire on November 29, 1997. See Note 4 to the financial statements for details. 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. 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. 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 whom 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. 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 remained until September 1996. During September 1996, the landlord was settled out of the action, and Ceradyne is no longer a defendant or cross-defendant in this matter. The amount to settle this particular suit was immaterial. 16 Item 4. Submission of Matters to Vote of Security Holders ------------------------------------------------- The following matters were voted upon at the Annual Meeting of Stockholders held on August 5, 1996. 1. 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:
NUMBER OF SHARES FOR AUTHORITY WITHHELD ========================================================= J. P. Moskowitz 6,738,976 9,815 L. M. Allenstein 6,738,976 9,815 R. A. Alliegro 6,738,976 9,815 P. Beardmore 6,738,976 9,815 F. Edelstein 6,738,776 10,015 M. A. Shader 6,738,776 10,015 M. Lohr 6,738,776 10,015 =========================================================
2. The approval of an amendment to increase the number of shares of Common Stock authorized for issuance by 100,000 shares to 450,000 shares of Common Stock under the Company's 1994 Stock Incentive Plan.
Votes: - ----- For...................... 6,493,393 Against.................. 46,661 Abstain.................. 6,437 Broker non votes......... 202,300
17 Items 2, 3 and 5. Not applicable Item 6. Exhibits and Reports on Form 8-K -------------------------------- (a) Financial Data Schedule: 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: /s/ Howard F. George ---------------------------------------------------- Howard F. George Vice President Chief Financial Officer (Principal Financial and Accounting Officer) Dated: November 10, 1996 18 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q - FIRST AND SECOND QUARTER 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1995 JUL-01-1996 SEP-30-1996 3,099 0 5,448 132 8,830 18,571 24,433 18,571 26,982 3,137 0 0 0 37,030 0 26,982 7,385 7,385 5,223 1,037 0 0 19 1,106 22 0 0 0 0 1,084 .14 .14
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