Summary of CERADYNE INC - Yahoo! Finance

Item 8.01 Other Events.

This Current Report on Form 8-K is being filed to update the historical financial statements of Ceradyne, Inc. (Company) included in its Annual Report on Form 10-K for the year ended December 31, 2008 (the 2008 Form 10-K) to reflect changes in the accounting treatment of the Companys 2.875% senior subordinated convertible notes due December 15, 2035 (the Notes). These changes, which are described below, are required by Financial Accounting Standards Board Staff Position (FSP) No. APB 14-1, Accounting for Convertible Debt Instruments That May be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP No. APB 14-1), which was issued in May 2008 and became effective for Ceradyne as of January 1, 2009.

FSP No. APB 14-1 specifies that issuers of convertible debt instruments that may be settled in cash upon conversion, such as the Notes, should separately account for the liability and equity components in a manner that will reflect the issuers nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods. The Company adopted FSP No. APB 14-1 as of January 1, 2009, and the adoption impacted the historical accounting for the Notes. The adoption of FSP No. APB 14-1 resulted in the following retrospective changes in long-term debt, debt issuance costs (included in other noncurrent assets), deferred tax liability, additional paid in capital and retained earnings:

(in Thousands)                                          Net Increase (Decrease)
                                                Debt                            Additional
                             Long -Term       Issuance      Deferred Tax         Paid In          Retained
                                Debt           Costs          Liability          Capital          Earnings
Allocation of long term
debt proceeds and
issuance costs  to equity
component on issuance
date                        $    (29,261 )   $   (1,018 )   $      11,015     $       17,228     $        -
Cumulative retrospective
impact from amortization
of discount on liability
component and debt
issuance costs                     3,414            204            (1,252 )                -         (1,958 )
Cumulative retrospective
impact at January 1, 2007        (25,847 )         (814 )           9,763             17,228         (1,958 )
Retrospective impact from
amortization of discount
on liablity component and
debt issuance costs
during the year                    3,595            182            (1,331 )                -         (2,082 )
Cumulative retrospective
impact at December 31,
2007                        $    (22,252 )   $     (632 )   $       8,432     $       17,228     $   (4,040 )

The adoption of FSP No. APB 14-1 also resulted in increased interest expense of approximately $3.7 million in 2008, $3.4 million in 2007 and $3.1 million in 2006 and decreased net income by $2.3 million in 2008, $2.1 million in 2007 and $1.9 million in 2006. The retrospective impact to earnings per share was a decrease of $0.09 in 2008, $0.08 in 2007 and $0.07 in 2006.

As of December 31, 2008 and 2007, long-term debt and the equity component (recorded in additional paid in capital, net of income tax benefit) associated with the Notes, retrospectively changed in accordance with FSP No. APB 14-1, comprised the following (in thousands):

                                                December        December
                                                31, 2008        31, 2007
            Long-term debt
            Principal amount                   $   121,000     $   121,000
            Unamortized discount                   (18,369 )       (22,252 )
               Net carrying amount             $   102,631     $    98,748

            Equity component, net of income
            tax benefit                        $   17,228          17,228

As required by FSP No. APB 14-1, the Company has revised the presentation of its convertible debt, capitalized debt issuance costs and related interest expense associated with the Notes to reflect these changes and has retrospectively adjusted all comparative prior period information in the 2008 Form 10-K on this basis. The Company is filing this Current Report on Form 8-K to reflect the impact of the adoption of this standard on previously issued financial statements. This will permit the Company to incorporate these financial statements by reference in future SEC filings. The impact of the adoption of this standard is reflected and is set forth in the following sections of the Companys 2008 Form 10-K, which as revised are included as Exhibit 99.1 to this Current Report on Form 8-K.

Part II, Item 6. Selected Consolidated Financial Data,

Part II, Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations,

Part II, Item 8. Financial Statements and Supplementary Data

Part IV, Item 15(a). Financial Statements and

Exhibit 12. Calculation of Ratio of Earnings to Fixed Charges.

As this Current Report on Form 8-K is being filed only for the purpose described above, and only affects the Items specified above, the other information in the Companys 2008 Form 10-K remains unchanged. No attempt has been made in this Current Report on Form 8-K to modify or update disclosures in the Companys 2008 Form 10-K except as described above. This Current Report on Form 8-K does not reflect events occurring after the filing of the Companys 2008 Form 10-K or modify or update any related disclosures. Information in the Companys 2008 Form 10-K not affected by this Current Report on Form 8-K is unchanged and reflects the disclosure made at the time of the filing of the original Companys 2008 Form 10-K with the Securities and Exchange Commission on February 24, 2009. Accordingly, this Current Report on Form 8-K should be read in conjunction with the Companys 2008 Form 10-K and the Companys filings made with the Securities and Exchange Commission subsequent to the filing of the Companys 2008 Form 10-K, including any amendments to those filings.