<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 March 31, 2000

     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. 000-13059

                                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 April 2, 2000
------------------------------             -----------------------------------

Common Stock, $.01 par value                    8,166,938 Shares

                                 Page 1 of 17 Pages
<PAGE>

                                CERADYNE, INC.


<TABLE>
<CAPTION>
             INDEX                                                              PAGE NO.
             -----                                                              --------
<S>                                                                             <C>
PART I.      FINANCIAL INFORMATION

Item 1.      Financial Statements

             Statement Regarding Financial Information........................        3

             Consolidated Balance Sheets -March 31, 2000
             and December 31, 1999............................................      4-5

             Consolidated Statements of Income -
             Three Months Ended March 31, 2000 and 1999.......................        6

             Consolidated Statements of Cash Flow -
             Three Months Ended March 31, 2000 and 1999.......................        7

             Condensed Notes to Consolidated Financial Statements.............     8-11

Item 2.      Management's Discussion and Analysis of Financial Condition
             & Results of Operations..........................................    11-14

Item 3.      Quantitative and Qualitative Disclosures
             About Market Risk................................................       14

PART II.     OTHER INFORMATION

Item 1.      Legal Proceedings................................................       15

Items 2,     N/A..............................................................       16
 3, 4 and 5

Item 6.      Exhibits and Reports on Form 8-K.................................       16

SIGNATURE.....................................................................       16
</TABLE>

                                       2
<PAGE>

                                CERADYNE, INC.

                                   FORM 10-Q
                             FOR THE QUARTER ENDED

                                March 31, 2000



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 the disclosures are adequate to make the information
          presented not misleading.  It is suggested 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, 1999, as filed with the Securities and
          Exchange Commission on March 30, 2000.

                                       3
<PAGE>

================================================================================
                                CERADYNE, INC.
                          CONSOLIDATED BALANCE SHEETS
                                    ASSETS
                            (Amounts in thousands)

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------
                                                                              March 31, 2000            December 31, 1999
                                                                                (Unaudited)
=========================================================================================================================
<S>                                                                           <C>                       <C>
CURRENT ASSETS
-------------------------------------------------------------------------------------------------------------------------
  Cash & cash equivalents                                                            $  1,465                    $  1,407
-------------------------------------------------------------------------------------------------------------------------
  Accounts receivable, net of allowances for                                            7,995                       5,837
  Doubtful accounts of approximately $90 and $39
  at March 31, 2000 and December 31, 1999
-------------------------------------------------------------------------------------------------------------------------
  Other receivables                                                                       113                          98
-------------------------------------------------------------------------------------------------------------------------
  Inventories                                                                           8,782                       8,452
-------------------------------------------------------------------------------------------------------------------------
  Production tooling                                                                    1,504                       1,343
-------------------------------------------------------------------------------------------------------------------------
  Prepaid expenses and other                                                              719                       1,147
                                                                                     --------                    --------
-------------------------------------------------------------------------------------------------------------------------
  TOTAL CURRENT ASSETS                                                                 20,578                      18,284
                                                                                     --------                    --------
-------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT & EQUIPMENT, at cost
-------------------------------------------------------------------------------------------------------------------------
  Land                                                                                    422                         422
-------------------------------------------------------------------------------------------------------------------------
  Buildings & improvements                                                              1,825                       1,825
-------------------------------------------------------------------------------------------------------------------------
  Machinery & equipment                                                                23,754                      23,462
-------------------------------------------------------------------------------------------------------------------------
  Leasehold improvements                                                                2,163                       1,870
-------------------------------------------------------------------------------------------------------------------------
  Office equipment                                                                      2,722                       2,456
-------------------------------------------------------------------------------------------------------------------------
  Construction in progress                                                                246                         700
                                                                                     --------                    --------
-------------------------------------------------------------------------------------------------------------------------
                                                                                       31,132                      30,735
-------------------------------------------------------------------------------------------------------------------------
  Less accumulated depreciation & amortization                                        (20,209)                    (19,733)
-------------------------------------------------------------------------------------------------------------------------
                                                                                       10,923                      11,002
                                                                                     --------                    --------
-------------------------------------------------------------------------------------------------------------------------
COSTS IN EXCESS OF NET ASSETS ACQUIRED,                                                 1,804                       1,846
  net of accumulated amortization of $2,113 and $2,071 at March
   31, 2000 and December 31,1999, respectively
-------------------------------------------------------------------------------------------------------------------------
OTHER ASSETS, net of accumulated amortization                                           1,755                       1,761
  of $651 and $645 at March 31, 2000 and December 31, 1999,                          --------                    --------
   respectively
-------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                                         $ 35,060                    $ 32,893
                                                                                     ========                    ========
=========================================================================================================================
</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>
-------------------------------------------------------------------------------------------------------------------------
                                                                               March 31, 2000           December 31, 1999
                                                                                 (Unaudited)
=========================================================================================================================
<S>                                                                            <C>                      <C>
CURRENT LIABILITIES
-------------------------------------------------------------------------------------------------------------------------
  Current portion of long-term debt                                                   $   100                    $    100
-------------------------------------------------------------------------------------------------------------------------
  Accounts payable                                                                      2,758                       2,214
-------------------------------------------------------------------------------------------------------------------------
  Accrued expenses:
-------------------------------------------------------------------------------------------------------------------------
       Payroll and payroll related                                                        793                         665
-------------------------------------------------------------------------------------------------------------------------
       Other                                                                              259                         149
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
  TOTAL CURRENT LIABILITIES                                                             3,910                       3,128
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT, NET OF CURRENT PORTION                                                    333                         358
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
DEFERRED REVENUE                                                                          202                         270
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------------------------------------------------
  Common stock, $.01 par value,
  Authorized - 12,000,000 shares,
  Outstanding - 8,166,938 shares
  and 8,095,848 shares at March 31, 2000
  and December 31, 1999, respectively.                                                 38,222                      37,900
-------------------------------------------------------------------------------------------------------------------------
  Accumulated deficit                                                                  (7,607)                     (8,763)
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
  TOTAL SHAREHOLDERS' EQUITY                                                           30,615                      29,137
                                                                                      -------                    --------
-------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY                                              $35,060                    $ 32,893
                                                                                      =======                    ========
=========================================================================================================================
</TABLE>

                      See accompanying condensed notes to
                      Consolidated Financial Statements.

                                       5
<PAGE>

    =========================================================================
                               CERADYNE, INC.
                      CONSOLIDATED STATEMENTS OF INCOME
                (Amounts in thousands, except per share data)

    =========================================================================
                                                           THREE MONTHS
                                                              ENDED
                                                             MARCH 31
    -------------------------------------------------------------------------
                                                        2000           1999
                                                   --------------------------
                                                             (Unaudited)
    =========================================================================
    NET SALES                                         $11,148         $6,305
    -------------------------------------------------------------------------
    COST OF PRODUCT SALES                               8,263          5,126
                                                      -------         ------
    -------------------------------------------------------------------------
      Gross Profit                                      2,885          1,179
                                                      -------         ------
    -------------------------------------------------------------------------
    OPERATING EXPENSES
    -------------------------------------------------------------------------
         General and Administrative                     1,148            823
    -------------------------------------------------------------------------
         Selling                                          356            346
    -------------------------------------------------------------------------
         Research & Development                           268            135
                                                      -------         ------
    -------------------------------------------------------------------------
                                                        1,772          1,304
                                                      -------         ------
    -------------------------------------------------------------------------
         Income (loss) from operations                  1,113           (125)
                                                      -------         ------
    -------------------------------------------------------------------------
    OTHER (INCOME) EXPENSE:
    -------------------------------------------------------------------------
         Other (income)                                   (75)           (90)
    -------------------------------------------------------------------------
         Interest expense                                   9            ---
                                                      -------         ------
    -------------------------------------------------------------------------
                                                          (66)           (90)
                                                      -------         ------
    -------------------------------------------------------------------------
         Income before provision
         (benefit) for income taxes                     1,179            (35)
    -------------------------------------------------------------------------
    PROVISION (BENEFIT) FOR INCOME TAXES                   23            (83)
                                                      -------         ------
    -------------------------------------------------------------------------
    NET INCOME                                        $ 1,156         $   48
                                                      -------         ------
    -------------------------------------------------------------------------
    BASIC & DILUTED INCOME PER SHARE                  $   .14         $  .01
                                                      =======         ======
    =========================================================================


                      See accompanying condensed notes to
                      Consolidated Financial Statements.

                                       6
<PAGE>

<TABLE>
<CAPTION>
====================================================================================================
                             CERADYNE, INC.
                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                         (Amounts in thousands)                          THREE MONTHS ENDED
                                                                              MARCH 31,
----------------------------------------------------------------------------------------------------
                                                                       2000               1999
                                                                    (Unaudited)         (Unaudited)
====================================================================================================
<S>                                                                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
----------------------------------------------------------------------------------------------------
  Net Income                                                           $ 1,156             $   48
----------------------------------------------------------------------------------------------------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET CASH
PROVIDED FROM (USED IN) OPERATING ACTIVITIES:
----------------------------------------------------------------------------------------------------
  Depreciation and amortization                                            524                418
----------------------------------------------------------------------------------------------------
  Increase in accounts receivable, net                                  (2,158)              (172)
----------------------------------------------------------------------------------------------------
  (Increase) decrease in other receivables                                 (15)                91
----------------------------------------------------------------------------------------------------
  Increase in inventories                                                 (330)              (246)
----------------------------------------------------------------------------------------------------
  (Increase) decrease in production tooling                               (161)                29
----------------------------------------------------------------------------------------------------
  (Increase) decrease in prepaid expenses & other assets                   428               (244)
----------------------------------------------------------------------------------------------------
  Increase in accounts payable                                             544                298
----------------------------------------------------------------------------------------------------
  Increase in accrued expenses                                             238                115
----------------------------------------------------------------------------------------------------
  Decrease in deferred revenue                                             (68)               (68)
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                  158                269
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
----------------------------------------------------------------------------------------------------
  Purchases of property, plant & equipment                                (397)              (881)
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES                                     (397)              (881)
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
----------------------------------------------------------------------------------------------------
  Proceeds from issuance of common stock                                   322                ---
----------------------------------------------------------------------------------------------------
      Net payments on long-term debt                                       (25)               ---
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
Net cash provided by financing activities                                  297                ---
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents                            58               (612)
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
Cash & cash equivalents, beginning of period                             1,407              2,870
                                                                       -------             ------
----------------------------------------------------------------------------------------------------
Cash & cash equivalents, end of period                                 $ 1,465             $2,258
                                                                       =======             ======
----------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
----------------------------------------------------------------------------------------------------
Interest paid                                                          $     9             $  ---
----------------------------------------------------------------------------------------------------
Income taxes paid                                                      $     4             $  ---
                                                                       -------             ------
====================================================================================================
</TABLE>

                      See accompanying condensed notes to
                      Consolidated Financial Statements.

                                       7
<PAGE>

                                CERADYNE, INC.
             CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                MARCH 31, 2000
                                  (Unaudited)
1.   Basis of Presentation
     ---------------------

     The consolidated financial statements include the financial statements of
     Ceradyne, Inc. (the Company) and its divisions. 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 March 31, 2000 and December 31, 1999 (in thousands):

     ==========================================================================
                               MARCH 31, 2000               DECEMBER 31, 1999
     ==========================================================================
      Raw Materials                $4,581                       $4,454
     --------------------------------------------------------------------------
      Work-in-Process               3,041                        3,198
     --------------------------------------------------------------------------
      Finished Goods                1,160                          800
     --------------------------------------------------------------------------
      Total Inventories            $8,782                       $8,452
                                   ======                       ======
     ==========================================================================

3.   Net Income Per Share
     --------------------

     The Company accounts for net income per share in accordance with SFAS No.
     128 "Earnings Per Share". Basic net income per share is computed by
     dividing income available to common stockholders by the weighted average
     number of common shares outstanding. Diluted net income per share is
     computed by dividing income available to common stockholders by the
     weighted average number of common shares outstanding plus the effect of any
     dilutive stock options and common stock warrants using the treasury stock
     method. The table below reconciles the weighted shares outstanding in the
     computation of basic net income per share to diluted net income per share.


     ===========================================================================
                                                          THREE MONTHS ENDED
                                                               MARCH 31,
     ---------------------------------------------------------------------------
                                                         2000           1999
     ===========================================================================

      Weighted average number of shares                8,113,641      8,054,838
      outstanding
     ---------------------------------------------------------------------------
      Dilutive stock options and common                  221,651         55,207
      stock warrants                                   ---------      ---------
     ---------------------------------------------------------------------------
      Number of shares used in diluted                 8,335,292      8,110,045
      computations                                     =========      =========
     ===========================================================================

                                       8
<PAGE>

4.   Long Term Debt
     ----------------

     =============================================================
      Capital Equipment loan bearing                   $ 433,000
      interest at 8.18%  APR.  Payable in
      monthly installments of $8,333,
      expiring August 2004.
     -------------------------------------------------------------
      Less Current Portion                              (100,000)
                                                        ---------
     -------------------------------------------------------------
      Long Term Debt                                   $ 333,000
     =============================================================


5.   Disclosure About Segments of Enterprise and Related Information
     ---------------------------------------------------------------

     In June 1997, the Financial Accounting Standards Board (FASB) issued
     Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures
     About Segments of an Enterprise and Related Information".  SFAS No. 131
     establishes standards for the way that public business enterprises report
     information about operating segments.  The Company adopted No. 131 in
     fiscal 1998, as required.

     The Company serves its markets and manages its business through three
     divisions, each of which has its own manufacturing facilities and
     administrative and selling functions.  The Company's Advanced Ceramic
     Operations, located in Costa Mesa, California, primarily produces armor and
     orthodontic products, components for semiconductor equipment, and houses
     the Company's SRBSN research and development activities.  The Company's
     cathode development and production are handled through its Semicon
     Associates division located in Lexington, Kentucky.  Fused silica products,
     including missile radomes, are produced at the Company's Thermo Materials
     division located in Scottdale, Georgia. Ceradyne's manufacturing structure
     is summarized in the following table:


<TABLE>
<CAPTION>
     =======================================================================================================
               FACILITY LOCATION                                     PRODUCTS
     -------------------------------------------------------------------------------------------------------
     <S>                                          <C>
      Advanced Ceramic Operations                 . Semiconductor Equipment Components
      Costa Mesa, California                      . Lightweight ceramic armor
      Approximately 74,000 square feet            . Orthodontic ceramic brackets
                                                  . Ceralloy(R) 147 SRBSN wear parts
                                                  . Precision ceramics
                                                  . Ceralloy(R) 147 SRBSN diesel/automotive engine parts
     -------------------------------------------------------------------------------------------------------
      Semicon Associates                          . Microwave ceramic-impregnated dispenser cathodes
      Lexington, Kentucky                         . Ion laser ceramic-impregnated dispenser cathodes
      Approximately 35,000 square feet            . Samarium cobalt magnets
     -------------------------------------------------------------------------------------------------------
      Thermo Materials                            . Glass tempering rolls (fused silica ceramics)
      Scottdale, Georgia                          . Metallurgical tooling (fused silica ceramics)
      Approximately 85,000 square feet            . Missile radomes (fused silica ceramics)
                                                  . Castable and other fused silica product
      ======================================================================================================
</TABLE>

                                       9
<PAGE>

                                Ceradyne, Inc.
                              Segment Disclosures
              for the Three Months Ended March 31, 2000 and 1999
                            (Amounts in thousands)

                         Three Months Ended March 31,

<TABLE>
<CAPTION>
                          Advanced Ceramic Ops    Semicon  Associates     Thermo Materials        TOTAL
------------------------------------------------------------------------------------------------------------------
                            2000      1999          2000     1999           2000    1999       2000     1999
------------------------------------------------------------------------------------------------------------------
<S>                      <C>       <C>             <C>      <C>            <C>     <C>         <C>      <C>
 Revenue from            $ 7,525   $ 3,246         $1,769   $1,562         $1,854  $1,497      $11,148  $ 6,305
 External                -------   -------         ------   ------         ------  ------      -------  -------
 Customers

 Depreciation            $   370   $   277         $   96   $   81         $   58  $   60      $   524  $   418
 and                     -------   -------         ------   ------         ------  ------      -------  -------
 Amortization

 Segment Income          $   662   $  (250)        $  307   $   81         $  210  $  134      $ 1,179  $   (35)
 (loss) before           -------   -------         ------   ------         ------  ------      -------  -------
 Provision
 (benefit) for
 Income  Taxes

 Segment Assets          $24,909   $19,774         $5,856   $6,627         $4,295  $3,485      $35,060  $29,886
                         -------   -------         ------   ------         ------  ------      -------  -------

 Expenditures            $   258   $   656         $   14   $  108         $  125  $  117      $   397  $   881
 for PP&E                -------   -------         ------   ------         ------  ------      -------  -------
                      --------------------------------------------------------------------------------------------
</TABLE>

                                       10
<PAGE>

                   Segment Disclosures for Net Sales by Area
              for the Three Months Ended March 31, 2000 and 1999


                         Three Months Ended March 31,

<TABLE>
<CAPTION>
                    Advanced Ceramic Ops    Semicon Associates       Thermo Materials         TOTAL
----------------------------------------------------------------------------------------------------------
                        2000   1999           2000     1999            2000     1999       2000     1999
----------------------------------------------------------------------------------------------------------
<S>                     <C>    <C>            <C>      <C>             <C>      <C>        <C>      <C>
U.S. Net Sales          62%     47%            14%      21%             12%      19%        88%      87%

Western Europe           5%      4%            1%        2%              1%       2%         7%       8%
Net Sales

Asia Net Sales           1%    ---             1%        1%              1%       2%         3%       3%

Israel Net             ---     ---           ---       ---             ---      ---        ---      ---
Sales

Canada Net
 Sales                 ---     ---           ---       ---               1%       1%         1%       1%

Other                  ---     ---           ---       ---               1%       1%         1%       1%
                    ------  ------        ------   -------         -------  -------     ------  -------

Total Net Sales         68%     51%           16%       24%             16%      25%       100%     100%
                    ======  ======        ======   =======         =======  =======     ======  =======
                 -------------------------------------------------------------------------------------------
</TABLE>


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, 1999, as
         filed with the Securities and Exchange Commission under "Item 1-
         Business", including the section therein entitled "Risk Factors", and
         "Item 7-Management's Discussion and Analysis of Financial Condition and
         Result of Operations".

         Results of Operations for the Three Months Ended March 31, 2000
         ---------------------------------------------------------------

         Reference is made to the Company's Annual Report on Form 10-K for the
         fiscal year ended December 31, 1999, for an analysis and detailed
         discussion of the Company's financial condition and results of
         operations for the period covered by that report.

                                       11
<PAGE>

     Net Sales.  Net sales for the three months ended March 31, 2000 were $11.1
     ---------
     million which represents a 77% or a $4.8 million increase over the
     corresponding quarter of the prior year.  The increase in sales was
     primarily attributable to the Company's Advanced Ceramic Operations in
     Costa Mesa, California.  This increase was approximately $4.3 million over
     the corresponding first quarter of the prior year.  Contributing to the
     increase was armor products due to the increased demand by the U.S. Armed
     Forces for protective armor.  Orthodontic brackets also contributed to the
     increase sales over the year ago quarter because of increased demand by
     orthodontists for the "Clarity" orthodontic brackets.  Additionally, the
     automotive product line had increased demand over the prior year first
     quarter due to new orders that were booked in the fourth quarter of 1999
     for technical ceramic components by a major diesel engine manufacturer.
     Also, sales of structural ceramics for semiconductor manufacturing
     equipment had a slight increase over the prior year quarter due to the
     continued expansion in the semiconductor industry.

     The Company's Semicon Associates division in Lexington, Kentucky, posted a
     sales increase of $.2 million as compared to the year ago period.  The
     increase was mainly due to price increases, and to the product mix.

     The Company's Thermo Materials division in Scottdale, George, posted a $.3
     million sales increase over the year ago quarter.  The increase was
     attributable to demand by the tool and dye business for composites in
     forming aerospace alloys.  Also contributing was an increase in market
     share that resulted from a more aggressive sales effort.

     Gross Profit.  The Company's gross profit was $2.9 million or 26% of sales
     ------------
     for the first quarter ended March 31, 2000 compared to $1.2 million or 19%
     of sales for the prior year's first quarter.

     The Company's Advanced Ceramic Operations in Costa Mesa, California posted
     gross profit of $1.9 million compared to $.5 million or 280% increase over
     the year ago quarter.  This result was mainly due to higher volume and
     higher capacity utilization resulting in favorable cost absorption.

     Gross profit for Semicon Associates in Lexington, Kentucky, was $.5 million
     as compared to $.3 million a year ago.  The increase was attributable to
     volume, price increases, and higher production yields.

     Gross profit for Thermo Materials in Scottdale, Georgia was $.5 million
     versus $.4 million from the prior year's first quarter.  This increase was
     mainly attributable to volume and the product mix of larger quantities
     yielding better manufacturing efficiencies than in the year ago quarter.

     Research and Development Expenses.  Expenses for the first quarter ended
     ---------------------------------
     March 31, 2000 and 1999 for the Research and Development Department were
     $268,000 and $135,000, respectively.  This department was set up in 1998 to
     develop new product lines to grow the business, and the increases for the
     current period are related to salaries, travel, outside services, materials
     and tooling.

                                       12
<PAGE>

     In addition, the Company historically has and continues to engage in
     application engineering to improve and reduce the cost of production and to
     develop new manufacturing processes. The costs associated with application
     engineering are generally expensed as incurred and are included in cost of
     product sales. Expenses for the first quarters ended March 31, 2000 and
     1999 for the Application Engineering Department were $87,000 and $109,000,
     respectively. The decrease in the current year period was mainly
     attributable to organizational changes.

     Selling Expenses.  Selling expenses were $356,000 for the quarter ended
     ----------------
     March 31, 2000.  The above compares to the prior year ago amount of
     $346,000 for the quarter. Recruiting, travel, salaries, product literature
     and the addition of a direct salesperson in the United Kingdom contributed
     to the increase over the prior year quarter and was offset slightly by
     reclassifying a sales engineer to general and administrative expense, and
     miscellaneous freight expenses to manufacturing overhead.

     General and Administrative Expenses.  General Administrative expenses were
     -----------------------------------
     $1,148,000 for the quarter ended March 31, 2000.  The above compares to the
     prior year amount of $823,000.  Approximately forty percent of the increase
     was attributable to employee profit sharing, which is in total charged to
     general and administrative expense.  The other increases involved two
     additional personnel at the Thermo Materials division, organizational
     reclassifications from other departments at the Advanced Ceramic
     Operations, investor relations consulting fees, salary increases, and
     fringe benefits.

     Other Income.  Other income for the quarters ended March 31, 2000 and 1999
     ------------
     were $75,000 and $90,000, respectively.  The decrease of $15,000 was caused
     by a decrease of interest income due to lower cash balances in the current
     quarter.

     Interest Expense.  Interest expense was $9,000 for the quarter period as
     ----------------
     compared to none in the prior year period.  The increase was caused by
     entering into a capital equipment loan during the third quarter of the
     prior year.

     Income Taxes.  The Company recorded a $23,000 provision for taxes for the
     ------------
     quarter ended March 31, 2000.  The Company has available net operating loss
     carry forwards of approximately $9.5 million as of March 31, 2000 for
     Federal income tax purposes.  It is anticipated that the Company will
     utilize all of the net operating loss carry forwards for Federal income tax
     purposes in the year 2001.

     Net Income.  Reflecting all of the matters discussed above, net income was
     ----------
     $1,156,000 or $.14 per share diluted and basic for the quarter ended March
     31,  2000.

     Year 2000 Disclosure.  Many currently installed computer systems and
     --------------------
     software products are coded to accept only two digit entries in the date
     code field.  These date code fields will need to accept four digit entries
     to distinguish 21st century dates from 20th century dates.  This inability
     to recognize or properly treat the Year 2000 may cause the Company's
     systems and applications to process critical financial and

                                       13
<PAGE>

         operational information incorrectly. The Company has and continues to
         assess any impact of the Year 2000 issue on its reporting systems and
         operations. The Company did not experience any Year 2000 issues within
         or outside the Company in the millennium change or the leap year day of
         February 29, 2000. The costs associated with getting prepared for Year
         2000 issues were as previously stated, approximately $150,000. Also,
         the Company has not experienced any unusual patterns or trends from the
         Year 2000 issue. The Company will continue to monitor this issue and
         any changes or trends will be disclosed.

         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, 1997 the Company entered into a revolving credit agreement
         with Comerica Bank. The credit facility amount remains at $4,000,000 as
         of quarter ended March 31, 2000 and no collateral is required of the
         Company. As of March 31, 2000 there had been no borrowing under this
         credit facility. Under a separate credit facility with Comerica Bank,
         the Company entered into a $500,000 capital equipment loan agreement
         during the third quarter of 1999. The term of the loan is for 60 months
         with no prepayment penalty.

         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 facilities, will be sufficient to finance
         anticipated capital and operating requirements for at least the next 12
         months.

         New Accounting Pronouncements
         -----------------------------

         In June 1998, the Financial Accounting Standards Board issued SFAS No.
         133, "Accounting for Derivative Instruments and Hedging Activities."
         SFAS No. 133 is effective for fiscal years beginning after June 15,
         2000. SFAS No. 133 requires that all derivative instruments be recorded
         on the balance sheet at their fair value. Currently, the Company does
         not have any instruments that would qualify as derivatives under SFAS
         No. 133. Accordingly, the Company does not believe SFAS No. 133 will
         have a material impact on the Company's financial position, results of
         operations, or liquidity at the current time.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

         The Company is exposed to market risks related to fluctuations in
         interest rates on its debt. Currently, the Company does not utilize
         interest rate swaps, forward or option contracts on foreign currencies
         or commodities, or other types of derivative financial instruments. The
         purpose of the following analysis is to provide a framework to
         understand the Company's sensitivity to hypothetical changes in
         interest rates as of March 31, 2000.

                                       14
<PAGE>

         The Company utilized debt financing during 1999 primarily for the
         purpose of acquiring manufacturing equipment. For fixed rate debt,
         changes in interest rates generally affect the fair market value of the
         debt instrument, but not the Company's earnings or cash flows. The
         Company does not have an obligation to prepay fixed rate debt prior to
         maturity, and as a result, interest rate risk and changes in fair
         market value should not have a significant impact on the fixed rate
         debt until the Company would be required to refinance such debt. The
         fair market value estimates for debt securities are based on
         discounting future cash flows utilizing current rates offered to the
         Company for debt of the same type and remaining maturity.

         As of March 31, 2000, the Company's debt consisted of a $433,000
         capital equipment loan at a fixed interest rate of 8.18% due June 28,
         2004. The carrying amount is a reasonable estimate of fair value as the
         rate of interest paid on the note approximates the current rate
         available for financing with similar terms and maturities.


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, February 1997, August 1997, February 1999, and
         December 1999, the Company, along with others, was served with six
         different complaints that were filed by nine former employees of one of
         the Company's customers, and eight spouses. The complaints, filed in
         the United States District Court, Eastern District of Tennessee, allege
         that the customers' employees contracted chronic beryllium disease as a
         result of their exposure to beryllium-containing products sold by
         Ceradyne and others. One complaint seeks compensatory damages in the
         amount of $3.0 million for the four husbands, $1.0 million for the four
         spouses, and punitive damages in the amount of $5.0 million. Four other
         complaints each seek compensatory damages in the amount of $5.0 million
         for four husbands, $1.0 million for the spouses, and punitive damages
         in the amount of $10.0 million. The final complaint seeks compensatory
         damages in the amount of $5.0 million for an individual 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 these
         matters will not have a material adverse effect on the financial
         condition or operations of the Company. Defense of these cases 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 these claims will be covered by insurance, or
         that, if covered, the amount of insurance will be sufficient to cover
         any potential judgments.

                                       15
<PAGE>

Items 2, 3, 4 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:  May 12, 2000

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