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Ferro Reports 2011 Fourth-Quarter And Full-Year Results

Stocks in this article: FOE

This release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the period ended December 31, 2011.

           
 

Ferro Corporation and Subsidiaries

Consolidated Statements of Operations

 
Three months endedDecember 31,(Unaudited) Twelve months endedDecember 31,

(Dollars in thousands, except share and per share amounts)

2011   2010 2011   2010
 
Net sales $442,695 $536,951 $2,155,792 $2,101,865
Cost of sales 367,991 427,846 1,742,605 1,643,200
Gross profit 74,704 109,105 413,187 458,665
 

Selling, general and administrative expenses

76,906 78,101 294,802 293,736
Restructuring and impairment charges 12,986 19,625 17,030 63,732
Other expense (income):
Interest expense 7,201 7,372 28,409 44,568
Interest earned (92) (109) (285) (651)
Losses on extinguishment of debt 45 3,670 45 23,001
Foreign currency losses, net 709 1,080 4,758 4,724
Miscellaneous expense, net 2,034 3,291 2,492 5,814
(Loss) income before income taxes (25,085) (3,925) 65,936 23,741
Income tax expense (benefit) 3,582 (6,778) 33,569 16,468
Net (loss) income (28,667) 2,853 32,367 7,273

Less: Net income attributable to noncontrolling interests

157 844 730 1,577

Net (loss) income attributable to Ferro Corporation

(28,824) 2,009 31,637 5,696
Dividends on preferred stock 0 (165) (165) (660)

Net (loss) income attributable to Ferro Corporation common shareholders

$(28,824) $1,844 $31,472 $5,036
 

(Loss) earnings per share attributable to Ferro Corporation common shareholders:

Basic (loss) earnings per share $(0.33) $0.02 $0.37 $0.06
Diluted (loss) earnings per share (0.33) 0.02 0.36 0.06
 
Shares outstanding:
Weighted-average basic shares 86,174,555 85,867,752 86,119,380 85,822,887
Weighted-average diluted shares 86,771,135 86,517,511 86,778,335 86,539,924
End-of-period basic shares 86,175,117 85,873,376 86,175,117 85,873,376
 
           
 

Ferro Corporation and Subsidiaries

Segment Net Sales and Segment Income

 
(Dollars in thousands)

Three months endedDecember 31,(Unaudited)

Twelve months endedDecember 31,
2011   2010 2011   2010
Segment Net Sales
Electronic Materials $84,187 $186,687 $622,977 $675,401
Performance Coatings 149,020 140,477 602,566 555,023
Color and Glass Perf. Materials 89,511 93,959 396,317 382,155
Polymer Additives 74,198 70,921 336,965 302,352
Specialty Plastics 39,283 38,693 172,028 163,058
Pharmaceuticals 6,496 6,214 24,939 23,876
Total Segment Net Sales $442,695 $536,951 $2,155,792 $2,101,865
 
Segment Income
Electronic Materials $612 $35,312 $74,869 $132,585
Performance Coatings 7,526 4,190 37,988 39,416
Color and Glass Perf. Materials 2,538 5,057 32,327 31,514
Polymer Additives 414 4,590 15,221 18,387
Specialty Plastics 2,140 1,773 9,521 11,348
Pharmaceuticals 73 426 3,050 814
Total Segment Income 13,303 51,348 172,976 234,064
 
Unallocated corporate expenses 15,505 20,344 54,591 69,135

Restructuring and impairment charges

12,986 19,625 17,030 63,732
Interest expense 7,201 7,372 28,409 44,568
Other expense, net 2,696 7,932 7,010 32,888
(Loss) income before income taxes $(25,085) $(3,925) $65,936 $23,741
 
           
 

Ferro Corporation and Subsidiaries

Consolidated Balance Sheets

 
(Dollars in thousands)

December 31,2011

December 31,2010

Assets
Current assets:
Cash and cash equivalents $22,991 $29,035
Accounts receivable, net 306,775 302,448
Inventories 228,813 202,067
Deposits for precious metals 0 28,086
Deferred income taxes 17,395 24,924
Other receivables 37,839 27,762
Other current assets 17,086 7,432
Total current assets 630,899 621,754
 

Property, plant and equipment, net

379,336 391,496
Goodwill 215,601 219,716
Amortizable intangible assets, net 11,056 11,869
Deferred income taxes 117,658 121,640
Other non-current assets 86,101 67,880
Total assets $1,440,651 $1,434,355
 
Liabilities and Equity
Current liabilities:
Loans payable and current portion of long-term debt $11,241 $3,580
Accounts payable 214,460 207,770
Accrued payrolls 31,055 49,590

Accrued expenses and other current liabilities

67,878 84,735
Total current liabilities 324,634 345,675
 
Long-term debt, less current portion 298,082 290,971

Postretirement and pension liabilities

215,732 189,058
Other non-current liabilities 19,709 25,044
Total liabilities 858,157 850,748
 
Series A convertible preferred stock 0 9,427
 
Shareholders' equity 572,262 563,409
Noncontrolling interests 10,232 10,771
Total liabilities and equity $1,440,651 $1,434,355
 
           
 

Ferro Corporation and Subsidiaries

Consolidated Statements of Cash Flows

 
(Dollars in thousands) Three months endedDecember 31,(Unaudited) Twelve months endedDecember 31,
2011   2010 2011   2010
Cash flows from operating activities
Net income (loss) $(28,667) $2,853 $32,367 $7,273
Depreciation and amortization 14,970 17,426 63,493 76,936
Other non-cash adjustments, net 36,038 5,924 18,684 29,181
Precious metals deposits 0 (28,086) 28,086 84,348
Accounts receivable 50,289 27,167 (13,444) (24,697)
Inventories 11,760 7,898 (29,790) (22,654)
Accounts payable 726 (19,968) 4,715 12,618

Other changes in current assets and liabilities, net

(14,513) 5,196 (50,878) 35,860

Net cash provided by operating activities

70,603 18,410 53,233 198,865
 
Cash flows from investing activities

Capital expenditures for property, plant and equipment and other long-lived assets

(20,790) (17,004) (72,713) (44,737)

Expenditures for acquisitions, net of cash acquired

0 (6,938) 0 (6,938)

Proceeds from sale of assets and businesses

4,067 4,902 6,441 18,214
Other investing activities 952 0 1,145 139

Net cash used for investing activities

(15,771) (19,040) (65,127) (33,322)
 
Cash flow from financing activities

Net (repayments) borrowings under loans payable

(46,835) 1,005 8,661 (21,495)
Proceeds from long-term debt 116,660 55,559 646,834 632,299

Principal payments on long-term debt

(122,063) (55,559) (639,128) (392,061)
Extinguishment of debt (725) (36,310) (725) (362,997)
Debt issue costs 0 612 0 (9,848)

Redemption of convertible preferred stock

0 0 (9,427) 0
Cash dividends paid 0 (165) (165) (660)
Other financing activities 34 (1,714) (146) (2,502)

Net cash (used for) provided by financing activities

(52,929) (36,572) 5,904 (157,264)

Effect of exchange rate changes on cash and cash equivalents

(812) 881 (54) 2,249

Increase (decrease) in cash and cash equivalents

1,091 (36,321) (6,044) 10,528

Cash and cash equivalents at beginning of period

21,900 65,356 29,035 18,507

Cash and cash equivalents at end of period

$22,991 $29,035 $22,991 $29,035
 
Cash paid during the period for:
Interest $1,300 $1,590 $25,920 $31,881
Income taxes 1,414 4,656 22,060 20,379
 
           
 

Ferro Corporation and Subsidiaries

Supplemental Information

 

Reconciliation of Adjusted Earnings to Reported Earnings

for the Three Months Ended December 31 (Unaudited)

 
Three months endedDecember 31, 2011 Three months endedDecember 31, 2010

(Dollars in thousands, except per share amounts)

AsReported   Adjust-ments   Non-GAAP AsReported   Adjust-ments   Non-GAAP
Net sales $442,695 $442,695 $536,951 $536,951
Cost of sales 367,991 $(1,137) 366,854 427,846 $(4,053) 423,793
Gross profit 74,704 75,841 109,105 113,158
 

Selling, general and administrative expenses

76,906 (760) 76,146 78,101 (4,565) 73,536

Restructuring and impairment charges

12,986 (12,986) 0 19,625 (19,625) 0
Other expense, net 2,696 (397) 2,299 7,932 (9,203) (1,271)

(Loss) earnings before interest, taxes and noncontrolling interest

(17,884) (2,604) 3,447 40,893
 
Interest expense 7,201   7,201 7,372   7,372
Total adjustments $(15,280) $(37,446)
 

(Loss) income before taxes

(25,085) (9,805) (3,925) 33,521

Income tax expense (benefit)

3,582 (6,778)
Income tax benefit 1 (3,138)
Income tax expense 2       12,068
Net (loss) income (28,667) (6,667) 2,853 21,453

Less: Net income attributable to noncontrolling interest

157 157 844 844

Net (loss) income attributable to Ferro

(28,824) (6,824) 2,009 20,609

Dividends on preferred stock

0 0 (165) (165)

Net (loss) income attributable to Ferro common shareholders

$(28,824) $(6,824) $1,844 $20,444
 

Diluted (loss) earnings per share

$(0.33) $(0.08) $0.02 $0.24
 

1 2011 tax rate of 32%, consistent with the Company’s expectation for future effective tax rates, excluding discrete items. The Company’s expected future effective tax rate is lower than the U.S. statutory rate because of expected earnings in foreign jurisdictions with lower tax rates. 2 2010 tax rate of 36%, consistent with the Company’s 2010 expectation for normalized effective tax rates, excluding discrete items.

It should be noted that adjusted earnings is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings presented here exclude certain special charges including restructuring and impairment charges, charges related to debt refinancing, and other charges that are not related to production of products for sale. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

 
 

Ferro Corporation and Subsidiaries

Supplemental Information

 

Reconciliation of Adjusted Earnings to Reported Earnings

for the Twelve Months Ended December 31 (Unaudited)

           
Twelve months endedDecember 31, 2011 Twelve months endedDecember 31, 2010

(Dollars in thousands, except per share amounts)

AsReported   Adjust-ments   Non-GAAP AsReported   Adjust-ments   Non-GAAP
Net sales $2,155,792 $2,155,792 $2,101,865 $2,101,865
Cost of sales 1,742,605 $(4,761) 1,737,844 1,643,200 $(8,965) 1,634,235
Gross profit 413,187 417,948 458,665 467,630
 

Selling, general and administrative expenses

294,802 (4,100) 290,702 293,736 (18,064) 275,672

Restructuring and impairment charges

17,030 (17,030) 0 63,732 (63,732) 0
Other expense, net 7,010 (397) 6,613 32,888 (32,336) 552

Earnings before interest, taxes and noncontrolling interest

94,345 120,633 68,309 191,406
 
Interest expense 28,409   28,409 44,568 (2,280) 42,288
Total adjustments $(26,288) $(125,377)
 
Income before taxes 65,936 92,224 23,741 149,118
Income tax expense 33,569 16,468
Income tax expense 1 29,512
Income tax expense 2       53,682
Net income 32,367 62,712 7,273 95,436
Less: Net income attributable to noncontrolling interest 730 730 1,577 1,577
Net income attributable to Ferro 31,637 61,982 5,696 93,859
Dividends on preferred stock (165) (165) (660) (660)
Net income attributable to Ferro common shareholders $31,472 $61,817 $5,036 $93,199
 
Diluted earnings per share $0.36 $0.71 $0.06 $1.08
 

1 2011 tax rate of 32%, consistent with the Company’s expectation for future effective tax rates, excluding discrete items. The Company’s expected future effective tax rate is lower than the U.S. statutory rate because of expected earnings in foreign jurisdictions with lower tax rates. 2 2010 tax rate of 36%, consistent with the Company’s 2010 expectation for normalized effective tax rates, excluding discrete items.

It should be noted that adjusted earnings is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings presented here exclude certain special charges including restructuring and impairment charges, charges related to debt refinancing, and other charges that are not related to production of products for sale. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

 
 

Ferro Corporation and Subsidiaries

Supplemental Information

 

Segment Net Sales Excluding Precious Metals and

Reconciliation of Sales Excluding Precious Metals to Net Sales (Unaudited)

           
(Dollars in thousands) Three months endedDecember 31, Twelve months endedDecember 31,
2011   2010 2011   2010
 
Electronic Materials $41,443 $78,621 $257,991 $321,990
Performance Coatings 149,020 140,349 602,566 554,796
Color and Glass Performance Materials 81,718 87,967 362,232 357,359
Polymer Additives 74,198 70,921 336,965 302,352
Specialty Plastics 39,283 38,693 172,028 163,058
Pharmaceuticals 6,496 6,214 24,939 23,876
Total segment net sales excluding precious metals 392,158 422,765 1,756,721 1,723,431
Sales of precious metals 50,537 114,186 399,071 378,434
Total net sales $442,695 $536,951 $2,155,792 $2,101,865
 

It should be noted that segment net sales excluding precious metals is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The sales are presented here to exclude the impact of volatile precious metal raw material costs. The precious metal raw material costs are generally passed through directly to customers with minimal margin. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance.

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