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Ferro Reports 2012 Fourth Quarter And Full-Year Results

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, 2012.

 
Ferro Corporation and Subsidiaries
Consolidated Statements of Operations
       
Three months ended
December 31, Twelve months ended
(Unaudited) December 31,
(Dollars in thousands, except share and per share amounts) 2012 2011 2012 2011
 
Net sales $ 405,896 $ 442,695 $ 1,768,631 $ 2,155,792
Cost of sales 346,541   368,946   1,470,769   1,743,560  
Gross profit 59,355 73,749 297,862 412,232
 

Selling, general and administrative expenses

96,352 125,158 302,658 335,311
Restructuring and impairment charges 21,990 12,986 225,819 17,030
Other expense (income):
Interest expense 7,290 7,201 27,979 28,409
Interest earned (119 ) (92 ) (311 ) (285 )
Losses on extinguishment of debt 45 45
Foreign currency losses, net 1,394 709 2,186 4,758
Miscellaneous expense, net 53   2,034   3,080   2,492  
(Loss) income before income taxes (67,605 ) (74,292 ) (263,549 ) 24,472
Income tax (benefit) expense (4,133 ) (13,487 ) 109,485   19,338  
Net (loss) income (63,472 ) (60,805 ) (373,034 ) 5,134

Less: Net income attributable to noncontrolling interests

404   157   1,234   730  

Net (loss) income attributable to Ferro Corporation

(63,876 ) (60,962 ) (374,268 ) 4,404
Dividends on preferred stock 0       (165 )

Net (loss) income attributable to Ferro Corporation common shareholders

$ (63,876 ) $ (60,962 ) $ (374,268 ) $ 4,239  
 

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

Basic (loss) earnings per share $ (0.74 ) $ (0.71 ) $ (4.34 ) $ 0.05
Diluted (loss) earnings per share (0.74 ) (0.71 ) (4.34 ) 0.05
 
Shares outstanding:
Weighted-average basic shares 86,331,679 86,174,555 86,288,481 86,119,380
Weighted-average diluted shares 86,331,679 86,174,555 86,288,481 86,778,335
End-of-period basic shares 86,367,096 86,175,117 86,367,096 86,175,117
 
 
Ferro Corporation and Subsidiaries
Segment Net Sales and Segment Income (Loss)
       
Three months ended
December 31, Twelve months ended
(Dollars in thousands) (Unaudited) December 31,
2012 2011 2012 2011
Segment Net Sales
Electronic Materials $ 65,215 $ 84,187 $ 293,840 $ 622,977
Performance Coatings 140,640 149,020 587,698 602,566
Color and Glass Perf. Materials 86,137 89,511 371,723 396,317
Polymer Additives 69,580 74,198 320,635 336,965
Specialty Plastics 38,205 39,283 170,717 172,028
Pharmaceuticals 6,119   6,496   24,018   24,939
Total Segment Net Sales $ 405,896   $ 442,695   $ 1,768,631   $ 2,155,792
 
Segment Income (Loss)
Electronic Materials $ (5,154 ) $ (1,593 ) $ (16,122 ) $ 68,024
Performance Coatings 5,338 6,120 26,306 34,033
Color and Glass Perf. Materials 2,013 1,539 26,115 29,672
Polymer Additives (1,192 ) 437 12,711 15,784
Specialty Plastics 1,875 2,012 14,057 9,428
Pharmaceuticals 517   219   2,409   3,744
Total Segment Income 3,397 8,734 65,476 160,685
 
Unallocated corporate expenses 40,394 60,143 70,272 83,764
Restructuring and impairment charges 21,990 12,986 225,819 17,030
Interest expense 7,290 7,201 27,979 28,409
Other expense, net 1,328   2,696   4,955   7,010
(Loss) income before income taxes $ (67,605 ) $ (74,292 ) $ (263,549 ) $ 24,472
 
 
Ferro Corporation and Subsidiaries
Consolidated Balance Sheets
 
December 31,
(Dollars in thousands) 2012   2011
Assets
Current assets:
Cash and cash equivalents $ 29,576 $ 22,991
Accounts receivable, net 306,463 306,775
Inventories 207,091 228,813
Deferred income taxes 7,995 17,395
Other receivables 31,554 37,839
Other current assets 10,824   17,086
Total current assets 593,503 630,899
 
Property, plant and equipment, net 324,720 379,336
Goodwill 62,975 215,601
Amortizable intangible assets, net 14,410 11,056
Deferred income taxes 21,554 117,658
Other non-current assets 61,941   86,101
Total assets $ 1,079,103   $ 1,440,651
 
Liabilities and Equity
Current liabilities:
Loans payable and current portion of long-term debt $ 85,152 $ 11,241
Accounts payable 182,904 214,460
Accrued payrolls 31,690 31,055
Accrued expenses and other current liabilities 76,757   67,878
Total current liabilities 376,503 324,634
 
Long-term debt, less current portion 261,624 298,082
Postretirement and pension liabilities 216,167 215,732
Other non-current liabilities 18,135   19,709
Total liabilities 872,429 858,157
 
Shareholders' equity 193,527 572,262
Noncontrolling interests 13,147   10,232
Total liabilities and equity $ 1,079,103   $ 1,440,651
 
 
Ferro Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
       
Three months ended
December 31, Twelve months ended
(Dollars in thousands) (Unaudited) December 31,
2012 2011 2012 2011
Cash flows from operating activities
Net (loss) income $ (63,472 ) $ (60,805 ) $ (373,034 ) $ 5,134
Depreciation and amortization 15,650 14,970 57,384 63,493
Other non-cash adjustments, net 31,864 68,176 323,037 45,917
Precious metals deposits 0 0 0 28,086
Accounts receivable 17,748 50,289 (5,258 ) (13,444 )
Inventories 6,650 11,760 22,287 (29,790 )
Accounts payable (14,105 ) 726 (18,359 ) 4,715
Other changes in current assets andliabilities, net 9,787   (14,513 ) 17,601   (50,878 )
Net cash provided by operatingactivities 4,122 70,603 23,658 53,233
 
Cash flows from investing activities
Capital expenditures for property, plantand equipment and other long-livedassets (12,440 ) (20,790 ) (58,685 ) (72,713 )
Proceeds from sale of assets andbusinesses 657 4,067 3,043 6,441
Other investing activities 238   952   334   1,145  
Net cash used for investing activities (11,545 ) (15,771 ) (55,308 ) (65,127 )
 
Cash flow from financing activities
Net borrowings (repayments) under loanspayable 17,847 (46,835 ) 39,934 8,661
Proceeds from long-term debt 72,425 116,660 395,576 646,834
Principal payments on long-term debt (80,761 ) (122,063 ) (400,687 ) (639,128 )
Extinguishment of debt 0 (725 ) 0 (725 )
Redemption of convertible preferred stock 0 0 0 (9,427 )
Cash dividends paid 0 0 0 (165 )
Other financing activities 874   34   1,634   (146 )
Net cash provided by (used for)financing activities 10,385 (52,929 ) 36,457 5,904
Effect of exchange rate changes on cashand cash equivalents 1,797   (812 ) 1,778   (54 )
Increase (decrease) in cash and cash equivalents 4,759 1,091 6,585 (6,044 )
Cash and cash equivalents at beginning ofperiod 24,817   21,900   22,991   29,035  
Cash and cash equivalents at end of period $ 29,576   $ 22,991   $ 29,576   $ 22,991  
 
Cash paid during the period for:
Interest $ 1,125 $ 1,300 $ 26,468 $ 25,920
Income taxes 1,527 1,414 4,657 22,060
 
 
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Reported Loss to Adjusted Loss
for the Three Months Ended December 31 (Unaudited)
               
(Dollars in thousands, except per share amounts) Cost of sales Selling, general and administrative expenses Restructuring and impairment charges Other expense, net Income tax (benefit) expense

Net (loss) income attributable to common shareholders

Diluted (loss) earnings per share
Three months ended December 31, 2012
 
As reported $ 346,541 $ 96,352 $ 21,990 $ 8,618 $ (4,133 ) $ (63,876 ) $ (0.74 )
Special items:
Impairments (16,403 ) 5,905 10,498 0.12
Restructuring (5,587 ) 2,011 3,576 0.04
Pension 1 (3,758 ) (23,480 ) 9,806 17,432 0.20
Other 2 (1,861 ) (8,222 ) 3,630 6,453 0.08
Taxes 3         (20,205 ) 20,205   0.23  
Total special items (5,619 ) (31,702 ) (21,990 )   1,147   58,164   0.67  
As adjusted $ 340,922   $ 64,650   $   $ 8,618   $ (2,986 ) $ (5,712 ) $ (0.07 )
 
Three months ended December 31, 2011
 
As reported $ 368,946 $ 125,158 $ 12,986 $ 9,897 $ (13,487 ) $ (60,962 ) $ (0.71 )
Special items:
Impairments (12,129 ) 3,881 8,248 0.09
Restructuring (857 ) 274 583 0.01
Pension 1 (968 ) (50,792 ) 16,563 35,197 0.41
Other 2 (1,137 ) (760 ) (397 ) 734 1,560 0.02
Taxes 3         (10,286 ) 10,286   0.12  
Total special items (2,105 ) (51,552 ) (12,986 ) (397 ) 11,166   55,874   0.65  
As adjusted $ 366,841   $ 73,606   $   $ 9,500   $ (2,321 ) $ (5,088 ) $ (0.06 )
 
 

1 Pension and other postretirement benefits mark-to-market adjustment of the related net liabilities.

2 Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, and certain business development activities.

3 Adjustment of reported earnings and of special items to a normalized 36% rate for 2012 and 32% for 2011.

 
It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items including the mark-to-market adjustments related to our net pension and other postretirement benefit liabilities, restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, and certain business development costs. We believe this data provides investors with additional 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 Reported (Loss) Income to Adjusted Income
for the Twelve Months Ended December 31 (Unaudited)
               
(Dollars in thousands, except per share amounts) Cost of sales Selling, general and administrative expenses Restructuring and impairment charges Other expense, net Income tax expense (benefit) Net (loss) income attributable to common shareholders Diluted (loss) earnings per share
Twelve months ended December 31, 2012
 
As reported $ 1,470,769 $ 302,658 $ 225,819 $ 32,934 $ 109,485 $ (374,268 ) $ (4.34 )
Special items:
Impairments (215,279 ) 77,500 137,779 1.60
Restructuring (10,540 ) 3,794 6,746 0.08
Pension 1 (3,758 ) (23,480 ) 9,806 17,432 0.20
Other 2 (9,065 ) (14,191 ) (808 ) 8,663 15,401 0.18
Taxes 3         (204,363 ) 204,363   2.37  
Total special items (12,823 ) (37,671 ) (225,819 ) (808 ) (104,600 ) 381,721   4.43  
As adjusted $ 1,457,946   $ 264,987   $   $ 32,126   $ 4,885   $ 7,453   $ 0.09  
 
Twelve months ended December 31, 2011
 
As reported $ 1,743,560 $ 335,311 $ 17,030 $ 35,419 $ 19,338 $ 4,239 $ 0.05
Special items:
Impairments (12,132 ) 3,882 8,250 0.10
Restructuring (4,898 ) 1,567 3,331 0.04
Pension 1 (968 ) (50,792 ) 16,563 35,197 0.41
Other 2 (4,761 ) (4,100 ) (397 ) 2,963 6,295 0.07
Taxes 3         (11,507 ) 11,507   0.13  
Total special items (5,729 ) (54,892 ) (17,030 ) (397 ) 13,468   64,580   0.75  
As adjusted $ 1,737,831   $ 280,419   $   $ 35,022   $ 32,806   $ 68,819   $ 0.80  
 
 

1 Pension and other postretirement benefits mark-to-market adjustment of the related net liabilities.

2 Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, and certain business development activities.

3 Adjustment of reported earnings and of special items to a normalized 36% rate for 2012 and 32% for 2011.

 
It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items including the mark-to-market adjustments related to our net pension and other postretirement benefit liabilities, restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, and certain business development costs. We believe this data provides investors with additional 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
Supplement Information
 
Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales and Schedule of Adjusted Gross Profit(Unaudited)
     
(Dollars in thousands) Three months endedDecember 31, Twelve months endedDecember 31,
2012 2011 2012 2011
 
Electronic Materials $ 32,238 $ 41,443 $ 149,182 $ 257,991
Performance Coatings 140,640 149,020 587,698 602,566
Color and Glass Perf. Materials 79,208 81,718 343,631 362,232
Polymer Additives 69,580 74,198 320,635 336,965
Specialty Plastics 38,205 39,283 170,717 172,028
Pharmaceuticals 6,119   6,496   24,018   24,939  
Total segment net sales excluding precious metals 365,990 392,158 1,595,881 1,756,721
Sales of precious metals 39,906   50,537   172,750   399,071  
Total net sales $ 405,896   $ 442,695   $ 1,768,631   $ 2,155,792  
 
Net sales excluding precious metals $ 365,990 $ 392,158 $ 1,595,881 $ 1,756,721
Adjusted cost of sales 340,922 366,841 1,457,946 1,737,831
Cost of sales from precious metals (39,906 ) (50,537 ) (172,750 ) (399,071 )
Adjusted cost of sales excluding precious metals 301,016   316,304   1,285,196   1,338,760  
Adjusted gross margin $ 64,974   $ 75,854   $ 310,685   $ 417,961  
Adjusted gross profit percentage 17.8 % 19.3 % 19.5 % 23.8 %
 

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, including the adjusted gross profit, 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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