For Immediate Release
Ferro Reports 2012 Second-Quarter Results
CLEVELAND, Ohio – July 25, 2012 – Ferro Corporation (NYSE: FOE, the “Company”) today announced net sales of $482 million for the three-month period ended June 30, 2012, compared with net sales of $594 million in the second quarter of 2011. The Company recorded a net loss attributable to common shareholders of $2.8 million, or $0.03 per diluted share, in the 2012 second quarter, compared with net income attributable to common shareholders of $19.4 million, or $0.22 per diluted share, in the prior-year quarter. The adjusted net income attributable to common shareholders, excluding special charges, was $4.6 million, or $0.05 per diluted share, compared with $23.8 million, or $0.27 per diluted share, in the second quarter of 2011.
“Ferro generated adjusted earnings of $0.05 per diluted share and $16 million of cash flow from operations in the 2012 second quarter. The business recorded sequential sales growth in the United States and Asia-Pacific compared with the first quarter of 2012. However, sales and earnings were negatively impacted by the effects of a weakening economic environment in Europe and higher than expected healthcare and pension expenses. The unexpected healthcare and pension expense reduced adjusted earnings by approximately 3 cents per share,” said Chairman, President and Chief Executive Officer James F. Kirsch. “We are taking aggressive steps to lower costs in Europe with the successful roll-out of our new management information systems platform in the region on July 1. We expect this new platform to provide the tools that will allow us to reduce future operating costs and administrative expense. In addition, we expect to move forward on staffing reductions that will lower annual costs by approximately $5 million in our European operations through consolidation of certain manufacturing and administrative resources in our Performance Coatings business.”
2012 Second-Quarter Results
Net sales for the three months ended June 30, 2012, were $482 million, a decline of 19 percent from net sales of $594 million in the second quarter of 2011. Reduced sales of Electronic Materials products, including precious metal sales, largely drove the decline in consolidated net sales. In addition, reduced customer demand in Europe due to a weaker economic climate and changes in foreign currency exchange rates contributed to the decline in sales compared with the prior-year quarter. Reduced demand for conductive pastes used in solar cell applications, metal powders used in a variety of electronic products and ceria-based surface finishing materials resulted in a $90 million decline in sales for the Electronic Materials segment, including a $63 million decline in sales of precious metals due to reduced volume and lower silver prices. Sales declined relative to the prior-year quarter to a lesser extent in thePerformance Coatings, Color and Glass Performance Materials, Polymer Additives and Specialty Plastics segments. Sales declines in these businesses were largely a result of changes in foreign currency exchange rates. Gross profit was $88 million, or 18.2% of net sales, during the 2012 second quarter, compared with $114 million or 19.3% of net sales during the prior-year quarter. Excluding special charges, gross profit was 20.7% of sales excluding precious metals during the quarter, compared with 24.3% in the 2011 second quarter. The primary driver of the decline in gross profit dollars was lower sales volume in the Electronic Materials segment. During the 2012 second quarter, gross profit was reduced by charges of $0.7 million, primarily related to residual costs at closed manufacturing sites involved in earlier restructuring initiatives. Gross profit was reduced by charges of $1.3 million during the second quarter of 2011, also due to residual costs at closed manufacturing sites.
Selling, general and administrative (“SG&A”) expenses were $75 million during the 2012 second quarter compared with $74 million in the prior-year quarter. Increased pension expenses, healthcare expenses for U.S. employees and expenses related to an initiative to streamline and standardize business processes and improve management information systems contributed approximately $4.2 million to higher SG&A expenses for the quarter. These increases were partially offset by lower depreciation expense and cost containment in other discretionary SG&A spending. SG&A expenses during the quarter included special charges of $1.0 million, primarily related to expenses at sites that were closed during earlier restructuring actions and severance expenses. During the second quarter of 2011, SG&A expense included $1.4 million in charges, primarily related to sites closed during prior-period restructuring actions.
Restructuring and impairment charges were $4.7 million during the 2012 second quarter, compared with $1.5 million in the prior-year quarter. Nearly all of the current-quarter charges are related to restructuring actions that are expected in the Performance Coatings business in Europe over the next three quarters. The restructuring initiative is expected to consolidate certain Performance Coatings manufacturing activities, technical service and general administrative organizations. Annual savings from these actions is expected to be approximately $5 million, beginning in 2013.
Interest expense was $6.8 million during the 2012 second quarter, down from $7.4 million in the prior-year quarter. Average borrowings and interest rates were little changed from the second quarter of 2011. The decline interest expense was driven by an increase in the amount of interest expense that was capitalized.
The net loss attributable to common shareholders for the 2012 second quarter was $2.8 million, or $0.03 per diluted share, compared with net income attributable to common shareholders of $19.4 million, or $0.22 per diluted share, in the second quarter of 2011. The adjusted net income attributable to common shareholders for the 2012 second quarter was $0.05 per diluted share, excluding special charges, compared with adjusted earnings of $0.27 per diluted share in the second quarter of 2011. A reconciliation of reported to adjusted results excluding special charges is available in the supplementary financial data included in this press release.
Cash generated by operating activities was $16.2 million during the 2012 second quarter compared with $7.8 million in the prior-year quarter. The cash generation during the quarter was driven by reduced net working capital (inventories plus accounts receivable less accounts payable). Total debt declined to $342 million at June 30, 2012 from $344 million on March 31, 2012.
2012 Outlook
The Company expects 2012 sales, excluding precious metal pass-throughs, to be down 3% to 7% compared with 2011, including the negative impact of lower forecasted foreign exchange rates. Sales of precious metals are expected to decline due to lower average prices and lower volume. The sales outlook assumes modest economic growth in all regions except in Europe where economic activity is expected to decline.
Based on the Company’s current view of worldwide economic conditions, adjusted earnings in 2012 are expected to be in the range of $0.15 to $0.20 per diluted share. The current adjusted earnings estimates are $0.20 to $0.25 per share below the low end of the Company’s previous guidance. The downward revision is due to lower sales expectations for the Company’s products in Europe and reduced growth expectations for Electronic Materials products during the second half of 2012.
The Company’s expectations for its sales in Europe during the second half of 2012 have been lowered in response to a decline in customer orders and the expectation of a continued decline in overall economic activity in the region.
Sales of Electronic Material products, including solar pastes and metal powders, are expected to be modestly higher in the 2012 second half compared with the first half of the year. Expectations for the rate of sales growth for these products have been reduced compared with the Company’s previous estimates. The Company has limited visibility regarding the strength and timing of a recovery in demand for solar pastes and the pace of customer adoption of the Company’s new paste products. The Company’s sales growth expectations for metal powders have been reduced as a result of lower customer demand forecasts.
Non-GAAP Measures
Adjusted earnings per share is equal to income (loss) before taxes, restructuring and impairment charges, and other special charges, adjusted for a normalized tax rate that is consistent with the Company’s expected future effective tax rate excluding discrete items, and divided by the average number of common shares outstanding. 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. Ferro believes this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance.
Conference Call
The Company will host a conference call to discuss its second quarter financial results, its view of general business conditions and its current outlook for 2012 on Thursday, July 26, 2012, at 10:00 a.m. Eastern time. To participate in the call, dial 800-750-5849 if calling from the United States or Canada, or dial 212-231-2932 if calling from outside North America. Please call approximately 10 minutes before the conference call is scheduled to begin.
An audio replay of the call will be available from noon Eastern time on July 26 through noon Eastern time on August 2. To access the replay, dial 800-633-8284 (toll-free) if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America. Use the program ID #21599830 to access the audio replay.
The conference call also will be broadcast live over the Internet and will be available for replay through December 31, 2012. The live broadcast and replay can be accessed through the Investor Information portion of the Company’s Web site atwww.ferro.com. A podcast of the conference call will also be available on the Company’s Web site.
About Ferro Corporation
Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials for manufacturers. Ferro materials enhance the performance of products in a variety of end markets, including electronics, solar energy, telecommunications, pharmaceuticals, building and renovation, appliances, automotive, household furnishings, and industrial products.
Headquartered in Mayfield Heights, Ohio, the Company has approximately 5,100 employees globally and reported 2011 sales of $2.2 billion.
Cautionary Note on Forward-Looking Statements
Certain statements in this press release may constitute “forward-looking statements” within the meaning of Federal securities laws. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements and that could adversely affect the Company’s future financial performance include the following:
• | demand in the industries into which Ferro sells its products may be unpredictable, cyclical or heavily influenced by consumer spending; |
• | uncertainty in the development of the solar energy market; |
• | restrictive covenants in the Company’s credit facilities could affect its strategic initiatives and liquidity; |
• | Ferro’s ability to access capital markets, borrowings, or financial transactions; |
• | the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques; |
• | implementation of new business processes and information systems; |
• | the availability of reliable sources of energy and raw materials at a reasonable cost; |
• | currency conversion rates and economic, social, regulatory, and political conditions around the world; |
• | Ferro’s presence in the Asia-Pacific region where it can be difficult to compete lawfully; |
• | increasingly aggressive domestic and foreign governmental regulations on hazardous materials and regulations affecting health, safety and the environment; |
• | Ferro’s ability to successfully introduce new products; |
• | sale of products into highly regulated industries; |
• | limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities; |
• | Ferro’s ability to complete future acquisitions or successfully integrate future acquisitions; |
• | the impact of the Company’s performance on its ability to utilize significant deferred tax assets; |
• | competitive factors, including intense price competition; |
• | Ferro’s ability to protect its intellectual property or to successfully resolve claims of infringement brought against the Company; |
• | the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations; |
• | stringent labor and employment laws and relationships with the Company’s employees; |
• | the impact of requirements to fund employee benefit costs, especially post-retirement costs; |
• | the impact of interruption, damage to, failure, or compromise of the Company’s information systems; |
• | manufacture and sale of products into the pharmaceutical industry; |
• | exposure to lawsuits in the normal course of business; |
• | risks and uncertainties associated with intangible assets; |
• | Ferro’s borrowing costs could be affected adversely by interest rate increases; |
• | liens on the Company’s assets by its lenders affect its ability to dispose of property and businesses; |
• | Ferro’s ability to successfully implement and/or administer its restructuring programs and produce the desired results; |
• | Ferro may not pay dividends on its common stock in the foreseeable future; and |
• | other factors affecting the Company’s business that are beyond its control, including disasters, accidents, and governmental actions. |
The risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently believes to be immaterial also may adversely affect the Company. Should any known or unknown risks and uncertainties develop into actual events, these developments could have material adverse effects on Ferro’s business, financial condition and results of operations.
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 the Ferro Corporation Annual Report on Form 10-K for the period ended December 31, 2011.
# # #
INVESTOR CONTACT:
David Longfellow
Director, Investor Relations, Ferro Corporation
Phone: 216-875-5488
E-mail:david.longfellow@ferro.com
MEDIA CONTACT:
Mary Abood
Director, Corporate Communications, Ferro Corporation
Phone: 216-875-5401
E-mail:mary.abood@ferro.com
Ferro Corporation and Subsidiaries |
Consolidated Statements of Net Income (Unaudited)
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(Dollars in thousands, except share and | ||||||||||||||||
per share amounts) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
Net sales | $ | 481,505 | $ | 593,974 | $ | 947,895 | $ | 1,166,983 | ||||||||
Cost of sales | 393,660 | 479,627 | 771,727 | 932,310 | ||||||||||||
Gross profit | 87,845 | 114,347 | 176,168 | 234,673 | ||||||||||||
Selling, general and administrative expenses | 74,645 | 73,548 | 152,330 | 150,366 | ||||||||||||
Restructuring and impairment charges | 4,728 | 1,545 | 5,039 | 3,175 | ||||||||||||
Other expense (income): | ||||||||||||||||
Interest expense | 6,848 | 7,352 | 13,588 | 14,178 | ||||||||||||
Interest earned | (51 | ) | (69 | ) | (135 | ) | (143 | ) | ||||||||
Foreign currency (gains) losses, net | (221 | ) | 1,013 | (77 | ) | 2,323 | ||||||||||
Miscellaneous expense (income), net | 1,841 | (124 | ) | 2,235 | 394 | |||||||||||
Income before income taxes | 55 | 31,082 | 3,188 | 64,380 | ||||||||||||
Income tax expense | 2,573 | 11,461 | 4,292 | 21,568 | ||||||||||||
Net (loss) income | (2,518 | ) | 19,621 | (1,104 | ) | 42,812 | ||||||||||
Less: Net income attributable to noncontrolling interests | 330 | 232 | 454 | 533 | ||||||||||||
Net (loss) income attributable to Ferro Corporation | (2,848 | ) | 19,389 | (1,558 | ) | 42,279 | ||||||||||
Dividends on preferred stock | 0 | 0 | 0 | (165 | ) | |||||||||||
Net (loss) income attributable to Ferro Corporation common shareholders | $ | (2,848 | ) | $ | 19,389 | $ | (1,558 | ) | $ | 42,114 | ||||||
(Loss) earnings per share attributable to Ferro Corporation common shareholders: | ||||||||||||||||
Basic (loss) earnings per share | $ | (0.03 | ) | $ | 0.23 | $ | (0.02 | ) | $ | 0.49 | ||||||
Diluted (loss) earnings per share | (0.03 | ) | 0.22 | (0.02 | ) | 0.48 | ||||||||||
Shares outstanding: | ||||||||||||||||
Weighted-average basic shares | 86,293,650 | 86,159,100 | 86,263,367 | 86,066,886 | ||||||||||||
Weighted-average diluted shares | 86,293,650 | 86,868,138 | 86,263,367 | 87,057,768 | ||||||||||||
End-of-period basic shares | 86,295,512 | 86,165,887 | 86,295,512 | 86,165,887 |
1
Ferro Corporation and Subsidiaries
Segment Net Sales and Segment Income (Loss) (Unaudited)
Three months ended | Six months ended | |||||||||||||||
(Dollars in thousands) | June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Segment Net Sales | ||||||||||||||||
Electronic Materials | $ | 90,741 | $ | 180,362 | $ | 162,437 | $ | 382,709 | ||||||||
Performance Coatings | 157,315 | 163,481 | 309,829 | 300,181 | ||||||||||||
Color and Glass Perf. Materials | 99,889 | 106,476 | 201,324 | 206,281 | ||||||||||||
Polymer Additives | 83,450 | 91,271 | 171,174 | 177,133 | ||||||||||||
Specialty Plastics | 44,151 | 46,510 | 91,207 | 89,139 | ||||||||||||
Pharmaceuticals | 5,959 | 5,874 | 11,924 | 11,540 | ||||||||||||
Total Segment Net Sales | $ | 481,505 | $ | 593,974 | $ | 947,895 | $ | 1,166,983 | ||||||||
Segment Income (Loss) | ||||||||||||||||
Electronic Materials | $ | 33 | $ | 22,406 | $ | (4,657 | ) | $ | 53,154 | |||||||
Performance Coatings | 9,699 | 10,497 | 17,758 | 16,844 | ||||||||||||
Color and Glass Perf. Materials | 10,009 | 10,670 | 18,466 | 19,768 | ||||||||||||
Polymer Additives | 1,878 | 4,515 | 8,505 | 11,095 | ||||||||||||
Specialty Plastics | 3,806 | 2,827 | 8,454 | 4,699 | ||||||||||||
Pharmaceuticals | 620 | 945 | 1,807 | 2,271 | ||||||||||||
Total Segment Income | 26,045 | 51,860 | 50,333 | 107,831 | ||||||||||||
Unallocated corporate expenses | 12,845 | 11,061 | 26,495 | 23,524 | ||||||||||||
Restructuring and impairment charges | 4,728 | 1,545 | 5,039 | 3,175 | ||||||||||||
Interest expense | 6,848 | 7,352 | 13,588 | 14,178 | ||||||||||||
Other expense, net | 1,569 | 820 | 2,023 | 2,574 | ||||||||||||
Income before income taxes | $ | 55 | $ | 31,082 | $ | 3,188 | $ | 64,380 | ||||||||
2
Ferro Corporation and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands) | June 30, | December 31, | ||||||
2012 | 2011 | |||||||
Assets | (Unaudited) | (Audited) | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 25,367 | $ | 22,991 | ||||
Accounts receivable, net | 353,076 | 306,775 | ||||||
Inventories | 217,300 | 228,813 | ||||||
Deferred income taxes | 17,277 | 17,395 | ||||||
Other receivables | 32,437 | 37,839 | ||||||
Other current assets | 13,715 | 17,086 | ||||||
Total current assets | 659,172 | 630,899 | ||||||
Property, plant and equipment, net | 367,184 | 379,336 | ||||||
Goodwill | 215,693 | 215,601 | ||||||
Amortizable intangible assets, net | 13,651 | 11,056 | ||||||
Deferred income taxes | 114,789 | 117,658 | ||||||
Other non-current assets | 87,128 | 86,101 | ||||||
Total assets | $ | 1,457,617 | $ | 1,440,651 | ||||
Liabilities and Equity | ||||||||
Current liabilities: | ||||||||
Loans payable and current portion of long-term debt | $ | 45,868 | $ | 11,241 | ||||
Accounts payable | 214,195 | 214,460 | ||||||
Accrued payrolls | 34,659 | 31,055 | ||||||
Accrued expenses and other current liabilities | 68,246 | 67,878 | ||||||
Total current liabilities | 362,968 | 324,634 | ||||||
Long-term debt, less current portion | 295,844 | 298,082 | ||||||
Postretirement and pension liabilities | 195,366 | 215,732 | ||||||
Other non-current liabilities | 19,493 | 19,709 | ||||||
Total liabilities | 873,671 | 858,157 | ||||||
Shareholders’ equity | 573,691 | 572,262 | ||||||
Noncontrolling interests | 10,255 | 10,232 | ||||||
Total liabilities and equity | $ | 1,457,617 | $ | 1,440,651 | ||||
3
Ferro Corporation and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
Three months ended | Six months ended | |||||||||||||||
(Dollars in thousands) | June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Cash flows from operating activities | ||||||||||||||||
Net (loss) income | $ | (2,518 | ) | $ | 19,621 | $ | (1,104 | ) | $ | 42,812 | ||||||
Depreciation and amortization | 14,128 | 16,620 | 28,007 | 32,849 | ||||||||||||
Precious metals deposits | 0 | 0 | 0 | 28,086 | ||||||||||||
Accounts receivable | (16,890 | ) | (18,470 | ) | (50,623 | ) | (68,540 | ) | ||||||||
Inventories | 20,506 | (1,203 | ) | 8,577 | (43,094 | ) | ||||||||||
Accounts payable | 3,697 | (6,412 | ) | 15,251 | 27,356 | |||||||||||
Other changes in current assets and liabilities, net | (6,273 | ) | (37 | ) | 8,131 | (14,121 | ) | |||||||||
Other adjustments, net | 3,503 | (2,297 | ) | (3,061 | ) | (26,106 | ) | |||||||||
Net cash provided by (used for) operating activities | 16,153 | 7,822 | 5,178 | (20,758 | ) | |||||||||||
Cash flows from investing activities | ||||||||||||||||
Capital expenditures for property, plant and equipment | (12,929 | ) | (15,780 | ) | (35,508 | ) | (31,817 | ) | ||||||||
Proceeds from sale of assets | 824 | 1,242 | 1,192 | 2,374 | ||||||||||||
Other investing activities | 436 | 193 | 436 | 193 | ||||||||||||
Net cash used for investing activities | (11,669 | ) | (14,345 | ) | (33,880 | ) | (29,250 | ) | ||||||||
Cash flow from financing activities | ||||||||||||||||
Net borrowings under loans payable | 3,222 | 4,626 | 34,906 | 57,570 | ||||||||||||
Proceeds from long-term debt | 115,078 | 172,542 | 212,996 | 382,219 | ||||||||||||
Principal payments on long-term debt | (119,501 | ) | (172,094 | ) | (215,174 | ) | (381,771 | ) | ||||||||
Redemption of convertible preferred stock | 0 | 0 | 0 | (9,427 | ) | |||||||||||
Cash dividends paid | 0 | 0 | 0 | (165 | ) | |||||||||||
Other financing activities | (620 | ) | (1,187 | ) | (1,060 | ) | (856 | ) | ||||||||
Net cash (used for) provided by financing activities | (1,821 | ) | 3,887 | 31,668 | 47,570 | |||||||||||
Effect of exchange rate changes on cash and cash equivalents | (567 | ) | 411 | (590 | ) | 771 | ||||||||||
Increase (decrease) in cash and cash equivalents | 2,096 | (2,225 | ) | 2,376 | (1,667 | ) | ||||||||||
Cash and cash equivalents at beginning of period | 23,271 | 29,593 | 22,991 | 29,035 | ||||||||||||
Cash and cash equivalents at end of period | $ | 25,367 | $ | 27,368 | $ | 25,367 | $ | 27,368 | ||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | 1,137 | $ | 1,035 | $ | 13,196 | $ | 12,575 | ||||||||
Income taxes | 869 | 7,785 | 2,098 | 14,715 |
4
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Adjusted Earnings to Reported Earnings
for the Three Months Ended June 30 (Unaudited)
Three months ended June 30, 2012 | Three months ended June 30, 2011 | |||||||||||||||||||||||
(Dollars in thousands, except per | As | Adjust- | Non- | As | Adjust- | Non- | ||||||||||||||||||
share amounts) | Reported | ments | GAAP | Reported | ments | GAAP | ||||||||||||||||||
Net sales | $ | 481,505 | $ | 481,505 | $ | 593,974 | $ | 593,974 | ||||||||||||||||
Cost of sales | 393,660 | $ | (685 | ) | 392,975 | 479,627 | $ | (1,345 | ) | 478,282 | ||||||||||||||
Gross profit | 87,845 | 88,530 | 114,347 | 115,692 | ||||||||||||||||||||
Selling, general and administrative expenses | 74,645 | (967 | ) | 73,678 | 73,548 | (1,382 | ) | 72,166 | ||||||||||||||||
Restructuring and impairment charges | 4,728 | (4,728 | ) | 0 | 1,545 | (1,545 | ) | 0 | ||||||||||||||||
Other expense, net | 1,569 | (808 | ) | 761 | 820 | 820 | ||||||||||||||||||
Earnings before interest, taxes and noncontrolling interest | 6,903 | 14,091 | 38,434 | 42,706 | ||||||||||||||||||||
Interest expense | 6,848 | 6,848 | 7,352 | 7,352 | ||||||||||||||||||||
Total adjustments | (7,188 | ) | (4,272 | ) | ||||||||||||||||||||
Income before taxes | 55 | 7,243 | 31,082 | 35,354 | ||||||||||||||||||||
Income tax expense | 2,573 | 11,461 | ||||||||||||||||||||||
Income tax expense1 | 2,318 | 11,313 | ||||||||||||||||||||||
Net (loss) income | (2,518 | ) | 4,925 | 19,621 | 24,041 | |||||||||||||||||||
Less: Net income attributable to noncontrolling interest | 330 | 330 | 232 | 232 | ||||||||||||||||||||
Net (loss) income attributable to Ferro | (2,848 | ) | 4,595 | 19,389 | 23,809 | |||||||||||||||||||
Dividends on preferred stock | 0 | 0 | 0 | 0 | ||||||||||||||||||||
Net (loss) income attributable to Ferro common shareholders | $ | (2,848 | ) | $ | 4,595 | $ | 19,389 | $ | 23,809 | |||||||||||||||
Diluted (loss) earnings per share | $ | (0.03 | ) | $ | 0.05 | $ | 0.22 | $ | 0.27 |
1 2012 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.
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. Ferro believes 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.
5
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Adjusted Earnings to Reported Earnings
for the Six Months Ended June 30 (Unaudited)
Six months ended | Six months ended | |||||||||||||||||||||||
June 30, 2012 | June 30, 2011 | |||||||||||||||||||||||
(Dollars in thousands, except per share amounts) | As Reported | Adjust- ments | Non- GAAP | As Reported | Adjust- ments | Non- GAAP | ||||||||||||||||||
Net sales | $ | 947,895 | $ | 947,895 | $ | 1,166,983 | $ | 1,166,983 | ||||||||||||||||
Cost of sales | 771,727 | $ | (1,391 | ) | 770,336 | 932,310 | $ | (2,912 | ) | 929,398 | ||||||||||||||
Gross profit | 176,168 | 177,559 | 234,673 | 237,585 | ||||||||||||||||||||
Selling, general and administrative expenses | 152,330 | (2,724 | ) | 149,606 | 150,366 | (2,505 | ) | 147,861 | ||||||||||||||||
Restructuring and impairment charges | 5,039 | (5,039 | ) | 0 | 3,175 | (3,175 | ) | 0 | ||||||||||||||||
Other expense, net | 2,023 | (808 | ) | 1,215 | 2,574 | 2,574 | ||||||||||||||||||
Earnings before interest, taxes and noncontrolling interest | 16,776 | 26,738 | 78,558 | 87,150 | ||||||||||||||||||||
Interest expense | 13,588 | 13,588 | 6,826 | 6,826 | ||||||||||||||||||||
Total adjustments | (9,962 | ) | (8,592 | ) | ||||||||||||||||||||
Income before taxes | 3,188 | 13,150 | 64,380 | 72,972 | ||||||||||||||||||||
Income tax expense | 4,292 | 21,568 | ||||||||||||||||||||||
Income tax expense1 | 4,208 | 23,351 | ||||||||||||||||||||||
Net (loss) income | (1,104 | ) | 8,942 | 42,812 | 49,621 | |||||||||||||||||||
Less: Net income attributable to noncontrolling interest | 454 | 454 | 533 | 533 | ||||||||||||||||||||
Net (loss) income attributable to Ferro | (1,558 | ) | 8,488 | 42,279 | 49,088 | |||||||||||||||||||
Dividends on preferred stock | 0 | 0 | (165 | ) | (165 | ) | ||||||||||||||||||
Net (loss) income attributable to Ferro common shareholders | $ (1,558) | $ 8,488 | $ 42,114 | $ 48,923 | ||||||||||||||||||||
Diluted (loss) earnings per share | $ | (0.02) | $ | 0.10 | $ | 0.48 | $ | 0.57 |
1 2012 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.
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. Ferro believes 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.
6
Ferro Corporation and Subsidiaries
Supplemental Information
Segment Net Sales Excluding Precious Metals and
Reconciliation of Sales Excluding Precious Metals to Net Sales (Unaudited)
Three months ended | Six months ended | |||||||||||||||
(Dollars in thousands) | June 30, | June 30, | ||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Electronic Materials | $ | 43,656 | $ | 70,629 | $ | 81,680 | $ | 150,812 | ||||||||
Performance Coatings | 157,315 | 163,481 | 309,829 | 300,181 | ||||||||||||
Color and Glass Perf. Materials | 92,614 | 97,430 | 185,199 | 189,341 | ||||||||||||
Polymer Additives | 83,450 | 91,271 | 171,174 | 177,133 | ||||||||||||
Specialty Plastics | 44,151 | 46,510 | 91,207 | 89,139 | ||||||||||||
Pharmaceuticals | 5,959 | 5,874 | 11,924 | 11,540 | ||||||||||||
Total segment sales excluding precious metals | 427,145 | 475,195 | 851,013 | 918,146 | ||||||||||||
Sales of precious metals | 54,360 | 118,779 | 96,882 | 248,837 | ||||||||||||
Total net sales | $ | 481,505 | $ | 593,974 | $ | 947,895 | $ | 1,166,983 | ||||||||
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. Ferro believes this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance.
7
Ferro Corporation and Subsidiaries
Supplemental Information
Prior-Period Segment Income (Loss), As Adjusted for a Change in Methodology Related to the Allocation of Corporate Expenses (Unaudited)
Three months ended | ||||||||||||||||
December | September | June 30, | March 31, | |||||||||||||
(Dollars in thousands) | 31, 2011 | 30, 2011 | 2011 | 2011 | ||||||||||||
Segment Income (Loss) | ||||||||||||||||
Electronic Materials | $ | (1,594 | ) | $ | 16,463 | $ | 22,406 | $ | 30,748 | |||||||
Performance Coatings | 6,120 | 11,069 | 10,497 | 6,347 | ||||||||||||
Color and Glass Perf. Materials | 1,539 | 8,365 | 10,670 | 9,098 | ||||||||||||
Polymer Additives | 437 | 4,252 | 4,515 | 6,580 | ||||||||||||
Specialty Plastics | 2,012 | 2,717 | 2,827 | 1,872 | ||||||||||||
Pharmaceuticals | 219 | 1,254 | 945 | 1,326 | ||||||||||||
Total Segment Income | 8,733 | 44,120 | 51,860 | 55,971 | ||||||||||||
Unallocated corporate expenses | 10,939 | 7,837 | 11,061 | 12,463 | ||||||||||||
Restructuring and impairment charges | 12,986 | 869 | 1,545 | 1,630 | ||||||||||||
Interest expense | 7,201 | 7,030 | 7,352 | 6,826 | ||||||||||||
Other expense, net | 2,696 | 1,740 | 820 | 1,754 | ||||||||||||
Income (loss) before income taxes | $ | (25,085 | ) | $ | 26,641 | $ | 31,082 | $ | 33,298 | |||||||
Three months ended | ||||||||||||||||
December | September | June 30, | March 31, | |||||||||||||
(Dollars in thousands) | 31, 2010 | 30, 2010 | 2010 | 2010 | ||||||||||||
Segment Income | ||||||||||||||||
Electronic Materials | $ | 34,849 | $ | 31,052 | $ | 37,535 | $ | 28,573 | ||||||||
Performance Coatings | 1,837 | 9,100 | 12,729 | 7,737 | ||||||||||||
Color and Glass Perf. Materials | 3,387 | 7,635 | 8,876 | 6,134 | ||||||||||||
Polymer Additives | 3,911 | 6,325 | 2,324 | 3,467 | ||||||||||||
Specialty Plastics | 2,199 | 4,712 | 4,100 | 2,402 | ||||||||||||
Pharmaceuticals | 1,372 | 1,490 | 723 | 1,115 | ||||||||||||
Total Segment Income | 47,555 | 60,314 | 66,287 | 49,428 | ||||||||||||
Unallocated corporate expenses | 16,550 | 14,853 | 13,809 | 13,442 | ||||||||||||
Restructuring and impairment charges | 19,625 | 9,570 | 21,205 | 13,332 | ||||||||||||
Interest expense | 7,372 | 10,519 | 13,766 | 12,911 | ||||||||||||
Other expense, net | 7,932 | 26,996 | (4,006 | ) | 1,966 | |||||||||||
Income (loss) before income taxes | $ | (3,925 | ) | $ | (1,624 | ) | $ | 21,513 | $ | 7,777 | ||||||
8