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EXHIBIT 13
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FERRO AT A GLANCE
SPECIALTY COATINGS, COLORS AND CERAMICS
PRODUCTS TYPICAL APPLICATIONS
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COATINGS Glaze Frit Floor and wall tile, sanitaryware, tableware, artware and roof tiles.
Porcelain Enamel Frit Appliances, water heaters, plumbing fixtures and architectural coatings.
Organic Powder Coatings Appliances, automotive parts, lighting fixtures, leisure furniture, toys
and recreational vehicles.
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COLORS Complex Inorganic Color Pigments Pigments for paints, military camouflage materials, automotive components,
vinyl house siding and plastic colorants. Glaze and body stains for floor
and wall tile, sanitaryware, tableware and artware. Ceramic and plastic
color applications which require heat, light or weather stability,
including porcelain enamel colors for appliances, architectural panels
and sanitaryware.
Decorating Products Enamels for automotive glass, appliance control panels, architectural
spandrels, glass beverage and cosmetic containers.
Decoration on dinnerware and other ceramic applications.
Forehearth Colors Glass beverage and cosmetic containers, tableware, cookware, architectural
flat glass and building blocks.
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CERAMICS Ceramic Powders Precision polishing of ophthalmic lenses, television picture tubes and
crystal.
Kiln Furniture Used during the firing process to carry ceramic shapes, including
sanitaryware, dinnerware, floor and wall tile, brick, electrical
porcelain, capacitors, grinding wheels and hobbyware.
Porous Ceramics Sewage treatment and chemical processes, filtration, air gravity conveying
systems, fluidizing, electrolytic diaphragms, inking pads, vacuum plates,
sampling tubes, soil testing, liquid dispersion, metering and venting for
batteries, storage tanks and instrumentation.
Wear-Resistant Ceramics Lining for various material handling equipment.
Grinding Media and Mill Linings Particle size reduction or dispersion for minerals and coatings for floor
and wall tile, sanitaryware, dinnerware, paint and chemical industries.
Custom Technical Ceramics Nozzles, aircraft engines, automotive control valves, specialty cores for
bowling balls, mineral and chemical handling equipment, wear and corrosion-
resistant surfaces.
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ELECTRONIC Electronic Ceramics Multilayer capacitors and varistors.
MATERIALS
Thick Film Pastes, Organic Binder Microelectronic circuitry and ceramic components used in a wide range of
Systems and Electronic Glasses applications including high-performance radar, photovoltaic cells, surge
protection for telecommunications systems, automotive control circuits,
semiconductor packaging and many others.
Ceramic Coated Substrates Circuit board applications subject to heat, vibration and hostile
atmospheric conditions.
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SPECIALTY PLASTICS
PLASTIC Color Concentrates Colors for plastics used in appliances, furniture, power tool housings,
COLORANTS tableware, cups, automotive functional parts and decorative trim.
Engineering Colors Concentrates for engineering resins.
Specialty Colored Compounds Specialty colors in rubber modified thermoplastics.
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FILLED AND Polypropylene Compounds Appliances, furniture, power tool housings, liquid handling products and
REINFORCED automotive functional parts.
PLASTICS
Engineering Thermoplastics Applications requiring high-strength, high-performance plastics, such as
automotive and leisure products.
Specialty Polyolefin Alloys Medical disposables and packaging, including tubing, catheters and
solution containers.
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LIQUID COATINGS Gelcoats Sanitaryware, boats, recreational vehicles and truck trailers.
AND DISPERSIONS
Color Dispersions Urethane carpet padding, business machine housings, fiberglass chairs and
epoxy floor coatings.
Liquid Color Colors for plastics used in appliances, furniture, power tool housings,
tableware, cups, automotive functional components and decorative trim.
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SPECIAL CHEMICALS
POLYMER Heat Stabilizers Vinyl floor tile, wall coverings, automotive instrument panels, coated
ADDITIVES fabrics, roofing membranes and wire/cable.
Light Stabilizers Indoor/outdoor carpeting, automotive components, agricultural film, toys
and lawn furniture.
Antimicrobials Pool covers, shower curtains and other flexible vinyl products.
Rubber Chemicals Tires, adhesives and elastic thread.
Epoxy Plasticizers Refrigerator gaskets, food wrap, film and medical tubing.
Flame Retardants Electrical and electronic applications, including appliances, business
machines, computers and home entertainment systems.
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FUEL ADDITIVES Automotive engine oils
AND FRICTION
MODIFIERS
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INDUSTRIAL Solvents, Catalysts, Stabilizers Synthesis of pharamaceutical and agrichemical-active compounds.
CHEMICALS Electrolytic solutions, rubber and paper applications, engineering
polymers.
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METALWORKING Industrial lubricants and grease
LUBRICANTS
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Five-A
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A HISTORY OF EXPANDING CAPABILITIES
FERRO FOCUSES
MARKETING ON CORE COMPETENCE
Since 1919, Ferro has demonstrated the ability to build successful,
interrelated businesses around a basic core competency' - the custom formulation
and production of specialty materials. Today, this competency relies on
expertise in eight fundamental technologies: formulation, synthesis, mixing/
processing, deposition/rheology, particle science and technology,
environmental science, material characterization and color.
The Company we know today, Ferro Corporation, actually began as a
collaboration between two separate entrepreneurial entities. The Ferro
Enameling Company was formed in 1919 by Harry Cushman and Ray Williams to
manufacture and apply porcelain enamel frit to customers' components. Ferro
Enamel & Supply Company was created one year later by Robert Weaver to provide
engineering services to Ferro Enameling, as well as to market frit. Frit is a
complex glass formulated to produce either porcelain enamel frit for metal
applications or glaze frit for ceramic products.
To survive the Great Depression, the two companies merged in 1930. From
the porcelain enamel frit business, Ferro soon expanded into producing ceramic
glaze frit, kiln furniture to support ceramic ware during the firing process,
and inorganic color pigments. After World War II, Ferro began to grow
dramatically, when its porcelain enamel - the preferred finish on kitchen
appliances - was needed to meet the huge pent-up consumer demand for appliances.
In the period between the 1940s and the 1970s, Ferro acquired a number
of specialty ceramics and chemical companies, while developing colorants for
plastics based on the Company's color technology expertise. The chemical
acquisitions primarily produced additives to enhance the properties of
plastics.
Anticipating the growing demand for powder coatings, which have
distinct environmental advantages over liquid paint equivalents, Ferro acquired
a German powder coatings business in the early 1970s. The Company also acquired
its filled and reinforced thermoplastics compounding business and the first
electronic material business during the '70s.
Although the core competency is well established, Ferro has undergone
considerable restructuring in recent years to focus on specialty materials
businesses with the potential to meet corporate objectives for growth and
profitability. Management defines Ferro's core businesses as coatings, colors
and ceramics; chemicals; and plastics.
The Company has made important acquisitions in recent years to bolster
the ceramic glaze, color, powder coatings, specialty ceramics, electronic
materials and plastics businesses.
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In addition, the management structure has been reorganized to better
focus corporate resources, enabling many business units to achieve considerable
internal growth. Ferro now holds the number-one or number-two position in the
vast majority of markets served.
Ferro's core competence in specialty materials provides a solid
foundation for marketing products to industrial customers serving the building
and renovation, major appliance, household furnishings, transportation,
industrial products, packaging and leisure markets.
GLOBAL NETWORK REFLECTS OPPORTUNITIES
By the end of its first decade of operation, Ferro already had a global
presence, exporting frit to Canada and England and manufacturing in Holland to
supply Europe. The Company began producing frit in England in the 1930s and
soon expanded operations into France, Brazil, Argentina and Australia.
Ferro's global network grew substantially in the decades following
World War II. Typically, the Company's approach was to initiate sales of frit
in a country or region and follow with production facilities when the market
was sufficiently developed. Often, Ferro formed joint ventures in conjunction
with a partner familiar with the local market. Over time, many overseas plants
expanded and began producing a complete line of Ferro products.
Applications for Ferro products vary considerably by geographic market.
For example, in the United States, paints and plastics are the largest users of
its color pigments, while in most countries abroad the ceramic market is the
largest consumer. The appliance and automotive markets are the largest users of
Ferro's powder coatings in the United States, yet the general industrial
market - lawn furniture and lighting fixtures - is the largest powder coatings
user in Europe.
Over the years, the Company has benefited from the transfer of
technology between various geographic locations. Ferro is organized to
emphasize the global performance of each business unit, while remaining close
to customers through local or regional facilities. Ferro's global perspective
becomes more important than ever as geographic barriers are eliminated and
industries centralize in locations with cost advantages. Ferro anticipates
substantial growth in the decades ahead for many of its businesses in the
developing economies, especially those of Asia-Pacific.
Ferro's international operations also provide a training ground for
Ferro's future leadership as managers gain a global perspective through
assignments in a variety of countries.
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TECHNICAL SERVICE MEETS CUSTOMER NEEDS
Throughout its history, the Company has worked closely with customers
to help them achieve the desired results when using Ferro materials. For
example, in the 1920s, Ferro started the first trade publication devoted
exclusively to porcelain enameling and published a book entitled The Technique
of Porcelain Enameling.
Today, in the wake of corporate downsizing, restructuring and
re-engineering, customers are relying on suppliers such as Ferro for product
and process innovation and technical research. Meeting that demand requires
Ferro's technical service staff to set clear priorities and be focused on the
customers' markets.
Ferro's technical capabilities range from doctorates in chemistry and
physics to process and ceramic engineers. Each Ferro facility has its own
technical service staff, whose members draw on Ferro's global resources to
improve customers' products and production processes.
In addition to technical service laboratories, Ferro operates a new
powder coatings research and development center in Cleveland, Ohio. This
world-class center is the most modern and comprehensive powder coatings
research and development facility in the world. Ferro's Corporate Research
Center in Independence, Ohio, provides primary research and technical support
for core technologies throughout the world.
INNOVATION IN CORE TECHNOLOGIES
Ferro's tradition of core technology innovation dates back to the
1920s. Co-founder Harry Cushman funded graduate research that pioneered a
scientific understanding of the chemical reactions occurring during the
production of frit so Ferro could develop physical and chemical controls for
optimum manufacturing conditions. Glenn McIntyre, the graduate student who
completed these studies at Western Reserve University in Cleveland, later
became Ferro#s first vice president of research.
Over the years, Ferro has continually improved the performance of its
products and the efficiency of processes for its industrial customers. Ferro
developed coatings for continuous-clean household ovens in the late 1960s and
more recently has pioneered the development of leadless and heavy-metal-free
glazes and decoration enamels for dinnerware and glass products.
Ferro gains competitive advantage from research and development. For
example, many companies produce powder coatings, but only a few conduct
significant research. Among a number of important new powder coatings products
and processes developed in 1994, Ferro introduced a new line of polymer alloy
powder coatings for the appliance industry that outperforms conventional
materials at a significantly lower applied cost. Ferro's chemicals business
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developed several new plastics additives, as well as proprietary technology for
both products and processes used to produce chemicals for fuel additives. The
plastics business has new polymer alloy compounds that provide excellent
processing properties while reducing overall costs.
Ferro has invested considerable effort and resources in research in
recent years. The result is a concurrent development process that uses
multi-functional teams. Representatives from marketing, operations, research
and purchasing, and even customers, work simultaneously to hasten the
development process. Ferro's capabilities in research and development remain
one of the Company's greatest strengths.
MANUFACTURING EXPERTISE PROVIDES COMPETITIVE ADVANTAGES
Ferro's "check-in-circle" insignia was introduced in 1921, two years
after the Company's founding. By the end of its first decade, Ferro already had
a well-established reputation for excellence and quality in products and
service. The long-term quality reputation provides a competitive advantage to
manufacturing operations. Responding quickly to market demand is a hallmark of
the Company's operations, which have earned quality awards from many major
customers in the automotive, appliance and chemical industries.
Ferro continues to make major improvements in its operations in order
to remain a low-cost producer of specialty materials. An example is the
development of a new scheduling logic that enables the plastics operations to
respond more efficiently to customers' orders and delivery requirements. As a
result, over the past two years, Ferro's Plymouth, Indiana facility reduced the
order cycle time while increasing volume 60 percent. Ferro's manufacturing
operation in Spain was re-engineered in 1994 to be one of the most efficient
and modern powder coatings plants in the world. Further, a recent glaze frit
acquisition in Italy was re-engineered to conform with Ferro's manufacturing
techniques, resulting in a 35 percent increase in production.
Ferro is exploiting technological synergies among its businesses. The
Company formed core-technology teams to share processing expertise among the
business units. In addition, a major factor in controlling costs includes
product lines sharing material requirements and a centralized purchasing
program for key raw materials.
ISO 9000 certification remains a key integrating concept for Ferro's
Total Quality Management program. Over 80 percent of the Company's facilities
worldwide are ISO-certified.
Ferro is a charter member of Responsible Care(R), a program of the
Chemical Manufacturers Association to continuously improve health, safety and
environmental performance within the industry. The program is intended to be
particularly sensitive and responsive to public concerns.
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MANAGEMENT'S DISCUSSION & ANALYSIS
Ferro Corporation and Subsidiaries
Ferro Corporation is a major international producer of industrial
specialty materials. The Company's business consists of Coatings, Colors and
Ceramics; Plastics; and Chemicals. Geographically, the Company operates in
the United States and Canada; Europe; Latin America; and Asia-Pacific. See Note
11 to the Consolidated Financial Statements for segment operating data.
1994 RESULTS OF OPERATIONS
The Company posted record annual sales of $1.194 billion, with
increases in all segments and all geographic regions. The variety of products
sold by the Company makes it difficult to determine with certainty the
increases or decreases in sales resulting from changes in the volume of
products sold and selling prices. However, management's best estimate of volume
and selling price changes, as well as changes in other factors affecting total
changes in net sales are: volume and acquisitions, 13%; currency, 0%;
price/mix, 1%; and divestitures, (2%).
Net earnings were $47.4 million, or $1.52 per common share (primary),
compared with the $57.5 million, or $1.83 per common share (before the
cumulative effect of changes in accounting principles) earned in 1993.
The primary reasons for the decline in net earnings were: slower than
anticipated assimilation of the domestic powder coatings business acquired from
ICI in 1993; loss of volume of fuel additive business in the chemicals segment;
increases in raw material costs, largely in the second half of the year, the
size and frequency of which at times outpaced the Company's ability to pass on
price increases to customers; and continued pricing pressures in Europe,
primarily in the ceramic glaze business.
Pricing pressures and increased raw material costs were primarily
responsible for the decline in gross margin from 26.4% of sales to 24.9%.
Worldwide operating income of $85.7 million declined from the $94.5
million earned in 1993 because of the gross margin items mentioned above, as
well as increases in selling, general and administrative expenses, most of
which are associated with the full-year impact of acquisitions and increases in
research and development expenditures. Operating profit improved in Europe and
Asia-Pacific. Segment operating profit improved slightly for Coatings, Colors
and Ceramics, but declined in the other segments.
Interest earned decreased primarily because of the reduction in cash
and marketable securities used to finance the repurchase of the Company's
common stock.
Equity in net earnings of affiliates decreased due to continued
unfavorable business conditions in markets served by the Turkish affiliate.
Slow development of market penetration in Thailand continued.
Foreign currency loss of $0.5 million compared with a $2.7 million gain
in 1993 because of the effects of a weaker U.S. dollar and lower translation
gains in Brazil.
The effective tax rate increased slightly from the 1993 rate of 35.6%
to 36.2%.
COATINGS, COLORS AND CERAMICS
Led by volume increases in powder coatings and colorants and pigments,
and double-digit increases in all geographic regions except Latin America,
sales increased 15% to $710.3 million.
Operating profit increased slightly, despite the price pressures
experienced in international ceramic glaze markets. Additionally, the 1993
operating profit included a $3.0 million one-time charge associated with an
acquisition in powder coatings.
PLASTICS
Plastics sales of $267.1 million were 8% greater than those of 1993,
largely due to volume increases in the United States, though each geographic
region did post higher revenues.
Operating profit declined, because in some instances raw material cost
increases outpaced the Company's ability to increase selling prices to
customers. During 1994, the Company divested its plastics business in Australia
and New Zealand, a business which had contributed to profit in 1993.
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CHEMICALS
Chemicals sales rose 7% to $216.8 million, despite having experienced a
significant setback in the domestic fuel additive business from a major
customer whose business had decreased. Sales increases in other domestic
product lines and in Europe and Asia-Pacific more than offset the decline in
domestic fuel additives.
The loss of the fuel additive volume and tankage facility clean-up
costs incurred during the year were the major reasons for the decline in
operating profit from last year.
1993 RESULTS OF OPERATIONS
The Company performed well in 1993 compared with 1992 despite very poor
economic conditions in Europe. Excluding a $1.8 million after-tax charge
related to the acquisition of ICI's European and North American powder coatings
business and a net after-tax charge of $20.6 million for required accounting
changes, 1993 net earnings were comparable with those of the record established
in 1992.
Net earnings before the above charges were $59.3 million, or $1.89 per
common share (primary), compared with net earnings of $58.8 million, or $1.90
per common share in 1992. Net earnings after the above charges were $36.9
million, or $1.13 per common share.
Consolidated revenues were $1.066 billion, 3% less than those of 1992.
The impact of the stronger U.S. dollar decreased sales by 5% when foreign
currency sales were translated into U.S. dollars. The combination of
acquisitions and volume differences combined to increase sales by 4%, while
businesses sold or discontinued reduced sales by 4%. Lastly, a favorable
price/mix effect increased sales by 2%.
Gross margin improved slightly from 26.2% of sales to 26.4%, though in
dollar terms gross profit declined nominally, in accordance with the decline in
total sales.
Total operating income of $94.5 million, which includes a $3.0 million
charge associated with the ICI acquisition, was 9% less than the $103.6 million
in 1992. Improvements were noted in all geographic regions except Europe and in
all businesses except Coatings, Colors and Ceramics. The decline in Coatings,
Colors and Ceramics was related to the sizable European exposure of this
business.
Interest earned decreased because of the reduction in cash and
marketable securities utilized to finance acquisitions.
Equity in net earnings of affiliated companies declined because of
divestitures of non-core businesses, unfavorable business conditions in the
markets served by the Turkish affiliate, and slower than anticipated
penetration of developing markets in Thailand.
Foreign currency transaction gains during 1993 were $2.7 million, 31%
less than the $4.0 million gain recorded for 1992, largely attributable to
lower translation gains in Brazil.
The effective tax rate declined from 39.8% to 35.6%, reflecting
effective worldwide tax planning, utilization of tax loss carryforwards and the
impact of various tax law changes.
The Company adopted changes in accounting required by the Financial
Accounting Standards Board associated with accounting for postretirement
benefits other than pensions and accounting for income taxes. The after-tax
effect of these accounting changes was a net charge of $20.6 million. See Notes
to Consolidated Financial Statements for additional information.
COATINGS, COLORS AND CERAMICS
Sales of $616.9 million were down 2% from 1992 as the positive effect of 1993
acquisitions was exceeded by the negative effects of the European recession,
the stronger U.S. dollar and the decline in sales associated with
businesses sold or discontinued. While sales declined in both Europe and Latin
America, they increased in the United States and Canada as a result of
acquisitions and growth in many markets served. Sales also increased in
Asia-Pacific due to the start-up of the joint venture located in Indonesia.
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Operating profit declined 15%, due largely to the European economic
situation and the inclusion of a $3.0 million charge associated with an
acquisition in powder coatings. Beyond Europe, operating profit improved in the
United States and Canada, as well as Latin America, but declined nominally in
Asia-Pacific.
PLASTICS
Plastics sales of $246.9 million declined 3% from 1992, primarily because of
the strength of the U.S. dollar and the economic conditions in Europe. Sales
increased in the United States and Canada, as well as in Asia-Pacific, but
declined in Latin America because the Company curtailed plastics operations in
the area over the past two years.
Operating profit increased by 16% as improvements in all other
regions more than compensated for the decline in Europe. Improved volumes in
some domestic markets, stable raw material prices and productivity improvements
contributed to the increase in margin.
CHEMICALS
Sales of $201.9 million were 5% less than those of 1992, due largely to the
stronger U.S. dollar, the economic situation in Europe and decreased demand for
products in the United States. Sales increased in Asia-Pacific and declined
marginally in Latin America.
Significant contributors to the profitability of the chemicals business
in 1993 were payments received from certain customers in settlement of
contractual obligations. Operating profit improved $2.6 million.
OTHER ITEMS
ENVIRONMENTAL
During 1994, the Company signed an Agreed Order with the Indiana Department of
Environmental Management and the Hammond Department of Environmental
Management, settling the agencies' claims that the Keil Chemical facility had
violated various air emission regulations. Subject to satisfactory compliance
with the terms of the Agreed Order, the United States Environmental Protection
Agency has concluded its Notice of Violations against the Keil Chemical
facility. Under the Agreed Order, the Company was required to pay a civil cash
penalty of $1.5 million; to construct a supplemental environmental project,
estimated to cost approximately $1.5 million; and to reduce air emissions to
reach compliance with federal and state air emission regulations under
compliance schedules as contained in the Agreed Order.
During 1993, the Company became involved in environmental claims
regarding Keil Chemical. As stated above, one such claim has been settled. In
the other claim, the Company has been named as one of several defendants,
including three local municipalities, one local government agency (a sewer
district) and four other area industrial concerns in a suit filed by the United
States Environmental Protection Agency alleging violation of the Clean Water
Act and the River and Harbors Act. The suit alleges violation of pretreatment
requirements for removal of pollutants prior to discharge of wastewater into
the Grand Calumet and Little Calumet Rivers. Relief sought includes orders to
comply with environmental regulations, civil penalties, and contribution to the
cost of removing contaminated sediments from the west branch of the Grand
Calumet River. The Company believes it is in substantial compliance with
applicable law and intends to vigorously defend this litigation. However, the
Company will also explore settlement possibilities, and if it is more
economical to settle than to defend, the Company will pursue that course of
action.
Additionally, governmental agencies have identified several disposal
sites for cleanup under Superfund and similar laws to which the Company has
been named a Potential Responsible Party (PRP). The Company is participating in
the cost of certain cleanup efforts. However, the Company's share of such costs
has not been material.
The Company does not expect its environmental liabilities to have a
material adverse impact on its financial condition or results of operations.
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INTERNATIONAL
During the course of 1994, commencing about mid-year, European operations
posted improvements in revenues and operating earnings over the prior year,
the results of which are reflected in the 15% increase in revenues and the 14%
increase in operating earnings.
Macroeconomic conditions in Europe were quite depressed throughout
1993, as evidenced by the 16% decline in revenues and the 49% decline in
operating earnings.
ACCOUNTING CHANGES
The Company adopted Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 112, "Employers' Accounting for Postemployment
Benefits," as of January 1, 1994. The Company provides certain postemployment
benefits to certain former and inactive employees. The incremental cost of
adopting this standard was insignificant to the year of adoption and on an
ongoing basis.
The Company adopted Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," as of January 1, 1994. Under the new standard,
debt securities which are classified as available-for-sale are to be carried at
fair value, and unrealized holding gains or losses must be carried as a
separate component of shareholders' equity. The Company's debt securities are
deemed to be available-for-sale and the Company's investment guidelines require
that such securities be primarily short-term. Because of the short-term nature
of these securities, market value generally approximates cost, and the Company
experienced no material impact on its financial statements in 1994.
ACQUISITIONS AND DIVESTITURES
During 1994, the Company acquired Diamonite Products from W. R. Grace &
Company. Diamonite, located in Shreve, Ohio, manufactures custom ceramic
products for the automotive, aerospace, electronics, metalworking, textile and
power generation industries.
In April 1994, the Company signed agreements with Guangdong Fotoa
Group Co. Ltd. to establish a joint venture with the People's Republic of China
to manufacture and market ceramic frit, glazes, colors and grinding media.
Ferro will hold a majority interest of 60%. It is expected that the new
company will be operational in 1996.
The Company aquired the North American and European powder coatings
business of Imperial Chemical Industries (ICI) in April 1993, and with this
aquisition became one of the largest powder coatings producers in the world.
Bayer S.p.A's ceramic frit and color business in Italy was aquired in June 1993
and enhanced the Company's already strong presence in the very significant
Italian ceramic marketplace. In October 1993, the Company aquired the binder
and ink business, previously known as the MSI Materials Division of
Palomar-MSI, Inc., from Electro Scientific Industries, Inc. These aquisitions
added approximately $100.0 million annually to the Company's revenue base. See
note 6 to Consolidated Financial Statements.
The Company sold or discontinued operations representing annual sales
of approximately $30 million, $15 million and $50 million in 1994, 1993 and
1992, respectively. The largest of these were the 1994 sale of the plastics
business located in Austrailla and new Zealand, representing approximately $30
million in annual sales and the 1992 sale of the Foundry Products and Steel
Mill Products business, representing approximately $34 million in annual sales.
The result of these operations were not material to Ferro.
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LIQUIDITY AND CAPITAL RESOURCES
Cash flow from operations was again a strong source of funds in 1994,
permitting the Company to meet financial obligations, while repurchasing
approximately 1.5 million shares of Ferro common stock and providing
for significant capital expenditures. Cash flow from operating activities
amounted to $81.8 million in 1994 versus $62.0 million in 1993. This increase
in cash from operating activities was largely attributable to the reduction in
income taxes paid versus 1993. Additionally, net reductions in other working
capital items produced added cash from operations.
Cash used for financing activities was primarily affected by the
purchase of treasury stock. The Company purchased 1,492,900 shares of common
stock during 1994 under the stock purchase plan. It did not purchase any shares
of common stock under the stock purchase program in 1993. In 1992, the Company
purchased 91,100 shares.
Capital expenditures for plant and equipment were $59.7 million in
1994, $43.7 million in 1993 and $44.8 million in 1992. Information concerning
these expenditures by business segment can be found on page 30. Capital
expenditures for 1995 are estimated to be $76.0 million.
In 1993, the Company issued $25.0 million of 7 5/8% debentures with a
20-year maturity under a Shelf Registration originally filed with the
Securities and Exchange Commission in August 1992. Accordingly, $75.0 million
of the original $100.0 million remains available under the Shelf Registration.
This registration will enable the Company to access the public debt market if
advantageous opportunities should present themselves and is intended to be
used for general corporate purposes.
Common stock cash dividends were paid at the rate of $0.54 and $0.51
per share in 1994 and 1993, respectively. The common stock cash dividend was
increased by 12.5% during 1993 to an annual payout of $0.54 per common share.
See page 34 for additional dividend data.
The Company's financial condition remains strong and the Company has
the resources necessary to meet future anticipated funding requirements. In
addition to cash flow from operations, the Company has sufficient unused debt
capacity, including an unused $150.0 million line of credit, to finance its
ongoing capital requirements and to take advantage of acquisition
opportunities.
INFLATION
Management does not consider its business as a whole to be subject to
significant effects of inflationary pressures. Because of the diverse
geographic distribution of the Company's operations, the high inflation in
certain of the countries in which the Company operates is not considered to
create an unacceptable risk to conducting business worldwide.
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CONSOLIDATED STATEMENTS OF INCOME
Ferro Corporation and Subsidiaries
(Dollars in Thousands)
Years ended December 31, 1994, 1993 and 1992 1994 1993 1992
===================================================================================================================================
NET SALES $1,194,247 1,065,748 1,097,793
COST OF SALES 896,587 783,897 809,948
SELLING, ADMINISTRATIVE AND GENERAL EXPENSE 211,983 184,372 184,198
RESTRUCTURING CHARGE --- 3,000 ---
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1,108,570 971,269 994,146
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OPERATING INCOME 85,677 94,479 103,647
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OTHER INCOME
Interest earned 3,778 4,654 6,224
Equity in net earnings (losses) of affiliated companies (1,143) 770 2,707
Foreign currency transaction gains (losses) (508) 2,743 3,997
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2,127 8,167 12,928
OTHER CHARGES
Interest expense 10,933 10,081 9,227
Miscellaneous/net 2,565 3,276 9,659
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13,498 13,357 18,886
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INCOME BEFORE TAXES AND CUMULATIVE EFFECT
OF CHANGES IN ACCOUNTING PRINCIPLES 74,306 89,289 97,689
INCOME TAXES 26,912 31,784 38,861
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INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 47,394 57,505 58,828
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES FOR
Postretirement benefits, net of tax --- (23,603) ---
Income taxes --- 3,053 ---
===================================================================================================================================
NET INCOME 47,394 36,955 58,828
DIVIDEND ON PREFERRED STOCK, NET OF TAX 3,583 3,524 3,150
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS 43,811 33,431 55,678
===================================================================================================================================
PER COMMON SHARE DATA
Before cumulative effect of accounting changes
Primary earnings 1.52 1.83 1.90
Fully diluted earnings 1.45 1.73 1.77
After cumulative effect of accounting changes
Primary earnings 1.52 1.13 1.90
Fully diluted earnings 1.45 1.09 1.77
===================================================================================================================================
See accompanying notes to consolidated financial statements.
Nineteen
13
CONSOLIDATED BALANCE SHEETS
Ferro Corporation and Subsidiaries
(Dollars in Thousands)
December 31, 1994 and 1993 1994 1993
===================================================================================================================================
ASSETS
CURRENT ASSETS
Cash including cash equivalents $ 19,822 25,116
Marketable securities --- 38,335
Trade notes and accounts receivable, after deduction of
$7,129 in 1994 and $6,464 in 1993 for possible losses 217,889 175,826
Inventories (note 2) 142,133 128,736
Other current assets 35,571 43,240
-----------------------------------------------------------------------------------------------------------------------------------
Total current assets 415,415 411,253
OTHER ASSETS
Investments in affiliated companies 8,923 10,096
Unamortized excess of cost over net assets acquired 50,629 53,988
Sundry other assets 37,820 34,736
-----------------------------------------------------------------------------------------------------------------------------------
Total other assets 97,372 98,820
PLANT AND EQUIPMENT
Land 14,989 14,914
Buildings 135,282 126,981
Machinery and equipment 451,323 396,293
-----------------------------------------------------------------------------------------------------------------------------------
601,594 538,188
Less accumulated depreciation and amortization 313,005 280,367
-----------------------------------------------------------------------------------------------------------------------------------
Net plant and equipment 288,589 257,821
-----------------------------------------------------------------------------------------------------------------------------------
$801,376 767,894
==================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes and loans payable (note 3) $ 18,752 19,301
Accounts payable, trade 120,308 97,247
Income taxes payable 8,553 5,957
Accrued payrolls 15,553 15,917
Accrued expenses and other current liabilities 65,170 60,536
-----------------------------------------------------------------------------------------------------------------------------------
Total current liabilities 228,336 198,958
LONG-TERM LIABILITIES, less current portion (note 3) 77,611 79,349
ESOP LOAN GUARANTEE (note 3) 37,503 44,076
POSTRETIREMENT LIABILITIES (note 9) 42,076 40,096
OTHER NON-CURRENT LIABILITIES 49,106 46,618
SHAREHOLDERS' EQUITY (notes 4 and 5)
Serial convertible preferred stock, without par value. Authorized 2,000,000
shares; 1,520,215 shares issued 70,500 70,500
Guaranteed ESOP obligation (37,503) (44,076)
Common stock, par value $1 per share. Authorized 150,000,000 shares
in 1994 and 75,000,000 shares in 1993; 31,549,083 shares issued 31,549 31,549
Paid-in capital 10,233 9,760
Earnings retained in the business 396,969 368,590
Foreign currency translation adjustment (24,020) (29,121)
Other (1,550) (3,690)
-----------------------------------------------------------------------------------------------------------------------------------
446,178 403,512
Less cost of common stock held in treasury, 3,722,464 shares in 1994 and
2,413,091 shares in 1993 74,207 40,571
Less cost of convertible preferred stock held in treasury, 112,717 shares in 1994
and 89,355 shares in 1993 5,227 4,144
-----------------------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 366,744 358,797
-----------------------------------------------------------------------------------------------------------------------------------
$801,376 767,894
==================================================================================================================================
See accompanying notes to consolidated financial statements.
Twenty
14
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Ferro Corporation and Subsidiaries
December 31, 1994, 1993 and 1992
FOREIGN COMMON PREFERRED TOTAL
GUARANTEED CURRENCY STOCK STOCK SHARE-
PREFERRED ESOP COMMON PAID-IN RETAINED TRANSLATION HELD IN HELD IN HOLDERS'
(DOLLARS IN THOUSANDS) STOCK OBLIGATION STOCK CAPITAL EARNINGS ADJUSTMENT TREASURY TREASURY OTHER EQUITY
===================================================================================================================================
BALANCES AT
DECEMBER 31, 1991 $70,500 (57,229) 21,033 20,070 307,391 (4,866) (50,028) (1,584) 305,287
Net income 58,828 58,828
Cash dividends:
Common stock (13,088) (13,088)
Preferred stock (4,772) (4,772)
Federal tax benefits 1,622 1,622
Transactions involving
benefit plans 6,332 (217) 8,474 (1,081) 13,508
Foreign currency
translation adjustment (12,751) (12,751)
Three-for-two stock split 10,516 (10,516) ----
Cash paid in lieu of
fractional shares (14) (14)
Purchase of treasury
stock (2,351) (1,296) (3,647)
---------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1992 70,500 (50,897) 31,549 9,323 349,981 (17,617) (43,905) (2,880) (1,081) 344,973
Net income 36,955 36,955
Cash dividends:
Common stock (14,822) (14,822)
Preferred stock (4,675) (4,675)
Federal tax benefits 1,151 1,151
Transactions involving
benefit plans 6,821 437 3,334 (2,609) 7,983
Foreign currency
translation adjustment (11,504) (11,504)
Purchase of treasury
stock (1,264) (1,264)
---------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1993 70,500 (44,076) 31,549 9,760 368,590 (29,121) (40,571) (4,144) (3,690) 358,797
Net income 47,394 47,394
Cash dividends:
Common stock (15,443) (15,443)
Preferred stock (4,598) (4,598)
Federal tax benefits 1,026 1,026
Transactions involving
benefit plans 6,573 473 3,425 2,140 12,611
Foreign currency
translation adjustment 5,101 5,101
Purchase of treasury
stock (37,061) (1,083) (38,144)
---------------------------------------------------------------------------------------------------------------------------------
BALANCES AT
DECEMBER 31, 1994 $70,500 (37,503) 31,549 10,233 396,969 (24,020) (74,207) (5,227) (1,550) 366,744
=================================================================================================================================
See accompanying notes to consolidated financial statements.
Twenty-One
15
CONSOLIDATED STATEMENTS OF CASH FLOWS
Ferro Corporation and Subsidiaries
(Dollars in Thousands)
Years ended December 31, 1994, 1993 and 1992 1994 1993 1992
=================================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $47,394 36,955 58,828
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 42,704 38,257 34,622
Change in deferred income taxes (202) (11,520) 1,474
Effect of accounting change for postretirement benefits -- 37,764 --
Other non-cash items 1,546 (139) (1,055)
Changes in current assets and liabilities, net of effects of acquisitions
Trade notes and accounts receivable (39,378) (11,131) 13,770
Inventories (12,678) (20,602) 10,594
Other current assets 10,961 4,092 (3,334)
Accounts payable trade 22,204 8,026 (10,609)
Accrued expenses and other current liabilities 5,681 (14,605) (2,463)
Other operating activities 3,613 (5,137) (251)
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES 81,845 61,960 101,576
CASH FLOW FROM INVESTING ACTIVITIES
Proceeds from sale of equipment 2,885 1,687 2,943
Capital expenditures for plant and equipment (59,700) (43,711) (44,759)
Proceeds from divestitures 3,151 5,048 17,548
Acquisition of companies, net of cash acquired (9,176) (75,456) (26,809)
Transactions with affiliated companies 126 2,036 1,356
Change in marketable securities, net 38,335 9,774 (16,497)
Other investing activities (2,249) (1,240) (1,422)
---------------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (26,628) (101,862) (67,640)
CASH FLOW FROM FINANCING ACTIVITIES
Net borrowings (payments) under short-term lines (549) (1,308) 2,223
Proceeds from long-term debt -- 25,962 992
Principal payments on long-term debt (2,070) (1,245) (2,618)
Proceeds from sale of stock 2,780 3,109 3,716
Purchase of treasury stock (38,144) (1,264) (3,647)
Cash dividends paid to minority shareholders of subsidiaries (701) (312) (459)
Cash dividends paid (20,041) (19,497) (17,860)
---------------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM (USED FOR) FINANCING ACTIVITIES (58,725) 5,445 (17,653)
Effect of Exchange Rate Changes on Cash (1,786) (1,239) (2,381)
---------------------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,294) (35,696) 13,902
Cash and Cash Equivalents at Beginning of Year 25,116 60,812 46,910
---------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR 19,822 25,116 60,812
=================================================================================================================================
CASH PAID DURING THE YEAR FOR
Interest $11,517 11,001 10,480
Income taxes $26,467 35,090 25,653
See accompanying notes to consolidated financial statements.
Twenty-Two
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ferro Corporation and Subsidiaries
Years ended December 31, 1994, 1993 and 1992
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all of its subsidiaries after elimination of significant intercompany accounts,
transactions and profits. Affiliates in which the Company has stock ownership
from 20% to 50% are accounted for on the equity basis.
Certain amounts in the 1992 and 1993 financial statements and the accompanying
notes have been reclassified to conform to the 1994 presentation.
Financial results for acquisitions are included in the consolidated financial
statements from the date of acquisition. The excess of cost over equity in net
assets of acquired companies is being amortized over periods benefited, with
the most extended period being 40 years.
TRANSLATION OF FOREIGN CURRENCIES
Except for international companies whose functional currency is the U.S.
dollar, financial statements of international companies are translated into
U.S. dollar equivalents at exchange rates as follows: (1) balance sheet
accounts at year-end rates; (2) income statement accounts at exchange rates
weighted by the monthly volume of transactions occurring during the year.
Translation gains or losses are recorded in shareholders' equity and
transaction gains and losses are reflected in net income.
The U.S. dollar is the functional currency for the Company's Argentine and
Brazilian operations due to the high inflation experienced in those countries.
Translation gains or losses for these operations are reflected in net income.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid instruments with a maturity of
three months or less and are carried at cost which approximates market value.
MARKETABLE SECURITIES
Marketable securities consist of highly liquid investments carried at cost
which approximates market value.
RISK MANAGEMENT DERIVATIVES
Derivatives consist primarily of forward exchange contracts, foreign currency
options and options related to primary metals. Gains and losses related to
qualifying hedges of firm commitments or anticipated transactions are deferred
and are recognized as adjustments of carrying amounts when the hedged
transaction occurs. Gains and losses on derivative financial instruments that
do not qualify as hedges are recognized as foreign currency transaction gain or
loss. Premiums paid on purchased options are deferred and amortized over the
life of the option.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined
utilizing the first-in, first-out (FIFO) method, except for selected domestic
and international inventories which utilize the last-in, first-out (LIFO)
method.
PLANT AND EQUIPMENT
Plant and equipment is carried at cost. Depreciation of plant and equipment is
provided substantially on a straight-line basis for financial reporting
purposes. The annual depreciation provision has been based upon the following
estimated useful lives:
Buildings 20 to 40 years
Machinery and equipment 5 to 15 years
INCOME TAXES
Income taxes for 1994 and 1993 have been provided using the liability method in
accordance with Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 109, ``Accounting for Income Taxes.'' Financial
statements for 1992 have not been restated to apply the provisions of Statement
109.
EARNINGS PER SHARE
Primary net income per common share is based on a weighted average of common
and common equivalent shares. Fully diluted earnings per share further reflect
the potential dilution of the assumed conversion of the convertible preferred
shares into common shares.
Twenty-Three
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ferro Corporation and Subsidiaries
2. INVENTORIES
The portion of inventories valued on a LIFO basis at December 31, 1994 and 1993
is as follows:
1994 1993
======================================================================
United States 50% 44
Outside the United States 12 14
Consolidated 26 26
=====================================================================
If the FIFO method of inventory valuation had been used exclusively by
the Company, inventories would have been $17,678,000 and $17,279,000 higher
than reported at December 31, 1994 and 1993, respectively.
Inasmuch as certain of the inventory costs are determined by use of the
LIFO dollar value method (under which the raw materials, work in process and
finished goods are included in one pool), it is impracticable to separate LIFO
inventory values among raw materials, work in process and finished goods.
3. FINANCING AND LONG-TERM LIABILITIES
Long-term liabilities at December 31, 1994 and 1993 are as follows:
(Dollars in Thousands) 1994 1993
======================================================================
Parent Company:
Unsecured:
Debentures, 11 3/4%, due 2000 $49,964 49,954
Debentures, 7 5/8%, due 2013 24,782 24,777
Secured:
Mortgages, 5.9% to 8.5%,
payable to 2017 252 341
Subsidiary Companies:
Unsecured:
Notes payable, 6.5% to 12.0%,
payable to 1998 2,418 2,733
Secured:
Mortgages, 8.8% payable
to 2001 1,670 2,469
----------------------------------------------------------------------
79,086 80,274
Less current portion (A) 1,475 925
----------------------------------------------------------------------
Total $77,611 79,349
======================================================================
<FN>
(A) Included in notes and loans payable.
The aggregate principal payments on long-term indebtedness for the next
five years are as follows:
(Dollars in Thousands)
1995 1996 1997 1998 1999
============================================================================
$1,475 1,278 455 380 307
At December 31, 1994, $1,921,000 of long-term indebtedness was secured
by property, equipment and certain other assets with a net book value
approximating $3,317,000.
The 11 3/4% debentures in the principal amount of $50,000,000 are
due in the year 2000. These debentures, issued in 1985, may be called by the
Company in 1995 at par. The fair market value of these debentures, on a
yield-to-call basis, was approximately $52,125,000 at December 31, 1994.
In 1992, the Company filed a Shelf Registration with the Securities and
Exchange Commission for the issuance of up to $100,000,000 in debt securities.
The Company intends to offer these debt securities from time to time in the
future on terms determined at the time of sale. The Shelf Registration will
enable the Company to access the public debt market quickly if advantageous
opportunities should present themselves. The proceeds from the future sale of
debt securities under the Shelf Registration are intended to be used for general
corporate purposes.
In 1993, the Company issued $25,000,000 in 7 5/8% debentures under the
Shelf Registration. These debentures mature in the year 2013 and the fair market
value was approximately $22,438,000 at December 31, 1994.
The Company has a five-year revolving credit agreement in the amount of
$150,000,000. The maturity date of this facility is August 1, 1999. The
agreement permits the maturity date to be extended annually for one additional
year with the consent of the parties. Interest on revolving credit borrowings
is payable at floating prime or lower rates based on Company options. There is a
commitment fee of 3/16% per year. There have been no borrowings under this
agreement.
Twenty-Four
18
There are no covenants in either the 11 3/4% indenture, the Shelf
Registration or revolving credit agreement which significantly limit dividend
payment capability of the Company. In addition, there are no significant
restrictions on the payment of dividends by the subsidiaries and affiliates to
the Company.
In 1989, the Company created an Employee Stock Ownership Plan (ESOP).
The ESOP borrowed $63,500,000 at an interest rate of 8.5% and $7,000,000 at an
adjustable interest rate in 10-year loans guaranteed by the Company. Interest
paid by the ESOP totaled $3,558,000, $4,103,000 and $4,628,000 in 1994, 1993
and 1992, respectively. The Company has reflected the guaranteed ESOP
borrowings as a loan guarantee on its balance sheet with a like amount of
``Guaranteed ESOP Obligation'' recorded as a reduction of stockholders' equity.
As the Company and its employees make contributions to the ESOP, these
contributions, plus the dividends paid on the Company's preferred stock held by
the ESOP, are used to service the borrowings. As the principal amounts of the
loans are repaid, the ``Guaranteed ESOP Obligation'' is reduced accordingly.
Capitalized interest was $1,042,000, $1,108,000 and $753,000 in 1994,
1993 and 1992, respectively.
The maintenance of minimum cash balances is informally agreed to with
certain banks as a result of loans, commitments and services rendered. Cash
balances maintained to meet operating needs on a daily basis are sufficient to
satisfy these informal agreements. There are no legal restrictions on these
balances, which are available to the Company and its subsidiaries for use at
all times. Cash in excess of such operating requirements is invested in
short-term securities.
4. STOCK PLANS
The Company maintains stock option plans, a performance share plan and a
savings and stock ownership plan which includes an investment savings plan and
the ESOP for the benefit of its employees.
The stock option plans provide for the issuance of stock options at no
less than the market price. Options are exercisable over a 10-year period.
Information pertaining to these stock options is shown below:
1994 1993 1992
==============================================================================
Shares granted 201,850 180,775 67,650
Average option price $33.39 29.42 26.10
Shares exercised 39,284 98,961 200,841
Average option price $15.93 14.04 11.64
Shares which became
exercisable 114,613 103,068 138,337
Average option price $23.14 19.03 16.48
Shares unexercised at
year-end 1,003,241 845,551 776,707
Option price range
per share $6.95 6.95 6.95
to 34.00 to 30.42 to 30.42
Shares cancelled 4,876 12,970 35,937
Shares available for
granting future options 821,706 1,018,680 1,186,485
=============================================================================
The Company maintains a Performance Share Plan whereby awards,
expressed as shares of common stock of the Company, are earned only if the
Company meets specific performance targets over a three to five year period.
The Plan provides for 50% of the value of any earned performance shares to be
paid to participants in the form of cash and 50% in the form of common stock of
the Company. Performance share awards in the amount of 235,395 shares, 305,858
shares and 442,440 shares were outstanding at the end of 1994, 1993 and 1992,
respectively. The Company accrues amounts based on performance reflecting the
value of cash and common stock which is anticipated to be earned. The effect of
the Plan was to reduce income by $64,000, $1,144,000 and $3,658,000 in 1994,
1993 and 1992, respectively.
The ESOP provides for the Company to match eligible employee pretax
savings. Amounts expensed under the ESOP were $2,488,000, $2,141,000 and
$1,929,000 in 1994, 1993 and 1992, respectively.
5. CAPITAL STOCK
In 1989, Ferro issued 1,520,215 shares of 7% Series A ESOP Convertible
Preferred Stock to National City Bank, trustee for the Ferro ESOP. The shares
were issued at a price of $46.375 per share for a total consideration of
$70,500,000. Each share of
Twenty-Five
19
ESOP convertible preferred stock is convertible into 1.7325 shares of common
stock. As the loans are repaid by the trustee, preferred shares are allocated
to participating individual employee accounts. The Company is required to
repurchase at the original issue price, for cash or common stock at the
Company's option, the preferred shares allocated to an employee's ESOP account
upon distribution of such account to the employee unless such shares have been
converted to common stock. Each preferred share carries one vote, voting
together with the common stock on most matters.
The Company purchased 1,492,900 shares of common stock in 1994 at an
aggregate cost of $37,061,000; did not purchase any shares of common stock
during 1993; and during 1992, it purchased 91,100 shares of common stock at an
aggregate cost of $2,351,000. At December 31, 1994, the Company had remaining
authorization under its current treasury stock purchase program to acquire an
additional 1,416,000 shares.
In 1992, the Company effected a three-for-two stock split.
The Company maintains a Shareholder Rights Plan whereby, until the
occurrence of certain events, each share of the outstanding common stock
represents ownership of one right (Right). The Rights become exercisable only
if a person or group acquires 20% or more of the Company's common stock (10%
under certain circumstances) or commences a tender or exchange offer upon con-
summation of which such person or group would control 20% or more of the common
shares. Each Right entitles holders to buy, from the Company, one share of its
common stock at an exercise price of $20.00 per share. The Rights, which do not
have the right to vote or receive dividends, expire on April 9, 1996. Rights
may be redeemed by the Company at $0.022 per Right at any time until the
fifteenth day following public announcement that a person or group has acquired
20% or more of the voting power, unless such period is extended by the Board of
Directors while the Rights are redeemable.
If any person becomes the owner of 20% or more of the common stock
(10% under certain circumstances), or if the Company is the surviving
corporation in a merger with a 20% or more stock-holder and its common shares
are not changed or converted, or if a 20% or more stockholder engages in
certain self-dealing transactions with the Company, then each Right not owned
by such person or related parties will entitle its holder to purchase one share
of common stock at a purchase price of 20% of the then current market price of
the common stock.
In the event the Company engages in a merger or other business
combination transaction in which the Company is not the surviving corporation
or the Company is the surviving corporation but its common stock is changed or
exchanged or 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right shall have the right to receive, upon
exercise thereof at the then current exercise price of the Right, that number
of shares of common stock of the surviving company which at the time of the
transaction would have a market value of two times the exercise price of the
Right.
6. ACQUISITIONS AND DIVESTITURES
During 1994, the Company acquired Diamonite Products from W.R. Grace & Company.
Diamonite, located in Shreve, Ohio, manufactures custom ceramic products for
the automotive, aerospace, electronics, metalworking, textile and power
generation industries. The acquisition was accounted for using the purchase
method of accounting.
In April 1994 the Company signed agreements with Guangdong Fotoa Group
Co. Ltd. to establish a joint venture in the People's Republic of China to
manufacture and market ceramic frit, glazes, colors and grinding media. Ferro
will hold a majority interest of 60%. It is expected that the new company will
be operational in 1996.
In 1993, the Company acquired the North American and European powder
coatings business of Imperial Chemical Industries (ICI), the Italian ceramic
frit and color business of Bayer S.p.A. and the binder and ink business of
Electro Scientific Industries, Inc. Acquisitions were completed for cash of
approximately $75,456,000 and were accounted for using the purchase method of
accounting. Accordingly, the results of operations for these acquisitions have
been included within the Coatings, Colors and Ceramics segment since their
dates of
Twenty-Six
20
acquisition. Purchase prices have been allocated based on fair values of assets
at date of acquisitions with approximately $37,400,000 being assigned to
goodwill and other intangibles.
The Company sold or discontinued operations representing annual sales
of approximately $30,000,000, $15,000,000 and $50,000,000 in 1994, 1993 and
1992, respectively. The largest of these were the 1994 sale of the plastics
business located in Australia and New Zealand, representing approximately
$30,000,000 in annual sales and the 1992 sale of the Foundry Products and Steel
Mill Products businesses, representing approximately $34,000,000 in annual
sales. The results of these operations were not material to Ferro.
7. CONTINGENT LIABILITIES
There are pending against the Company and its consolidated subsidiaries various
lawsuits and claims. In the opinion of Management, the ultimate liabilities
resulting from such lawsuits and claims will not materially affect the
consolidated financial position or results of operations of the Company.
8. RESEARCH AND DEVELOPMENT EXPENSE
Amounts expended for development or significant improvement of new and/or
existing products, services and techniques approximated $22,919,000,
$19,334,000 and $15,440,000 in 1994, 1993 and 1992, respectively.
9. RETIREMENT BENEFITS
The following information sets forth data for those selected pension plans of
the Company and those subsidiaries which are subject to Statement of
Financial Accounting Standards No. 87, ``Employers' Accounting for Pensions.''
Several other pension plans for the international subsidiaries are insured and
fully funded. Due to the diverse nature of the regulatory environment of
various countries, the pension plans have varied benefit determinations. The
largest plan is for United States salaried employees whose benefits are
primarily based on employees' highest consecutive five years' earnings. Annual
pension costs for the Company and its subsidiaries were $8,455,000, $6,021,000
and $7,218,000 in 1994, 1993 and 1992, respectively.
The Company's funding policy is to contribute annually amounts required
by the various agencies governing the retirement plans of the Company.
The net periodic pension cost for plans accounted for under Statement
87 included the following components:
(Dollars in Thousands) 1994 1993 1992
================================================================================
Service cost-benefits earned
during the period $ 7,212 5,815 5,919
Interest cost on the projected
benefit obligation 13,775 13,082 12,815
Actual return on plan assets 4,269 (15,645) (18,020)
Net amortization and deferral (18,628) 1,577 4,395
================================================================================
Net periodic pension cost $ 6,628 4,829 5,109
================================================================================
Net amortization and deferral consists of amortization of net assets and
obligations at transition and deferral and amortization of subsequent net gains
and losses.
Assumptions used in developing the projected benefit obligation as of
December 31 were:
1994 1993 1992
================================================================================
Discount or settlement rate 7.0-10.0% 6.0-10.0 8.0-10.0
Rate of increase in
compensation levels 3.0- 9.0 4.0- 9.0 5.0- 9.0
Expected long-term rate of
return on assets 6.0-10.0 8.0-11.0 7.0-11.0
================================================================================
Twenty-Seven
21
The following table sets forth the funded status of the plans and the
amounts recognized in the Company's consolidated balance sheets:
Plans in Which Plans in Which
Assets Exceed Accumulated
Accumulated Benefits
(Dollars in Thousands) Benefits Exceed Assets
=================================================================================================================================
1994 1993 1994 1993
=================================================================================================================================
Actuarial present value of benefit obligations:
Vested benefit obligation $113,004 135,608 20,742 13,364
=================================================================================================================================
Accumulated benefit obligation $117,848 140,463 26,195 18,378
=================================================================================================================================
Projected benefit obligation $136,506 167,113 28,987 20,706
Plan assets at fair value 145,490 161,966 16,847 9,465
---------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation (in excess of) or less than
plan assets 8,984 (5,147) (12,140) (11,241)
Unrecognized net (gain) or loss (9,212) 5,517 (1,427) 3,119
Prior service cost 4,534 5,008 2,979 2,164
Unrecognized net transition (asset) obligation (5,760) (5,941) 2,737 2,498
Minimum liability adjustment -- -- (3,745) (6,253)
---------------------------------------------------------------------------------------------------------------------------------
Prepaid pension cost (pension liability) $ (1,454) (563) (11,596) (9,713)
=================================================================================================================================
In the aggregate, at year-end 1994 and 1993, the various plans' assets
at fair value were less than the various plans' projected benefit obligations
by $3,156,000 and $16,388,000, respectively. The Company recognized a
$2,245,000 increase in equity in 1994 and a $3,221,000 decrease in equity in
1993 for the minimum liability adjustment.
The plans' assets consist primarily of equities and government and
corporate obligations. The United States plans' assets included shares of the
Company's stock with a market value of $8,050,000 and $10,790,000 at year-end
1994 and 1993, respectively.
The Company adopted Statement of Financial Accounting Standards No.
106, ``Employers' Accounting for Postretirement Benefits Other than Pensions,''
as of January 1, 1993. The Company immediately recognized the transition
obligation resulting in a charge against income of $23,603,000 after related
income tax benefit of $14,161,000 representing the cumulative effect of the
change in accounting on results prior to January 1, 1993. Under Statement 106,
1993 current period expense exceeded the amount under the previous accounting
method by $1,516,000 after-tax.
The Company provides eligible domestic retired employees with health
care and life insurance benefits. Medical coverage is provided to all active
domestic employees on a contributory basis. Life insurance is provided to all
active domestic employees on a non-contributory basis.
The Company funds these benefits as the claims are presented.
The net periodic postretirement benefit cost included the following
components:
(Dollars in Thousands) 1994 1993
===================================================================================
Service cost $ 731 588
Interest cost 3,077 3,129
-----------------------------------------------------------------------------------
Net periodic postretirement
benefit cost $3,808 3,717
===================================================================================
Assumptions used in developing the accumulated postretirement benefit
obligation as of December 31 were:
1994 1993
===================================================================================
Discount or Settlement Rate 9.5% 7.5
Rate of increase in covered
health care benefits:
First year 9.0 9.0
Decreasing gradually over
20 years to 4.0 4.0
===================================================================================
The following table sets forth the accrued postretirement benefit
obligation recognized in the Company's consolidated balance sheets.
(Dollars in Thousands) 1994 1993
==================================================================================
Accumulated Postretirement
Benefit Obligation:
Retirees $26,122 27,868
Fully eligible active plan
participants 3,801 6,476
Other active plan participants 5,876 6,048
----------------------------------------------------------------------------------
35,799 40,392
Unrecognized net (gain) or loss (6,277) 296
----------------------------------------------------------------------------------
Accrued postretirement benefit obligation $42,076 40,096
==================================================================================
Twenty-Eight
22
Increasing the assumed health care cost trend rates by one percentage
point for each future year would increase the accumulated postretirement
benefit obligation as of December 31, 1994, by $3,465,000 and the net periodic
postretirement benefit cost by $373,000.
The Company adopted Statement of Financial Accounting Standards No.
112, ``Employers' Accounting for Postemployment Benefits,'' as of January 1,
1994. The effect on the Company's financial statements was not material.
10. INCOME TAX EXPENSE
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," as of January 1, 1993. The cumulative
effect of this change was to increase net income by $3,053,000.
Income tax expense attributable to income before taxes and cumulative
effect of accounting changes:
Liability Deferred
Method Method
----------------------------------------------------------------------
(Dollars in Thousands) 1994 1993 1992
======================================================================
Current:
U.S. Federal $ 8,885 11,035 12,293
Foreign 13,498 12,323 23,087
State and local 1,841 1,904 1,840
----------------------------------------------------------------------
24,224 25,262 37,220
----------------------------------------------------------------------
Deferred:
U.S. Federal 3,054 5,151 1,262
Foreign (329) 787 206
State and local (37) 584 173
----------------------------------------------------------------------
2,688 6,522 1,641
----------------------------------------------------------------------
Total income tax $26,912 31,784 38,861
======================================================================
In addition to the 1994 income tax expense of $26,912,000, certain
income tax benefits of $594,000 were allocated directly to shareholders'
equity.
The above taxes are based on earnings before income taxes and the
cumulative effect of change in accounting principles. They aggregated
$34,365,000, $47,400,000 and $38,343,000 for domestic operations and
$39,941,000, $41,889,000 and $59,346,000 for foreign operations in 1994, 1993
and 1992, respectively.
A reconciliation of the statutory federal income tax rate and the
effective tax rate follows:
(Dollars in Thousands) 1994 1993 1992
==========================================================================
Statutory federal income tax rate 35.0% 35.0 34.0
Foreign tax rate difference (1.7) (1.4) 3.9
U.S. taxes on dividends from
subsidiaries 1.3 1.9 2.6
State and local taxes net of
federal income tax 1.6 1.8 1.4
Miscellaneous -- (1.7) (2.1)
---------------------------------------------------------------------------
Effective tax rate 36.2% 35.6 39.8
===========================================================================
The components of deferred tax assets and liabilities at December 31
were:
(Dollars in Thousands) 1994 1993
=======================================================================
Deferred Tax Assets:
Pension and other benefit programs $18,937 18,682
Restructuring reserves 4,070 4,972
Accrued liabilities 4,922 5,137
Net operating loss carryforwards 8,733 6,428
Inventory 3,100 3,751
Other 5,269 7,996
-----------------------------------------------------------------------
Total Deferred Tax Assets 45,031 46,966
-----------------------------------------------------------------------
Deferred Tax Liabilities:
Property and equipment-
depreciation and amortization 22,275 20,388
Other 2,082 6,142
-----------------------------------------------------------------------
Total Deferred Tax Liabilities 24,357 26,530
-----------------------------------------------------------------------
Net Deferred Tax Asset Before
Valuation Allowance 20,674 20,436
Valuation Allowance (5,980) (5,821)
-----------------------------------------------------------------------
Net Deferred Tax Asset $14,694 14,615
=======================================================================
At December 31, 1994, the Company's foreign subsidiaries had deferred
assets relating to net operating loss carryforwards for income tax purposes of
$8,733,000 that expire in years 1995 through 2001, and in one instance, have no
expiration period. For financial reporting purposes, a valuation allowance of
$4,997,000 has been recognized to offset the deferred tax assets relating to
the net operating loss carryforwards.
Undistributed earnings of the Company's foreign subsidiaries amounted
to approximately $107,000,000. Deferred income taxes are not provided on
these earnings as it is intended that the majority of them are indefinitely
invested in these entities.
Twenty-Nine
23
11. REPORTING FOR SEGMENTS
Major product lines of the Company are Coatings, Colors and Ceramics; Plastics;
and Chemicals. Within Coatings, Colors and Ceramics, coatings revenues
represented approximately 41% of consolidated net sales during 1994 and 1993
and 38% for 1992, while colors represented approximately 10% of consolidated
net sales in each of the three years. The Company's sales are primarily made
through its own full-time sales force, though some sales are made through
manufacturers' representatives and distributors.
Identifiable assets are those used in the operation of each segment.
Information about the Company's segment operating data follows:
Coatings, Colors
(Dollars in Millions) and Ceramics Plastics Chemicals Total
=================================================================================================
Sales
1994 $710.3 267.1 216.8 1,194.2
1993 616.9 246.9 201.9 1,065.7
1992 629.5 255.2 213.1 1,097.8
Operating Profit
1994 $ 74.4 7.4 6.3 88.1
1993 71.9 10.3 13.5 95.7
1992 $ 84.6 8.9 10.9 104.4
Identifiable Assets
1994 $444.2 120.3 157.9 722.4
1993 402.9 107.0 131.2 641.1
1992 $306.0 111.6 124.4 542.0
Capital Expenditures
1994 $ 35.4 7.7 16.6 59.7
1993 20.0 8.6 15.1 43.7
1992 $ 26.2 5.4 13.2 44.8
Depreciation and Amortization
1994 $ 24.5 7.0 11.2 42.7
1993 20.9 6.8 10.6 38.3
1992 $ 16.2 7.5 10.9 34.6
=================================================================================================
A reconciliation of operating profit to income before income taxes and
changes in accounting principles included in the consolidated statements of
income follows:
(Dollars in Millions) 1994 1993 1992
=============================================================================================================
Operating profit $ 88.1 95.7 104.4
Equity in net earnings of affiliated companies (1.1) 0.8 2.7
Interest earned 3.8 4.7 6.2
General corporate expense\net (6.1) (5.4) (7.5)
Interest expense (10.9) (10.1) (9.2)
Miscellaneous 0.5 3.6 1.1
-------------------------------------------------------------------------------------------------------------
Income before taxes and changes in accounting principles $ 74.3 89.3 97.7
=============================================================================================================
A reconciliation of identifiable assets shown above to the total assets
included in the consolidated balance sheets follows:
(Dollars in Millions) 1994 1993 1992
=====================================================================================================
Total identifiable assets $ 722.4 641.1 542.0
Investments in affiliated companies 8.9 10.1 13.4
Corporate assets 70.1 116.7 141.1
-----------------------------------------------------------------------------------------------------
Total assets $ 801.4 767.9 696.5
=====================================================================================================
Thirty
24
Geographic operating data follows:
United
States and Latin Asia-
(Dollars in Millions) Canada Europe America Pacific Total
=================================================================================================================
1994
Net sales $602.0 399.3 93.2 99.7 1,194.2
Operating profit 35.6 30.3 12.4 9.8 88.1
Identifiable assets 348.7 260.6 47.1 66.0 722.4
1993
Net sales $534.0 347.6 91.6 92.5 1,065.7
Operating profit 44.8 26.6 15.4 8.9 95.7
Identifiable assets 300.8 243.7 38.2 58.4 641.1
1992
Net sales $493.8 412.0 107.6 84.4 1,097.8
Operating profit 32.4 51.8 12.3 7.9 104.4
Identifiable assets 229.0 221.1 37.7 54.2 542.0
=================================================================================================================
Transfers between geographic areas are
immaterial. Identifiable assets are those used in the
operation of each geographic area.
The Company's international operations
may be affected by exchange controls, currency
fluctuations, and laws or policies of particular
countries, as well as by laws and policies of the
United States affecting foreign trade and investment.
Because of the diversity of Ferro's international
operations, the Company does not consider that its
international business, as a whole, is exposed to
significant political or economic risks which are
disproportionate to ordinary risks of doing business,
whether domestic or international.
12. FINANCIAL INSTRUMENTS
It is Ferro's hedging policy to neutralize or mitigate
the potentially negative effects of currency move-
ments and raw materials prices. The Company's
use of derivative financial instruments is limited
to the hedging of underlying exposures. Ferro does
not engage in speculative transactions for trading
purposes.
The Company uses forward exchange
contracts and currency options to hedge its
exposure to foreign currency fluctuations. Several
of Ferro's foreign subsidiaries enter into forward
contracts to protect against the risk of increased
cost of non-local currency denominated raw
materials. The most prevalent transactions involve
the purchase of U.S. dollars against Dutch guilders
and Spanish pesetas. The maturity of the hedges
is consistent with the underlying exposure,
generally not beyond one year. At December 31,
1994, the market value of such forward contracts
was $7,900,000, compared with a contract value
of $7,700,000.
Ferro Corporation enters into foreign
currency options to protect the U.S. dollar value of
profits generated by certain European operations.
Such activity involves the purchase of put options
for the Dutch guilder, Spanish peseta and French
franc against the U.S. dollar. The maturity of the
options is generally under one year. At December
31, 1994, the face value or notional amount of all
outstanding currency options was $7,439,000. If
liquidated at year-end 1994, these options would
have produced a cash amount of $215,000 versus
an unamortized cost of $160,000.
In addition to hedging foreign exchange risk,
the Company also purchases call options to
hedge certain raw materials against future increases
in price. At December 31, 1994, the face value
or notional amount of all raw material call options
was $7,200,000. If liquidated at year-end 1994,
these options would have produced a cash amount
of $713,000 versus an unamortized cost of $647,000.
All forward contract, option and hedging
activity is executed with major reputable multi-
national financial institutions. Accordingly, the
Company does not anticipate counterparty default
and believes that such risk is immaterial.
Thirty-One
25
SELECTED FINANCIAL DATA
Ferro Corporation and Subsidiaries
Years ended December 31, 1984 through 1994
(Dollars in thousands except per share data
and sales per employee data) 1994 1993 1992 1991 1990
====================================================================================================================================
OPERATING RESULTS (A)
Net sales $1,194,247 1,065,748 1,097,793 1,056,940 1,124,833
Income before taxes and cumulative
effect of changes in accounting
principles 74,306 89,289 97,689 20,349 43,509
Income taxes 26,912 31,784 38,861 15,532 24,090
Net income $ 47,394 36,955 58,828 4,817 19,419
Income as a percent of sales before
cumulative effect of changes in
accounting principles 4.0% 5.4% 5.4% 0.5% 1.7%
RETURN ON AVERAGE NET WORTH 13.1% 16.3% 18.1% 1.6% 6.4%
PER COMMON SHARE DATA (A,B)
Average shares outstanding 28,735,898 29,472,201 29,314,494 28,821,380 29,064,517
Primary net income $ 1.52 1.13 1.90 .06 .55
Fully diluted net income $ 1.45 1.09 1.77 .06 .53
Cash dividends $ .54 .51 .45 .43 .43
Book value $ 13.18 12.32 11.92 10.67 10.77
FINANCIAL CONDITION AT YEAR-END
Current assets $ 415,415 411,253 414,927 405,740 386,704
Current liabilities 228,336 198,958 205,043 212,575 221,155
-----------------------------------------------------------------------------------------------------------------------------------
Working capital $ 187,079 212,295 209,884 193,165 165,549
-----------------------------------------------------------------------------------------------------------------------------------
Plant and equipment $ 601,594 538,188 497,561 511,605 519,044
Accumulated depreciation and
amortization 313,005 280,367 269,998 276,885 263,114
-----------------------------------------------------------------------------------------------------------------------------------
Net plant and equipment $ 288,589 257,821 227,563 234,720 255,930
-----------------------------------------------------------------------------------------------------------------------------------
Other assets $ 97,372 98,820 54,055 31,465 43,029
Total assets 801,376 767,894 696,545 671,925 685,663
Long-term liabilities 77,611 79,349 53,210 55,658 58,047
ESOP loan guarantee 37,503 44,076 50,897 57,229 62,649
Deferred income taxes 17,309 14,884 10,918 9,444 21,088
Postretirement liabilities 42,076 40,096 -- -- --
Other non-current liabilities 31,797 31,734 31,504 31,732 17,122
Shareholders' equity $ 366,744 358,797 344,973 305,287 305,602
PLANT AND EQUIPMENT
Capital expenditures and
acquisitions $ 63,404 75,037 48,761 39,005 61,408
Depreciation $ 37,076 33,812 33,451 32,686 30,389
EMPLOYEES
Number (year-end) 6,817 6,627 6,535 7,266 8,205
Sales per employee $ 175,187 160,820 167,990 145,460 137,090
===================================================================================================================================
Thirty-Two
26
1989 1988 1987 1986 1985 1984
===========================================================================================
1,083,573 1,008,990 871,008 725,241 651,071 662,867
83,764 88,436 61,023 45,482 18,265 32,351
34,016 41,816 29,336 21,400 9,372 15,465
49,748 46,620 31,687 24,082 8,893 16,886
4.6% 4.6% 3.6% 3.3% 1.4% 2.5%
16.8% 16.8% 13.1% 11.5% 4.6% 9.0%
30,972,625 30,884,797 31,043,830 30,599,257 30,287,551 30,046,725
1.53 1.51 1.02 .79 .29 .57
1.46 -- -- -- -- --
.40 .31 .30 .27 .27 .27
10.20 9.53 8.46 7.27 6.46 6.25
408,692 356,972 325,835 271,643 227,467 207,233
210,059 194,171 174,577 131,605 109,521 95,398
--------------------------------------------------------------------------------------------
198,633 162,801 151,258 140,038 117,946 111,835
--------------------------------------------------------------------------------------------
446,290 399,785 359,223 316,770 282,986 258,488
226,268 202,563 187,334 163,058 137,335 122,026
--------------------------------------------------------------------------------------------
220,022 197,222 171,889 153,712 145,651 136,462
--------------------------------------------------------------------------------------------
40,417 33,946 34,302 23,993 20,272 18,603
669,131 588,140 532,026 449,348 393,390 362,298
60,764 63,163 64,147 68,136 68,391 60,950
68,020 -- -- -- -- --
19,860 20,622 22,035 17,347 12,812 11,828
-- -- -- -- -- --
13,359 14,850 11,516 8,963 6,559 5,779
297,069 295,334 259,751 223,297 196,107 188,343
53,471 53,753 37,339 23,839 27,050 29,364
27,574 24,696 21,883 18,926 16,832 15,988
8,045 8,374 8,100 7,721 8,018 7,950
134,690 120,490 107,530 93,930 81,200 83,380
============================================================================================
<FN>
(A) Included in 1993 is a pretax restructuring charge of $3.0 million which on an after-tax basis is $1.8 million, or $0.06
per common share. Also included in 1993 is the cumulative effect of accounting changes of $20.6 million which on an after-tax
basis is $0.70 per common share. Included in 1991 is a pretax restructuring charge of $45.3 million which on an after-tax basis
is $31.7 million, or $1.11 per common share. A litigation charge of $12.0 million is included in 1990 which on an after-tax
basis is $7.9 million, or $0.27 per common share. Excluding the charges in 1991 and 1990, net income for 1991 would have been
$36.5 million, or $1.17 per common share, and net income for 1990 would have been $27.3 million, or $0.82 per common share.
(B) Primary earnings per common share are calculated on a weighted average of common and common equivalent shares. Net income per
common share for 1988 and prior periods is based on average shares outstanding during the year. Fully diluted earnings per share
further reflect the potential dilution of the assumed conversion of the convertible preferred shares (issued in 1989) into
common shares. Book value is based on outstanding common shares and net worth at the end of the year. Outstanding common shares
and per share data are adjusted to reflect the 2-for-1 stock split in August 1987, 3-for-2 stock split in August 1989 and
3-for-2 stock split in August 1992.
Thirty-Three
27
QUARTERLY DATA
(Unaudited)
(Dollars in Thousands Except Per Share Data)
Earnings (Loss) Per
Common Share Dividends Common
Net ----------------------- Per Stock
Net Gross Income/ Fully Common Price
Quarter Sales Profit (Loss) Primary Diluted Share Range
====================================================================================================================================
1994 1 $ 283,324 70,942 11,324 .35 .34 .135 $35.875-30.875
2 300,225 76,195 11,966 .38 .36 .135 31.625-22.375
3 296,803 73,693 11,632 .38 .36 .135 27.250-21.625
4 313,895 76,830 12,472 .41 .39 .135 26.125-22.875
------------------------------------------------------------------------------------------------------------------------------------
Total $1,194,247 297,660 47,394 1.52 1.45 .540
====================================================================================================================================
1993(A) 1 $ 257,036 68,722 (7,428) (.28) (.28) .120 $34.750-26.875
2 279,717 73,559 13,597 .43 .41 .120 32.375-26.125
3 263,697 67,585 14,988 .48 .45 .135 34.250-28.500
4 265,298 71,985 15,798 .51 .48 .135 33.875-29.750
------------------------------------------------------------------------------------------------------------------------------------
Total $1,065,748 281,851 36,955 1.13 1.09 .510
====================================================================================================================================
Primary earnings per common share are calculated using a weighted average of common and common equivalent shares.
The common stock of the Company is listed on the New York Stock Exchange. Ticker symbol: FOE.
At January 31, 1995, the Company had 3,213 holders of its common stock.
The Company's fully diluted earnings per share in 1993 differ from the total of the quarterly amounts because of the effect of
antidilutive securities in the second and fourth quarter calculations.
(A) Included in 1993 is an after-tax charge of $20,550 for the cumulative effect of changes in accounting for postretirement
benefits and income taxes. Excluding this charge, net income for 1993 would have been $57,505, or $1.83 per common share primary
and $1.73 per common share fully diluted.
Thirty-Four