Ferro Reports 2012 First-Quarter Results
CLEVELAND, Apr 25, 2012 (BUSINESS WIRE) --
Copyright Business Wire 2012
Ferro Corporation (NYSE: FOE, the "Company") today announced net sales
of $466 million for the three-month period ended March 31, 2012,
compared with net sales of $573 million in the first quarter of 2011.
The Company recorded net income attributable to common shareholders of
$1.3 million, or $0.01 per diluted share, in the 2012 first quarter,
compared with $22.7 million, or $0.26 per diluted share, in the
prior-year quarter. The adjusted net income attributable to common
shareholders, excluding special charges, was $3.9 million, or $0.04 per
diluted share, compared with $25.1 million, or $0.29 per diluted share,
in the first quarter of 2011.
"Ferro generated income and positive earnings in the 2012 first quarter
and sales increased in all businesses except Electronic Materials
compared with the first quarter of 2011. While we continued to
experience weak demand for conductive pastes and powders in our
Electronic Materials business, we recorded sequential sales and income
improvement in our Performance Coatings, Color and Glass Performance
Materials, Polymer Additives, and Specialty Plastics businesses,
compared with the fourth quarter of 2011," said Chairman, President and
Chief Executive Officer James F. Kirsch. "We will continue to carefully
manage costs, expenses and cash, given the existing uncertainties
regarding the timing and strength of a recovery of solar paste demand in
the Electronic Materials business."
2012 First-Quarter Results
Net sales for the three months ended March 31, 2012, were $466 million,
a decline of 19 percent from net sales of $573 million in the first
quarter of 2011. Reduced sales of Electronic Materials products,
including precious metal sales, were the driver of the decline in
consolidated net sales. Excluding the Electronic Materials segment,
sales increased by 6.5 percent. Reduced customer demand for conductive
pastes used in solar cell applications and metal powders used in a
variety of electronic products resulted in a $131 million decline in
sales for the Electronic Materials segment, including an $88 million
decline in sales of precious metals due to reduced volume and lower
silver prices. Demand for conductive pastes remains weak. Sales
increased in the Performance Coatings, Specialty Plastics, Polymer
Additives, Color and Glass Performance Materials and Pharmaceuticals
segments compared with the prior-year quarter.
Gross profit was $88 million, or 18.9 percent of net sales, during the
2012 first quarter, compared with $120 million, or 21.0 percent of net
sales, during the first quarter of 2011. Excluding special charges,
gross profit was 21.0 percent of sales excluding precious metals during
the quarter, compared with 27.5 percent in the first quarter of 2011.
The primary driver of the decline in gross profit dollars was lower
sales volume in the Electronic Materials segment, including conductive
pastes and powders sold to manufacturers of solar cells and other
electronic products. During the 2012 first quarter, gross profit was
reduced by charges of $0.7 million, related to residual costs at closed
manufacturing sites that were affected by prior-period restructuring
actions. In the first quarter of 2011, gross profit was reduced by
charges of $1.6 million, primarily as a result of residual costs at
closed manufacturing sites.
Selling, general and administrative ("SG&A") expenses were $78 million
during the first quarter compared with $77 million in the prior-year
quarter. SG&A expenses were 16.7 percent of net sales during the
quarter, compared with 13.4 percent of net sales in the first quarter of
2011. Increased pension expense, salary adjustments and higher expenses
related to an initiative to streamline and standardize business
processes and improve management information systems tools contributed
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 2012 first quarter
included special charges of $1.8 million, primarily related to expenses
at sites that were closed during earlier restructuring actions and
severance expenses. During the first quarter of 2011, SG&A expense
included $1.1 million in charges, primarily related to residual expenses
at closed sites impacted by prior-period restructuring actions.
Restructuring and impairment charges were $0.3 million in the first
quarter of 2012, compared with $1.6 million in the prior-year quarter.
The decline reflects the continued winding down of the Company's
multi-year manufacturing rationalization activities.
Interest expense was $6.7 million during the 2012 first quarter, down
slightly from the prior-year period. Compared with the first quarter of
2011, average borrowings declined in the 2012 first quarter.
Net income attributable to common shareholders for the 2012 first
quarter was $1.3 million, or $0.01 per diluted share, compared with
$22.7 million, or $0.26 per diluted share, in the first quarter of 2011.
The adjusted net income attributable to common shareholders for the 2012
first quarter was $0.04 per diluted share, excluding special charges,
compared with adjusted earnings of $0.29 per diluted share in the first
quarter of 2011. A reconciliation of reported results to adjusted
results excluding special charges is available in the supplementary
financial data included in this press release.
Cash used by operating activities was $11.0 million during the first
quarter of 2012, compared with $28.6 million used in the prior-year
quarter. Cash flow in the 2011 first quarter benefited from the return
of $28.1 million in cash deposits for precious metal leases. There were
no cash deposits related to precious metal leases during the first
quarter of 2012, and no deposit-related impact on cash flow. The
decrease in cash used by operating activities during the quarter was
driven by lower cash used in inventory and receivables.
The Company has refined its methodology for the allocation of corporate
expenses to its reportable segments beginning with the 2012 first
quarter to better align segment reporting to the current manner in which
strategic decisions are made and resources allocated. Prior-period
results have been adjusted to be consistent with the new methodology.
The effect of the change was to reduce unallocated corporate expenses,
with a corresponding increase in total segment expenses. This change has
no net effect on the consolidated income reported by the Company.
Prior-year segment income and unallocated corporate expenses shown in
the tables within this press release have been adjusted to reflect the
current allocation methodology. Income by segment for the prior eight
quarters, adjusted to reflect the new allocation methodology, is shown
in the supplementary table included in this press release.
The Company expects 2012 sales, excluding precious metal pass-throughs,
to be approximately the same as in 2011, after 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
Sales of Electronic Materials products are expected to be lower in 2012
compared with 2011. However, sales of these products are expected to
improve during the course of 2012, with most of the improvement expected
in the second half of the year. The 2012 worldwide demand for solar
power is expected to be flat to down, after taking into account recent
changes in European incentive programs. 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
Based on the Company's current view of demand for its Electronic
Materials products, adjusted earnings per share in 2012 are expected to
be toward the low end of the previously provided guidance range of $0.40
to $0.65 per diluted share.
Adjusted earnings per share is equal to income (loss) before taxes, plus
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.
The Company will host a conference call to discuss its first quarter
financial results, its outlook for general business conditions and its
current outlook for 2012 on Thursday, April 26, 2012, at 10:00 a.m.
Eastern time. To participate in the call, dial 800-750-5845 if calling
from the United States or Canada, or dial 212-231-2930 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
April 26 through noon Eastern time on May 3. To access the replay, dial
800-633-8284 if calling from the United States or Canada, or dial
402-977-9140 if calling from outside North America. Use the program ID
#21587900 to access the audio replay.
The conference call also will be broadcast live over the Internet and
will be available for replay through September 30, 2012. The live
broadcast and replay can be accessed through the Investor Information
portion of the Company's Web site at www.ferro.com.
A podcast of the conference call will also be available on the Company's
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
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
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
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
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
the impact of requirements to fund employee benefit costs, especially
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
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
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 our 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 our Annual Report on
Form 10-K for the period ended December 31, 2011.
(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.
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.
SOURCE: Ferro Corporation