Ferro Corporation Announces Third Quarter Financial Results
CLEVELAND, Oct. 28 /PRNewswire-FirstCall/ -- Ferro Corporation today announced
that revenue for the third quarter 2003 increased 2.1% to $397.0 million,
compared with $388.8 million for the third quarter 2002. Favorable foreign
currency exchange rates and stronger demand in several key end markets helped to
offset the impact of continued overall sluggish economic conditions in North
America and Europe.
The Company reported a loss of ($0.8) million, or ($0.03) per share, which
included an after-tax restructuring charge of approximately $7.4 million, or
$0.18 per share. This compared with earnings for third quarter 2002 of $10.0
million, or $0.23 per share, which included an after-tax charge of $3.6 million,
or $0.08 per share, related to the dmc2 integration process. Earnings in the
current quarter reflect slightly lower volumes, increased raw material costs and
lower average product pricing. The $7.4 million restructuring charge is in line
with previous announcements and largely represents the final phase of the
integration of the dmc2 acquisition, including the closing of a tile facility in
Italy. In addition to the integration process, the current quarter charge
included further actions the Company has taken to consolidate and reduce
overhead costs. In total, these cost reduction efforts will create an annualized
pre-tax savings of approximately $15 million.
"During the third quarter we continued to face challenging economic conditions,"
said Hector R. Ortino, chairman and chief executive officer. "Market demand
remained robust in Asia-Pacific, but demand growth in North America was
inconsistent and European demand remained soft for most of our key end markets.
As the quarter progressed, we did experience improving conditions for several of
our business units, particularly electronic materials and pharmaceuticals and
fine chemicals. Unfortunately, demand was very soft for polymer additives and
specialty plastics. In addition, polymer additives experienced an increase in
raw material costs and product pricing pressure. Although we are disappointed
with our overall results in the quarter and the lack of a sustainable economic
recovery, we have done a good job of managing what we can control and doing what
is necessary to keep our cost base competitive." Ferro also reported cash flow from operations of nearly $41 million and a
reduction in total debt of approximately $17 million in the third quarter 2003. In addition, the Company recently announced it amended its five-year, $300
million bank credit agreement to provide increased latitude for certain
financial covenants. Ortino commented, "We continued to improve our balance
sheet and increase our financial flexibility. We are taking action today -- in
anticipation of a sustainable economic recovery -- to improve the competitive
position and growth profile of the Company. Our efforts in the third quarter,
including the debt reduction, the bank amendment and the restructuring and
consolidation efforts, support our Leadership Agenda strategy and our objective
to position the Company for long-term revenue and earnings growth." Segment Results - Third Quarter 2003 Sales for the Coatings segment increased 5.1% to $262.6 million for the third
quarter, compared with $250.0 million in the third quarter 2002. Segment income
from continuing operations decreased to $22.6 million, compared with $26.3
million in the year ago quarter. The increase in revenue was driven primarily
by favorable foreign currency exchange rates and increased global end market
demand for electronics. Segment income in the quarter reflects an unfavorable
mix and lower volumes related to the key European end markets for color and
glass, tile coatings and porcelain enamel. This was partially offset by
cost-saving actions taken throughout the year.
Sales for the Performance Chemicals segment were $134.4 million, compared with
$138.8 million in the third quarter 2002. Segment income in the third quarter
2003 was $5.3 million, compared with $9.4 million in the year ago quarter. Lower
sales and segment income reflect soft end market conditions that developed in
the second quarter 2003 and persisted into July and August, primarily in the
appliances, packaging and the non-residential construction markets for specialty
plastics and polymer additives, before showing some improvement in September. Polymer additives was negatively affected by very weak demand in the PVC market,
pricing pressures caused by competitive market conditions and further raw
material cost increases. The pharmaceutical and fine chemicals business
continued to deliver strong revenue and earnings growth as they implement the
springboard growth strategies as part of the overall Leadership Agenda strategy
for the Company.
Outlook "There are positive signs that improvement in economic and market conditions are
on the horizon, but we are going to be challenged in the near- term by the
polymer additives business environment and the overall economic conditions in
Europe," Ortino stated. "We are optimistic that market demand in North America
will show gradual progress through the fourth quarter 2003, but Europe will not
likely see much improvement until early 2004. The signs for a sustainable global
economic recovery are still unclear as we move toward 2004. We will remain
focused on improving our long-term competitive position by reducing debt and
evaluating options to further reduce costs, including the potential for further
facility rationalization." Conference Call The Company will host a conference call to discuss quarterly results, progress
on strategic actions and general business outlook today, October 28, at 11 a.m. Eastern Standard Time. If you wish to participate in the call, dial (877)
310-1794 if calling from the United States or Canada, and dial (706) 643-3611 if
calling from outside North America. Please call the assigned number
approximately 10 minutes before the conference call is planned to begin.
A replay of the call will be available from noon Eastern Standard Time on
October 28 until 11 p.m. Eastern Standard Time on October 31. To access the
replay, dial (800) 642-1687 if calling from the United States or Canada, and
dial (706) 645-9291 if calling from outside North America. Please reference the
Conference ID# 2785399. The replay will also be available on the Company's Web
site at http://www.ferro.com/ , beginning at 1 p.m. Eastern Standard Time on
October 28.
Cautionary Note on Forward-Looking Statements This press release contains statements about future events and expectations that
may constitute "forward-looking statements" within the meaning of the federal
securities laws. Actual results may be materially different. These
forward-looking statements are subject to a variety of uncertainties, unknown
risks, and other factors concerning the Company's operations and business
environment, which are difficult to predict and beyond the control of the
Company. Such risks could cause the actual results of the Company to differ
materially from those matters expressed or implied in such forward-looking
statements. For a full explanation of the risks associated with forward-looking
statements, please refer to the Company's SEC filings.
About Ferro Corporation Ferro Corporation is a major international producer of performance materials for
industry, including coatings and performance chemicals. The Company has
operations in 20 countries and reported sales of $1.5 billion in 2002. For more
information on Ferro, visit the Company's Web site at http://www.ferro.com/ or
contact John Atkinson, 216-875-7155.
Condensed Consolidated Statements of Income
Ferro Corporation and Subsidiaries Three Months Ended Nine Months Ended
September 30 September 30 (Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Dollars in Thousands,
except per share amounts) 2003 2002 2003 2002 Net Sales $397,010 $388,807 $1,214,958 $1,162,246 Cost of Sales 307,427 293,577 926,210 866,956
Selling, Administrative
and General Expenses 78,864 69,937 231,741 213,099
Other Charges (Credits):
Interest Expense 9,014 9,571 26,713 33,182
Net Foreign Currency
(Gain) Loss (36) (1,327) 2,357 349
Other Expense - Net 2,819 3,811 7,410 9,506
Income/(loss) from
Continuing Operations
Before Taxes (1,078) 13,238 20,527 39,154
Income Tax Expense (321) 3,221 5,971 12,461 Income/(loss) from
Continuing Operations (757) 10,017 14,556 26,693
Discontinued Operations
Earnings from
Discontinued
Operations, Net - 2,039 (923) 6,590
Gain on Disposal of
Discontinued
Operations, Net - 32,465 2,417 32,465
- 34,504 1,494 39,055 Net Income/(loss) (757) 44,521 16,050 65,748 Dividend on Preferred
Stock 517 594 1,598 1,875 Net Income/(loss)
Available to Common
Shareholders ($1,274) $43,927 $14,452 $63,873 Per Common Share Data:
Basic
Income/(loss)
from
Continuing
Operations ($0.03) $0.23 $0.31 $0.66
Discontinued
Operations - 0.86 0.04 1.04
Net Income/(loss) ($0.03) $1.09 $0.35 $1.70
Diluted
Income/(loss)
from
Continuing
Operations ($0.03) $0.23 $0.31 $0.65
Discontinued
Operations - 0.80 0.04 0.97
Net Income/(loss) ($0.03) $1.03 $0.35 $1.62 Shares Outstanding:
Average Basic
Outstanding 40,953,873 40,347,707 40,759,106 37,550,340
Average Diluted 40,953,873 43,010,001 40,943,904 40,443,732
Actual End of Period 41,290,954 40,381,678 41,290,954 40,381,678
Consolidated Balance Sheet
Ferro Corporation and Subsidiaries
September 30, 2003 and December 31, 2002 (Dollars in Thousands)
(Unaudited) (Audited)
ASSETS 2003 2002 Current Assets:
Cash and Cash Equivalents $19,001 $14,942
Net Receivables 174,021 154,533
Inventories 179,939 183,055
Other Current Assets (A) 199,956 133,055 Total Current Assets $572,917 $485,585 Net Property, Plant & Equipment 599,882 577,754
Unamortized Intangible Assets 421,012 421,274
Other Assets 130,769 119,860
$1,724,580 $1,604,473 LIABILITIES Current Liabilities:
Notes and Loans Payable (B) $9,329 $7,835
Accounts Payable, Trade 212,490 207,873
Other Current Liabilities (A) 175,113 188,459 Total Current Liabilities $396,932 $404,167 Long - Term Debt (B) 540,678 443,552
Other Liabilities 271,092 284,258
Shareholders' Equity 515,878 472,496
$1,724,580 $1,604,473 (A) Other current assets include assets held for sale of $0 at
September 30, 2003 and $27,046 at December 31, 2002. Other current
liabilities includes liabilities associated with assets held for sale
of $0 at September 30, 2003 and $12,518 at December 31, 2002.
(B) Total debt including off-balance sheet financing was $553,091 at
September 30, 2003 and $562,085 at December 31, 2002. The off-balance
sheet financing included an asset securitization balance of $3,084 at
September 30, 2003 and a combined balance for asset securitization and
the terminated leveraged lease program of $110,698 at December 31,
2002. Ferro Corporation and Subsidiaries
Segment Data Three Months Ended Nine Months Ended
September 30 September 30 (Unaudited)(Unaudited) (Unaudited)(Unaudited)
(Dollars in Thousands) 2003 2002 2003 2002
Segment Sales
Coatings $262,587 $249,975 $797,602 $746,307
Performance Chemicals 134,423 138,832 417,356 415,939
Total $397,010 $388,807 $1,214,958 $1,162,246 Segment Income
Coatings $22,575 $26,315 $69,167 $72,575
Performance Chemicals 5,341 9,410 22,505 32,129
Total $27,916 $35,725 $91,672 $104,704 Geographic Sales
United States $192,325 $196,240 $587,802 $582,022
International 204,685 192,567 627,156 580,224
$397,010 $388,807 $1,214,958 $1,162,246
DATASOURCE: Ferro Corporation CONTACT: John Atkinson of Ferro Corporation, +1-216-875-7155 Web site: http://www.ferro.com/
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