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[May 2006]
Ferro Announces Unaudited Financial Results for 2005; Provides Preliminary Expectations for First Quarter 2006
Ferro Corporation (Cleveland, OH, USA) announced that sales for 2005 increased by 2% to US$1.9 billion. Net income from continuing operations was US$15 million compared with US$27.8 million in 2004. Included in the results for 2005 are certain charges which reduced net income by $0.24 per share. In 2004, one-time charges reduced earnings by $0.02 per share.
Ferro also announced that sales in the first quarter of 2006, ended 31 March, are expected to be between US$500 million and US$510 million, up 8% to 10% from the prior-year quarter. Net income from continuing operations for the quarter is expected to be in the range of US$0.12 to US$0.16 cents per share, compared with a breakeven first quarter of 2005. Included in the estimated results for the quarter are charges which are expected to have reduced net income from continuing operations by approximately US$0.11 per share.
"We're not at all satisfied with our performance in 2005, and we've been moving aggressively to improve Ferro's results," said James Kirsch, President and CEO. "We are beginning to see the benefits from the restructuring and productivity improvements we've put in place over the past several quarters. We expect to report a strong 2006 first quarter with substantial growth in sales and earnings, and we expect that momentum to carry through to the second quarter. I'm confident that we're taking the right actions to build a much stronger Ferro."
The company's 2004 financial filings were delayed while accounting investigations were undertaken. Those investigations have been completed and as a result, the company restated its 2003 and first quarter 2004 results. The restatement was contained in Ferro's 2004 Annual Report on Form 10-K that was filed with the U.S. Securities and Exchange Commission on 31 March 2006. As a result of this delay, the company has not completed its 2005 financial filings, which are expected to be filed by the end of September 2006. The company said it was therefore releasing unaudited 2005 financial results at this time.
2005 Full-Year Results
Sales for 2005 were US$1.9 billion, an increase of 2% from 2004. All segments registered growth for the year with the exception of Electronic Materials, where sales declined 8% due to difficult market conditions in the first half of the year. Electronic Materials sales recovered to post a 1% year-over-year gain in the third quarter and a 6% year-over-year gain in the fourth quarter.
Net income from continuing operations for the year was US$15 million. Included in the 2005 net income were certain items, some favourable and some unfavourable, which had a combined negative pre-tax effect of approximately US$16.5 million. Included in these amounts were charges resulting from the company's previously announced restructuring programmes and expenses related to the accounting investigation and restatement.
In addition, during 2005, the company recognized a pre-tax gain of US$3 million related to energy supply contracts. This was a non-cash benefit resulting from marking-to-market supply contracts for natural gas.
The company's 2005 gross margin percentage was 20.1%, including one-time charges and expenses that negatively impacted gross margin by 0.2 percentage points. Sales, general and administrative (SG&A) expenses were 16.7% of sales for the year, including US$13 million in one-time charges and expenses, or 0.7% of sales.
Total debt on 31 December 2005 was US$555 million, up US$44 million from the prior year. During the year, the company made cash contributions of US$42 million to its global pension plans for employees.
Ferro's sales for the third and fourth quarters of 2005 were US$466 million and US$458 million, respectively. Electronic Materials rebounded from a weak first half to show year-over-year growth in both quarters, including 6% growth in the fourth quarter. Sales in Color and Glass Performance Materials were negatively affected by seasonally weak conditions in the fourth quarter along with negative exchange rate effects and customers' delayed buying decisions related to price increases. This weakness did not extend into the first quarter of 2006.
Net income from continuing operations was US$7.3 million in the third quarter and the company recorded a net loss from continuing operations of US$0.9 million in the fourth quarter. In 2004, the company posted net income from continuing operations of US$7 million in the third quarter and US$0.5 million in the fourth quarter.
During the third and fourth quarters of 2005, the company recorded charges for restructuring and expenses related to the accounting investigation and restatement, which had an overall negative impact on the company's results. For the third quarter, the total, pre-tax reduction in income due to these items was US$4 million. For the fourth quarter, reduction in pre-tax income related to the items totalled US$2.3 million. On an after-tax basis, net income from continuing operations was reduced by US$0.06 per share in the third quarter and US$0.03 in the fourth quarter. For the third and fourth quarters of 2004, the pre-tax reduction in income from one-time items totalled US$2.1 million and US$0.6 million, respectively.
In addition, the company's natural gas supply contracts generated a non-cash, mark-to-market, pre-tax gain of US$5.3 million in the third quarter of 2005 and a pre-tax loss of US$3.9 million in the fourth quarter.
There were segment operating profit improvements during the fourth quarter of 2005, compared with the prior year in Performance Coatings, Electronic Materials, Polymer Additives and Specialty Plastics as the company experienced improved product mix and better expense control. The Color and Glass Performance Materials segment operating profit increased by nearly 8% compared with the prior-year fourth quarter, despite a revenue decline, due to improved product mix and better expense control.
www.ferro.com
ENDS