Ferro Reports 2012 Third-Quarter Results

Publicado el 30 oct. 2012
Ferro Corporation 

Ferro Corporation today announced net sales of $415 million for the three-month period ended September 30, 2012, compared with net sales of $546 million in the third quarter of 2011. The Company recorded a net loss attributable to common shareholders of $316 million, or $3.66 per diluted share, in the 2012 third quarter, compared with net income attributable to common shareholders of $19.3 million, or $0.22 per diluted share, in the prior-year quarter. The adjusted net loss attributable to common shareholders, excluding special charges, was $1.9 million, or $0.02 per diluted share, compared with net income attributable to common shareholders of $20.9 million, or $0.24 per diluted share, in the third quarter of 2011.

Restructuring and impairment charges of $199 million were recorded during the third quarter. The charges included a $147 million impairment of goodwill associated with the Electronic Materials segment and a $41 million impairment of certain property, plant and equipment primarily related to a reduced outlook in the Company's solar pastes business in the Electronic Materials segment. An impairment charge of $11 million was also recorded to reduce the value of properties and buildings related to manufacturing sites that were closed as part of restructuring initiatives executed in prior years. In addition, special charges of $5.8 million were included in cost of goods sold primarily related to write-downs of solar pastes inventories and residual costs at closed manufacturing sites involved in earlier restructuring initiatives. Special charges of $3.2 million were included in selling, general and administrative expenses primarily related to an increased reserve for other tax assets and residual expenses at sites closed as part of earlier restructuring initiatives. In addition, third-quarter results were impacted by an increased reserve on deferred tax assets that increased income tax expense by approximately $112 million. A reconciliation of reported to adjusted results excluding special charges is available in the supplementary financial data included in this press release.

The Company announced on October 9, 2012 that it is exploring strategic options for its solar pastes business in order to eliminate the ongoing negative impact from that business on earnings and cash flow. The decision was in response to a significant contraction in the worldwide market for solar pastes and insufficient progress in the qualification of the Company's products at large solar cell producers.

"We are taking decisive action to improve our future profitability and build shareholder value. Our management team is focused on determining the best options for the solar pastes business, and we intend to make and execute our decisions quickly. In addition, we are taking actions in our worldwide operations—including business process improvements and organizational changes—in order to reduce annual operating expenses by $30 million over the next two years," said Chairman, President and Chief Executive Officer James F. Kirsch. "We are analyzing further capacity consolidation, particularly in Europe, due to the weak economic conditions in the region. As a result of these initiatives, we are targeting worldwide headcount reductions of approximately 10 percent over the next two years."

2012 Third-Quarter Results

Net sales for the three months ended September 30, 2012, were $415 million, a decline of 24 percent from net sales of $546 million in the third quarter of 2011. Sales declined in all segments compared with the prior-year quarter. Reduced sales of Electronic Materials products, including precious metal sales, and reduced customer demand in Europe due to a weaker economic climate were the primary contributors to the decline in net sales. Reduced demand for conductive pastes used in solar cell applications, metal powders used in a variety of electronic products, and ceria-based surface finishing materials resulted in a $90 million decline in sales for the Electronic Materials segment, including a $59 million decline in sales of precious metals due to reduced volume and lower silver prices.

Gross profit was $62 million, or 15.0% of net sales, during the 2012 third quarter, compared with $104 million or 19.0% of net sales during the prior-year quarter. Excluding special charges, gross profit was 18.0% of sales excluding precious metals during the quarter, compared with 23.4% in the 2011 third quarter. The primary driver of the decline in gross profit dollars was lower sales volume in the Electronic Materials segment. During the 2012 third quarter, gross profit was reduced by charges of $5.8 million, primarily related to inventory write-downs of solar pastes in the Electronic Materials segment and residual costs at manufacturing sites closed as part of earlier restructuring initiatives. Gross profit was reduced by charges of $0.7 million during the third quarter of 2011, due to residual costs at closed manufacturing sites.

Selling, general and administrative ("SG&A") expenses were $65 million during the 2012 third quarter compared with $66 million in the prior-year quarter. SG&A expenses declined primarily due to lower incentive compensation expense. Higher special charges and increased reserves for bad debt partially offset the decline in SG&A expenses. SG&A expenses during the quarter included special charges of $3.2 million, primarily related to an increased reserve for other tax assets and residual expenses at sites closed as a part of earlier restructuring initiatives. During the third quarter of 2011, SG&A expense included $0.8 million in charges, primarily related to sites closed during prior-period restructuring actions.

During the third quarter of 2012, the Company elected to change its method of recognizing defined benefit pension and other postretirement benefit expenses. Under the new method, actuarial gains and losses will be recognized in operating results in the year in which the gains or losses occur. Prior-period results shown in this press release have been adjusted to apply the new method retrospectively.

Interest expense was $7.1 million during the 2012 third quarter, little changed from the prior-year quarter. Compared with the prior-year quarter, average interest rates paid on borrowings were slightly higher. The impact of higher average interest rates was largely offset by lower average borrowings during the quarter.

Income tax expense was $105 million during the 2012 third quarter. During the quarter, the Company recorded a reserve on its deferred tax assets which resulted in a $112 million increase in income tax expense. The net deferred tax assets, to which the valuation allowance was applied, are available for use in future periods. The valuation allowance that was recorded against the net deferred tax assets will be reversed when the assets are utilized or when the Company determines that these assets are likely to be realized.

The net loss attributable to common shareholders for the 2012 third quarter was $316 million, or $3.66 per diluted share, compared with net income attributable to common shareholders of $19.3 million, or $0.22 per diluted share, in the third quarter of 2011. The adjusted net loss attributable to common shareholders for the 2012 third quarter was $0.02 per diluted share, excluding special charges, compared with adjusted earnings of $0.24 per diluted share in the third quarter of 2011. A reconciliation of reported to adjusted results excluding special charges is available in the supplementary financial data included in this press release.

The Company has estimated that the negative impact on adjusted earnings from its solar pastes business was $0.04 per diluted share during the 2012 third quarter and $0.09 per diluted share during the first nine months of 2012. During 2011, the solar pastes business contributed income of approximately $0.04 per diluted share in the third quarter and $0.22 per diluted share during the first nine months of the year. The estimated per share loss or income attributed to solar pastes excludes allocated corporate expenses for all periods.

Cash generated by operating activities was $14 million during the 2012 third quarter compared with $3 million in the prior-year quarter. The cash generation during the quarter was driven by reduced net working capital (inventories plus accounts receivable less accounts payable). Total debt declined to $337 million at September 30, 2012 from $342 million on June 30, 2012.

2012 Outlook

The Company expects 2012 sales, excluding precious metal sales, to be down 8% to 10% compared with 2011, including the negative impact of lower forecasted foreign exchange rates. Sales of precious metals are expected to decline due to lower average prices and lower volume. The sales outlook assumes modest economic growth in all regions except in Europe where economic activity is expected to continue to decline compared with prior-year periods.

Based on the Company's current view of worldwide economic conditions, adjusted earnings in 2012 are expected to be in the range of $0.07 to $0.12 per diluted share. This forecast is unchanged from the forecast provided by the Company on October 9, 2012. The forecast includes an expected loss of approximately $0.14 to $0.17 per share related to the Company's solar pastes business.

 

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Ferro Corporation (Materiales Solares): https://es.enfsolar.com/ferro-corporation
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