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FORM 10-K
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to_______
COMMISSION FILE NUMBER 1-584
FERRO CORPORATION
(Exact name of registrant as specified in its charter)
AN OHIO CORPORATION 1000 LAKESIDE AVENUE,
CLEVELAND, OH 44114 I.R.S. NO. 34-0217820
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 216-641-8580
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EXCHANGE ON WHICH REGISTERED
-------------- ------------------------------------
Common Stock, par value $1.00 New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
7 5/8% Debentures due May 1, 2013
7 3/8% Debentures due November 1, 2015
8% Debentures due June 15, 2025
7 1/8% Debentures due April 1, 2028
Series A ESOP Convertible Preferred Stock, without Par Value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained here, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
On, January 31, 2001 there were 34,129,479 shares of Ferro Common
Stock, par value $1.00 outstanding. As of the same date, the aggregate market
value (based on closing sale price) of Ferro's Common Stock held by
non-affiliates was $803,407,936
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Annual Report to Shareholders for the year ended December 31, 2000
(Incorporated into Parts I, II and IV of this Form 10-K). Portions of Ferro
Corporation's Proxy Statement for the Annual Meeting of Shareholders on April
27, 2001 (Incorporated into Part III of this Form 10-K).
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TABLE OF CONTENTS
PART I
Item 1. Business.....................................................................Page 3
Item 2. Properties...................................................................Page 5
Item 3. Legal Proceedings............................................................Page 6
Item 4. Submission of Matters to a Vote of Security Holders..........................Page 6
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........Page 7
Item 6. Selected Financial Data......................................................Page 7
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations...................................................Page 8
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk...................Page 8
Item 8. Financial Statements and Supplementary Data..................................Page 8
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure....................................................Page 8
PART III
Item 10. Directors and Executive Officers of the Registrant...........................Page 8
Item 11. Executive Compensation.......................................................Page 8
Item 12. Security Ownership of Certain Beneficial Owners and Management...............Page 8
Item 13. Certain Relationships and Related Transactions...............................Page 8
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..............Page 8
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PART I
ITEM 1- BUSINESS
Ferro Corporation ("Ferro" or "the Company"), which was incorporated
under the laws of Ohio in 1919, is a worldwide producer of performance materials
for manufacturers. It operates (either directly or through subsidiaries and
affiliates) in 19 countries worldwide. Ferro applies core technologies in
organic and inorganic chemistry to develop leading market positions in a variety
of businesses and markets. The Company holds global leadership positions as a
supplier of glazes and pigments for ceramics and as a supplier of industrial
coatings and polymer additives. In the United States, the Company is a leader in
plastic compounds and colorants. The Company is targeting growth in electronic
materials and performance and fine chemicals. Ferro's products are used
traditionally in the markets of building and renovation, major appliances,
household furnishings, transportation and industrial products and increasingly
in telecommunications, consumer electronics and pharmaceuticals. These
products are sold principally in the United States and Europe; however,
operations extend to Latin America and the Asia-Pacific region.
Most of the products produced by Ferro are classified as performance
materials, rather than commodities, because they are formulated or designed to
perform a specific and important function both in the manufacturing processes
and in the finished products of Ferro customers. These materials are not sold in
the high volume normally associated with commodity businesses. The Company's
materials are principally delivered by motor freight carriers and, in some
cases, through dedicated fleet operations on a lease basis.
Ferro's materials require a high degree of technical service on an
individual customer basis. The value of these performance materials stems from
the results and performance they achieve in actual use.
A further description of Ferro's business, its principal products,
their markets and applications, is contained under all headings on pages 2
through 17 of its 2000 Annual Report to Shareholders (the "Annual Report"),
which is attached here as Exhibit 13. The information contained under the
headings on pages 2 through 17 of the Annual Report is incorporated here by
reference. Information concerning Ferro's business during 2000, 1999 and 1998 is
included under the heading "Management's Discussion and Analysis" on pages 18
through 22 of the Annual Report and in Note 7 to Ferro's Consolidated Financial
Statements, appearing on page 31 of the Annual Report. Such information is
incorporated here by reference. Additional information about Ferro's reportable
operating segments, including financial information relating thereto, is set
forth in Note 12 to Ferro's Consolidated Financial Statements, which appears on
pages 35 and 36 of the Annual Report and is incorporated here by reference.
Certain statements contained here and in future filings with the
Securities and Exchange Commission reflect the Company's current expectations
with respect to the future performance of the Company and 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, and
actual events or results may differ materially from the events or results
discussed in the forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to: the success of
the Company's acquisition program; market acceptance of new product
introductions; changes in customer requirements, markets or industries served;
changing economic conditions; changes in foreign exchange rates; changes in the
prices of major raw materials; significant technological or competitive
developments; and the impact of environmental proceedings.
Raw Materials
The raw materials essential to Ferro's operations both in the United
States and overseas are obtainable from multiple sources worldwide. Ferro did
not encounter significant raw material shortages in 2000 and does not anticipate
such shortages in 2001.
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Patents and Licenses
Ferro owns a substantial number of patents relating to its various
products and their uses. While these patents are of importance to Ferro, it does
not believe that the invalidity or expiration of any single patent or group of
patents would have a material adverse effect on its business. Ferro patents
expire at various dates through the year 2021.
Ferro does not hold any licenses, franchises or concessions that it
considers to be material to its future.
Customers
Ferro does not consider that a material part of its coatings or its
performance chemcals businesses is dependent on any single customer or group of
customers.
Backlog of Orders
In general, no significant lead-time between order and delivery exists
in any of Ferro's business segments. As a result, Ferro does not consider that
the dollar amount of backlog orders believed to be firm as of any particular
date is material for an understanding of its business. Ferro does not regard any
material part of its business to be seasonal.
Competition
In most of its products, Ferro has a substantial number of competitors,
none of which is dominant. Competition varies by product and by region. Due to
the diverse nature of Ferro's product lines no single company competes across
all product lines in any of the Company's segments.
In the coatings group worldwide, the Company is the largest producer of
porcelain enamel and ceramic glaze coatings. Strong local competition for
ceramic glaze exists in the markets of Italy and Spain. Ferro is one of the top
five producers of powder coatings in the world. The top five producers of powder
coatings represent approximately 60% of the market. In the performance chemicals
group, the Company is one of the largest producers of polymer additives in the
United States and has several large competitors. The plastics business has a
large number of competitors in all businesses.
Product performance characteristics, customer and technical service,
and price are the most important components of the competition that Ferro
encounters in the sale of nearly all of its products.
Research and Development
A substantial number of Ferro's employees are involved in research and
development activities relating to new and existing products, services and
techniques required by the ever-changing markets of its customers. Laboratories
are located at each of Ferro's major subsidiaries around the world where
technical efforts are applied to meet customer and market needs of the
particular geographical area. In the United States, laboratories are maintained
in each of its divisions. In addition, corporate research and development
activity is located in the Cleveland area. The research staff is organized by
major business group. The Company also operates central design and development
labs in Italy and Spain to serve the tile market worldwide.
Expenditures for research and development activities relating to the
development or significant improvement of new and/or existing products, services
and techniques were approximately $30.2 million in 2000, $30.9 million in 1999
and $29.4 million in 1998. Expenditures for individual customer requests for
research and development were not material.
Environmental Matters
Ferro's manufacturing facilities, like those of its industry generally,
are subject to numerous laws and regulations implemented to protect the
environment, particularly with respect to plant wastes and emissions. Ferro
believes that it is in compliance with the environmental regulations to which
its operations are subject and that, to the extent Ferro may not be in
compliance with such regulations, non-compliance has not had a materially
adverse effect on Ferro's operations. The Company's compliance has required a
continuous management effort and significant expenditures.
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Ferro and its international subsidiaries authorized $8.7 million in
capital expenditures for environmental control in 2000 and the Company's best
estimate of what it expects capital expenditures for environmental control to be
in 2001 and 2002 is $7.0 million and $4.3 million, respectively. The Company
does not consider these capital expenditures to be material.
For additional information on other environmental matters see Item 3 of
this Annual Report on Form 10-K and information included under the heading
"Management's Discussion and Analysis - Environmental" on page 21 of the Annual
Report and information contained in Note 8 on page 32 of the Annual Report.
Employees
At December 31, 2000, Ferro employed approximately 7,117 full-time
employees, including 3,852 employees in its foreign subsidiaries and affiliates
and 3,265 in the United States.
Approximately 33.6% of the domestic workforce is covered by labor
agreements, and approximately 9.5% is affected by labor agreements that expire
in 2001.
Foreign Operations
Financial information about Ferro's domestic and foreign operations is
set forth in Note 12 to the consolidated financial statements of the Annual
Report and is incorporated here by reference.
Ferro's products are produced and distributed in foreign as well as
domestic markets. Ferro commenced its international operations in 1927.
Wholly-owned subsidiaries operate manufacturing facilities in
Argentina, Australia, Belgium, Brazil, England, France, Germany, Holland, Italy,
Mexico, Portugal and Spain. Partially-owned subsidiaries manufacture in
Argentina, China, Indonesia, Taiwan, Thailand, Turkey and Venezuela.
Foreign operations accounted for 41% of the consolidated net sales for
the year 2000 and 44% of consolidated net sales in 1999 and 46% of consolidated
net sales in 1998.
The sales of Ege-Ferro Kimya A.S. (Turkey), Ferro Enamel do Brasil,
I.C.L.(Brazil), Ferro de Venezuela C.A.(Venezuela), Ferro Corporation Australia
Pty. Ltd.(Australia) and Ferro (Ningbo) Peoples Republic of China are
principally for delivery of products inside the country in which the subsidiary
is located. The sales of each of Ferro's other subsidiaries are for delivery of
products both domestically and outside the country through exports. Ferro's
European Community subsidiaries continue to reduce and eliminate, to the extent
practical, duplication of product lines with the intended result being that only
one subsidiary will be the primary provider of each line of Ferro products to
the entire European Community market. A similar process is occurring within the
MERCOSUR economic union in Latin America.
Ferro receives technical service fees and/or royalties from many of its
foreign subsidiaries. Historically, as a matter of corporate policy, the foreign
subsidiaries have been expected to remit a portion of their annual earnings to
the parent as dividends. To the extent earnings of foreign subsidiaries are not
remitted to Ferro, those earnings are intended to be indefinitely re-invested in
those subsidiaries.
ITEM 2 - PROPERTIES
The Company's corporate headquarters offices are located at 1000
Lakeside Avenue, Cleveland, Ohio. Other corporate facilities, located in
Independence, Ohio, are owned by the Company. The business segments in which
manufacturing plants are used and the locations of the principal manufacturing
plants owned by Ferro in the United States are as follows:
COATINGS -- Cleveland, Ohio; Nashville, Tennessee; Pittsburgh,
Pennsylvania; Toccoa, Georgia; Orrville, Ohio; Shreve, Ohio; Penn Yan,
New York; East Liverpool, Ohio; Crooksville, Ohio; and Niagara Falls,
New York.
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PERFORMANCE CHEMICALS- Walton Hills, Ohio, Hammond, Indiana, Baton
Rouge, Louisiana, Waukegan, Illinois; Bridgeport, New Jersey;
Carpentersville, Illinois; Plymouth, Indiana; Evansville, Indiana;
Stryker, Ohio; Edison, New Jersey and South Plainfield, New Jersey.
In addition, Ferro leases manufacturing facilities in Cleveland, Ohio
(Performance Chemicals); Fort Worth, Texas (Performance Chemicals); Vista,
California (Coatings); and Montgomeryville, Pennsylvania (Coatings).
Outside the United States, Ferro or its subsidiaries own manufacturing
plants in Argentina, Australia, Brazil, Belgium France, Germany, Indonesia,
Italy, Mexico, the Netherlands, Spain, Taiwan, Thailand, Turkey and the United
Kingdom. Ferro or its subsidiaries lease manufacturing plants in Italy,
Portugal, Germany and the Netherlands. In many instances, the manufacturing
facilities outside of the United States are used in multiple business segments
of Ferro.
Ferro believes that its facilities are generally well maintained and
adequate for their present use. During the past year, several of Ferro's plants
have been operating near capacity.
ITEM 3 - LEGAL PROCEEDINGS
On May 4, 1999, and December 16, 1999, the United States Environmental
Protection Agency (U.S. EPA) issued Notices of Violation (NOVs) alleging that
the Company violated various requirements of the Clean Air Act and related state
laws in modifying and operating the Pyro-Chek process. The U.S. EPA has also
submitted requests seeking information from the Company related to the alleged
violations. The Company completed the sales of assets relating to the Pyro-Chek
process and ceased production of Pyro-Chek in June 2000. The Company has been
meeting with U.S. EPA and is engaged in negotiations intended to resolve the
issues raised in the NOVs. If these issues are not resolved in negotiations, the
United States may bring an enforcement action against the Company based on the
violations alleged in the NOVs. Although the maximum penalty that might be
sought by U.S. EPA could be material, the Company believes that it will resolve
this matter in a manner that will not have a material adverse effect on the
Company's financial position or results of operations.
In 2000, a wrongful death lawsuit was filed against Keil Chemical, a
division of the Company, and is now pending in federal court in Indiana. Two
negligence suits were filed against Keil Chemical also in federal court in
Indiana. These complaints generally allege that the Company was negligent and/or
reckless in failing to control emissions, misrepresenting emissions levels to
regulatory agencies, failing to warn nearby residents of the hazards posed by
its emissions, and in emitting carcinogenic chemicals without a permit. The
Company believes it has valid defenses to the allegations made in these suits
and is vigorously defending its position.
There are also pending against the Company and its consolidated
subsidiaries various other lawsuits and claims. In the opinion of management,
the ultimate liabilities resulting from such other lawsuits and claims will not
materially affect the consolidated financial position or results of operations
or liquidity of the Company.
The law firm of Squire, Sanders & Dempsey L.L.P., of which Mary Ann
Jorgenson is a partner, provided legal services to Ferro in 2000 and Ferro plans
to retain Squire, Sanders & Dempsey L.L.P. in 2001. Ms. Jorgenson is the
Secretary of Ferro.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Ferro's security holders during
the fourth quarter of the fiscal year covered by this report.
EXECUTIVE OFFICERS OF THE REGISTRANT
There is set forth below the name, age and positions held by each
individual serving as an executive officer of the Company as of March 16, 2001
as well as their business experience during the past five years. Years indicate
the year the individual was named to the indicated position. There is no family
relationship between any of Ferro's executive officers.
R. Jay Finch - 59
Senior Vice President, Specialty Plastics, 1999
Vice President, Specialty Plastics, 1991
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J. Larry Jameson - 63
Senior Vice President, Industrial Coatings, 1999
Vice President, Industrial Coatings, 1998
Vice President, Powder Coatings, 1996
Kent H. Lee - 59
Senior Vice President, Specialty Chemicals, 1999
Vice President, Specialty Chemicals, 1998
Director, United States Operations, Chemicals, 1998
General Manager Polymer Additives, 1996
Hector R. Ortino - 58
Chairman and Chief Executive Officer, 1999
President and Chief Executive Officer, 1999
President and Chief Operating Officer, 1996
President, 1996
Millicent W. Pitts - 46
Vice President, Global Support Operations, 1998
Director, Corporate Development, Rohm & Haas Company, 1996
Paul V. Richard - 41
Vice President, Human Resources, 1998
Director, Human Resources, 1993
Robert A. Rieger - 50
Vice President, Ceramics, Colors and Electronic Materials, 1999
Worldwide Business Director, Electronic Materials, 1998 President and
Chief Executive Officer, Exolon-ESK 1997 Managing Director, Zircon
Worldwide, Cookson Matthey Ceramics, 1994
Bret W. Wise - 40
Senior Vice President and Chief Financial Officer, 1999
Vice President and Chief Financial Officer, WCI Steel, 1994
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Information regarding the recent price and dividend history of Ferro's
Common Stock, the principal market for its Common Stock and the number of
holders of Common Stock is set forth under the heading "Quarterly Data
(unaudited)" on page 39 of the Annual Report. This information is incorporated
here by reference. Information concerning dividend restrictions is contained in
Note 3 to Ferro's Consolidated Financial Statements on pages 28 and 29 of the
Annual Report and this information is incorporated here by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The summary of selected financial data for each of the last five years
set forth under the heading "Selected Financial Data " on page 38 of the Annual
Report is incorporated here by reference.
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ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The information contained under the heading "Management's Discussion
and Analysis" on pages 18 through 22 of the Annual Report is incorporated here
by reference.
ITEM 7. A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information contained under the heading "Management's Discussion
and Analysis - Market Risk Management" on pages 21 and 22 of the Annual Report
is incorporated here by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Ferro and its subsidiaries
contained on pages 23 through 38, inclusive, including the Notes to Consolidated
Financial Statements, and the quarterly data (unaudited) on page 39 of the
Annual Report, are incorporated here by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There are no such changes or disagreements.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors of Ferro contained under the
headings "Election of Directors" on pages 1 through 10 of Ferro's Proxy
Statement for the Annual Meeting of Shareholders on April 27, 2001, is
incorporated here by reference. Information regarding executive officers of
Ferro is contained under Part I of this Annual Report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION
The information required by this Item 11 is set forth under the heading
"Information Concerning Executive Officers" on pages 14 through 26 of Ferro's
Proxy Statement for the Annual Meeting of Shareholders on April 27, 2001 and is
incorporated here by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 is set forth under the
headings "Election of Directors" on pages 1 through 10 of Ferro's Proxy
Statement for the Annual Meeting of Shareholders on April 27, 2001 and is
incorporated here by reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or transactions that are required to be
reported.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
1. DOCUMENTS FILED AS PART OF THIS ANNUAL REPORT ON FORM 10-K:
(a) The following consolidated financial statements of ferro
corporation and its subsidiaries, contained on pages 23
through 37 inclusive, of the annual report are incorporated here
by reference:
Consolidated Statements of Income for the years ended December
31, 2000, 1999 and 1998
Consolidated Balance Sheets at December 31, 2000 and 1999
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Consolidated Statements of Shareholders' Equity for the years
ended December 31, 2000, 1999 and 1998
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999 and 1998
Notes to Consolidated Financial Statements
(b) The following additional information for the years 2000, 1999
and 1998, is submitted herewith:
Independent Auditors' Report on Financial Statement Schedule
Schedule II - Valuation and Qualifying Accounts and Reserves
All other schedules have been omitted because the material is
not applicable or is not required as permitted by the rules and
regulations of the Securities and Exchange Commission, or the
required information is included in notes to consolidated
financial statements.
Financial Statement Schedule II, together with the independent
Auditors' Report, are contained on pages F-1 and F-2 of this
Annual Report on Form 10-K.
(c) Exhibits:
The exhibits listed in the attached Exhibit Index are filed pursuant
to Item 14 (c) of the Form 10-K.
2. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed for the three months ended December
31, 2000.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report on Form
10-K to be signed on its behalf by the undersigned, thereunto duly authorized.
FERRO CORPORATION
By /s/HECTOR R. ORTINO
----------------------------------
Hector R. Ortino
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Annual Report on Form 10-K has been signed below by the following persons
on behalf of the Registrant and in their indicated capacities as of the 23rd day
of February, 2001.
/s/HECTOR R. ORTINO Chairman and Chief Executive Officer
- ------------------------------------- (Principal Executive Officer)
Hector R. Ortino
/s/BRET W. WISE Senior Vice President and Chief Financial Officer
- ------------------------------------- (Principal Financial Officer and Principal Accounting Officer)
Bret W. Wise
/s/SANDRA AUSTIN CRAYTON Director
- -------------------------------------
Sandra Austin Crayton
/s/ALBERT C. BERSTICKER Director
- -------------------------------------
Albert C. Bersticker
/s/MICHAEL H. BULKIN Director
- -------------------------------------
Michael H. Bulkin
/s/GLENN R. BROWN Director
- -------------------------------------
Glenn R. Brown
/s/WILLIAM E. BUTLER Director
- -------------------------------------
William E. Butler
/s/WILLIAM B. LAWRENCE Director
- -------------------------------------
William B. Lawrence
/s/JOHN C. MORLEY Director
- -------------------------------------
John C. Morley
/s/WILLIAM J. SHARP Director
- -------------------------------------
William J. Sharp
/s/DENNIS W. SULLIVAN Director
- -------------------------------------
Dennis W. Sullivan
/s/ALBERTO WEISSER Director
- -------------------------------------
Alberto Weisser
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors Ferro Corporation:
Under date of January 23, 2001, we reported on the consolidated balance sheets
of Ferro Corporation and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, shareholders' equity, and cash flows
for each of the years in the three-year period ended December 31, 2000, as
contained in the 2000 Annual Report to Shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
Annual Report on Form 10-K for the year 2000. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related consolidated financial statement Schedule II-Valuation and Qualifying
Accounts and Reserves. This financial statement schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
/s/ KPMG LLP
- -------------------------------------
KPMG LLP
Cleveland, Ohio
January 23, 2001
F-1
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FERRO CORPORATION AND SUBSIDIARIES
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(THOUSANDS OF DOLLARS)
ADDITIONS
---------
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
---------- ---------- -------- ---------- ---------
Year ended December 31, 2000
Valuation and qualifying accounts which are
deducted on consolidated balance
sheet from the assets to which they apply.... 1,957(D)
Possible losses in collection of notes ... 318(B)
and accounts receivable - trade........... $ 8,801 870 161(C) 732(A) 6,825
=========== ========= =========== ========== ==========
Year ended December 31, 1999
Valuation and qualifying accounts which
are deducted on consolidated balance
sheet from the assets to which they apply
Possible losses in collection of notes ......... 457(B)
and accounts receivable - trade........... $ 9,737 857 65(C) 1,401(A) 8,801
=========== ========= =========== ========== ==========
Year ended December 31, 1998
Valuation and qualifying accounts which are
deducted on consolidated balance
sheet from the assets to which they apply
Possible losses in collection of notes.... (181)(B)
and accounts receivable - trade........... $ 8,280 3,185 (63)(C) 1,846(A) 9,737
=========== ========= =========== ========== ==========
Notes:
(A) Accounts written off, less recoveries
(B) Adjustment in respect of differences in rates of exchange
(C) Acquisitions and divestitures
(D) Reserves on receivables sold
F-2
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EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated here by
reference to a prior filing in accordance with Rule 12b-32 under the Securities
and Exchange Act of 1934. (Asterisk denotes exhibits filed with this report).
Exhibit:
(3) Articles of Incorporation and by-laws
(a) Eleventh Amended Articles of Incorporation. (Reference is made to
Exhibit (3)(a) to Ferro Corporation's Quarterly Report on Form 10-Q for
the three months ended June 30, 1998, which Exhibit is incorporated here
by reference.)
(b) Certificate of Amendment to the Eleventh Amended Articles of
Incorporation of Ferro Corporation filed December 28, 1994. (Reference is
made to Exhibit (3)(b) to Ferro Corporation's Quarterly Report on Form
10-Q for the three months ended June 30, 1998, which Exhibit is
incorporated here by reference.)
(c) Certificate of Amendment to the Eleventh Amended Articles of
Incorporation of Ferro Corporation filed January 19, 1998. (Reference is
made to Exhibit (3)(c) to Ferro Corporation's Quarterly Report on Form
10-Q for the three months ended June 30, 1998, which Exhibit is
incorporated here by reference.)
(d) Amended Code of Regulations. (Reference is made to Exhibit (3)(d) to
Ferro Corporation's Quarterly Report on Form 10-Q for the three months
ended June 30, 1998, which Exhibit is incorporated here by reference.)
(4) Instruments defining rights of security holders, including indentures
(a) Revolving Credit Agreement by and between Ferro and seven commercial
banks dated May 9, 2000. (Reference is made to Exhibit 4(a) to Ferro
Corporation's quarterly report on Form 10-Q for the three months ended
March 31, 2000, which Exhibit is incorporated here by reference.)
(b) Amended and Restated Shareholder Rights Agreement between Ferro
Corporation and National City Bank, Cleveland, Ohio, as Rights Agent,
dated as of December 10, 1999. (Reference is made to Exhibit 4(k) to Ferro
Corporation's Form10-K for the year ended December 31, 1999, which Exhibit
is incorporated here by reference.)
(c) The rights of the holders of Ferro's Debt Securities issued and to be
issued pursuant to an Indenture between Ferro and Society National Bank,
as Trustee, are described in the form of Indenture dated May 1, 1993.
(Reference is made to Exhibit 4(j) to Ferro Corporation's Form 10- Q for
the three months ended June 30, 1993, which exhibit is incorporated here
by reference.)
(d) The rights of the holders of Ferro's Debt Securities issued and to be
issued pursuant to a Senior Indenture between Ferro and Chase Manhattan
Trust Company, National Association, as Trustee, are described in the
Senior Indenture, dated March 25, 1998. (Reference is made to Exhibit 4
(c) to Ferro Corporation's Quarterly Report on Form 10-Q for the three
months ended March 31,1998, which exhibit is incorporated here by
reference.)
(e) Form of Security (7 1/8% Debentures due 2028). (Reference is made to
Exhibit 4(a-1) to Ferro Corporation's Form 8-K filed March 31, 1998, which
Exhibit is incorporated here by reference.)
(10) Material Contracts
(a) Key elements of Ferro's Incentive Compensation Plan are set forth
under the heading "Report of the Compensation and Organization
Committee" on pages 14 through 17 of the Proxy Statement dated March
21, 2001. Said description is incorporated here by reference.
14
(b) Ferro's Performance Share Plan. (Reference is made to Exhibit B of
Ferro Corporation's Proxy Statement dated March 20, 2000, which
exhibit is incorporated here by reference.)
(c) Ferro Corporation Savings and Stock Ownership Plan. (Reference is
made to Exhibit 4.3 to Ferro Corporation's Quarterly Report on Form
10-Q for the three months ended March 31, 1989, which Exhibit is
incorporated here by reference.)
(d) Ferro's Employee Stock Option Plan. (Reference is made to Exhibit A
to Ferro Corporation's Proxy Statement dated March 20, 2000 which
Exhibit is incorporated here by reference.)
(e) Form of Indemnification Agreement (adopted January 25, 1991 for use
from and after that date). (Reference is made to Exhibit 10 to Ferro
Corporation's Form 10-K for the year ended December 31, 1990, which
Exhibit is incorporated here by reference.)
(f) Amended and Restated Executive Employment Agreement. (Reference is
made to Exhibit 10 (a) of Ferro Corporation's Form 10-Q for the
three months ended March 31, 1998, which Exhibit is incorporated
here by reference.)
*(g) Schedule I listing the officers with whom Ferro has entered into
currently effective executive employment agreements and change in
control agreements. A copy of this schedule is attached here as
Exhibit 10.
(h) Various agreements relating to an Asset Defeasance Financing
including a Participation Agreement dated as of October 31, 1995
among Ferro Corporation, State Street Bank and Trust Company (not in
its individual capacity but solely as Trustee), the financial
institutions named as Purchasers, and Citibank N.A, as Agent, and a
Lease dated October 31, 1995 between State Street Bank and Trust
Company (not in its individual capacity but solely as Trustee) as
Lessor and Ferro Corporation as Lessee. The additional agreements
are available upon request. (Reference is made to Exhibit 10(a) of
Ferro Corporation's Form 10-Q for the three months ended September
30, 1995, which Exhibit is incorporated here by reference. Reference
is also made to Exhibit 10 of Ferro Corporation's 10-Q for the three
months ended June 30, 1997 for an amendment to the agreements, which
exhibit is incorporated here by reference.)
(i) Ferro's Supplemental Executive Defined Contribution Plan. (Reference
is made to Exhibit 10.1 to Ferro Corporation's Form 10-K for the
year ended December 31, 1996, which exhibit is incorporated here by
reference.)
(j) Form of Change in Control Agreement. (Reference is made to Exhibit
10 (j) to Ferro Corporation's Form 10-K for the year ended December
31, 1999, which Exhibit is incorporated here by reference.)
*(11) Computation of Earnings Per Share
*(12) Ratio of Earnings to Fixed Charges
*(13) Annual Report to Shareholders for the year ended December 31, 2000
*(21) List of Subsidiaries
*(23) Consent of Independent Auditors