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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, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 1 (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:
9 1/8% SENIOR NOTES DUE JANUARY 1, 2009
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, 2002 there were 34,493,347 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 $879,580,349.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Annual Report to Shareholders for the year ended December
31, 2001 (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 26, 2002 (Incorporated into Part III of this Form 10-K).
TABLE OF CONTENTS
PART I
Item 1. Business.................................................................................. Page 1
Item 2. Properties................................................................................ Page 4
Item 3. Legal Proceedings......................................................................... Page 4
Item 4. Submission of Matters to a Vote of Security Holders....................................... Page 5
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters..................................................................... Page 6
Item 6. Selected Financial Data................................................................... Page 6
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................... Page 6
Item 7.A. Quantitative and Qualitative Disclosures About Market Risk................................ Page 6
Item 8. Financial Statements and Supplementary Data............................................... Page 6
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure...................................................................... Page 6
PART III
Item 10. Directors and Executive Officers of the Registrant........................................ Page 6
Item 11. Executive Compensation.................................................................... Page 6
Item 12. Security Ownership of Certain Beneficial Owners and Management............................ Page 6
Item 13. Certain Relationships and Related Transactions............................................ Page 6
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................... Page 7
PART I
ITEM 1- BUSINESS
Ferro Corporation ("Ferro" or the "Company"), incorporated under the
laws of Ohio in 1919, is a leading global producer of a diverse array of
performance materials sold to a broad range of manufacturers in approximately 30
markets throughout the world. The Company applies certain core scientific
expertise in organic chemistry, inorganic chemistry, polymer science and
material science to develop coatings for ceramics and metal; materials for
passive electronic components; pigments; enamels, pastes and additives for the
glass market; specialty plastic compounds and colors; and polymer additives.
Ferro's products are classified as performance materials, rather than
commodities, because they are formulated to perform specific and important
functions both in the manufacturing processes and in the finished products of
our customers. The Company's performance 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.
Ferro's products are traditionally used in markets such as appliances,
automotive, building and renovation, electronics, household furnishings,
industrial products, pharmaceuticals, telecommunications and transportation. The
Company's leading customers include major chemical companies, producers of
multi-layer ceramic capacitors and manufacturers of tile, appliances and
automobiles. Many customers, particularly in the appliance and automotive
markets, purchase materials from more than one of the Company's business units.
Ferro's customer base is also well-diversified both geographically and by
end-market.
A further description of Ferro's business, its principal products,
their markets and applications, is contained under all headings on pages 2
through 16 of its 2001 Annual Report to Shareholders (the "Annual Report"),
which is attached here as Exhibit 13. The information contained under the
headings on pages 2 through 16 of the Annual Report is incorporated here by
reference. Information concerning Ferro's business during 2001, 2000 and 1999 is
included under the heading "Management's Discussion and Analysis" on pages 17
through 21 of the Annual Report and in Note 7 to Ferro's Consolidated Financial
Statements, appearing on page 32 and 33 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 13 to Ferro's Consolidated Financial Statements, which
appears on pages 36 and 37 of the Annual Report and is incorporated here by
reference.
Risk Factors
Certain statements contained here and in future filings with the
Securities and Exchange Commission reflect the Company's expectations with
respect to the future performance 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, which are
difficult to predict and are beyond the control of the Company. 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, are described in the documents
incorporated by reference and include the following:
- The outcome of the Company's efforts to integrate the dmc2
businesses acquired in 2001;
- Changes in customer requirements, markets or industries
served;
- Economic downturns in some or all of the Company's major
product markets;
- The risks related to fluctuating currency rates, changing
legal, tax and regulatory requirements that affect the
Company's businesses and changing social and political
conditions in the many countries in which the Company
operates;
- Political or economic instability as a result of acts of
terrorism; and
- Access to capital, primarily in the United States capital
markets, and any restrictions placed on Ferro by current or
future financing arrangements.
1
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 the
Company's business, financial condition and results of operations.
Raw Materials
Raw materials widely used in Ferro's operations include resins,
thermoplastic polymers, cobalt oxide, zinc oxide, zircon sand, borates,
porcelain, silica, steric acid, tallow and titanium dioxide. Other important raw
materials include silver, copper and precious metals. Over the past two years,
the prices of silver and copper have been generally stable or declining. The
price of precious metal cost fluctuations are generally passed through to
customers, however, the Company does have some exposure to cost fluctuation for
precious metals held in inventory.
The Company has a broad supplier base and, in most instances,
alternative sources of raw materials are available if problems arise with a
particular supplier. Ferro maintains comprehensive supplier agreements for our
strategic and critical raw materials. In addition, the magnitude of our
purchases provides for significant leverage in negotiating favorable conditions
for long-term supplier contracts. 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
2001 and does not anticipate such shortages in 2002.
Patent, Trademarks 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 2022. Ferro also uses a number of
trademarks which are important to its business as a whole or to a particular
segment. Ferro believes that these trademarks are adequately protected.
Ferro does not hold any licenses, franchises or concessions that it
considers to be material to its future.
Customers
Ferro does not consider a material part of its coatings or its
performance chemicals businesses to be 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 segment 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
segment, 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.
In September 2001, Ferro acquired the electronic materials, performance
pigments and colors, glass systems, and Cerdec ceramics businesses ("dmc(2)
businesses") of dmc(2) Degussa Metals Catalysts Cerdec AG (dmc(2). The dmc(2)
businesses produce materials for passive electronic components; organic and
inorganic pigments and colors for ceramics, plastic and glass; enamels, pastes
and additives for the glass market; and ceramic coatings for structural ceramics
and sanitaryware. The products are manufactured in 15 countries around the world
and used primarily in markets Ferro traditionally serves.
2
In electronic materials, the dmc(2) acquisition more than doubles the
Company's sales of its electronic materials business and adds critical metals
technology and manufacturing capabilities, specifically in Europe and Japan. In
specialty colors, the dmc(2) acquisition strengthens the Company's technology
and competitive presence. In tile coatings, the dmc(2) acquisition complements
existing manufacturing capabilities in the tile business and broadens the
Company's presence in Asia and Southern Europe.
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 $30.1 million in 2001, $30.2 million in 2000
and $30.9 million in 1999. 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.
Ferro and its international subsidiaries authorized $5.8 million in
capital expenditures for environmental control in 2001 and the Company's best
estimate of what it expects capital expenditures for environmental control to be
in 2002 and 2003 is $4.9 million and $4.6 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 contained in Note 9 on page
33 of the Annual Report. This information is incorporated here by reference.
Employees
At December 31, 2001, Ferro employed 9,348 full-time employees,
including 6,493 employees in its foreign subsidiaries and affiliates and 2,855
in the United States.
Approximately 29% of the domestic workforce is covered by labor
agreements, and approximately 15% is affected by labor agreements that expire in
2002.
Foreign Operations
Financial information about Ferro's domestic and foreign operations is
set forth in Note 13 on pages 36 and 37 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, China, France, Germany, Italy, Japan,
Mexico, the Netherlands, Portugal and Spain. Partially-owned subsidiaries
manufacture in Argentina, Indonesia, Italy, Spain, South Korea, Taiwan,
Thailand, Turkey and Venezuela.
3
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; Washington,
Pennsylvania; Toccoa, Georgia; Orrville, Ohio; Shreve, Ohio; Penn Yan,
New York; East Liverpool, Ohio; Crooksville, Ohio; South Plainfield,
New Jersey and Niagara Falls, New York.
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); Brecksville, Ohio (Coatings); Galion, Ohio (Coatings)
Fort Worth, Texas (Performance Chemicals); Vista, California (Coatings);
Montgomeryville, Pennsylvania (Coatings), Carpentersville, Illinois (Performance
Chemicals) and Owatonna, Minnesota (Coatings).
Outside the United States, Ferro or its subsidiaries own manufacturing
plants in Argentina, Australia, Belgium, Brazil, France, Germany, Indonesia,
Italy, Mexico, the Netherlands, South Korea, Spain, Taiwan, Thailand, Turkey,
the United Kingdom and Venezuela. Ferro or its subsidiaries lease manufacturing
plants in Brazil, China, Germany, Italy, Japan, the Netherlands and Portugal. In
many instances, the manufacturing facilities outside of the United States are
used in both business segments.
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 Company completed the
sale of assets relating to the Pyro-Chek process and ceased production of
Pyro-Chek in June 2000.
The Company has negotiated with the U.S. EPA, the State of Indiana and
local authorities a settlement of this matter that resolves the issues raised in
the NOVs. The settlement is subject to public notice and comment and then to
approval by the United States District Court for the Northern District of
Indiana. If approved, the settlement will not have a material adverse effect on
the Company's financial position or results of operations.
In 2000 and 2001, tort actions were filed against the Company
in the United States District Court for the Northern District of Indiana by or
on behalf of four individual plaintiffs. The complaints in these actions
generally alleged 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. On February 13, 2002, the
United States District Court dismissed with prejudice the claims brought by
three of the four plaintiffs pursuant to settlement agreements. Payment of these
settlements will not have a material adverse effect on the Company's financial
position or results of operations. The fourth action, which involves allegations
of negligence, remains pending and the Company intends to defend the claims
vigorously.
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.
4
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, 2002
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.
James C. Bays - 52
Vice President and General Counsel, 2001
Senior Vice President, General Counsel and Chief Legal Officer,
Invensys plc, 1996
Dale G. Kramer - 49
Vice President, Performance Chemicals, 2002
Vice President, Industrial Coatings, 2001
Worldwide Business Director, Appliance, 1999
Global Vice President and General Manager, Estane TPU Division, 1997
Hector R. Ortino - 59
Chairman and Chief Executive Officer, 1999
President and Chief Executive Officer, 1999
President and Chief Operating Officer, 1996
Millicent W. Pitts - 47
Vice President, Industrial Coatings, 2001
Vice President, Global Support Operations, 1998
Director, Corporate Development, Rohm and Haas Company, 1997
Robert A. Rieger - 51
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, 1997
Bret W. Wise - 41
Senior Vice President and Chief Financial Officer, 1999
Vice President and Chief Financial Officer, WCI Steel, 1997
5
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 through 30 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.
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 17 through 21 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 "Quantitative and
Qualitative Disclosures About Market Risk" on page 20 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 22 through 37, 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 26, 2002 (the "Proxy
Statement"), 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 15 through 18 and pages 20
through 28 of the Proxy Statement 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 the Proxy Statement
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.
The law firm of Squire, Sanders & Dempsey L.L.P., of which Mary Ann
Jorgenson is a partner, provided legal services to Ferro in 2001 and Ferro plans
to retain Squire, Sanders & Dempsey L.L.P. in 2002. Ms. Jorgenson is the
Secretary of Ferro.
6
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 22 through
37 inclusive, of the Annual Report are incorporated here by
reference:
Consolidated Statements of Income for the years ended December
31, 2001, 2000 and 1999
Consolidated Balance Sheets at December 31, 2001 and 2000
Consolidated Statements of Shareholders' Equity for the
years ended December 31, 2001, 2000 and 1999
Consolidated Statements of Cash Flows for the years ended
December 31, 2001, 2000 and 1999
Notes to Consolidated Financial Statements
(b) The following additional information for the years 2001, 2000
and 1999, 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:
(a) The Company filed a Current Report on Form 8-K dated September
7, 2001, reporting that the Company purchased from OM Group,
Inc. the electronic materials, performance pigments, glass
systems and Cerdec ceramics businesses that were previously
owned by dmc(2) Degussa Metals Catalysts Cerdec A.G.
(b) The Company filed a Current Report on Form 8-K/A dated
September 7, 2001, to include the historical financial
statements and pro forms financial information required by Item
7(a) and (b).
(c) The Company filed a Current Report on Form 8-K/A-2 dated
September 7, 2001, to amend the pro forma financial information
required by Item 7(b).
(d) The Company filed a Current Report on Form 8-K dated December
17, 2001, reporting that the Company entered into an
Underwriting Agreement with Credit Suisse First Boston, for
itself and as representative of the underwriters named in for
Schedule I thereto, for the offering of the Company's 9-1/8%
Senior Notes due 2009 in the aggregate principal amount of
$200,000,000.
7
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,
in the City of Cleveland, State of Ohio, on this 26th day of March, 2002.
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 26th day
of March, 2002.
/s/ HECTOR R. ORTINO Director, 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/ MICHAEL H. BULKIN Director
- -----------------------------------------------------
Michael H. Bulkin
*/s/ SANDRA AUSTIN CRAYTON Director
- -----------------------------------------------------
Sandra Austin Crayton
*/s/ JENNIE S. HWANG Director
- -----------------------------------------------------
Jennie S. Hwang
*/s/ WILLIAM B. LAWRENCE Director
- -----------------------------------------------------
William B. Lawrence
*/s/ MICHAEL F. MEE Director
- -----------------------------------------------------
Michael F. Mee
*/s/ WILLIAM J. SHARP Director
- -----------------------------------------------------
William J. Sharp
*/s/ PADMASREE WARRIOR Director
- -----------------------------------------------------
Padmasree Warrior
*/s/ JOHN C. MORLEY Director
- -----------------------------------------------------
John C. Morley
*/s/ DENNIS W. SULLIVAN Director
- -----------------------------------------------------
Dennis W. Sullivan
*/s/ ALBERTO WEISSER Director
- -----------------------------------------------------
Alberto Weisser
By /s/ JAMES C. BAYS
---------------------------------------------------
James C. Bays, Attorney-in-Fact
8
INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
To the Shareholders and Board of Directors Ferro Corporation:
Under date of February 13, 2002, we reported on the consolidated balance sheets
of Ferro Corporation and subsidiaries as of December 31, 2001 and 2000, 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, 2001, which
are included in the 2001 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 2001. 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
February 13, 2002
FERRO CORPORATION AND SUBSIDIARIES
SCHEDULE II -VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
(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, 2001
Valuation and qualifying accounts which are
deducted on consolidated balance
sheet from the assets to which they apply.............
Possible losses in collection of notes ............ 392(B)
and accounts receivable - trade.................... $ 6,825 2,771 7,186(C) 1,161(A) 15,229
========= ========== ========== ============ =========
Year ended December 31, 2000
Valuation and qualifying accounts which are
deducted on consolidated balance
sheet from the assets to which they apply.............
Possible losses in collection of notes............. 318(B)
and accounts receivable - trade.................... $ 8,801 (1,737) 811(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
========= ========== ========== ============ =========
Notes: (A) Accounts written off, less recoveries
(B) Adjustment with respect to differences in rates of exchange
(C) Acquisitions and divestitures
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:
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(a) OMG-Ferro Purchase Agreement between the Company and OM Group, Inc.
dated as of August 31, 2001. (Reference is made to Exhibit 2.0 to
Ferro Corporation's Current Report on Form 8-K for the event dated
September 7, 2001, which Exhibit is incorporated herein by
reference.)
The Company agrees that it shall, upon request, furnish to the
Securities and Exchange Commission a copy of any exhibit or annex
to the OMG-Ferro Purchase Agreement that is not filed with Exhibit
2(a).
(b) Heads of Agreement between the Company and OM Group, Inc. dated as
of April 23, 2001. (Reference is made to Exhibit 10(b) to Ferro
Corporation's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2001, which Exhibit is incorporated herein by reference.)
The Company agrees that it shall, upon request, furnish to the
Securities and Exchange Commission a copy of any exhibit or annex
to the Heads of Agreement that is not filed with Exhibit 2(b).
(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) 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 Form 10-K for the year ended December
31, 1999, which Exhibit is incorporated here by reference.)
(b) The rights of the holders of Ferro's Debt Securities issued and to
be issued pursuant to a Senior Indenture between Ferro and J. P.
Morgan Trust Company, National Association (successor-in-interest
to 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) Ferro Corporation Quarterly
Report on Form 10-Q for the three months ended March 31, 1998,
which Exhibit is incorporated herein by reference.)
(c) 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.)
(d) Officers' Certificate dated December 20, 2001, pursuant to Section
301 of the Indenture dated as of March 25, 1998, between the
Company and J. P. Morgan Trust Company, National Association (the
successor-in-interest to Chase Manhattan Trust Company, National
Association), as Trustee (excluding exhibits thereto). (Reference
is made to Exhibit 4.1 to Ferro Corporation's Form 8-K filed
December 21, 2001, which Exhibit is incorporated herein by
reference.
(e) Form of Global Note (9-1/8% Senior Notes due 2009). (Reference is
made to Exhibit 4.2 to Ferro Corporation's Form 8-K filed December
21, 2001, which Exhibit is incorporated here by reference.)
The Company agrees, upon request, to furnish to the Securities and
Exchange Commission a copy of any instrument authorizing long-term
debt that does not authorize debt in excess of 10% of the total
assets of the Company and its subsidiaries on a consolidated basis.
(10) Material Contracts
(a) Ferro Corporation Performance Share Plan (Reference is made to
Exhibit B of Ferro Corporation's Proxy Statement dated March 20,
2000, which Exhibit is incorporated herein by reference.)
* (b) Ferro Corporation Acquisition Performance Reward Plan.
* (c) Ferro Corporation Savings and Stock Ownership Plan.
* (d) Ferro Corporation Employee Stock Option Plan.
(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) Form of Change in Control Agreement. (Reference is made to Exhibit
10(j) to Ferro Corporation Form 10-K for the year ended December
31, 1999, which Exhibit is incorporated herein by reference.)
* (h) Schedule I listing the officers with whom Ferro has entered
into currently effective executive employment agreements and change
in control agreements.
* (i) 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 of
Ferro Corporation's Form 10-Q for the three months ended June 30,
1997, for an amendment to the agreements, which Exhibit is
incorporated herein by reference.) *Amended and Restated
Participation Agreement, dated as of November 30, 2000, 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 First Amendment to Lease dated as of November 30, 2000 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. Amendment No.
1 to Amended and Restated Participation Agreement, dated as of
August 31, 2001, by and among Ferro Corporation, State Street Bank
& Trust Company, as Trustee, the financial institutions named
therein, and Citibank, N. A., as Agent. (Reference is made to
Exhibit 10(d) to Ferro Corporation's Form 10-Q for the three months
ended September 30, 2001, which Exhibit is incorporated herein by
reference.)
* (j) Ferro Corporation Supplemental Executive Defined Contribution Plan.
* (k) Ferro Corporation Executive Employee Deferred Compensation Plan.
* (l) Ferro Corporation Deferred Compensation Plan for Non-Employee
Directors, Ferro Corporation Deferred Compensation Plan for
Non-Employee Directors Trust Agreement, and a First Amendment to
Ferro Corporation Deferred Compensation Plan for Non-Employee
Directors.
* (m) Receivables Purchase Agreement, dated as of September 28, 2000,
among Ferro Finance Corporation, Ciesco L. P. as the Investor,
Citicorp North America, Inc. as the Agent, Ferro Electronic
Materials as an Originator and Ferro Corporation as Collection
Agent and Originator.
* (n) Purchase and Contribution Agreement, dated as of September 28,
2000, between Ferro Corporation and Ferro Electronic Materials,
Inc. as Sellers and Ferro Finance Corporation as Purchaser.
(o) Credit Agreement, dated as of August 31, 2001, among Ferro
Corporation, as Borrower, Various Financial Institutions, as
Lenders, Credit Suisse First Boston, as the Syndication Agent and a
Joint Lead Arranger, Citicorp U.S.A., Inc. and Key Bank National
Association, as the Co-Documentation Agents. (Reference is made to
Exhibit 10(b) to Ferro Corporation's Form 10-Q for the three months
ended September 30, 2001, which Exhibit is incorporated herein by
reference.)
(p) 364-Day Credit Agreement, dated as of August 31, 2001, among Ferro
Corporation, as Borrower, Various Financial Institutions, as
Lenders, Credit Suisse First Boston, as the Syndication Agent and a
Joint Lead Arranger, National City Bank, as the Administrative
Agent and a Joint Lead Arranger, Citicorp U.S.A., Inc. and Key Bank
National Association, as the Co-Documentation Agents. (Reference is
made to Exhibit 10(c) to Ferro Corporation's Form 10-Q for the
three months ended September 30, 2001, which Exhibit is
incorporated herein by reference.)
*(11) Computation of Earnings Per Share
*(12) Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
*(13) Annual Report to Shareholders for the year ended December 31, 2001
*(21) List of Subsidiaries
*(23) Consent of Independent Auditors
*(24) Powers of Attorney