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1997
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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(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, 1997
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
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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
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Title of Class Name of Exchange on which registered
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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:
75/8% Debentures due May 1, 2013
73/8% Debentures due November 1, 2015
8% Debentures due June 15, 2025
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 herein, 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, 1998 there were 37,301,529 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
$920,881,497
DOCUMENTS INCORPORATED BY REFERENCE
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Portions of Annual Report to Shareholders for the year ended December 31, 1997
(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 24, 1998
(Incorporated into Parts III of this Form 10-K).
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TABLE OF CONTENTS
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PART I
Item 1. Business...................................................................................................Page 3
Item 2. Properties.................................................................................................Page 6
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 8
Item 6. Selected Financial Data....................................................................................Page 8
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 9
PART III
Item 10. Directors and Executive Officers of the Registrant........................................................Page 9
Item 11. Executive Compensation....................................................................................Page 9
Item 12. Security Ownership of Certain Beneficial Owners and Management............................................Page 9
Item 13. Certain Relationships and Related Transactions............................................................Page 9
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K........................................ Page 9
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PART I
ITEM 1- BUSINESS
Ferro Corporation ("Ferro"), which was incorporated under the laws of Ohio
in 1919, is a worldwide producer of performance materials for industry by
utilizing organic and inorganic chemistry. It operates (either directly or
through subsidiaries and affiliates) in 19 countries worldwide. Ferro produces a
variety of coatings, colors, ceramics, chemicals, plastics and related products
and services. Ferro's most important product is frit produced for use in
porcelain enamels and ceramic glazes.
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.
Ferro's materials require a high degree of technical service on an
individual customer basis. The value of these performance materials stems not
just from their raw materials composition, but from the result 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 8 through 17
of its 1997 Annual Report to Shareholders, which is attached hereto as Exhibit
13 (the "Annual Report"). The information contained under the headings on pages
8 through 17 of the Annual Report (excluding pages 11, 13, 15, 16 on which only
pictures appear and the text describing such pictures on pages 10, 12, 14, 17)
is incorporated herein by reference. Information concerning Ferro's business
during 1997, 1996 and 1995 and certain transactions consummated during those
years is included under the heading "Management's Discussion and Analysis" on
pages 18 through 22 of the Annual Report and in Note 8 to Ferro's Consolidated
Financial Statements, which are included in the Annual Report. Note 8 appears at
page 32 of the Annual Report. Such information is incorporated herein by
reference. Additional information about Ferro's industry segments, including
financial information relating thereto, is set forth in Note 13 to Ferro's
Consolidated Financial Statements, which appears on pages 35 and 36 of the
Annual Report and is incorporated herein by reference.
Certain statements contained herein 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." Because they are based on current expectations,
actual results may differ materially. Please refer to the "Cautionary Note on
Forward-Looking Statements" section of "Management's Discussion and Analysis"
contained on page 21 of the Annual Report for additional information, which
information is incorporated herein by reference.
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 1997 and does not anticipate
such shortages in 1998.
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 consider that the invalidity or expiration of any single patent or group of
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patents would have a material adverse effect on its business. Ferro patents
expire at various dates through the year 2018.
Ferro does not hold any licenses, franchises or concessions that it
considers to be material.
CUSTOMERS
Ferro does not consider that a material part of its coatings, colors and
ceramics or its plastics businesses are dependent on any single customer or
group of customers. In the chemicals segment however, the loss of two or three
of the largest customers could have a materially adverse effect on this segment.
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 competes with a substantial number of
competitors, none of which is dominant. However, Ferro believes that it is the
largest worldwide supplier of ceramic glaze and porcelain enamel coatings.
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, colors and ceramics 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. In
powder coatings, Ferro is one of the top five producers in the world. The top
five producers of powder coatings represent approximately 60% of the market. In
the chemicals group , the Company is one of the largest producers of polymer
additives in United States. The plastics group 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 which 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, a corporate research and development
activity is conducted by 61 scientists and support personnel in the Cleveland
area. The corporate research staff is organized by major business group.
Expenditures for research and development activities relating to the
development or significant improvement of new and/or existing products, services
and techniques were approximately $26,645,000, $23,779,000 and $23,150,000 in
1997, 1996 and 1995 respectively. Expenditures for individual customer requests
for research and development were not material.
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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 substantial 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. Moreover, while Ferro has not experienced
substantial difficulty in complying with environmental requirements, compliance
has required a continuous management effort and significant expenditures.
Ferro and its international subsidiaries authorized $2.9 million in
capital expenditures for environmental control in 1997 and the Company's best
estimate of what it expects capital expenditures for environmental control to be
in 1998 and 1999 are $3.3 million and $3.0 million. The Company does not
consider these capital expenditures to be material.
EMPLOYEES
At December 31, 1997, Ferro employed approximately 6,851 full-time
employees, including 3,976 employees in its foreign subsidiaries and affiliates
and 2,875 in the United States.
Approximately 24% of the domestic workforce is covered by labor
agreements, and approximately 7% is affected by union agreements that expire in
1998.
FOREIGN OPERATIONS
Financial information about Ferro's domestic and foreign operations is set
forth on pages 35 and 36 of the Annual Report and is incorporated herein 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, Brazil, England, France, Germany, Holland, Italy, Mexico, Portugal,
Spain and Taiwan. Partially-owned subsidiaries manufacture in Ecuador,
Indonesia, Taiwan, Thailand, Turkey and Venezuela.
Foreign operations (excluding Canada) accounted for 46% of the
consolidated net sales and 44% of Ferro's geographic operating profit before
realignment charges for the year 1997; comparable amounts for the year 1996 were
46% and 46% and for the year 1995 were 50% and 53%.
Except for the sales of Ferro Italia S.R.L. (Italy), 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), Ferro
Thailand Co. Ltd. (Thailand), and P.T. Ferro Mas Dinamika (Indonesia), the sales
of each of Ferro's subsidiaries are principally for delivery of products outside
the country in which the subsidiary is located. 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.
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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, such earnings are intended to be indefinitely invested in
those subsidiaries.
ITEM 2 - PROPERTIES
Ferro's corporate headquarters office at 1000 Lakeside Avenue, Cleveland,
Ohio and 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, COLORS AND CERAMICS -- Cleveland, Ohio; Nashville, Tennessee;
Pittsburgh, Pennsylvania; Toccoa, Georgia; Orrville, Ohio; Shreve, Ohio; Penn
Yan, New York; East Liverpool, Ohio; Crooksville, Ohio and East Rochester, New
York.
PLASTICS -- Plymouth, Indiana; Evansville, Indiana; Stryker, Ohio; Edison, New
Jersey and South Plainfield, New Jersey.
CHEMICALS -- Bedford, Ohio; Hammond, Indiana and Baton Rouge, Louisiana.
In addition, Ferro leases manufacturing facilities in Cleveland, Ohio
(Chemicals); Fort Worth, Texas (Chemicals); Santa Barbara, California (Coatings)
and San Marcos, California (Coatings).
Outside the United States, Ferro or its subsidiaries own manufacturing
plants in Argentina, Australia, Brazil, Ecuador, 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 all of the foregoing 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
Information set forth in Note 9 to Ferro's Consolidated Financial
Statements on page 32 of the Annual Report is incorporated herein by reference.
The law firm of Squire, Sanders & Dempsey, of which Mark A. Cusick is a
partner, provided legal services to Ferro in 1997 and Ferro plans to continue
the use of such firm in 1998. Mr. Cusick 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
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There is set forth below the name, age, positions and offices held by each
individual serving as executive officer as of March 16, 1998 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.
Albert C. Bersticker - 63
Chairman of the Board and Chief Executive Officer, 1996
President and Chief Executive Officer, 1991
David G. Campopiano - 48
Vice President, Corporate Development, 1989
R. Jay Finch - 56
Vice President, Specialty Plastics, 1991
James F. Fisher - 60
Senior Vice President, Ceramics and Colorants, 1997
Vice President, Ceramics and Colorants, 1996
Senior Vice President, Powder Coatings, Specialty Ceramics and
Electronic Materials, 1994
Senior Vice President, Coatings, Colors and Ceramics, 1993
Group Vice President, International, 1991
James B. Friederichsen - 55
Vice President, Specialty Chemicals, 1994
President, MTM Americas, 1990
D. Thomas George - 50
Treasurer, 1991
J. Larry Jameson - 60
Vice President, Powder Coatings, 1996
Self Employed, Coatings Consultant, 1993
Chief Executive Officer, Pirelli Cable Corporation, 1993
President, Coatings and Colorants Division, BASF Corporation,
1986
Charles M. Less - 48
Vice President, Marketing, 1995
Group Market Manager, Rohm and Haas, 1992
Hector R. Ortino - 55
President and Chief Operating Officer, 1996
President, 1996
Executive Vice President and Chief Financial-Administrative
Officer, 1993
Senior Vice President and Chief Financial Officer, 1991
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Thomas O. Purcell, Jr. - 53
Vice President and Chief Technical Officer, 1996
Vice President, Research and Development, 1991
Paul V. Richard - 38
Vice President, Human Resources, 1998
Director, Human Resources, 1993
Gary H. Ritondaro - 51
Vice President and Chief Financial Officer, 1996
Vice President, Finance, 1993
Vice President, Controller, 1991
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 37 of the Annual Report. Said information is incorporated
herein by reference. Information concerning dividend restrictions is contained
in Note 3 to Ferro's Consolidated Financial Statements on page 29 the Annual
Report and this information is incorporated herein 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 pages 38 and 39 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 18 through 22 of the Annual Report is incorporated here by
reference.
ITEM 7. A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements of Ferro and its subsidiaries
contained on pages 27 through 36, inclusive, including the Notes to Consolidated
Financial Statements, and the quarterly data (unaudited) on page 37 of the
Annual Report, are incorporated here by reference.
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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" and "Stock Ownership of Management and Certain
Beneficial Owners"in Ferro's Proxy Statement for the Annual Meeting of
Shareholders on April 24, 1998, 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" in Ferro's Proxy Statement for the
Annual Meeting of Shareholders on April 24, 1998 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" and "Security Ownership of Directors, Officers and
Certain Beneficial Owners" in Ferro's Proxy Statement for the Annual Meeting of
Shareholders on April 24, 1998 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 36,
INCLUSIVE, OF THE ANNUAL REPORT ARE INCORPORATED HERE BY REFERENCE:
Consolidated Statements of Income for the years ended December 31,
1997, 1996 and 1995
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Consolidated Balance Sheets at December 31, 1997 and 1996
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the years ended December
31, 1997, 1996 and 1995
Notes to Consolidated Financial Statements
(b) THE FOLLOWING ADDITIONAL INFORMATION FOR THE YEARS 1997, 1996 AND
1995, 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 statements of foreign affiliates in which Ferro ownership
exceeds 20 percent, accounted for on the equity method, are not
included here because, in the aggregate, these companies do not
constitute a significant subsidiary.
Financial Statement Schedule II, together with the independent
Auditors' Report thereon, are contained on pages F-1 and F-2 of
this Annual Report on Form 10-K.
(c) EXHIBITS:
(3) Articles of Incorporation and by-laws
(a) Eleventh Amended Articles of Incorporation.
(Reference is made to Exhibit 3 to Ferro
Corporation's Quarterly Report on Form 10-Q for the
three months ended September 30, 1989, 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 Annual Report on Form
10-K for the year ended December 31, 1994, which
Exhibit is incorporated here by reference.)
(c) Amended Code of Regulations. (Reference is made to
Exhibit (3)(b) to Ferro Corporation's Quarterly
Report on Form 10-Q for the three months ended June
30, 1987, 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
four commercial banks dated August 22, 1990.
(Reference is made to Exhibit 10 to Ferro
Corporation's Form 10-Q for
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the three months ended September 30, 1990, which
Exhibit is incorporated here by reference.)
(b) Amendment Number 1 dated May 31, 1991, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4(b)(1) to Ferro Corporation's Quarterly Report on
Form 10-Q for the three months ended June 30, 1991,
which Exhibit is incorporated here by reference.)
(c) Amendment Number 2 dated July 30, 1991, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4(b)(2) to Ferro Corporation's Form 10-Q for the
three months ended June 30, 1991, which Exhibit is
incorporated here by reference.)
(d) Amendment Number 3 dated December 31, 1991, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4 to Ferro Corporation's Form 10-K for the year ended
December 31, 1991, which Exhibit is incorporated here
by reference.)
(e) Amendment Number 4 dated July 21, 1992, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4 to Ferro Corporation's Form 10-Q for the three
months ended June 30, 1992, which Exhibit is
incorporated here by reference.)
(f) Amendment Number 5 dated April 20, 1993, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4(b)(4) to Ferro Corporation's Form 10-Q for the
three months ended June 30, 1993, which Exhibit is
incorporated here by reference.)
(g) Amendment Number 6 dated June 22, 1995, to the
Revolving Credit Agreement by and between Ferro and
four commercial banks. (Reference is made to Exhibit
4(b)(4) to Ferro Corporation's Form 10-Q for the
three months ended June 30, 1995, which Exhibit is
incorporated here by reference.)
(h) Amendment Number 7 dated October 25, 1995 to the
Revolving Credit Agreement by and between Ferro
Corporation and four commercial banks.(Reference is
made to Exhibit 4(b)(4) to Ferro Corporation's Form
10-Q for the three months ended September 30, 1995,
which Exhibit is incorporated here by reference.)
(i) Amendment Number 8 dated July 24, 1997 to the
Revolving Credit Agreement by and between Ferro
Corporation and four commercial banks.(Reference is
made to Exhibit 4(k) to Ferro Corporation's Form 10-Q
for the three months ended June 30, 1997, which
Exhibit is incorporated here by reference.)
(j) Shareholder Rights Agreement between Ferro
Corporation and National City Bank, Cleveland, Ohio,
as Rights Agent, dated as of March 22, 1996 .
(Reference is made to the Exhibit to the Registration
Statement on Form 8-A dated May 15, 1996 which
Exhibit is incorporated here by reference.)
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(k) 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 filed as Exhibit 4(j) to Ferro Corporation's
Form 10-Q for the three months ended June 30, 1993.
Said 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 13,
1997. Said description is incorporated here by
reference.
(b) Ferro's 1997 Performance Share Plan. Reference is
made to Exhibit A of Ferro Corporation's Proxy
Statement dated March 13, 1997, 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 1985 Employee Stock Option Plan for Key
Personnel (Amended and Restated). (Reference is made
to Exhibit A to Ferro Corporation's Proxy Statement
dated March 11, 1991, which Exhibit is incorporated
by reference.) Reference is also made to pages 13 and
14 of Ferro Corporation's Proxy Statement dated March
20, 1995, for an amendment to the plan. Reference is
also made to pages 10 through 13 of Ferro
Corporation's Proxy Statement dated March 12, 1996,
for an amendment to the plan. Reference is also made
to Exhibit 10.3 of Ferro Corporation's Form 10-K for
the year ended December 31, 1996, for an amendment to
the 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
dated July 28, 1995. (Reference is made to Exhibit 10
(b) of Ferro Corporation's Form 10-Q for the three
months ended September 30, 1995, which Exhibit is
incorporated here by reference.)
(g) Schedule I listing the officers with whom Ferro has
entered into currently effective executive employment
agreements. A copy of such Schedule I is attached
hereto 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
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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) Separation Agreement between Ferro Corporation and
Werner F. Bush dated September 30, 1996 (Reference is
made to Exhibit 10.2 to Ferro Corporation's Form 10-K
for the year ended December 31, 1996, which Exhibit
is incorporated here by reference).
(k) Separation Agreement between Ferro Corporation and
Richard C. Oudersluys dated March 13, 1997 and
effective January 6, 1997 (Reference is made to
Exhibit 10 of Ferro Corporation's Form 10-Q for the
three months ended March 31, 1997).
(11) Statement Regarding Computation of Earnings per Share.
(12) Ratio of Earnings to Fixed Charges.
(13) Annual Report to Shareholders for the year ended December 31,
1997.
(21) List of Subsidiaries.
(23) Consent of KPMG Peat Marwick LLP to the incorporation by
reference of their audit report on the Consolidated Financial
Statements contained in the Annual Report into Ferro's
Registration Statements on Form S-8 Registration Nos. 2-61407,
33-28520 and 33-45582 and Ferro's Registration Statement on
Form S-3 Registration No. 33-51284 and Registration No.
33-63855.
(27) Financial Data Schedule (Electronic Filing Only)
2. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed for the three months ended December 31,
1997
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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/Albert C. Bersticker
Albert C. Bersticker,
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 and as of this 11th
day of March, 1998
/s/Albert C. Bersticker Chairman and Chief Executive Officer and Director
Albert C. Bersticker (Principal Executive Officer)
/s/Gary H . Ritondaro Vice President and Chief Financial Officer
Gary H. Ritondaro (Principal Financial Officer and Principal Accounting Officer)
/s/Sandra Harden Austin Director
Sandra Harden Austin
/s/Michael H. Bulkin Director
Michael H. Bulkin
/s/Paul S. Brentlinger Director
Paul S. Brentlinger
/s/Glenn R. Brown Director
Glenn R. Brown
/s/William E. Butler Director
William E. Butler
/s/A. James Freeman Director
A. James Freeman
/s/John C. Morley Director
John C. Morley
/s/Hector R. Ortino Director
Hector R. Ortino
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/s/Rex A. Sebastian Director
Rex A. Sebastian
/s/William J. Sharp Director
William J. Sharp
/s/Dennis W. Sullivan Director
Dennis W. Sullivan
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INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENT SCHEDULE
The Shareholders and Board of Directors Ferro Corporation
Under date of January 26,1998, we reported on the consolidated balance sheets of
Ferro Corporation and subsidiaries as of December 31, 1997 and 1996, 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, 1997, as
contained in the 1997 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 1997. In connection with our audits of
the aforementioned consolidated financial statements, we also audited the
related 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 Peat Marwick LLP
KPMG Peat Marwick LLP
Cleveland, Ohio
January 26, 1998
F-1
17
FERRO CORPORATION AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts and Reserves
Years ended December 31, 1997, 1996 and 1995
(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, 1997
Valuation and qualifying accounts which
are deducted on consolidated balance
sheet from the assets to which they apply
Possible losses in collection of notes 1,367 (B)
and accounts receivable - trade $ 9,497 2,630 15 (C) 2,495 (A) 8,280
========== ========= ======= ======== ========
Year ended December 31, 1996
Valuation and qualifying accounts which
are deducted on consolidated balance
sheet from the assets to which they apply 254 (C)
Possible losses in collection of notes 225 (B)
and accounts receivable - trade $ 9,877 3,006 2,907 (A) 9,497
========== ========= ======= ======== ========
Year ended December 31, 1995
Valuation and qualifying accounts which
are deducted on consolidated balance
sheet from the assets to which they apply
Possible losses in collection of notes 12 (C)
and accounts receivable - trade $ 7,129 4,750 174 (B) 2,188 (A) 9,877
========== ========= ======= ======== ========
Notes:
(A) Accounts written off, less recoveries
(B) Adjustment in respect of differences in rates of exchange
(C) Acquisitions and divestitures, net
F-2
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EXHIBIT INDEX
(3) Articles of Incorporation and by-laws
(a) Eleventh Amended Articles of Incorporation. (Reference is made to
Exhibit 3 to Ferro Corporation's Quarterly Report on Form 10-Q for
the three months ended September 30, 1989, 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 Annual
Report on Form 10-K for the year ended December 31, 1994, which
Exhibit is incorporated here by reference.)
(c) Amended Code of Regulations. (Reference is made to Exhibit (3)(b)
to Ferro Corporation's Quarterly Report on Form 10-Q for the three
months ended June 30, 1987, 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 four
commercial banks dated August 22, 1990. (Reference is made to
Exhibit 10 to Ferro Corporation's Form 10-Q for the three months
ended September 30, 1990, which Exhibit is incorporated here by
reference.)
(b) Amendment Number 1 dated May 31, 1991, to the Revolving Credit
Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4(b)(1) to Ferro Corporation's
Quarterly Report on Form 10-Q for the three months ended June 30,
1991, which Exhibit is incorporated here by reference.)
(c) Amendment Number 2 dated July 30, 1991, to the Revolving Credit
Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4(b)(2) to Ferro Corporation's Form
10-Q for the three months ended June 30, 1991, which Exhibit is
incorporated here by reference.)
(d) Amendment Number 3 dated December 31, 1991, to the Revolving
Credit Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4 to Ferro Corporation's Form 10-K
for the year ended December 31, 1991, which Exhibit is
incorporated here by reference.)
(e) Amendment Number 4 dated July 21, 1992, to the Revolving Credit
Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4 to Ferro Corporation's Form 10-Q
for the three months ended June 30, 1992, which Exhibit is
incorporated here by reference.)
(f) Amendment Number 5 dated April 20, 1993, to the Revolving Credit
Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4(b)(4) to Ferro Corporation's Form
10-Q for the three months ended June 30, 1993, which Exhibit is
incorporated here by reference.)
(g) Amendment Number 6 dated June 22, 1995, to the Revolving Credit
Agreement by and between Ferro and four commercial banks.
(Reference is made to Exhibit 4(b)(4) to Ferro Corporation's Form
10-Q for the three months ended June 30, 1995, which Exhibit is
incorporated here by
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reference.)
(h) Amendment Number 7 dated October 25, 1995 to the Revolving Credit
Agreement by and between Ferro Corporation and four commercial
banks.(Reference is made to Exhibit 4(b)(4) to Ferro Corporation's
Form 10-Q for the three months ended September 30, 1995, which
Exhibit is incorporated here by reference.)
(i) Amendment Number 8 dated July 24, 1997 to the Revolving Credit
Agreement by and between Ferro Corporation and four commercial
banks.(Reference is made to Exhibit 4(k) to Ferro Corporation's
Form 10-Q for the three months ended June 30, 1997, which Exhibit
is incorporated here by reference.)
(j) Shareholder Rights Agreement between Ferro Corporation and
National City Bank, Cleveland, Ohio, as Rights Agent, dated as of
March 22, 1996 . (Reference is made to the Exhibit to the
Registration Statement on Form 8-A dated May 15, 1996 which
Exhibit is incorporated here by reference.)
(k) 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 filed as Exhibit 4(j) to Ferro Corporation's
Form 10-Q for the three months ended June 30, 1993. Said 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 13, 1997. Said description is incorporated here by
reference.
(b) Ferro's 1997 Performance Share Plan. Reference is made to Exhibit
A of Ferro Corporation's Proxy Statement dated March 13, 1997,
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 1985 Employee Stock Option Plan for Key Personnel (Amended
and Restated). (Reference is made to Exhibit A to Ferro
Corporation's Proxy Statement dated March 11, 1991, which Exhibit
is incorporated by reference.) Reference is also made to pages 13
and 14 of Ferro Corporation's Proxy Statement dated March 20,
1995, for an amendment to the plan. Reference is also made to
pages 10 through 13 of Ferro Corporation's Proxy Statement dated
March 12, 1996, for an amendment to the plan. Reference is also
made to Exhibit 10.3 of Ferro Corporation's Form 10-K for the year
ended December 31, 1996, for an amendment to the 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 dated July 28,
1995. (Reference is made
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to Exhibit 10 (b) of Ferro Corporation's Form 10-Q for the three
months ended September 30, 1995, which Exhibit is incorporated
here by reference.)
(g) Schedule I listing the officers with whom Ferro has entered into
currently effective executive employment agreements. A copy of
such Schedule I is attached hereto 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) Separation Agreement between Ferro Corporation and Werner F. Bush
dated September 30, 1996 (Reference is made to Exhibit 10.2 to
Ferro Corporation's Form 10-K for the year ended December 31,
1996, which Exhibit is incorporated here by reference).
(k) Separation Agreement between Ferro Corporation and Richard C.
Oudersluys dated March 13, 1997 and effective January 6, 1997
(Reference is made to Exhibit 10 of Ferro Corporation's Form 10-Q
for the three months ended March 31, 1997).
(11) Statement Regarding Computation of Earnings per Share.
(12) Ratio of Earnings to Fixed Charges.
(13) Annual Report to Shareholders for the year ended December 31, 1997.
(21) List of Subsidiaries.
(23) Consent of KPMG Peat Marwick LLP to the incorporation by reference of their
audit report on the Consolidated Financial Statements contained in the
Annual Report into Ferro's Registration Statements on Form S-8 Registration
Nos. 2-61407, 33-28520 and 33-45582 and Ferro's Registration Statement on
Form S-3 Registration No. 33-51284 and Registration No. 33-63855.
(27) Financial Data Schedule (Electronic Filing Only)