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Ferro Reports 2012 First-Quarter Results

This release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the period ended December 31, 2011.

Ferro Corporation and Subsidiaries Consolidated Statements of Net Income (Unaudited)

 
Three months endedMarch 31,
(Dollars in thousands, except share and per share amounts) 2012   2011
 
Net sales $466,390 $573,009
Cost of sales 378,067 452,683
Gross profit 88,323 120,326
 
Selling, general and administrative expenses 77,685 76,818
Restructuring and impairment charges 311 1,630
Other expense (income):
Interest expense 6,740 6,826
Interest earned (84) (74)
Foreign currency losses, net 144 1,310
Miscellaneous expense, net 394 518
Income before income taxes 3,133 33,298
Income tax expense 1,719 10,107
Net income 1,414 23,191

Less: Net income attributable to noncontrolling interests

124 301
Net income attributable to Ferro Corporation 1,290 22,890
Dividends on preferred stock 0 (165)

Net income attributable to Ferro Corporation common shareholders

$1,290 $22,725
 

Earnings per share attributable to Ferro Corporation common shareholders:

Basic earnings per share $0.01 $0.26
Diluted earnings per share 0.01 0.26
 
Shares outstanding:
Weighted-average basic shares 86,233,084 85,974,673
Weighted-average diluted shares 86,695,652 87,279,453
End-of-period basic shares 86,291,812 86,152,312
 

Ferro Corporation and Subsidiaries Segment Net Sales and Segment Income (Loss) (Unaudited)

 
(Dollars in thousands) Three months endedMarch 31,
2012   2011
Segment Net Sales
Electronic Materials $71,696 $202,347
Performance Coatings 152,514 136,700
Color and Glass Perf. Materials 101,435 99,805
Polymer Additives 87,724 85,862
Specialty Plastics 47,056 42,629
Pharmaceuticals 5,965 5,666
Total Segment Net Sales $466,390 $573,009
 
Segment Income (Loss)
Electronic Materials $(4,690) $30,748
Performance Coatings 8,059 6,347
Color and Glass Perf. Materials 8,457 9,098
Polymer Additives 6,627 6,580
Specialty Plastics 4,648 1,872
Pharmaceuticals 1,187 1,326
Total Segment Income 24,288 55,971
 
Unallocated corporate expenses 13,650 12,463

Restructuring and impairment charges

311 1,630
Interest expense 6,740 6,826
Other expense, net 454 1,754
Income before income taxes $3,133 $33,298
 

Ferro Corporation and Subsidiaries Consolidated Balance Sheets

   
(Dollars in thousands)

March 31,2012

December 31,2011

Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $23,271 $22,991
Accounts receivable, net 343,668 306,775
Inventories 243,151 228,813
Deferred income taxes 17,291 17,395
Other receivables 33,915 37,839
Other current assets 10,076 17,086
Total current assets 671,372 630,899
 
Property, plant and equipment, net 378,988 379,336
Goodwill 215,830 215,601
Amortizable intangible assets, net 11,184 11,056
Deferred income taxes 118,978 117,658
Other non-current assets 89,096 86,101
Total assets $1,485,448 $1,440,651
 
Liabilities and Equity
Current liabilities:

Loans payable and current portion of long-term debt

$43,194 $11,241
Accounts payable 217,457 214,460
Accrued payrolls 30,773 31,055

Accrued expenses and other current liabilities

71,789 67,878
Total current liabilities 363,213 324,634
 
Long-term debt, less current portion 300,530 298,082
Postretirement and pension liabilities 213,253 215,732
Other non-current liabilities 20,954 19,709
Total liabilities 897,950 858,157
 
Shareholders' equity 577,188 572,262
Noncontrolling interests 10,310 10,232
Total liabilities and equity $1,485,448 $1,440,651
 

Ferro Corporation and Subsidiaries Consolidated Statements of Cash Flows (Unaudited)

 
(Dollars in thousands) Three months endedMarch 31,
2012   2011
Cash flows from operating activities
Net income $1,414 $23,191
Depreciation and amortization 13,879 16,229
Precious metals deposits 0 28,086
Accounts receivable (33,733) (50,070)
Inventories (11,929) (41,891)
Accounts payable 11,554 33,768

Other changes in current assets and liabilities, net

14,404 (14,084)
Other adjustments, net (6,564) (23,809)
Net cash used for operating activities (10,975) (28,580)
 
Cash flows from investing activities

Capital expenditures for property, plant and equipment

(22,579) (16,037)
Proceeds from sale of assets 368 1,132
Other investing activities 0 0
Net cash used for investing activities (22,211) (14,905)
 
Cash flow from financing activities
Net borrowings under loans payable 31,684 52,944
Proceeds from long-term debt 97,918 209,677
Principal payments on long-term debt (95,673) (209,677)
Redemption of convertible preferred stock 0 (9,427)
Cash dividends paid 0 (165)
Other financing activities (440) 331
Net cash provided by financing activities 33,489 43,683

Effect of exchange rate changes on cash and cash equivalents

(23) 360
Increase in cash and cash equivalents 280 558
Cash and cash equivalents at beginning of period 22,991 29,035
Cash and cash equivalents at end of period $23,271 $29,593
 
Cash paid during the period for:
Interest $12,059 $11,540
Income taxes 1,229 6,930
 

Ferro Corporation and Subsidiaries Supplemental Information

   

Reconciliation of Adjusted Earnings to Reported Earnings for the Three Months Ended March 31 (Unaudited)

 
Three months ended March 31, 2012 Three months ended March 31, 2011
(Dollars in thousands, except per share amounts) AsReported   Adjust-ments   Non-GAAP AsReported   Adjust-ments   Non-GAAP
 
Net sales $466,390 $466,390 $573,009 $573,009
Cost of sales 378,067 $(706) 377,361 452,683 $(1,567) 451,116
Gross profit 88,323 89,029 120,326 121,893
 
Selling, general and administrative expenses 77,685 (1,757) 75,928 76,818 (1,123) 75,695
Restructuring and impairment charges 311 (311) 0 1,630 (1,630) 0
Other expense, net 454 454 1,754 1,754
Earnings before interest, taxes and noncontrolling interest 9,873 12,647 40,124 44,444
 
Interest expense 6,740   6,740 6,826   6,826
Total adjustments (2,774) (4,320)
 
Income before taxes 3,133 5,907 33,298 37,618
Income tax expense 1,719 10,107
Income tax expense 1   1,890   12,038
Net income 1,414 4,017 23,191 25,580
Less: Net income attributable to noncontrolling interest 124 124 301 301
Net Income attributable to Ferro 1,290 3,893 22,890 25,279
Dividends on preferred stock 0 0 (165) (165)
Net Income attributable to Ferro common shareholders $1,290 $3,893 $22,725 $25,114
 
Diluted earnings per share $0.01 $0.04 $0.26 $0.29
 

1 2012 tax rate of 32%, consistent with the Company’s expectation for future effective tax rates, excluding discrete items. The Company’s expected future effective tax rate is lower than the U.S. statutory rate because of expected earnings in foreign jurisdictions with lower tax rates.

It should be noted that adjusted earnings is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings presented here exclude certain special charges including restructuring and impairment charges, charges related to debt refinancing, and other charges that are not related to production of products for sale. Ferro believes this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

Ferro Corporation and Subsidiaries Supplemental Information

 

Segment Net Sales Excluding Precious Metals and Reconciliation of Sales Excluding Precious Metals to Net Sales (Unaudited)

 
(Dollars in thousands) Three months endedMarch 31,
2012   2011
 
Electronic Materials $38,024 $80,183
Performance Coatings 152,514 136,700
Color and Glass Perf. Materials 92,585 91,911
Polymer Additives 87,724 85,862
Specialty Plastics 47,056 42,629
Pharmaceuticals 5,965 5,666
Total segment sales excluding precious metals 423,868 442,951
Sales of precious metals 42,522 130,058
Total net sales $466,390 $573,009
 

It should be noted that segment net sales excluding precious metals is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The sales are presented here to exclude the impact of volatile precious metal raw material costs. The precious metal raw material costs are generally passed through directly to customers with minimal margin. Ferro believes this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance.

Ferro Corporation and Subsidiaries Supplemental Information

 

Prior-Period Segment Income (Loss), As Adjusted for a Change in Methodology Related to the Allocation of Corporate Expenses (Unaudited)

 
Three months ended
(Dollars in thousands)

December 31,2011

 

September 30,2011

 

June 30,2011

 

March 31,2011

Segment Income (Loss)
Electronic Materials $(1,594) $16,463 $22,406 $30,748
Performance Coatings 6,120 11,069 10,497 6,347
Color and Glass Perf. Materials 1,539 8,365 10,670 9,098
Polymer Additives 437 4,252 4,515 6,580
Specialty Plastics 2,012 2,717 2,827 1,872
Pharmaceuticals 219 1,254 945 1,326
Total Segment Income 8,733 44,120 51,860 55,971
 
Unallocated corporate expenses 10,939 7,837 11,061 12,463

Restructuring and impairment charges

12,986 869 1,545 1,630
Interest expense 7,201 7,030 7,352 6,826
Other expense, net 2,696 1,740 820 1,754
Income (loss) before income taxes $(25,085) $26,641 $31,082 $33,298
 
 
Three months ended
(Dollars in thousands)

December 31,2010

September 30,2010

June 30,2010

March 31,2010

Segment Income
Electronic Materials $34,849 $31,052 $37,535 $28,573
Performance Coatings 1,837 9,100 12,729 7,737
Color and Glass Perf. Materials 3,387 7,635 8,876 6,134
Polymer Additives 3,911 6,325 2,324 3,467
Specialty Plastics 2,199 4,712 4,100 2,402
Pharmaceuticals 1,372 1,490 723 1,115
Total Segment Income 47,555 60,314 66,287 49,428
 
Unallocated corporate expenses 16,550 14,853 13,809 13,442

Restructuring and impairment charges

19,625 9,570 21,205 13,332
Interest expense 7,372 10,519 13,766 12,911
Other expense, net 7,932 26,996 (4,006) 1,966
Income (loss) before income taxes $(3,925) $(1,624) $21,513 $7,777
 




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