Ferro Now Current on SEC Filings With Completion of 2006 Third Quarter Report

Business Wire, Dec 19, 2006

CLEVELAND -- Ferro Corporation (NYSE:FOE) announced today that it has filed its Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission (SEC) for the three-month period ended September 30, 2006. With this filing the Company is now current in its financial reports to the SEC.

Sales for the third quarter ended September 30, 2006, were $500.6 million, an increase of 7.4% from the third quarter of 2005. Net income from continuing operations was $5.4 million, or $0.12 per diluted share, compared with $7.2 million, or $0.16 per share, in the third quarter of 2005.

"The third quarter results show good sales growth along with solid growth in total segment income," said President and CEO James Kirsch. "Total company results were not up to our original expectations, however, we expect to deliver a solid fourth quarter that will provide further evidence of the transformation we are accomplishing within Ferro."

Included in the third quarter net income from continuing operations were net pre-tax charges of $1.3 million, primarily related to accelerated depreciation resulting from the Company's restructuring program in Europe. Also included in the net charges is a $0.8 million gain from the sale of property. In total, these items reduced third quarter net income from continuing operations by $0.02 per share. In the third quarter of 2005, restructuring charges reduced net income by $0.06 per share. In addition, the Company recognized a $0.2 million non-cash, pre-tax loss in the third quarter resulting from mark-to-market supply contracts for natural gas. The Company recognized a $5.3 million pre-tax gain from natural gas supply contracts in the 2005 third quarter.

Third Quarter Results

Sales for the third quarter showed growth in the Performance Coatings, Electronic Materials, Polymer Additives, and Color and Glass Performance Materials segments, continuing the growth trends seen through the first and second quarters of 2006. Sales were down in the Specialty Plastics and Other segments compared with the third quarter of 2005.

Most of the revenue increase for the quarter was due to increases in average selling prices, including changes in product mix and price increases. Sales benefited less than 2 percent from favorable changes in currency exchange rates.

Gross margins for the third quarter were 19.7% of sales. Included in the cost of sales during the third quarter were charges of $1.6 million for accelerated depreciation related to previously announced restructuring programs in Europe. Higher precious metal prices, which are generally passed through to customers without mark-up, also had a negative impact on gross margin percentage for the quarter.

Selling, general and administrative (SG&A) expenses for the third quarter were $74.1 million, or 14.8% of sales. SG&A expense was down by $1.2 million compared with the prior-year period and was lower as a percent of sales than the 16.1% recorded in the third quarter of 2005.

Total segment income for the third quarter was $33.9 million, an increase of 9.7% from the third quarter of 2005.

As of the end of September, total debt, including off-balance-sheet arrangements, was $684.3 million, an increase of $129.6 million from the end of 2005. This increase primarily was the result of increased deposit requirements for precious metal consignment arrangements and for working capital to support increased sales. Deposits for precious metal consignments were $93 million at the end of the third quarter. The Company expects to reduce the amount of material under consignment requiring cash deposits by year-end and anticipates that a majority of the deposits will be returned by the end of the first quarter of 2007.

Interest expense for the quarter increased by $4.7 million from the third quarter of 2005, reflecting increases in the Company's debt and higher interest rates. Miscellaneous income/expense was lower by $4.6 million in the 2006 third quarter, compared to 2005. The change was driven by a reduction of $5.5 million in mark-to-market charges for natural gas supply contracts compared to the prior-year period.

Fourth Quarter Guidance

Sales for the fourth quarter are expected to be approximately $500 million to $510 million, reflecting continued growth across multiple business segments. Sales growth in the fourth quarter, compared to the fourth quarter of 2005, is expected to be led by the Company's Electronic Materials, Performance Coatings and Color and Glass Performance Materials segments.

As previously indicated, the Company expects to recognize charges related to its restructuring programs during the fourth quarter. The current estimate of the pre-tax charges is $23 million. These charges will reduce after-tax earnings by approximately $0.35 per share. Including these charges, the net loss for the fourth quarter is expected to be in the range of $0.18 to $0.22 per share.

Conference Call

The Company will host a conference call to discuss its financial results and general business outlook on Thursday, December 21 at 10:00 a.m. Eastern time. If you wish to participate in the call, dial (800) 779-0712 if calling from the United States or Canada, or dial (210) 839-8501 if calling from outside North America. When prompted, refer to the pass code, FOE, and the conference leader, David Longfellow. Please call approximately 10 minutes before the conference call is scheduled to begin.