FERRO CORP - FORM 8-K - EX-99.1 - October 24, 2013

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For Immediate Release

FERRO REPORTS THIRD QUARTER 2013 ADJUSTED EPS OF $0.14

  •   Full-year 2013 adjusted EPS guidance raised to $0.42 — $0.45

  •   Cost savings for 2013 now expected to be approximately $45 million

  •   Company reaffirms 2015 adjusted EPS target in excess of $1.00

CLEVELAND, Ohio – October 23, 2013 – Ferro Corporation (NYSE: FOE, the “Company”) today reported results for the third quarter ended September 30, 2013. The third-quarter net income attributable to common shareholders was $0.15 per diluted share compared with a net loss of $3.66 per share in the third quarter of 2012. On an adjusted basis, earnings per diluted share were $0.14 compared with a net loss of $0.02 per share in the third quarter of 2012. The Company attributed the increase in profitability to management’s continued progress executing on its value creation strategy. The Company raised its full-year 2013 adjusted earnings guidance to $0.42 to $0.45 per diluted share, versus previous guidance of $0.35 to $0.40 per diluted share, reflecting lower selling, general and administrative (“SG&A”) expenses and improving gross profit margins, primarily as a result of successful execution of cost reduction initiatives and improved business mix. Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.

Peter Thomas, President and Chief Executive Officer, commented, “We continue to make progress on our value creation strategy, making Ferro more competitive and driving increased profitability. We are realizing the benefits of our cost saving initiatives more quickly than previously anticipated and are now expecting total savings for 2013 to be approximately $45 million. More importantly, we estimate that our annual savings run rate at the beginning of 2014 will be approximately $70 million.”

2013 Third-Quarter Results

Ferro reported net sales of $408.1 million in the third quarter of 2013, compared with net sales of $408.9 million in the third quarter of 2012. Value-added sales, which exclude precious metal sales, increased 3.8%, to $387.0 million from $372.9 million in the third quarter last year. Adjusting for the impact of exiting the solar pastes product line (approximately $4 million), value-added sales increased by 5.0%.

Gross profit was $84.2 million for the 2013 third quarter, compared with $60.7 million for the third quarter of 2012. Excluding special charges, adjusted gross profit was $84.8 million (21.9% of value-added sales) compared with $66.5 million (17.8% of value-added sales) in the prior-year period. During the third quarter of 2013, gross profit was reduced by special charges of $0.6 million compared with special charges of $5.8 million in the same period last year. The special charges in the 2012 period were primarily related to inventory write-downs associated with the solar pastes assets and residual costs at manufacturing sites closed as part of earlier restructuring initiatives.

SG&A expenses declined 7.5% to $59.1 million during the third quarter of 2013 from $63.9 million in the prior-year quarter. Excluding special charges in both periods, SG&A expenses declined 6.3% to $56.8 million from $60.6 million. Included in both periods is the impact of incentive compensation accruals, including a charge of approximately $7 million in the third quarter of 2013 and a credit of approximately $4 million in the same quarter last year. Excluding special charges and the impact of incentive compensation, SG&A expenses for the third quarter were reduced by over $15 million on a year-over-year basis. The Company estimates that its current normalized run-rate for quarterly SG&A expenses is approximately $54 million, adjusting for special charges, normalized incentive compensation expenses and seasonal effects.

Net income attributable to common shareholders for the quarter ended September 30, 2013, was $12.7 million, or $0.15 per diluted share compared with a net loss of $316.1 million, or $3.66 per diluted share, in the third quarter of 2012. Adjusted net income from continuing operations attributable to common shareholders was $12.5 million, or $0.14 per diluted share, compared with a net loss of $1.9 million, or $0.02 per diluted share, in the year-ago quarter.

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were approximately $38.0 million in the third quarter of 2013, compared with $16.9 million in the same period last year. Adjusted EBITDA margins, represented as a percentage of value-added sales, were 9.8% in the third quarter of 2013 and 4.5% in the same period last year.

Total debt as of the end of the third quarter was $337.8 million, a reduction of $9.0 million from December 31, 2012. In addition, cash balances increased $6.3 million during the first nine months of the year to $35.9 million, resulting in a reduction in net debt (debt less cash) of $15.3 million during the first nine months of the year. In comparison, net debt increased by $26.2 million during the first nine months of 2012.

Outlook

The Company expects adjusted earnings for the 2013 fourth quarter to be in the range of $0.04 to $0.07 per diluted share, resulting in full-year adjusted earnings of $0.42 to $0.45 per diluted share. The expected increase in earnings compared with the Company’s previous guidance is primarily a result of the accelerated pace of cost savings during the year. Full-year cost savings are now expected to be approximately $45 million.

Adjusting for the impact of divested operations and before the impact of changes in foreign currency rates, fourth-quarter and full-year value-added sales are expected to be essentially flat compared with the prior-year periods. Guidance for fourth quarter sales has been lowered, primarily due to an increase in product deselection of phthalate-based plasticizers in the Polymer Additives segment. The pace of deselection has increased, as U.S. vinyl flooring producers have begun migrating to more eco-friendly alternatives. Ferro currently is building dibenzoates manufacturing capacity in Europe to address growing demand for eco-friendly plasticizers.

For the year, the Company expects cash flow to be $15 million to $20 million, which is expected to be used to reduce net debt.

The Company also reaffirms its financial targets for 2015, including cost savings of greater than $100 million and adjusted earnings per share in excess of $1.00 per diluted share.

Conference Call

The Company will host a conference call to discuss its third-quarter financial results and current outlook for 2013 on Thursday, October 24, 2013, at 10:00 a.m. Eastern Time. To listen to the call, dial 800-354-6885 if calling from the United States or Canada, or dial 303-223-2685 if calling from outside North America. Please call approximately 10 minutes before the conference call is scheduled to begin.

An audio replay of the call will be available through noon Eastern Time on October 30. To access the replay, dial 800-633-8284 if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America. Use the program ID #21676629 to access the audio replay.

The conference call also will be broadcast live over the Internet and will be available for replay through November 30, 2013. The live broadcast and replay can be accessed through the Investor Information portion of the Company’s Web site at www.ferro.com. A podcast of the conference call will also be available on the site.

About Ferro Corporation

Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials and chemicals for manufacturers. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,550 employees globally and reported 2012 sales of $1.8 billion.

Cautionary Note on Forward-Looking Statements

Certain statements in this press release 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. 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 include the following:

  •   demand in the industries into which Ferro sells its products may be unpredictable, cyclical, or heavily influenced by consumer spending;

  •   Ferro’s ability to successfully implement its value creation strategy;

  •   Ferro’s ability to successfully implement and/or administer its cost-saving initiatives, including its restructuring programs and indirect spend optimization initiative, and to produce the desired results, including projected savings;

  •   restrictive covenants in the Company’s credit facilities could affect its strategic initiatives and liquidity;

  •   Ferro’s ability to access capital markets, borrowings, or financial transactions;

  •   the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;

  •   the availability of reliable sources of energy and raw materials at a reasonable cost;

  •   currency conversion rates and economic, social, regulatory, and political conditions around the world;

  •   Ferro’s presence in certain geographic regions, including Latin America and Asia-Pacific, where it can be difficult to compete lawfully;

  •   increasingly aggressive domestic and foreign governmental regulations on hazardous materials and regulations affecting health, safety and the environment;

  •   Ferro’s ability to successfully introduce new products or enter into new growth markets;

  •   sale of products into highly regulated industries;

  •   limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities;

  •   Ferro’s ability to complete future acquisitions or dispositions, or successfully integrate future acquisitions;

  •   competitive factors, including intense price competition;

  •   Ferro’s ability to protect its intellectual property or to successfully resolve claims of infringement brought against it;

  •   management of Ferro’s general and administrative expenses;

  •   Ferro’s multi-jurisdictional tax structure;

  •   the impact of the Company’s performance on its ability to utilize significant deferred tax assets;

  •   the effectiveness of strategies to increase Ferro’s return on capital;

  •   the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations;

  •   stringent labor and employment laws and relationships with the Company’s employees;

  •   the impact of requirements to fund employee benefit costs, especially post-retirement costs;

  •   implementation of new business processes and information systems;

  •   the impact of interruption, damage to, failure, or compromise of the Company’s information systems;

  •   exposure to lawsuits in the normal course of business;

  •   risks and uncertainties associated with intangible assets;

  •   Ferro’s borrowing costs could be affected adversely by interest rate increases;

  •   liens on the Company’s assets by its lenders affect its ability to dispose of property and businesses;

  •   Ferro may not pay dividends on its common stock in the foreseeable future; and

  •   other factors affecting the Company’s business that are beyond its control, including disasters, accidents and governmental actions.

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 our business, financial condition and results of operations.

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, 2012.

# # #

Contacts:

Investor Contact:
John Bingle, 216-875-5411
Treasurer and Director of Investor Relations
john.bingle@ferro.com

or

Media Contact:
Mary Abood, 216-875-5401
Director, Corporate Communications
mary.abood@ferro.com

                                                                 
Table 1    
Ferro Corporation and Subsidiaries    
Consolidated Statements of Operations (Unaudited)    
    Three months ended   Nine months ended
    September 30,   September 30,
(Dollars in thousands, except share and per share            
amounts)   2013   As adjusted 2012   2013   As adjusted 2012
Net sales
   $ 408,104             $ 408,865             $ 1,261,083             $ 1,344,836          
Cost of sales
     323,857               348,155               1,009,945               1,112,587          
 
                                                                
Gross profit
     84,247               60,710               251,138               232,249          
Selling, general and administrative expenses
     59,078               63,863               184,986               202,675          
Restructuring and impairment charges
     3,834               198,695               26,738               203,734          
Other expense (income):
                                                                
Interest expense
     6,766               6,716               21,034               19,566          
Interest earned
     (48 )             (57 )             (171 )             (192 )        
Foreign currency losses, net
     1,308               869               4,016               792          
Miscellaneous (income) expense, net
     (209 )             797               (9,493 )             3,038          
 
                                                                
Income (loss) before income taxes
     13,518               (210,173 )             24,028               (197,364 )        
Income tax expense
     474               105,447               4,025               113,115          
 
                                                                
Income (loss) from continuing operations
     13,044               (315,620 )             20,003               (310,479 )        
(Loss) income from discontinued operations, net of income taxes
     —               (118 )             (8,421 )             917          
Net income (loss)
     13,044               (315,738 )             11,582               (309,562 )        
Less: Net income attributable to noncontrolling interests
     392               376               177               830          
 
                                                                
Net income (loss) attributable to Ferro Corporation common shareholders
   $ 12,652             $ (316,114 )           $ 11,405             $ (310,392 )        
 
                                                                
Earnings (loss) per share attributable to Ferro Corporation common shareholders:
                                                                
Basic earnings (loss):
                                                                
From continuing operations
   $ 0.15             $ (3.66 )           $ 0.23             $ (3.61 )        
From discontinued operations
     —               —               (0.10 )             0.01          
 
                                                                
 
   $ 0.15             $ (3.66 )           $ 0.13             $ (3.60 )        
 
                                                                
Diluted earnings (loss):
                                                                
From continuing operations
   $ 0.15             $ (3.66 )           $ 0.23             $ (3.61 )        
From discontinued operations
     —               —               (0.10 )             0.01          
 
                                                                
 
   $ 0.15             $ (3.66 )           $ 0.13             $ (3.60 )        
 
                                                                
Shares outstanding:
                                                                
Weighted-average basic shares
     86,425,550               86,295,512               86,464,363               86,274,082          
Weighted-average diluted shares
     87,250,026               86,295,512               87,033,992               86,274,082          
End-of-period basic shares
     86,304,829               86,295,512               86,304,829               86,295,512          

1

                                                                 
Table 2    
Ferro Corporation and Subsidiaries    
Segment Net Sales and Segment Gross Profit    
(Unaudited)    
    Three months ended   Nine months ended
(Dollars in thousands)   September 30,   September 30,
    2013   As adjusted 2012   2013   As adjusted 2012
Segment Net Sales
                                                                
Pigments, Powders and Oxides
   $ 47,647             $ 64,053             $ 155,948             $ 219,398          
Performance Colors and Glass
     94,059               86,398               298,633               294,806          
Performance Coatings
     151,873               137,228               445,969               447,065          
Polymer Additives
     71,599               79,881               229,266               251,055          
Specialty Plastics
     42,926               41,305               131,267               132,512          
Total segment net sales
   $ 408,104             $ 408,865             $ 1,261,083             $ 1,344,836          
 
                                                                
Segment Gross Profit
                                                                
Pigments, Powders and Oxides
   $ 8,390             $ 7,231             $ 25,882             $ 28,363          
Performance Colors and Glass
     28,713               21,086               87,203               77,220          
Performance Coatings
     36,410               23,858               100,237               85,328          
Polymer Additives
     6,251               8,907               20,616               26,871          
Specialty Plastics
     6,881               6,984               22,116               23,207          
Other cost of sales
     (2,398 )             (7,356 )             (4,916 )             (8,740 )        
 
                                                                
Total gross profit
     84,247               60,710               251,138               232,249          
Selling, general and administrative expenses
     59,078               63,863               184,986               202,675          
Restructuring and impairment charges
     3,834               198,695               26,738               203,734          
Other expense, net
     7,817               8,325               15,386               23,204          
 
                                                                
Income (loss) before income taxes
   $ 13,518             $ (210,173 )           $ 24,028             $ (197,364 )        
 
                                                                

2

                 
Table 3        
Ferro Corporation and Subsidiaries        
Consolidated Balance Sheets (Unaudited)        
(Dollars in thousands)   September 30,
    2013   December 31, 2012
ASSETS
                
Current assets
                
Cash and cash equivalents
   $ 35,853     $ 29,576  
Accounts receivable, net
     331,847       306,463  
Inventories
     195,617       200,824  
Deferred income taxes
     8,011       7,995  
Other receivables
     32,371       31,554  
Other current assets
     14,571       10,802  
Current assets of discontinued operations
     —       6,289  
 
                
Total current assets
     618,270       593,503  
 
                
Property, plant and equipment, net
     299,619       309,374  
Goodwill
     63,234       62,975  
Amortizable intangible assets, net
     12,268       14,410  
Deferred income taxes
     20,527       21,554  
Other non-current assets
     55,444       61,941  
Other assets of discontinued operations
     —       15,346  
 
                
Total assets
   $ 1,069,362     $ 1,079,103  
 
                
LIABILITIES AND EQUITY
                
Current liabilities
                
Loans payable and current portion of long-term debt
   $ 59,665     $ 85,152  
Accounts payable
     183,044       182,024  
Accrued payrolls
     44,081       31,643  
Accrued expenses and other current liabilities
     67,514       76,384  
Current liabilities of discontinued operations
     —       1,300  
 
                
Total current liabilities
     354,304       376,503  
 
                
Long-term debt, less current portion
     278,119       261,624  
Postretirement and pension liabilities
     199,922       216,167  
Other non-current liabilities
     20,316       18,135  
 
                
Total liabilities
     852,661       872,429  
Shareholders’ equity
     203,356       193,527  
Noncontrolling interests
     13,345       13,147  
 
                
Total liabilities and equity
   $ 1,069,362     $ 1,079,103  
 
                

3

                                                                 
Table 4    
Ferro Corporation and Subsidiaries    
Consolidated Statements of Cash Flows (Unaudited)    
    Three months ended   Nine months ended
(Dollars in thousands)   September 30,   September 30,
    2013   2012   2013   2012
Cash flows from operating activities
                                                                
Net income (loss)
   $ 13,044             $ (315,738 )           $ 11,582             $ (309,562 )        
(Gain) loss on sale of assets and business
     (291 )             277               (10,686 )             1,018          
Restructuring and impairment charges
     (1,602 )             306,933               4,355               311,084          
Depreciation and amortization
     11,940               13,727               38,000               41,734          
Accounts receivable
     14,091               27,617               (23,079 )             (23,006 )        
Inventories
     2,017               7,060               12,118               15,637          
Accounts payable
     (11,448 )             (19,505 )             (5,864 )             (4,254 )        
Other changes in current assets and liabilities, net
     (3,443 )             (317 )             (8,363 )             7,814          
Other adjustments, net
     (12,751 )             (5,696 )             (15,060 )             (20,929 )        
Net cash provided by operating activities
     11,557               14,358               3,003               19,536          
Cash flows from investing activities
                                                                
Capital expenditures for property, plant and equipment
     (5,285 )             (10,737 )             (21,187 )             (46,245 )        
Proceeds from sale of assets
     586               1,194               16,034               2,386          
Proceeds from sale of stock of Ferro Pfanstiehl Laboratories, Inc.
     —               —               16,912               —          
Dividends received from affiliates
     —               (340 )             1,119               96          
 
                                                                
Net cash (used for) provided by investing activities
     (4,699 )             (9,883 )             12,878               (43,763 )        
Cash flow from financing activities
                                                                
Net borrowings (repayments) under loans payable
     17,937               (12,819 )             9,223               22,087          
Proceeds from revolving credit facility
     152,116               110,155               368,317               323,151          
Principal payments on revolving credit facility
     (136,584 )             (104,752 )             (351,404 )             (319,926 )        
Extinguishment of convertible senior notes
     (35,066 )             —               (35,066 )             —          
Other financing activities
     (347 )             1,820               (734 )             760          
 
                                                                
Net cash (used for) provided by financing activities
     (1,944 )             (5,596 )             (9,664 )             26,072          
Effect of exchange rate changes on cash and cash equivalents
     277               571               60               (19 )        
 
                                                                
Increase (decrease) in cash and cash equivalents
     5,191               (550 )             6,277               1,826          
Cash and cash equivalents at beginning of period
     30,662               25,367               29,576               22,991          
Cash and cash equivalents at end of period
   $ 35,853             $ 24,817             $ 35,853             $ 24,817          
 
                                                                
Cash paid during the period for:
                                                                
Interest
   $ 12,088             $ 12,147             $ 25,484             $ 25,343          
Income taxes
     526               1,032               2,905               3,130          

4

                                                                                                         
Table 5                                                                
Ferro Corporation and Subsidiaries                                                                
Supplemental Information                                                                
Reconciliation of Reported Income (Loss) to Adjusted Income (Loss)                                                
for the Three Months Ended September 30 (Unaudited)                                                
(Dollars in thousands,                   Selling, general and                                           Net income (loss)    
except per share amounts)                   administrative   Restructuring and   Other expense   Income tax expense   attributable to common   Diluted earnings
    Cost of sales   expenses   impairment charges   (income), net   (benefit)   shareholders   (loss) per share
    2013
As reported
   $ 323,857             $ 59,078             $ 3,834             $ 7,817     $ 474             $ 12,652             $ 0.15          
Special items:
                                                                                                        
Restructuring
     —               —               (3,834 )             —       1,380               2,454               0.02          
Other (1)
     (601 )             (2,256 )             —               —       1,029               1,828               0.02          
Taxes (2)
     —               —               —               —       4,392               (4,392 )             (0.05 )        
Total special items
     (601 )             (2,256 )             (3,834 )             —       6,801               (110 )             (0.01 )        
 
                                                                                                        
As adjusted
   $ 323,256             $ 56,822             $ —             $ 7,817     $ 7,275             $ 12,542             $ 0.14          
 
                                                                                                        
 
                                                     2012                                                  
     
As reported
   $ 348,155             $ 63,863             $ 198,695             $ 8,325     $ 105,447             $ (316,114 )           $ (3.66 )        
Special items:
                                                                                                        
Restructuring
     —               —               (198,695 )             —       71,530               127,165               1.47          
Other (1)
     (5,813 )             (3,245 )             —               —       3,261               5,797               0.07          
Taxes (2)
     —               —               —               —       (181,109 )             181,109               2.10          
Discontinued operations
     —               —               —               —       —               118               —          
 
                                                                                                        
Total special items
     (5,813 )             (3,245 )             (198,695 )             —       (106,318 )             314,189               3.64          
 
                                                                                                        
As adjusted
   $ 342,342             $ 60,618             $ —             $ 8,325     $ (871 )           $ (1,925 )           $ (0.02 )        
 
                                                                                                        

1)   Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development activities.

2)   Adjustment of reported earnings and of special items to a normalized 36% rate for 2013 and 2012.

It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items, including restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development costs. We believe this data provides investors with additional 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.

5

                                                                                                                 
Table 6                                                                        
Ferro Corporation and Subsidiaries                                                                        
Supplemental Information                                                                        
Reconciliation of Reported Income (Loss) to Adjusted Income                                                        
for the Nine Months Ended September 30 (Unaudited)                                                        
                    Selling, general and                                                   Net income (loss)    
(Dollars in thousands,                   administrative   Restructuring and   Other expense   Income tax expense   attributable to common   Diluted earnings
except per share amounts)   Cost of sales   expenses   impairment charges   (income), net   (benefit)   shareholders   (loss) per share
    2013
As reported
   $ 1,009,945             $ 184,986             $ 26,738             $ 15,386             $ 4,025             $ 11,405             $ 0.13          
Special items:
                                                                                                                
Restructuring
     —               —               (26,738 )             —               9,626               17,112               0.20          
Other (1)
     (3,465 )             (6,782 )             —               8,856               501               890               0.01          
Taxes (2)
     —               —               —               —               4,625               (4,625 )             (0.05 )        
Solar Pastes (3)
     —               —               —               —               —               205               —          
Discontinued operations
     —               —               —               —               —               8,421               0.10          
Noncontrolling interest
     —               —               —               —               —               (394 )             (0.01 )        
 
                                                                                                                
Total special items
     (3,465 )             (6,782 )             (26,738 )             8,856               14,752               21,609               0.25          
As adjusted
   $ 1,006,480             $ 178,204             $ —             $ 24,242             $ 18,777             $ 33,014             $ 0.38          
 
                                                                                                                
                                                    2012                                                
     
As reported
   $ 1,112,587             $ 202,675             $ 203,734             $ 23,204             $ 113,115             $ (310,392 )           $ (3.60 )        
Special items:
                                                                                                                
Restructuring
     —               —               (203,734 )             —               73,344               130,390               1.51          
Other (1)
     (7,204 )             (5,969 )             —               (808 )             5,033               8,948               0.10          
Taxes (2)
     —               —               —               —               (184,166 )             184,166               2.14          
Discontinued operations
     —               —               —               —               —               (917 )             (0.01 )        
 
                                                                                                                
Total special items
     (7,204 )             (5,969 )             (203,734 )             (808 )             (105,789 )             322,587               3.74          
As adjusted
   $ 1,105,383             $ 196,706             $ —             $ 22,396             $ 7,326             $ 12,195             $ 0.14          
 
                                                                                                                

1)   Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development activities.

2)   Adjustment of reported earnings and of special items to a normalized 36% rate for 2013 and 2012.

3)   Adjustment to exclude the operations of the Solar Pastes product line prior to the completion of the transaction on February 6, 2013 where certain Solar Pastes assets were sold and the Company exited the product line. We believe this adjustment, in combination with the adjustment to exclude the gain on the sale of Solar Pastes assets of $8,954 included within the adjustments to the Other Expense, Net, provides investors with additional information on the underlying operations of the business.

It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items, including restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development costs. We believe this data provides investors with additional 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.

6

                                                                 
Table 7    
Ferro Corporation and Subsidiaries    
Supplemental Information    
Segment Sales Excluding Precious Metals and    
Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales and Schedule of    
Adjusted Gross Profit (Unaudited)    
    Three months ended   Nine months ended
    September 30,   September 30,
(Dollars in thousands)   2013   As adjusted 2012   2013   As adjusted 2012
Pigments, Powders and Oxides
   $ 35,551             $ 38,286             $ 110,146             $ 124,429          
Performance Colors and Glass
     85,076               76,204               264,822               256,931          
Performance Coatings
     151,873               137,228               445,969               447,065          
Polymer Additives
     71,599               79,881               229,266               251,055          
Specialty Plastics
     42,926               41,305               131,267               132,512          
 
                                                                
Total segment sales excluding precious metals
     387,025               372,904               1,181,470               1,211,992          
Sales of precious metals
     21,079               35,961               79,613               132,844          
 
                                                                
Total net sales
   $ 408,104             $ 408,865             $ 1,261,083             $ 1,344,836          
 
                                                                
Net sales excluding precious metals
   $ 387,025             $ 372,904             $ 1,181,470             $ 1,211,992          
Adjusted cost of sales
     323,256               342,342               1,006,480               1,105,383          
Cost of sales from precious metals
     (21,079 )             (35,961 )             (79,613 )             (132,844 )        
 
                                                                
Adjusted cost of sales excluding precious metals
     302,177               306,381               926,867               972,539          
 
                                                                
Adjusted gross profit
   $ 84,848             $ 66,523             $ 254,603             $ 239,453          
 
                                                                
Adjusted gross profit percentage
     21.9       %       17.8       %       21.5       %       19.8       %  

It should be noted that segment net sales excluding precious metals, adjusted cost of sales and adjusted gross profit are financial measures 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. Adjusted cost of sales and adjusted gross profit presented here exclude certain special items including impairment charges and ongoing costs at facilities that have been idled. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.

7

                                 
Table 8    
Ferro Corporation and Subsidiaries    
Supplemental Information    
Segment Detail    
Performance Materials    
    Three months ended   Nine months ended
(Dollars in thousands)   September 30,   September 30,
    2013   As adjusted 2012   2013   As adjusted 2012
Sales
                                
 
                                
Pigments, Powders & Oxides
   $ 47,647     $ 64,053     $ 155,948     $ 219,398  
Performance Colors & Glass
     94,059       86,398       298,633       294,806  
Performance Coatings
     151,873       137,228       445,969       447,065  
 
                                
Total Performance Materials Sales
     293,579       287,679       900,550       961,269  
Gross profit
                                
 
                                
Pigments, Powders & Oxides
     8,390       7,231       25,882       28,363  
Performance Colors & Glass
     28,713       21,086       87,203       77,220  
Performance Coatings
     36,410       23,858       100,237       85,328  
 
                                
Total Performance Materials Gross Profit
     73,513       52,175       213,322       190,911  
Selling, general and administrative charges
     34,205       42,620       113,700       137,393  
 
                                
Performance Materials Operating Profit
   $ 39,308     $ 9,555     $ 99,622     $ 53,518  
 
                                
Performance Chemicals
                                
    Three months ended   Nine months ended
    September 30,   September 30,
         
 
     2013     As adjusted 2012     2013     As adjusted 2012
 
                                
Sales
                                
 
                                
Polymer Additives
   $ 71,599     $ 79,881     $ 229,266     $ 251,055  
Specialty Plastics
     42,926       41,305       131,267       132,512  
 
                                
Total Performance Chemicals Sales
     114,525       121,186       360,533       383,567  
Gross Profit
                                
 
                                
Polymer Additives
     6,251       8,907       20,616       26,871  
Specialty Plastics
     6,881       6,984       22,116       23,207  
 
                                
Total Performance Chemicals Gross Profit
     13,132       15,891       42,732       50,078  
Selling, general and administrative charges
     5,864       6,709       17,575       24,294  
 
                                
Performance Chemicals Operating Profit
   $ 7,268     $ 9,182     $ 25,157     $ 25,784  
 
                                

8

                                                                 
Table 9    
Ferro Corporation and Subsidiaries    
Supplemental Information    
Reconciliation of Operating Group Non-GAAP Measures to    
Consolidated GAAP Balances    
    Three months ended   Nine months ended
(Dollars in thousands)   September 30,   September 30,
    2013   As adjusted 2012   2013   As adjusted 2012
Total Sales
   $ 408,104             $ 408,865             $ 1,261,083             $ 1,344,836          
Performance Materials
     73,513               52,175               213,322               190,911          
Performance Chemicals
     13,132               15,891               42,732               50,078          
Other cost of sales
     (2,398 )             (7,356 )             (4,916 )             (8,740 )        
 
                                                                
Total gross profit
     84,247               60,710               251,138               232,249          
Performance Materials
     34,205               42,620               113,700               137,393          
Performance Chemicals
     5,864               6,709               17,575               24,294          
Corporate
     19,009               14,534               53,711               40,988          
 
                                                                
Total selling, general and administrative charges
     59,078               63,863               184,986               202,675          
Total operating profit
     25,169               (3,153 )             66,152               29,574          
Restructuring and impairment charges
     3,834               198,695               26,738               203,734          
Interest expense
     6,766               6,716               21,034               19,566          
Interest earned
     (48 )             (57 )             (171 )             (192 )        
Foreign currency losses, net
     1,308               869               4,016               792          
Miscellaneous (income) expense, net
     (209 )             797               (9,493 )             3,038          
 
                                                                
Income (loss) from continuing operations before taxes
   $ 13,518             $ (210,173 )           $ 24,028             $ (197,364 )        
 
                                                                

It should be noted that operating group sales, gross profit, selling, general and administrative charges, and operating profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The respective information has been aggregated in a manner consistent with the operating groups of the Company. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.

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Table 10    
Ferro Corporation and Subsidiaries    
Reconciliation of Net Income (Loss) to Adjusted    
EBITDA    
    Three months ended   Nine months ended
    September 30,   September 30,
(Dollars in thousands)   2013   2012   2013   2012
 
                                                                
Net Income (Loss) Attributable to Ferro Corporation
   $ 12,652             $ (316,114 )           $ 11,405             $ (310,392 )        
Loss (Income) from Discontinued Operations, net of Income Tax
     —               118               8,421               (917 )        
Interest Expense
     6,766               6,716               21,034               19,566          
Income Tax Expense
     474               105,447               4,025               113,115          
Depreciation and Amortization
     11,940               13,727               38,000               41,734          
Less Interest Amortization Expense and Other
     (545 )             (718 )             (2,616 )             (2,150 )        
Cost of Sales Adjustments
     601               5,813               3,465               7,204          
SG&A Adjustments
     2,256               3,245               6,782               5,969          
Restructuring and Impairment
     3,834               198,695               26,738               203,734          
Other (Income) and Expense Adjustments
     —               —               (520 )             808          
Noncontrolling Interest Adjustments
     —               —               (394 )             —          
Gain on Sale of Solar Pastes Assets
     —               —               (8,954 )             —          
Solar Pastes Operations
     —               —               323               —          
Adjusted EBITDA
   $ 37,978             $ 16,929             $ 107,709             $ 78,671          
 
                                                                
Net sales excluding precious metals
   $ 387,025             $ 372,904             $ 1,181,470             $ 1,211,992          
Adjusted EBITDA as a % of net sales excluding precious metals
     9.8       %       4.5       %       9.1       %       6.5       %  

It should be noted that adjusted EBITDA is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). Adjusted EBITDA is net income before the effects of discontinued operations, interest, income taxes, depreciation and amortization, nonrecurring adjustments to cost of sales, nonrecurring adjustments to SG&A, restructuring and impairment charges, nonrecurring adjustments to miscellaneous income and expense, and the gain and impact of solar pastes operations on Q1 2013. We believe this data provides investors with additional 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.

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FERRO CORP Reports