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Ferro Corp. Reports Operating Results (10-Q)

October 29, 2012 | About:
10qk

10qk

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Ferro Corp. (FOE) filed Quarterly Report for the period ended 2012-09-30.

Ferro Corp has a market cap of $229.4 million; its shares were traded at around $2.65 with a P/E ratio of 11 and P/S ratio of 0.1.

Highlight of Business Operations:

Gross profit declined as a result of reduced sales and a change in product mix due to the decline in Electronic Materials sales. Gross profit percentage declined to 17.5% of net sales from 19.8% of net sales in the first nine months of 2011. In total, raw material costs increased by approximately $7 million compared with the first three quarters of 2011 and these costs were offset by increased product prices. Gross profit was reduced by $7.2 million due to charges primarily related to write-downs of solar pastes inventory and residual costs at closed manufacturing sites involved in earlier restructuring initiatives. Gross profit was reduced by charges of $3.6 million during the first nine months of 2011, also as a result of residual costs at sites closed as a result of previous restructuring actions.

Selling, general and administrative (SG&A) expenses declined by $3.8 million compared with the first nine months of 2011. Due primarily to reduced sales, SG&A expenses increased to 15.1% of net sales compared with 12.3% of net sales in the prior-year period. SG&A expenses declined primarily as a result of reduced incentive compensation expenses, depreciation expense, business travel costs and professional fees. Increased special charges, increased healthcare benefit expense for U.S. employees, higher reserves for bad debt and expenses related to an initiative to improve management information systems tools partially offset the decline in SG&A expenses during the first nine months of 2012. SG&A expenses during the first nine months of 2012 included charges of $6.0 million that were primarily related to a write-down of other tax assets, residual expenses at sites closed as a part of earlier restructuring initiatives and severance costs. SG&A expenses in the first nine months of 2011 included charges of $3.3 million, primarily related to expenses at sites closed as a result of earlier restructuring initiatives.

Restructuring and impairment charges increased to $203.8 million during the first three quarters of 2012. The charges included a $147.3 million impairment of goodwill associated with the Electronic Materials segment. Impairment charges of $40.5 million were also recorded to reduce the value of long-lived assets, also in the Electronic Materials segment. These impairments were the result of reduced forecasts for future profitability, primarily for our solar pastes and metal powders businesses within Electronic Materials. In addition, an impairment charge of $11.0 million was recorded to reduce the value of assets held for sale, primarily properties and buildings related to manufacturing sites that were closed as part of earlier restructuring activities. Restructuring charges during the first nine months of 2012 also included charges of $4.6 million related to a restructuring initiative in our Performance Coatings business in Europe.

Specialty Plastics Segment Results. Sales in Specialty Plastics were little changed in the first nine months of 2012 compared with the first nine months of 2011. Lower sales volume reduced sales by approximately $4 million and changes in foreign currency exchange rates reduced sales by an additional $3 million. Changes in product pricing and mix increased sales by $7 million compared with the prior-year period. Sales declined in Europe-Middle East-Africa and increased in the United States. Segment income increased due to a $4 million increase in gross profit, primarily the result of changes in product pricing. In addition, SG&A expenses declined by $1 million compared to the prior-year period.

Cash flows from financing activities. Cash flows from financing activities decreased $32.8 million in the first nine months of 2012 compared with the prior-year period. In the first nine months of 2012, we borrowed $20.0 million through our domestic accounts receivable asset securitization program, $3.8 million in loans payable to banks and $3.2 million through our revolving credit facility. In the same period of 2011, we borrowed $45.0 million through our domestic accounts receivable asset securitization program, $9.7 million through our international accounts receivable sales program and $13.1 million through our revolving credit facility, and we redeemed in cash all outstanding 7% Series A ESOP Convertible Preferred Stock for $9.4 million plus earned but unpaid dividends.

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