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Ferro Corp. Reports Operating Results (10-Q)

April 27, 2010 | About:
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10qk

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Ferro Corp. (FOE) filed Quarterly Report for the period ended 2010-03-31.

Ferro Corp. has a market cap of $906.3 million; its shares were traded at around $10.51 with and P/S ratio of 0.5. FOE is in the portfolios of Chuck Royce of Royce& Associates, Arnold Schneider of Schneider Capital Management, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Electronic Materials Segment Results. Sales increased in Electronic Materials in all product areas, including conductive pastes and powders. Higher sales volume contributed approximately $38 million of the sales growth, and changes in product mix and prices accounted for an additional $26 million in increased sales. Changes in foreign currency exchange rates contributed an additional $1 million to the overall sales increase. An increase in precious metal sales of $41 million, reflecting changes in both volume and pricing, contributed to the overall sales increase. The costs of precious metals are generally passed through to our customers with minimal gross profit contribution. Sales increased in all three principal markets for our electronic material products: Asia-Pacific, the United States and Europe. Operating income increased due to a $25 million increase in gross profit and a $1 million decline in SG&A expense. The increase in gross profit was principally due to higher sales volume.

Performance Coatings Segment Results. Sales increased in Performance Coatings primarily due to higher sales volume, as well as changes in product prices and improved product mix. Higher sales volume accounted for approximately $12 million of the increased in sales. Changes in product prices and mix were responsible for an additional $6 million of the sales increase. Changes in foreign currency exchange rates increased sales by approximately $1 million. Sales increased in all regions compared with the prior-year quarter. Operating profit increased due to an increase of $12 million in gross profit, driven by increased sales volume and changes in product pricing and mix. Partially offsetting the improved gross profit was an increase of $2.4 million in SG&A expense, compared with the prior-year quarter.

Color and Glass Performance Materials Segment Results. Sales increased in Color and Glass Performance Materials primarily as a result of increased sales volume. Increased sales volume was responsible for approximately $20 million of the higher sales. Changes in product prices and mix contributed an additional $10 million to the sales increase, and changes in foreign exchange rates accounted for approximately $2 million of the increase in sales. Sales increased in all regions. Operating income increased due to an $11 million increase in gross profit, partially offset by a $1 million increase in SG&A expense. The increase in gross profit was driven by the positive effects of higher sales volume.

Polymer Additives Segment Results. Sales increased in Polymer Additives primarily as a result of higher sales volume. Increased sales volume accounted for approximately $15 million of the higher sales, offset by changes in product prices and mix that reduced sales by approximately $1 million. Changes in foreign currency exchange rates contributed an additional $1 million to the sales increase. The sales increase was primarily in the United States and Europe, the principal markets for our polymer additives products. Operating income increased due to an increase of approximately $1 million in gross profit and a $1 million reduction in SG&A expense, compared to the prior-year quarter. The increase in gross profit was primarily the result of increased sales volume, and the lower SG&A expense was driven by staffing reductions accomplished in prior periods.

Specialty Plastics Segment Results. Sales increased in Specialty Plastics primarily due to increased sales volume. Increased sales volume accounted for approximately $2 million in increased sales and changes in foreign currency exchange rates were responsible for an additional $1 million in sales. Changes in product mix and prices contributed an additional $1 million to the increased sales. Sales increased in the United States and Europe. Operating income increased as a result of a $1 million reduction in SG&A expense, partially offset by a $0.6 million decline in gross profit. The reduction in SG&A expense was driven by reduced staffing.

Cash flows from operating activities increased by $85.1 million in the first three months of 2010 compared with the prior-year period. Year-over-year cash flows from operating activities increased $92.2 million due to changes in accounts payable, $71.0 million primarily due to funding requirements in 2009 for precious metal deposits, and $19.2 million due to higher net income. Partially offsetting these effects, year-over-year cash flows from operating activities decreased $65.0 million due to changes in inventories and $56.1 million due to changes in accounts and trade notes receivable. Accounts payable, inventories, and accounts and trade notes receivable increased in the first three months of 2010 in response to improved customer demand as worldwide markets continued to recover from the economic downturn in 2009.

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