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Ferro Reports 2011 Fourth-Quarter and Full-Year Results

CLEVELAND--(BUSINESS WIRE)--Feb. 28, 2012-- Ferro Corporation (NYSE: FOE) (the “Company”) today announced net sales of $443 million for the three-month period ended December 31, 2011 compared with net sales of $537 million in the fourth quarter of 2010. The Company recorded a net loss attributable to Ferro Corporation common shareholders of $28.8 million, or $0.33 per diluted share, in the 2011 fourth quarter, compared with net income attributable to Ferro Corporation common shareholders of $1.8 million, or $0.02 per diluted share, in the prior-year quarter. The adjusted net loss attributable to Ferro Corporation common shareholders, excluding special charges, was $6.8 million, or $0.08 per diluted share, compared with adjusted net income attributable to Ferro Corporation common shareholders of $20.4 million, or $0.24 per diluted share, in the fourth quarter of 2010. “We began 2011 with high expectations following a strong performance in 2010 that was driven by worldwide economic growth and surging demand for solar power. During the year, the anticipated demand for conductive pastes used in solar cells did not materialize, resulting in significant booking reductions by our customers throughout the world, adversely affecting earnings. Our non-solar Electronic Materials businesses performed well in 2011, as did our Color and Glass Performance Materials and Pharmaceuticals businesses. However, improvements in these businesses did not offset the impact of the steep decline in solar paste revenues,” said Chairman, President and Chief Executive Officer James F. Kirsch. “We responded quickly to the slowing customer demand through appropriate limits on spending, reduced hiring and adjustments in our manufacturing operations. Our focus on working capital resulted in $71 million of cash from operations in the fourth quarter as we continued to manage our business in line with market conditions,” Kirsch noted. “Looking forward, we will continue making investments designed to fuel future sales growth, including new product development and enhanced customer technical support, as well as investments that will enhance our productivity and manufacturing efficiency.” 2011 Fourth-Quarter Results Net sales for the three months ended December 31, 2011, were $443 million, a decline of 18 percent from net sales of $537 million in the fourth quarter of 2010. Reduced sales of electronic materials products, including precious metal sales, were the primary driver of the decline in consolidated net sales. Excluding the Electronic Materials segment, sales increased by 2.4 percent. Reduced customer demand for conductive pastes used in solar cell applications and metal powders used in a variety of electronic products resulted in a $103 million decline in sales for the Electronic Materials segment, including a $65 million decline in sales of precious metals due to reduced volume and lower silver prices. Demand for conductive pastes remains weak due to low end-market demand and excess inventory of completed solar power modules, particularly in the European solar market. Sales increased in the Performance Coatings, Polymer Additives, Specialty Plastics and Pharmaceuticals segments compared with the prior-year quarter, while sales declined in the Color and Glass Performance Materials segment. Gross profit was $75 million, or 16.9 percent of net sales, during the 2011 fourth quarter, compared with $109 million, or 20.3 percent of net sales, during the fourth quarter of 2010. Excluding special charges, gross profit was 19.3 percent of sales excluding precious metals during the quarter, compared with 26.8 percent in the fourth quarter of 2010. The primary driver of the decline in gross profit dollars was the reduced sales volume in our Electronic Materials segment, including conductive pastes sold to manufacturers of solar cells. Electronic materials are among the Company’s highest margin products. During the 2011 fourth quarter, gross profit was reduced by charges of $1.1 million, primarily related to residual costs at closed manufacturing sites that were affected by prior-period restructuring actions. In the fourth quarter of 2010, gross profit was reduced by charges of $4.1 million, primarily as a result of a multi-year settlement of taxes owed on certain raw materials purchases and costs related to manufacturing rationalization activities. Selling, general and administrative (“SG&A”) expenses were $77 million during the fourth quarter compared with $78 million in the prior-year quarter. SG&A expenses were 17.4 percent of net sales during the quarter, compared with 14.5 percent of net sales in the fourth quarter of 2010. Reduced incentive compensation expenses, lower special charges and lower pension expenses reduced SG&A expenses during the quarter. Offsetting these declines were increased costs related to an initiative to streamline and standardize the Company’s business processes and to improve management information systems tools, increased SG&A expenses at non-U.S. operations resulting from changes in foreign currency exchange rates, and the costs of annual salary adjustments. SG&A expenses during the 2011 fourth quarter included special charges of $0.8 million, primarily related to expenses at sites that were closed during earlier restructuring initiatives. During the fourth quarter of 2010, SG&A expense included $4.6 million in charges, primarily related to manufacturing rationalization activities. Restructuring and impairment charges were $13.0 million in the fourth quarter of 2011, compared with $19.6 million in the prior-year quarter. The fourth-quarter 2011 total included fixed asset impairment charges of $8.2 million and a $3.9 million impairment of goodwill in the Performance Coatings segment. Interest expense was $7.2 million during the 2011 fourth quarter, down $0.2 million from the prior-year period as a result of slightly lower average borrowing balances. Losses on extinguishment of debt were minimal in the 2011 fourth quarter, down from losses of $3.7 million in the 2010 fourth quarter which were related to debt refinancing. The net loss attributable to Ferro Corporation common shareholders for the 2011 fourth quarter was $28.8 million, or $0.33 per diluted share, compared with net income attributable to Ferro Corporation common shareholders of $1.8 million, or $0.02 per diluted share, in the fourth quarter of 2010. The adjusted net loss attributable to Ferro Corporation common shareholders for the 2011 fourth quarter was $0.08 per diluted share, excluding special charges. A reconciliation of reported results to adjusted results excluding special charges is available in the supplementary financial data included in this press release. Cash flow from operations was $70.6 million during the fourth quarter of 2011, compared with $18.4 million in the prior-year quarter. The cash flow from operations in the final three months of 2011 was driven by a $62.8 million reduction in working capital. 2011 Full-Year Results Net sales for the year ended December 31, 2011 increased to $2.2 billion, an increase of 2.6 percent compared with 2010. Sales increased in all segments except Electronic Materials where reduced demand and excess inventories of solar power modules resulted in decreased demand for the Company’s conductive metal pastes. Excluding the Electronic Materials segment, sales increased by 7.5 percent compared with 2010. Sales of precious metals increased, primarily in the first half of the year when demand for conductive pastes was stronger and silver prices were higher. During 2011, changes in product pricing and mix were the primary drivers of increased sales, accounting for 10 percentage points of sales growth. Changes in foreign currency exchange rates contributed an additional 2 percentage points of sales growth. Lower sales volume reduced growth by 9 percentage points. Net income attributable to Ferro Corporation common shareholders was $31.5 million, or $0.36 per diluted share in 2011, compared with $5.0 million, or $0.06 per diluted share, in 2010. The improvement was driven by significantly lower restructuring and impairment charges, reduced losses on extinguishment of debt and lower interest expense. These profitability improvements were partially offset by reduced gross profit and higher income tax expense. Adjusted net income attributable to Ferro Corporation common shareholders for 2011, excluding special charges, was $61.8 million, or $0.71 per diluted share. The adjusted earnings exclude special charges of $26.3 million, consisting of $17.0 million of restructuring and impairment charges, and other charges of $9.3 million primarily related to residual costs at closed manufacturing sites that were involved in restructuring initiatives in prior periods. The adjusted net income attributable to Ferro Corporation common shareholders in 2010, excluding special charges, was $93.2 million, or $1.08 per diluted share. The 2010 adjusted net income excluded charges of $125.4 million, consisting of $63.7 million of restructuring and impairment charges, losses on extinguishment of debt of $23.0 million, and other charges of $38.6 million primarily related to manufacturing rationalization, the refinancing of debt and other expense reduction activities. Gross profit percentage declined to 19.2 percent of net sales during 2011, compared with 21.8 percent of net sales in 2010. The decline was primarily driven by reduced sales of high-margin electronic materials products, particularly conductive pastes used in solar applications. During 2011, gross profit was reduced by special charges of $4.8 million, primarily related to residual costs at manufacturing locations that were closed as a result of prior-period restructuring actions. In 2010, gross profit was reduced by special charges of $9.0 million, primarily the result of a multi-year settlement of taxes owed on certain raw materials and costs associated with manufacturing rationalization activities. SG&A expenses were nearly unchanged at $294.8 million during 2011. SG&A expenses as a percent of net sales declined to 13.6 percent in 2011, from 14.0 percent during 2010. Reduced incentive compensation, lower special charges and less pension expense contributed to the reduced SG&A expense. These declines were offset by increased spending for an initiative to streamline and standardize business processes and improve management information systems tools, increased SG&A expenses in the Company’s non-U.S. operations resulting from changes in foreign currency exchange rates, and the cost of annual salary adjustments. SG&A during 2011 included special charges of $4.1 million, primarily related to expenses at closed sites that were part of prior-period restructuring actions. During 2010, SG&A expenses included charges of $18.1 million, primarily related to manufacturing rationalization actions, employee severance and corporate development activities. Restructuring and impairment charges declined to $17.0 million, down from $63.7 million in the prior year. The lower charges reflected the reduction in restructuring activities as the Company completes the final actions related to its multi-year manufacturing rationalization efforts. Included in the 2011 restructuring and impairment charges were fixed asset impairment charges of $8.2 million and a $3.9 million impairment of goodwill in the Performance Coatings segment. Interest expense declined to $28.4 million in 2011, a reduction of $16.2 million compared with 2010. The reduction was driven by lower average borrowing levels, reduced average interest rates on borrowings and reduced amortization of debt issuance costs. Interest expense in 2010 included a $2.3 million write-off of debt issuance costs related to prepayments of the Company’s term loans. Losses on extinguishment of debt were minimal in 2011, down from $23.0 million in 2010. The 2010 losses included a write-off of unamortized fees and the difference between the carrying value and the fair value of the portion of the Company’s 6.5% Convertible Senior Notes purchased during 2010. The purchases were made as a result of a tender offer and subsequent purchases of the notes. The losses on extinguishment also included a write-off of unamortized fees associated with the Company’s previous credit facility. Total debt on December 31, 2011 was $309 million compared with $295 million at the end of 2010. Cash flow from operations was $53.2 million during 2011 driven by net income, depreciation and amortization, and the elimination of precious metal deposits, partially offset by increased working capital requirements. 2012 Outlook The Company expects 2012 sales, excluding precious metal pass-throughs, to be approximately the same as in 2011, after adjusting for the negative impact of lower forecasted foreign exchange rates. Sales of precious metals are expected to decline due to lower average prices and lower volume. The sales outlook assumes that cautious customer ordering patterns will continue in response to generally lower regional growth forecasts. However, the Company’s sales outlook does not anticipate a broad recessionary environment in any region. Foreign currency exchange rates used to estimate 2012 sales are assumed to be equal to year-end 2011 values, which were lower than the average rates for 2011. Sales of electronic materials products are expected to be lower in 2012 compared with 2011. Sales of these products are expected to improve during the course of 2012, with most of the improvement expected in the second half of the year. However, the strength and timing of a global recovery in demand for solar pastes remains uncertain. Adjusted earnings per share are expected to be in the range of $0.40 to $0.65 per diluted share in 2012. The expected reduction of 2012 adjusted earnings compared with the prior-year adjusted earnings is driven by lower income expectations in the Electronic Materials segment. The size of the range is driven primarily by uncertainties related to demand for electronic materials products. While the Company expects lower segment income from the Electronic Materials segment, total income from all other segments is expected to grow by 10 to 15 percent in 2012. Non-GAAP Measures Adjusted earnings per share is equal to income (loss) before taxes, plus restructuring and impairment charges, charges related to debt refinancing and other special charges, adjusted for a normalized tax rate that is consistent with the Company’s expected future effective tax rate excluding discrete items, and divided by the average number of common shares outstanding. 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. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. Conference Call The Company will host a conference call to discuss its 2011 fourth-quarter and full-year financial results, its outlook for general business conditions and its current outlook for 2012 on Wednesday, February 29, 2012, at 10:00 a.m. Eastern time. To participate in the call, dial 800-750-5845 if calling from the United States or Canada, or dial 212-231-2929 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 from noon Eastern time on February 29 through noon Eastern time on March 7. 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 #21579704 to access the audio replay. The conference call also will be broadcast live over the Internet and will be available for replay through June 30, 2012. 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 Company’s Web site. About Ferro Corporation Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials for manufacturers. Ferro materials enhance the performance of products in a variety of end markets, including electronics, solar energy, telecommunications, pharmaceuticals, building and renovation, appliances, automotive, household furnishings, and industrial products. Headquartered in Mayfield Heights, Ohio, the Company has approximately 5,100 employees globally and reported 2011 sales of $2.2 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; uncertainty in the development of the solar energy market; 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; implementation of new business information systems and processes; 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 the Asia-Pacific region 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; 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 successfully integrate future acquisitions into our business; the impact of the Company’s performance on its ability to utilize significant deferred tax assets; competitive factors, including intense price competition; Ferro’s ability to protect its intellectual property or to successfully resolve claims of infringement brought against the Company; 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; the impact of interruption, damage to, failure, or compromise of the Company’s information systems; manufacture and sale of products into the pharmaceutical industry; 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’s ability to successfully implement and/or administer our restructuring programs and produce the desired results; 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, 2011.               Ferro Corporation and Subsidiaries Consolidated Statements of Operations   Three months ended December 31, (Unaudited) Twelve months ended December 31, (Dollars in thousands, except share and per share amounts) 2011   2010 2011   2010   Net sales $442,695 $536,951 $2,155,792 $2,101,865 Cost of sales 367,991 427,846 1,742,605 1,643,200 Gross profit 74,704 109,105 413,187 458,665   Selling, general and administrative expenses 76,906 78,101 294,802 293,736 Restructuring and impairment charges 12,986 19,625 17,030 63,732 Other expense (income): Interest expense 7,201 7,372 28,409 44,568 Interest earned (92) (109) (285) (651) Losses on extinguishment of debt 45 3,670 45 23,001 Foreign currency losses, net 709 1,080 4,758 4,724 Miscellaneous expense, net 2,034 3,291 2,492 5,814 (Loss) income before income taxes (25,085) (3,925) 65,936 23,741 Income tax expense (benefit) 3,582 (6,778) 33,569 16,468 Net (loss) income (28,667) 2,853 32,367 7,273 Less: Net income attributable to noncontrolling interests 157 844 730 1,577 Net (loss) income attributable to Ferro Corporation (28,824) 2,009 31,637 5,696 Dividends on preferred stock 0 (165) (165) (660) Net (loss) income attributable to Ferro Corporation common shareholders $(28,824) $1,844 $31,472 $5,036   (Loss) earnings per share attributable to Ferro Corporation common shareholders: Basic (loss) earnings per share $(0.33) $0.02 $0.37 $0.06 Diluted (loss) earnings per share (0.33) 0.02 0.36 0.06   Shares outstanding: Weighted-average basic shares 86,174,555 85,867,752 86,119,380 85,822,887 Weighted-average diluted shares 86,771,135 86,517,511 86,778,335 86,539,924 End-of-period basic shares 86,175,117 85,873,376 86,175,117 85,873,376                 Ferro Corporation and Subsidiaries Segment Net Sales and Segment Income   (Dollars in thousands) Three months ended December 31, (Unaudited) Twelve months ended December 31, 2011   2010 2011   2010 Segment Net Sales Electronic Materials $84,187 $186,687 $622,977 $675,401 Performance Coatings 149,020 140,477 602,566 555,023 Color and Glass Perf. Materials 89,511 93,959 396,317 382,155 Polymer Additives 74,198 70,921 336,965 302,352 Specialty Plastics 39,283 38,693 172,028 163,058 Pharmaceuticals 6,496 6,214 24,939 23,876 Total Segment Net Sales $442,695 $536,951 $2,155,792 $2,101,865   Segment Income Electronic Materials $612 $35,312 $74,869 $132,585 Performance Coatings 7,526 4,190 37,988 39,416 Color and Glass Perf. Materials 2,538 5,057 32,327 31,514 Polymer Additives 414 4,590 15,221 18,387 Specialty Plastics 2,140 1,773 9,521 11,348 Pharmaceuticals 73 426 3,050 814 Total Segment Income 13,303 51,348 172,976 234,064   Unallocated corporate expenses 15,505 20,344 54,591 69,135 Restructuring and impairment charges 12,986 19,625 17,030 63,732 Interest expense 7,201 7,372 28,409 44,568 Other expense, net 2,696 7,932 7,010 32,888 (Loss) income before income taxes $(25,085) $(3,925) $65,936 $23,741                 Ferro Corporation and Subsidiaries Consolidated Balance Sheets   (Dollars in thousands) December 31, 2011 December 31, 2010 Assets Current assets: Cash and cash equivalents $22,991 $29,035 Accounts receivable, net 306,775 302,448 Inventories 228,813 202,067 Deposits for precious metals 0 28,086 Deferred income taxes 17,395 24,924 Other receivables 37,839 27,762 Other current assets 17,086 7,432 Total current assets 630,899 621,754   Property, plant and equipment, net 379,336 391,496 Goodwill 215,601 219,716 Amortizable intangible assets, net 11,056 11,869 Deferred income taxes 117,658 121,640 Other non-current assets 86,101 67,880 Total assets $1,440,651 $1,434,355   Liabilities and Equity Current liabilities: Loans payable and current portion of long-term debt $11,241 $3,580 Accounts payable 214,460 207,770 Accrued payrolls 31,055 49,590 Accrued expenses and other current liabilities 67,878 84,735 Total current liabilities 324,634 345,675   Long-term debt, less current portion 298,082 290,971 Postretirement and pension liabilities 215,732 189,058 Other non-current liabilities 19,709 25,044 Total liabilities 858,157 850,748   Series A convertible preferred stock 0 9,427   Shareholders' equity 572,262 563,409 Noncontrolling interests 10,232 10,771 Total liabilities and equity $1,440,651 $1,434,355                 Ferro Corporation and Subsidiaries Consolidated Statements of Cash Flows   (Dollars in thousands) Three months ended December 31, (Unaudited) Twelve months ended December 31, 2011   2010 2011   2010 Cash flows from operating activities Net income (loss) $(28,667) $2,853 $32,367 $7,273 Depreciation and amortization 14,970 17,426 63,493 76,936 Other non-cash adjustments, net 36,038 5,924 18,684 29,181 Precious metals deposits 0 (28,086) 28,086 84,348 Accounts receivable 50,289 27,167 (13,444) (24,697) Inventories 11,760 7,898 (29,790) (22,654) Accounts payable 726 (19,968) 4,715 12,618 Other changes in current assets and liabilities, net (14,513) 5,196 (50,878) 35,860 Net cash provided by operating activities 70,603 18,410 53,233 198,865   Cash flows from investing activities Capital expenditures for property, plant and equipment and other long-lived assets (20,790) (17,004) (72,713) (44,737) Expenditures for acquisitions, net of cash acquired 0 (6,938) 0 (6,938) Proceeds from sale of assets and businesses 4,067 4,902 6,441 18,214 Other investing activities 952 0 1,145 139 Net cash used for investing activities (15,771) (19,040) (65,127) (33,322)   Cash flow from financing activities Net (repayments) borrowings under loans payable (46,835) 1,005 8,661 (21,495) Proceeds from long-term debt 116,660 55,559 646,834 632,299 Principal payments on long-term debt (122,063) (55,559) (639,128) (392,061) Extinguishment of debt (725) (36,310) (725) (362,997) Debt issue costs 0 612 0 (9,848) Redemption of convertible preferred stock 0 0 (9,427) 0 Cash dividends paid 0 (165) (165) (660) Other financing activities 34 (1,714) (146) (2,502) Net cash (used for) provided by financing activities (52,929) (36,572) 5,904 (157,264) Effect of exchange rate changes on cash and cash equivalents (812) 881 (54) 2,249 Increase (decrease) in cash and cash equivalents 1,091 (36,321) (6,044) 10,528 Cash and cash equivalents at beginning of period 21,900 65,356 29,035 18,507 Cash and cash equivalents at end of period $22,991 $29,035 $22,991 $29,035   Cash paid during the period for: Interest $1,300 $1,590 $25,920 $31,881 Income taxes 1,414 4,656 22,060 20,379                 Ferro Corporation and Subsidiaries Supplemental Information   Reconciliation of Adjusted Earnings to Reported Earnings for the Three Months Ended December 31 (Unaudited)   Three months ended December 31, 2011 Three months ended December 31, 2010 (Dollars in thousands, except per share amounts) As Reported   Adjust- ments   Non- GAAP As Reported   Adjust- ments   Non- GAAP Net sales $442,695 $442,695 $536,951 $536,951 Cost of sales 367,991 $(1,137) 366,854 427,846 $(4,053) 423,793 Gross profit 74,704 75,841 109,105 113,158   Selling, general and administrative expenses 76,906 (760) 76,146 78,101 (4,565) 73,536 Restructuring and impairment charges 12,986 (12,986) 0 19,625 (19,625) 0 Other expense, net 2,696 (397) 2,299 7,932 (9,203) (1,271) (Loss) earnings before interest, taxes and noncontrolling interest (17,884) (2,604) 3,447 40,893   Interest expense 7,201   7,201 7,372   7,372 Total adjustments $(15,280) $(37,446)   (Loss) income before taxes (25,085) (9,805) (3,925) 33,521 Income tax expense (benefit) 3,582 (6,778) Income tax benefit1 (3,138) Income tax expense2       12,068 Net (loss) income (28,667) (6,667) 2,853 21,453 Less: Net income attributable to noncontrolling interest 157 157 844 844 Net (loss) income attributable to Ferro (28,824) (6,824) 2,009 20,609 Dividends on preferred stock 0 0 (165) (165) Net (loss) income attributable to Ferro common shareholders $(28,824) $(6,824) $1,844 $20,444   Diluted (loss) earnings per share $(0.33) $(0.08) $0.02 $0.24   1 2011 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. 2 2010 tax rate of 36%, consistent with the Company’s 2010 expectation for normalized effective tax rates, excluding discrete items. 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. We believe 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   Reconciliation of Adjusted Earnings to Reported Earnings for the Twelve Months Ended December 31 (Unaudited)             Twelve months ended December 31, 2011 Twelve months ended December 31, 2010 (Dollars in thousands, except per share amounts) As Reported   Adjust- ments   Non- GAAP As Reported   Adjust- ments   Non- GAAP Net sales $2,155,792 $2,155,792 $2,101,865 $2,101,865 Cost of sales 1,742,605 $(4,761) 1,737,844 1,643,200 $(8,965) 1,634,235 Gross profit 413,187 417,948 458,665 467,630   Selling, general and administrative expenses 294,802 (4,100) 290,702 293,736 (18,064) 275,672 Restructuring and impairment charges 17,030 (17,030) 0 63,732 (63,732) 0 Other expense, net 7,010 (397) 6,613 32,888 (32,336) 552 Earnings before interest, taxes and noncontrolling interest 94,345 120,633 68,309 191,406   Interest expense 28,409   28,409 44,568 (2,280) 42,288 Total adjustments $(26,288) $(125,377)   Income before taxes 65,936 92,224 23,741 149,118 Income tax expense 33,569 16,468 Income tax expense1 29,512 Income tax expense2       53,682 Net income 32,367 62,712 7,273 95,436 Less: Net income attributable to noncontrolling interest 730 730 1,577 1,577 Net income attributable to Ferro 31,637 61,982 5,696 93,859 Dividends on preferred stock (165) (165) (660) (660) Net income attributable to Ferro common shareholders $31,472 $61,817 $5,036 $93,199   Diluted earnings per share $0.36 $0.71 $0.06 $1.08   1 2011 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. 2 2010 tax rate of 36%, consistent with the Company’s 2010 expectation for normalized effective tax rates, excluding discrete items. 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. We believe 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 ended December 31, Twelve months ended December 31, 2011   2010 2011   2010   Electronic Materials $41,443 $78,621 $257,991 $321,990 Performance Coatings 149,020 140,349 602,566 554,796 Color and Glass Performance Materials 81,718 87,967 362,232 357,359 Polymer Additives 74,198 70,921 336,965 302,352 Specialty Plastics 39,283 38,693 172,028 163,058 Pharmaceuticals 6,496 6,214 24,939 23,876 Total segment net sales excluding precious metals 392,158 422,765 1,756,721 1,723,431 Sales of precious metals 50,537 114,186 399,071 378,434 Total net sales $442,695 $536,951 $2,155,792 $2,101,865   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. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. Source: Ferro Corporation Ferro Corporation INVESTOR CONTACT: David Longfellow, 216-875-5488 Director, Investor Relations E-mail: david.longfellow@ferro.com or MEDIA CONTACT: Mary Abood, 216-875-5401 Director, Corporate Communications E-mail: mary.abood@ferro.com