<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
-------------------------------
[ x ]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED MARCH 31, 1997
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from To
---------- -----------
Commission File Number 1-584
-------------------------------
FERRO CORPORATION
(Exact Name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
An Ohio Corporation 1000 LAKESIDE AVENUE CLEVELAND, OH 44114 IRS No. 34-0217820
(Address of principal executive offices)
</TABLE>
Registrant's telephone number including area code: 216/641-8580
-------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At April 30 1997, there were 25,597,328 shares of Ferro common stock, par value
$1.00, outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
ITEM 1 - FINANCIAL STATEMENTS
The consolidated Balance Sheets as of March 31, 1997 (unaudited) and December
31, 1996, and the Consolidated Statements of Income and Consolidated Statements
of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited) of
Ferro Corporation and Subsidiaries are set forth in Exhibit 20 hereof which is
incorporated by reference herein.
Those financial statements, which are subject to year-end audit adjustments,
should be read in conjunction with financial statements and notes thereto
included in the Company's annual report for the fiscal year ended December 31,
1996.
Cash dividends were paid at the rate of $0.155 per common share in the first
quarter of 1997 and $0.135 per common share in the first quarter of 1996. Cash
dividends on preferred shares were paid at the rate of $0.81 per preferred share
in the first quarter of 1997 and 1996.
Net sales and net income for the three months ended March 31, 1997 were $342.2
million and $15.2 million ($0.52 fully diluted earnings per common share) as
compared with net sales and net income of $348.2 million and $13.2 million
($0.43 fully diluted earnings per common share) for the corresponding 1996
period. The foregoing figures are unaudited, but in the opinion of the
Management of the Company, all adjustments (consisting of normal recurring
accruals) necessary for a fair presentation thereof have been made.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Comparison Between Three Months Ended March 31, 1997 and 1996.
Net Sales. First quarter 1997 sales of $342.2 million were 1.7% less than the
$348.2 million of the comparable 1996 period.
Sales increased 3.6% in the Coatings, Colors and Ceramics segment but decreased
6.9% in the Plastics segment and 9.7% in the Chemicals segment. The increase in
the Coatings, Colors and Ceramics segment was mainly due to increased volume of
products sold. The decrease in Chemicals is primarily attributable the
divestiture of certain businesses in 1996 and to campaign production of an
agricultural chemical which was produced in the first quarter of 1996 but will
be produced in the second quarter of this year. Plastics sales were lower
primarily due to the divestiture of certain businesses in 1996.
The variety of products sold by the Company makes it difficult to determine with
certainty the increases or decreases in sales resulting from changes in physical
volume of products sold and selling prices. Management's best estimate is that
the 1.7% decrease in sales comprises: volume, 3.7%;
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price/mix, -1.5%; currency, -3.0%; acquisitions, 1.3%; divestitures -2.2%.
Cost of Sales. Gross profit as a percent of sales was 25.3% as compared to the
24.5% for the comparable 1996 period. This improvement was evident in every
region and reflects productivity gains at the manufacturing level and relatively
stable raw materials prices.
Selling, administrative and general expenses. Such expenses declined 2% and, as
a percent of sales were 16.9% in the first quarter of both 1997 and 1996.
Interest expense. The decrease in interest expense from $3.3 million to $3.0
million is primarily attributable to lower interest expense in international
operations.
Net foreign currency gain or loss. The net foreign currency gain is primarily
attributable to gains on foreign currency option contracts purchased by the
parent company to hedge the earnings of various foreign subsidiaries.
Other income/expense. Net other expense increased to $2.5 million compared to
the 1996 first quarter expense of $2.1 million. This increase is comprised of
numerous income and expense items.
Income taxes. The effective tax rate declined from 38.5% to 38.0% reflecting
worldwide tax planning and a favorable mix of income from international
subsidiaries with lower tax rates.
Geographic discussion. Sales and operating profit improved in every region
except for Europe which was negatively affected by the continued strength of the
dollar. Regionally, the largest contributor to improved results was the United
States and Canada which posted significant gains in operating profit, helped by
strong performance in Coatings, Colors and Ceramics. Overall, continued
improvement in the Powder Coatings business, which recorded increased sales and
operating profit in every region, was the most significant factor in the
Company's improved performance.
Liquidity and Capital Resources
- -------------------------------
Working capital. Working capital was comparable to year-end 1996.
Cash flow. Net cash provided from operating activities for the three months
ended March 31, 1997 increased to $28.4 million compared to the $27.1 million
recorded in the first quarter of 1996. The change in net cash used for investing
activities is associated with lower level of capital expenditures and the
absence of acquisitions in 1997. The change in net cash used for financing
activities is primarily associated with a lower level of share repurchase
activity in 1997.
Financing requirements and resources. The long-term debt to equity ratio was
27.6% at March 31, 1997, excluding the loan guarantee of the Employee Stock
Ownership Plan adopted in April 1989. This is comparable to the 27.4% ratio at
December 31, 1996. The Company expects to be able to meet the financial
requirements of its existing businesses from existing cash and cash equivalents
and
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future cash flow. The Company has available to it a $150.0 million five-year
revolving credit facility with four domestic banks. There were no borrowings
under this facility as of the close of the quarter ended March 31, 1997. The
Company also has available a $300 million Universal Shelf Registration that was
filed with the Securities and Exchange Commission on October 31, 1995, under
which various types of securities may be issued.
Recent Developments
Subsequent to the end of the quarter, the Company announced plans for a
three-year corporate realignment designed to reduce costs. The Company will
incur a pre-tax charge of $153 million associated with this plan in the second
quarter of 1997. The plan calls for a reduction in worldwide manufacturing
operations from approximately 80 to 50 facilities and a decline in employment
levels of approximately 1,200 people over a three-year period from the current
level of 6,900 employees.
OTHER SIGNIFICANT DEVELOPMENTS
In January 1997, Richard C. Oudersluys, stepped down from his position of Vice
President, Inorganic Coatings and Colors.
PART II - OTHER INFORMATION
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ITEM 1 LEGAL PROCEEDINGS. NO CHANGE
ITEM 2 CHANGE IN SECURITIES. NO CHANGE.
ITEM 3 DEFAULT UPON SENIOR SECURITIES. NO CHANGE.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Shareholders held on April 25, 1997, the
Shareholders:
a) Re-elected four current Ferro Corporation directors - Glenn R.
Brown, William E. Butler, John C. Morley and Hector R. Ortino
to serve the Board until the meeting in the year 2000.
The results of the voting for directors were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C> <C>
Brown 23,410,140 0 530,083
Butler 23,410,418 0 529,806
Morley 23,412,635 0 527,589
Ortino 23,429,928 0 510,295
</TABLE>
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The terms of office for Sandra Harden Austin, Albert C.
Bersticker, Paul S. Brentlinger, A. James Freeman, Rex A.
Sebastian and Dennis W. Sullivan continued after the meeting.
b) Approved the 1997 Performance Share Plan.
Shareholders approved the proposal to adopt the 1997
Performance Share Plan by a vote of 22,593,696 for, 981,349
against and 365,179 shares that were present but abstained on
this issue.
c) Adopted a resolution to ratify the designation of KPMG Peat
Marwick LLP as independent auditors of Ferro's books and
accounts.
Shareholders approved the designation of KPMG Peat Marwick LLP
as independent auditors by a vote of 23,734,554 shares for,
115,123 shares against and 90,547 shares that were present but
abstained on this issue.
d) Rejected a proposal that the shareholders recommend that the
Board of Directors take the necessary steps to ensure that
from here forward all non-employee directors receive a minimum
of fifty percent (50%) of their total compensation in the form
of company stock which cannot be sold for three years.
Shareholders rejected this proposal by a vote of 3,601,966
for, 17,907,505 against, 644,991 shares that were present but
abstained on this issue and 1,785,762 shares represented at
the meeting but did not exercise any of the foregoing voting
options with respect to the proposal.
e) Approved a proposal that shareholders request that the Board
of Directors take the necessary steps, in accordance with
state law, to declassify the Board of Directors so that all
directors are elected annually, such declassification to be
effected in a manner that does not affect the unexpired terms
of the directors previously elected.
Shareholders approved this proposal by a vote of 11,694,681
for, 10,079,878 against, 379,904 shares that were present but
abstained on this issue and 1,785,761 shares represented at
the meeting but did not exercise any of the foregoing voting
options with respect to the proposal.
ITEM 5 OTHER INFORMATION. NONE.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
The Company has not filed any reports on Form 8-K for the
quarter ended March 31, 1997.
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Exhibits 3(a), (b) and (c) referenced in Ferro Corporation's
Form 10-K for the year ended December 31, 1996 are
incorporated herein by reference.
Exhibits 4(a) through 4(k) referenced in Ferro Corporation's
Form 10-K for the year ended December 31, 1996 are
incorporated herein by reference.
Exhibit 10 - Separation agreement between Ferro Corporation
and Richard C. Oudersluys dated March 13, 1997.
Exhibit 11 - Statement Regarding Computation of Earnings Per
Share.
Exhibit 12 - Ratio of Earnings to Fixed Charges.
Exhibit 20- The Consolidated Balance Sheets as of March 31,
1997 (Unaudited) and December 31, 1996, and the Consolidated
Statements of Income and Consolidated Statements of Cash Flows
for the three months March 31, 1997 and 1996 (Unaudited) of
Ferro Corporation and Subsidiaries.
Exhibit 27 - Financial Data Schedule (Electronic Filing Only)
6
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FERRO CORPORATION
(Registrant)
Date: May 13, 1997
/s/Hector R. Ortino
-------------------
Hector R. Ortino
President and Chief Operating Officer
Date: May 13, 1997
/s/ Gary H. Ritondaro
---------------------
Gary H. Ritondaro
Vice President and
Chief Financial Officer
<PAGE> 1
EXHIBIT 10
Agreement Between
Ferro Corporation and Richard C. Oudersluys
-------------------------------------------
Richard C. Oudersluys ("RCO") and Ferro Corporation hereby voluntarily
enter into the following Agreement:
1. Effective January 6, 1997 RCO shall cease to be an officer of
Ferro, but shall remain an employee of Ferro without specified duties, until the
earlier of April 16, 1999, or his death. RCO shall be retained on the payroll of
Ferro from January 6, 1997 to April 15, 1997 at his preexisting salary level.
Compensation arrangements applicable thereafter shall be as set forth in this
Agreement.
2. For the period April 16, 1997 through April 16, 1999, RCO shall be
retained on the payroll and shall be paid a salary at an annual rate of $290,640
payable in equal installments in accordance with Ferro's salaried employee
payroll practices at the time of any such payment. For purposes of pension
calculation, the $290,640 annual payment will be considered as $207,600 base
salary and $83,040 bonus.
3. RCO shall not be entitled to bonus participation applicable to the
year 1997 or subsequent years. The 1996 bonus will be paid on the regular
distribution dates with the personal performance portion at 0% achievement, and
the mathematical portion calculated based on final 1996 results per the plan.
4. RCO shall be entitled to full outplacement services at a mutually
<PAGE> 2
agreeable outplacement firm. Payment shall be made directly by Ferro to the
outplacement firm and this benefit cannot be converted to a cash payment to RCO.
5. RCO will not be entitled to participate in the following Ferro
employee plans after January 6, 1997:
a. Salary continuation plan;
b. Long-term disability plan;
c. Business travel accident insurance.
RCO will be entitled to participate in the following employee plans (or
their successor plans) as a continuing salaried employee through April 16, 1999:
a. Ferro FlexChoice Program;
b. Savings and Stock Ownership Plan;
c. Ferro Corporation Retirement Plan;
d. Ferro Corporation Excess Benefits Plan;
e. Supplemental SSOP;
f. Annual executive physical;
g. Life Insurance.
RCO's continued participation in such plans is subject to the ongoing
right of Ferro to modify, amend or discontinue such plans (and the Ferro
Salaried Retiree Medical Program) in any manner, so long as any such
modification, amendment or discontinuance is one of general application, rather
than one that uniquely discriminates against RCO.
Effective April 16, 1999 RCO shall be eligible to participate as a
retiree in the
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Ferro Salaried Retiree Medical Program (or any successor plan), provided he
follows the procedures in such plan to activate his participation. If RCO dies
prior to April 16, 1999, his wife shall become eligible to participate in the
Ferro Salaried Retiree Medical Program or any successor plan as if she were a
qualified widow of a salaried retiree.
6. Commencing May 1, 1999, Ferro will pay to RCO (or his spouse, in
the event of RCO's prior death) a monthly pension, for the balance of his
lifetime, in the amount determined by the terms and provisions of the Ferro
Corporation Retirement Plan and the Ferro Corporation Excess Benefits Plan. The
amount of his monthly pension is currently estimated to be $7,874.43, and will
be determined in accordance with the assumptions and procedures set forth in
Exhibit I. In the event RCO predeceases his wife after payments under this
Section 6. have commenced, his wife shall be entitled to receive a surviving
spouse's benefit as provided by the Ferro Corporation Retirement Plan and Ferro
Corporation Excess Benefits Plan. In the event RCO predeceases his wife before
payments under this Section 6 have commenced, his wife shall be entitled to
receive (a) for the balance of the period to April 16, 1999, those amounts which
would otherwise be payable to RCO under Section 1, 2, and 3 hereof, were it not
for his death, and (b) beginning with the date of RCO's death, such surviving
spousal pension benefits as are provided under the Ferro Corporation Retirement
Plan and Ferro Corporation Excess Benefits Plan as though RCO had been an active
salaried employee at the time of his death.
7. The provisions of this Agreement are based upon an election by RCO
of
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early retirement as of May 1, 1999 and the commencement of early retirement
income payments to him as of that date under the Ferro Corporation Retirement
Plan.
8. Provided that he survives to April 16, 1999, RCO shall be deemed
to have retired as of April 16, 1999 with respect to his rights under the Ferro
Stock Option Plan and Performance Share Plan, and the stock option awards and
performance share awards and agreements pursuant to such Plans shall be
determined under the provisions of those Plans and those agreements, based upon
termination of employment on April 16, 1999. RCO shall not be entitled to
receive additional awards under those Plans after the date of this Agreement.
9. Ferro shall have no obligation to RCO on account of unused
vacation, illness or personal absence, it being deemed that any such obligations
are fulfilled by the terms of this Agreement.
10. RCO currently uses a Ferro-provided leased automobile with respect
to which Ferro pays the operating costs. Upon expiration of the current lease,
Ferro will purchase it and transfer ownership to RCO. Transfer of title and
payment of operating costs through such date fully discharges any remaining
obligations of Ferro to RCO regarding the use of a Ferro-provided leased
automobile.
11. Ferro will continue to cause to be made available to RCO, at
Ferro's expense, the services of KPMG Peat Marwick with respect to tax advice
and tax return preparation through December 31, 1999, as well as for RCO's 1999
tax returns,
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whenever completed.
12. Ferro will provide RCO, for determining the amount of RCO's pension
only, with an additional two years of Credited Benefit Service beyond the
expiration of this Agreement. Thus, RCO will have a total of 22 years Credited
Benefit Service. In partial consideration therefore, RCO agrees to provide up to
one hundred twenty (120) full days consulting , by telephone or in person,
during the twenty-four (24) month period following the effective date of this
Agreement as Ferro may from time to time reasonably request. For any consulting
days in excess of the original one hundred twenty (120) days during that period,
Ferro will pay RCO at the rate of eight hundred fifty dollars ($850) per day. It
is agreed that such consulting will be scheduled so as not to unreasonably
interfere with RCO's other obligations or activities. Ferro will reimburse RCO
for reasonable and actual travel expenses incurred at Ferro's request in
conducting consulting projects under this section.
13. RCO hereby reaffirms his obligations and commitment pursuant to
that Employment Agreement between Ferro and RCO (the "Secrecy Agreement") that
he signed at the time of commencement of his employment with Ferro. RCO agrees
that in consideration for the early retirement benefit elected hereunder and
pursuant to the terms of the Excess Benefit Plan and in further consideration
for the additional service time provided in Section 12 of this Agreement, he
will not, at any time prior to age 65 without Ferro's prior written consent
(which may be given or withheld in Ferro's absolute discretion), accept any
other employment or engage, as a proprietor, consultant, partner, owner, or
otherwise in any activity, business or enterprise which,
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with respect to such activity or engagement, is competitive with the businesses
of Ferro for which RCO had direct responsibility during RCO's tenure as an
officer of Ferro, including but not limited to Porcelain Enamel, Ceramic Glaze,
Specialty Ceramics, Inorganic Pigments, Glass Enamels, Forehearth Colorants, and
Deco products. This covenant shall not be construed to preclude RCO's employment
by an entity which later acquires a product line that competes with Ferro's
product lines, as long as RCO is not directly involved with or employed in the
business unit producing or selling such line. Except as aforesaid, no other
restriction or noncompetition obligations shall be imposed upon RCO and he shall
be free to obtain employment or participate as a principal, shareholder, or
partner in any other business enterprise.
14. RCO hereby releases and discharges Ferro, its successors,
subsidiaries, employees, officers, directors and representatives from all
claims, liabilities, demands and causes of action, known or unknown, fixed or
contingent, which he may have or claim to have against them, or any of them,
(other than his rights under or described in this Agreement, other than claims
the basis of which arise after the date of this Agreement, and other than arise
in any benefit plan with respect to which RCO is or will be due to receive
benefits in the future). This includes, but is not limited to, claims arising
under Federal, state or local laws prohibiting age, sex, race or other forms of
discrimination or claims arising out of any legal or equitable restrictions on
Ferro's right to terminate the employment of its employees. It also includes a
release of all rights under his Executive Employment Agreement with Ferro as
amended and restated July 28, 1995, but not under provisions thereof as and to
the extent they are incorporated by
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reference under Section 17 of this Agreement.
This release also includes waiver of any right RCO may have or claim to
have to recovery in any lawsuit brought on his behalf by any state or Federal
agency with respect to his employment termination.
15. RCO agrees to furnish to Ferro such documentation as Ferro may
reasonably request for the release to Ferro of any funds held in escrow to
secure Ferro's obligations to RCO under his Executive Employment Agreement with
Ferro.
16. In the event of the death of RCO prior to April 16, 1999, the
payments described in Section 1, 2, and 3 hereof shall continue to be paid to
his surviving spouse and, in the event of her death prior to April 16, 1999, to
RCO's estate, until completion of payment of the amounts provided for in such
Section 1, 2 and 3.
17. This Agreement hereby expressly incorporates by reference the
provisions pertaining to mitigation and offset, arbitration, and successors and
assigns (but as if such terms referred to the compensation and benefits payable
under this Agreement, rather than those payable under the Executive Employment
Agreement) of the Executive Employment Agreement, as if such provisions were
fully rewritten herein and applicable as between RCO and Ferro.
18. For Federal, state, and local income tax reporting and withholding
purposes, the payments in Sections 2 and 6 herein shall be deemed taxable and
therefore reported as such in the years which the payments are made. For
purposes of employment tax under the Internal Revenue Code Section
3121(v)(2)(A), the payments under Section 6, to the extent subject to tax shall
be deemed taxable.
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19. Except as specifically provided otherwise in this Agreement, the
terms of this Agreement shall supersede any different or conflicting provisions
of any other agreement between RCO and Ferro, and of any plans or policies of
Ferro applicable to RCO.
20. Ferro shall pay all legal fees and expenses incurred by RCO in
connection with the negotiation and preparation of this Agreement (including all
such fees and expenses, if any, incurred in seeking to enforce any right or
benefit provided by this Agreement, or in interpreting this Agreement) and with
the interpretation and enforcement of his Executive Employment Agreement
effective July 28, 1995.
This Agreement may be executed in any number of counterparts, each of
which, when executed and delivered, shall be deemed to be an original, but all
of which shall collectively constitute one and the same instrument.
DATE: March 13, 1997 /s/ Richard C. Oudersluys
-------------------------
Richard C. Oudersluys
FERRO CORPORATION
DATE: March 13, 1997 By: /s/ Albert C. Bersticker
-------------------------
Albert C. Bersticker
8
<PAGE> 1
EXHIBIT 11
FERRO CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
3 Months 3 Months
(Dollars in Thousands) March March
1997 1996
------------ ------------
<S> <C> <C>
PRIMARY:
Weighted average shares and common stock equivalents 25,931,456 26,934,790
Net Income $ 15,194 $ 13,151
Less Preferred Stock Dividend, Net of Tax (941) (931)
------------ ------------
Income Available to Common Shareholders $ 14,253 $ 12,220
PRIMARY EARNINGS PER COMMON SHARE $ 0.55 $ 0.45
FULLY DILUTED:
Weighted average shares and common stock equivalents 25,931,456 26,934,790
Adjustments (primarily assumed conversion of
convertible preferred stock) 2,311,679 2,515,204
------------ ------------
28,243,135 29,449,994
Net Income $ 15,194 $ 13,151
Additional ESOP Contribution, Net of Tax (470) (495)
------------ ------------
Adjusted Net Income $ 14,724 $ 12,656
FULLY DILUTED EARNINGS PER SHARE $ 0.52 $ 0.43
</TABLE>
<PAGE> 1
EXHIBIT 12
FERRO CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
MARCH MARCH
(DOLLARS IN THOUSANDS) 1997 1996
------- -------
<S> <C> <C>
EARNINGS:
PRE-TAX INCOME 24,486 21,384
ADD: FIXED CHARGES 3,776 3,938
LESS: INTEREST CAPITALIZATION (132) (53)
------- -------
TOTAL EARNINGS 28,130 25,269
======= =======
FIXED CHARGES:
INTEREST EXPENSE 3,030 3,322
INTEREST CAPITALIZATION 132 53
INTEREST PORTION OF RENTAL EXPENSE 614 563
------- -------
TOTAL FIXED CHARGES 3,776 3,938
======= =======
TOTAL EARNINGS 28,130 25,269
DIVIDED BY:
TOTAL FIXED CHARGES 3,776 3,938
------- -------
RATIO 7.45 6.42
</TABLE>
NOTE: PREFERRED DIVIDENDS ARE EXCLUDED. AMORTIZATION OF DEBT EXPENSE AND
DISCOUNTS AND PREMIUMS WERE DEEMED IMMATERIAL TO THE ABOVE CALCULATION.
INTEREST PORTION OF RENTAL EXPENSE INCLUDES CONSERVATIVE ESTIMATES
BASED ON CALCULATIONS FROM PRIOR YEARS.
<PAGE> 1
EXHIBIT 20
FERRO CORPORATION
Consolidated Balance Sheets
As of March 31, 1997 (Unaudited) and December 31, 1996
Consolidated Statements of Income
For the Three Months Ended
March 31, 1997 and 1996 (Unaudited)
Consolidated Statements of Cash Flows
For the Three Months Ended
March 31, 1997 and 1996 (Unaudited)
<PAGE> 2
CONSOLIDATED BALANCE SHEET
FERRO CORPORATION AND SUBSIDIARIES
MARCH 31, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
(Dollars in Thousands)
(Unaudited) (Audited)
ASSETS 1997 1996
- ------ ---------- ---------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 16,891 $ 14,026
Net Receivables 243,647 214,131
Inventories 145,008 149,343
Other Current Assets 41,532 39,022
-------- --------
Total Current Assets $447,078 $416,522
Investments in Affiliated Companies 4,756 7,126
Unamortized Excess of Cost Over Net Assets Acquired 90,234 93,302
Other Assets 45,806 46,135
Net Plant and Equipment 301,565 307,383
-------- --------
$889,439 $870,468
======== ========
LIABILITIES
- -----------
Current Liabilities:
Notes and Loans Payable $ 44,227 $ 30,200
Accounts Payable, Trade 119,469 113,156
Income Taxes 17,242 10,597
Accrued Payrolls 15,839 16,559
Accrued Expenses and Other Current Liabilities 80,004 81,821
-------- --------
Total Current Liabilities $276,781 $252,333
Long-Term Debt 104,867 105,308
ESOP Loan Guarantee 20,224 22,592
Deferred Income Taxes 23,179 23,391
Postretirement Liabilities 45,306 44,846
Other Liabilities 39,528 37,794
Shareholders' Equity 379,554 384,204
-------- --------
$889,439 $870,468
======== ========
</TABLE>
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
FERRO CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Unaudited) (Unaudited)
(Dollars in Thousands) 1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Segment Sales
Coatings, Colors and Ceramics $ 202,545 $ 195,488
Plastics 59,241 63,636
Chemicals 80,411 89,060
------------ ------------
Total Net Sales $ 342,197 $ 348,184
Cost of Sales 255,770 262,925
Selling, Administrative and General Expenses 57,845 58,768
------------ ------------
Operating Income 28,582 26,491
Interest Expense 3,030 3,322
Net Foreign Currency (Gain) Loss (1,397) (267)
Other (Income) Expense - Net 2,463 2,052
------------ ------------
Income Before Taxes 24,486 21,384
Taxes on Income 9,292 8,233
------------ ------------
Net Income 15,194 13,151
Dividend on Preferred Stock, Net of Tax 941 931
------------ ------------
Net Income Available to Common Shareholders $ 14,253 $ 12,220
============ ============
Per Common Share Data:
Primary Earnings $ 0.55 $ 0.45
Fully Diluted Earnings $ 0.52 $ 0.43
Shares Outstanding:
Average Outstanding 25,931,456 26,934,790
Average Fully Diluted 28,243,135 29,449,994
Actual End of Period 25,595,936 26,676,272
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 4
CONSOLIDATED STATEMENTS OF CASH FLOWS
FERRO CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended
March 31
(Unaudited) (Unaudited)
(Dollars in Thousands) 1997 1996
================================================================================
<S> <C> <C>
Net Cash Provided from Operating Activities $ 28,434 $ 27,143
Cash Flow from Investing Activities:
Capital Expenditures for Plant and Equipment (9,048) (12,048)
Acquisition of Companies, net of cash acquired 0 (5,500)
Other Investing Activities 516 437
- --------------------------------------------------------------------------------
Net Cash (Used for) Provided by Investing Activities (8,532) (17,111)
Cash Flow from Financing Activities:
Net Borrowings (Payments) Under Short-Term Lines (6,234) (7,707)
Proceeds from Long-Term Debt 11 1,615
Principal Payments on Long-Term Debt (117) (47)
Purchase of Treasury Stock (5,751) (8,795)
Cash Dividend Paid (5,053) (4,751)
Other Financing Activities 913 551
- --------------------------------------------------------------------------------
Net Cash (Used for) Provided by Financing Activities (16,231) (19,134)
Effect of Exchange Rate Changes on Cash (806) (35)
- --------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents 2,865 (9,137)
Cash and Cash Equivalents at Beginning of Period 14,026 16,695
- --------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 16,891 $ 7,558
================================================================================
Cash Paid During the Period for:
Interest, net of amounts capitalized $ 1,504 $ 1,245
Income Taxes $ 2,477 $ 4,569
================================================================================
</TABLE>
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<CIK> 0000035214
<NAME> FERRO CORPORATION
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
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<COMMON> 31,549
0
0
<OTHER-SE> 348,005
<TOTAL-LIABILITY-AND-EQUITY> 889,439
<SALES> 342,197
<TOTAL-REVENUES> 342,197
<CGS> 255,770
<TOTAL-COSTS> 313,615
<OTHER-EXPENSES> 4,096
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<INTEREST-EXPENSE> 3,030
<INCOME-PRETAX> 24,486
<INCOME-TAX> 9,292
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<EXTRAORDINARY> 0
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<NET-INCOME> 15,194
<EPS-PRIMARY> .55
<EPS-DILUTED> .52
</TABLE>
