<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------------------
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
[ ] 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)
An Ohio Corporation 1000 LAKESIDE AVENUE CLEVELAND, OH 44114 IRS No. 34-0217820
(Address of principal executive offices)
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 October 31, 1998, there were 35,439,420 shares of Ferro common stock, par
value $1.00, outstanding.
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS.
The Condensed Consolidated Balance Sheets as of September 30, 1998 (unaudited)
and December 31, 1997, and the Condensed Consolidated Statements of Income and
Condensed Consolidated Statements of Cash Flows for the three and nine months
ended September 30, 1998 and 1997 (unaudited) of Ferro Corporation and
Subsidiaries are set forth in Exhibit 99, which is incorporated by reference
herein.
Those consolidated interim financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's annual report for the fiscal year ended December 31, 1997. In the
opinion of the management of the Company, the information furnished here
includes all the adjustments necessary for a fair presentation of the results
for the interim periods, and all such adjustments of a normal recurring nature
have been made.
The results of the three months ended September 30, 1998 are not necessarily
indicative of the results expected in subsequent quarters.
Cash dividends of $0.12 per common share were paid in the third quarter of 1998
and cash dividends of $0.103 per common share were paid in the third quarter of
1997. Cash dividends of $0.81 per preferred share were paid in the third quarter
of 1998 and 1997.
Net sales and net income for the three months ended September 30, 1998 were
$334.4 million and $16.8 million ($0.44 basic and $0.41 diluted earnings per
common share), respectively, as compared with net sales of $339.0 million and
net income of $15.4 million ($0.38 basic and $0.35 diluted earnings per common
share) for the corresponding 1997 period.
Effective, January 1, 1998, the Company adopted Statement of Financial
Accounting Standards, No.130, "Reporting Comprehensive Income". This Statement
establishes standards for the reporting and display of comprehensive income and
its components. Comprehensive income reflects the change in equity of a business
enterprise during a period from transactions and other events and circumstances
from non-owner sources. For Ferro, comprehensive income represents net income
adjusted for items such as foreign currency translation adjustments and pension
liability adjustments. Comprehensive income (loss) was $25.5 million and $9.7
million for the three months ended September 30, 1998 and 1997, respectively and
$59.3 million and ($77.9) million for the nine months ended September 30, 1998
and 1997, respectively. Accumulated other comprehensive income (loss) at
September 30, 1998 and December 31, 1997 was ($44.5) million and ($54.4)
million, respectively.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
COMPARISON BETWEEN THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997.
Net Sales. Third quarter 1998 net sales of $334.4 million were 1.3% less than
the $339.0 million of the comparable 1997 period.
Sales increased 1.4% in the Coatings, Colors and Ceramics group and declined
8.6% in the Chemicals group and 0.8% in the Plastics group. The increase in
Coatings, Colors and Ceramics was mainly due to improved results in Europe as
the economy there continued to recover and due to a strong third quarter
performance in powder coatings products. The decrease in Chemicals is primarily
attributable to lower volumes, particularly in the domestic petroleum additives
business and in flame retardants. Plastics sales were down slightly as declining
raw materials costs had a negative impact on prices in the plastics business.
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 1.3% decrease in sales is comprised of: volume, -2.0%; price/mix, 0.7%;
currency, 0.1%; acquisitions, 0.4%; and divestitures -0.5%.
Cost of Sales. Gross profit as a percent of sales was 26.9% as compared to the
25.6% for the comparable 1997 period. This improvement was driven by improved
manufacturing efficiencies and the combination of a decrease in the amount of
low-margin products sold with an increase in the amount of higher-margin
products sold.
Selling, administrative and general expenses. Such expenses decreased 1.1% in
dollar terms, and, as a percent of sales, were 17.3% in the third quarter of
1998 compared to 17.2% in the third quarter of 1997.
Interest expense. Interest expense of $4.1 million increased from the $3.0
million of the third quarter of last year. The increase is primarily due to
a higher level of debt associated with the issuance of $55 million in 7 1/8%
debentures during the first quarter of 1998.
Net foreign currency gain/loss. The net foreign currency loss of $0.2 million is
comparable to the $0.2 million loss in the third quarter of 1997.
Other expense-net. Net other expense increased to $1.2 million compared to the
1997 third quarter expense of $1.0 million.
Taxes on income. The effective tax rate increased to 37.5% for the third
quarter of 1998 from 36.9% for the third quarter of 1997. The increase in the
effective tax rate reflects a greater proportion of income from international
subsidiaries with higher tax rates.
Geographic discussion. Sales declined in all regions except Europe. United
States sales were
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impacted by the decline in Chemicals volumes. European sales were helped by
a shift in the mix of products sold toward higher priced products and by the
strengthening of European currencies against the United States dollar. Continued
economic downturn in Asia affected volumes in that region. Latin American sales
were impacted by a slowdown in economic conditions, continued pricing pressure
and a divestiture.
United States operating profit was up more than 15% compared with the third
quarter of 1997. Strong performance in the Plastics group and continued progress
in powder coatings margins combined to drive the improvement. Operating profit
was up almost 20% in Europe, as an improved mix of products sold, the
reorganization of European operations and improved manufacturing efficiencies
helped to improve margins. Latin America continued to show signs of weakness as
high interest rates in the region have slowed demand. Despite better operational
performance, operating profit in Asia-Pacific was down 30% compared to the same
period in 1997, most of the decline was due to inventory gains generated by
currency devaluation a year ago.
COMPARISON BETWEEN NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997.
Net Sales. Sales of $1,022.2 million for the first nine months of 1998 were 2.1%
less than the $1,044.2 million of the comparable 1997 period.
Sales declined 0.6% in the Coatings, Colors and Ceramics group and 8.0% in the
Chemicals group but increased 1.0% in the Plastics group. The decrease in
Coatings, Colors and Ceramics was mainly due to the negative impact of currency
exchange and an ongoing plan to exit low-margin product sales, which was
partially offset by improvement in European operations in the third quarter. The
decrease in Chemicals is primarily attributable to lower volumes in the domestic
petroleum additives and flame retardant businesses. Plastics sales were higher
primarily due to an increase in volumes associated with strong demand in
consumer durables and packaging.
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 2.1% decrease in sales is comprised of: volume, -0.9%; price/mix, 1.1%;
currency, -1.7%; acquisitions, 0.2%; and divestitures -0.8%.
Cost of Sales. Gross profit as a percent of sales was 26.7% as compared to the
25.5% for the comparable 1997 period. This improvement was driven by improved
manufacturing efficiencies and the combination of a decrease in the amount of
low-margin products sold with an increase in the amount of higher-margin
products sold.
Selling, administrative and general expenses. Such expenses increased 0.1% in
dollar terms and, as a percent of sales, were 17.2% in the first nine months of
1998 compared to 16.9% in the first nine months of 1997.
Interest expense. Interest expense of $11.0 million increased from the $9.0
million of the first nine months of last year. The increase is primarily
attributable to a higher level of debt associated with
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the issuance of $55 million in 7 1/8% debentures during the first quarter of
1998.
Net foreign currency gain/loss. The net foreign currency gain of $0.9 million is
primarily attributable to gains on foreign currency option contracts purchased
by the parent company to hedge firm commitments or anticipated transactions of
various foreign subsidiaries.
Other expense-net. Net other expense decreased to $3.1 million compared to the
1997 first nine months expense of $3.8 million.
Taxes on income. The effective tax rate decreased to 37.3% for the first nine
months of 1998 from 37.6% for the first nine months of 1997, excluding the
impact of the charge associated with the realignment plan in the second quarter
of 1997. The reduction in the effective tax rate, excluding the realignment
charge, reflects worldwide tax planning and a greater proportion of income from
international subsidiaries with lower tax rates, or a year to date basis.
Geographic discussion. Sales declined in all regions, except Europe. United
States sales were impacted by the decline in chemicals volumes in the second and
third quarters of 1998. European sales were helped by a shift in the mix of
products sold toward higher priced products which offset a negative currency
translation. The continued economic downturn in Asia affected volumes in that
region. Latin American sales were impacted by continued pricing pressure from
imported goods and a 1998 divestiture.
Operating profit for the first nine months of 1998 was up in all regions except
Asia-Pacific. United States operating profit increased just under 5% compared
with the first nine months of 1997, driven by improvements in the Plastics
group. Europe overcame the negative effects of currency translations to produce
an increase in operating profit of more than 10%, reflecting a shift in the mix
of products sold toward higher priced products and manufacturing efficiencies.
Latin America operating profit was up almost 5% as the Company continues to
reduce costs in the region and exit low-margin business. Asia-Pacific operating
profit declined 10%, although it is a very small dollar amount. Results for the
year-to-date were mostly impacted by the third quarter decline where, despite
better operational performance, operating margins were down compared to the
prior year, due to one-time inventory gains generated by currency devaluation a
year ago.
FORWARD LOOKING STATEMENTS
Certain statements contained in this report on Form 10-Q reflect the Company's
current expectations with respect to the future performance of the Company and
may constitute "forward-looking statements" within the meaning of the 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, including, but not limited to: changes in customer requirements,
markets or industries served; changing economic conditions, particularly in
Europe or Latin America or Asia-Pacific; foreign exchange rates, especially in
Europe or Asia-Pacific; changes in the prices of major raw materials;
significant technological or competitive developments; and disruption of
operations
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<PAGE> 6
associated with certain computer-based systems that rely on date routines in
connection with the year 2000.
LIQUIDITY AND CAPITAL RESOURCES
Working capital. Working capital increased to $179.6 million at September 30,
1998 compared with $149.3 at December 31, 1997. The increase in working capital
is primarily attributable to the proceeds from the issuance of $55 million in
71/8% debentures during the first quarter of 1998 and increases in net
receivables and inventories.
Cash flow. Net cash provided from operating activities for the nine months ended
September 30, 1998 was $49.4 million compared to the $102.7 million recorded in
the first nine months of 1997. The change in net cash provided from operations
is primarily due to an increase in the amount of net receivables and
inventories. The increase in net cash used for investing activities, for the
first nine months of 1998, is associated with a higher level of capital
expenditures for plant and equipment and an increase in net cash used for
acquisitions. The change in net cash from financing activities is primarily
associated with the issuance of $55 million in 7 1/8% debentures during the
first quarter of 1998 and an increase in the amount of Ferro common shares
repurchased.
Financing requirements and resources. The long-term debt to equity ratio was
56.7% at September 30, 1998, excluding the loan guarantee of the Employee Stock
Ownership Plan adopted in April 1989, as compared to the 37.3% ratio at December
31, 1997. The increase is primarily attributable to the issuance of $55 million
in 71/8% debentures during the first quarter of 1998. The Company expects to be
able to meet the financial requirements of its existing businesses from existing
cash and cash equivalents and future cash flow from operations. 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 September 30,
1998. The Company also has $245.0 million of availability under a Universal
Shelf Registration that was filed with the Securities and Exchange Commission on
October 31, 1995 and declared effective January 4, 1996, pursuant to which
various types of securities may be issued.
YEAR 2000 READINESS DISCLOSURE
Historically, many computer software programs were written to refer to years in
terms of their final two digits only. Such programs may interpret the year 2000
to mean the year 1900 instead. The Company is aware of the implications and
issues associated with this problem and could be faced with disruption of
operations and a corresponding impact on the Company's results of operations if
the year 2000 issues are not resolved in a timely manner.
The Company believes it has identified the issues that affect global computer
operations and has or will implement appropriate plans to address this problem.
Local area networks, telephone systems, business systems, financial systems, and
other systems are being assessed globally. In order to fully determine the
readiness of its production and other equipment with the year 2000 issue, the
Company
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has substantially completed a comprehensive inventory of operations systems that
it believes may be impacted.
The Company is using multiple strategies to address the year 2000 issues; new
software is being purchased and installed, current software is being rewritten,
and hardware that is non-year 2000 compliant is being replaced. The Company has
contracted with a third party consultant with special expertise in this area.
In addition, the Company is in the process of developing contingency plans for
these actions in the event they are not implemented in a timely manner as
expected.
The Company expects that all correction and testing will be complete by the end
of the second quarter of 1999. Based upon findings to date, the Company's total
incremental costs (historical plus estimated future costs) of addressing year
2000 issues are currently estimated to be in the range of $5 million to $7
million, of which approximately $1.5 million has been incurred. The Company does
not now anticipate that the total cost of being in compliance with year 2000
needs will have a material effect on the Company's financial position or results
of operations.
The Company is assessing the plans and progress of key suppliers and customers
in addressing the year 2000 problem. To the extent that these key suppliers and
customers are impacted by their failure to address the year 2000 problem, such
disruption could have a direct impact on the Company. The Company is exploring a
variety of contingency plans to minimize the impact of third party failures on
the Company.
The Company's expectations outlined above with respect to the year 2000 are
subject to uncertainties and are forward-looking statements that give the
Company's current expectations or forecasts of future events. The Company
believes that it has identified the year 2000 issues that affect its global
computer operations, however, if the Company is unsuccessful in identifying or
solving all year 2000 issues in its critical operations, or if the Company is
materially and adversely affected by the inability of its key suppliers and
customers to identify and solve their year 2000 issues, the Company's results
of operations or financial condition could be materially impacted.
Furthermore, the total costs that the Company will incur with respect to year
2000 issues will be influenced by the Company's ability to successfully
identify and solve year 2000 issues, the extent and complexity of programming
required to fix affected programs, the related labor and consulting costs the
Company will incur, and the ability of third parties with whom the Company has
business relationships to successfully identify and solve their own Year 2000
issues. These and other unforeseen factors could have a material adverse effect
on the Company's results of operations or financial condition.
OTHER DEVELOPMENTS
On September 25, 1998 the board of directors of the Company elected Hector R.
Ortino, President and Chief Operating Officer, to succeed Albert C. Bersticker
as chief executive officer on January 1, 1999. Mr. Bersticker will remain
chairman of the board of directors until his retirement at the annual meeting in
April 1999.
On October 19, 1998 the Company announced that Kent H. Lee was named Vice
president Specialty Chemicals. He will report to Hector R. Ortino, President and
Chief Operating Officer. Lee was most recently Director, United States
Operations for the chemicals group.
On October 23, 1998, the Board of Directors announced a 12.5 percent increase
in the Company's quarterly common stock cash dividend. The dividend action
increases the quarterly dividend to $0.135 per share from the previous rate of
$0.12. The increase will be effective with the next quarterly dividend payment
on December 10, 1998, to shareholders of record on November 13, 1998.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS.
There have been no material changes in market risk exposures during the
first nine months of 1998 that effect the disclosures presented in the Company's
Annual Report to Shareholders for the year ended December 31, 1997.
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PART II - OTHER INFORMATION
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.
None.
ITEM 5 - OTHER INFORMATION.
The deadline for shareholders to submit proposals pursuant to Rule
14a-8 under the Securities Act of 1934 for inclusion in the Company's
proxy statement for its 1999 Annual Meeting of Shareholders is November
19, 1998. Any proposals submitted other than for inclusion in the proxy
statement, pursuant to Rule 14a-8, must be received by the Company no
later than February 2, 1999 or such proposals will be considered
untimely, in which case the Company's proxy for its 1999 Annual Meeting
of Shareholders may confer discretionary voting authority regarding
such matters.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a)The exhibits listed in the attached Exhibit Index are filed
pursuant to Item 6(a) of the Form 10-Q.
(b) The Company has not filed any reports on Form 8-K for the quarter
ended September 30, 1998.
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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: November 16, 1998
/s/ Hector R. Ortino
-------------------------------------------
Hector R. Ortino
President and Chief Operating Officer
Date: November 16, 1998
/s/ Gary H. Ritondaro
-------------------------------------------
Gary H. Ritondaro
Vice President and Chief Financial Officer
<PAGE> 10
EXHIBIT INDEX
The following exhibits are filed with this report or are incorporated here by
reference to a prior filing in accordance with Rule 12b-32 under the Securities
and Exchange Act of 1934. (Asterisk denotes exhibits filed with this report).
Exhibit:
(3) Articles of Incorporation and by-laws
(a) Eleventh Amended Articles of Incorporation.
(b) Certificate of Amendment to the Eleventh Amended Articles of
Incorporation of Ferro Corporation filed December 28, 1994.
(c) Certificate of Amendment to the Eleventh Amended Articles of
incorporation of Ferro Corporation filed June 19, 1998.
(d) Amended Code of Regulations.
(4) Instruments defining rights of security holders, including indentures
(a) Shareholder Rights Agreement between Ferro Corporation and
National City Bank, Cleveland, Ohio, as Rights Agent, dated as
of March 22, 1996. (Reference is made to the Exhibit to the
Registration Statement on Form 8-A dated May 15, 1996, which
Exhibit is incorporated here by reference.)
(b) The rights of the holders of Ferro's Debt Securities issued
and to be issued pursuant to an Indenture between Ferro and
Society National Bank, as Trustee, are described in the form
of Indenture dated May 1, 1993. (Reference is made to Exhibit
4(j) to Ferro Corporation's Form 1O-Q for the three months
ended June 30, 1993, which Exhibit is incorporated here by
reference.)
(c) The rights of the holders of Ferro's Debt Securities issued
and to be issued pursuant to a Senior Indenture between Ferro
and Chase Manhattan Trust Company, National Association, as
Trustee, are described in the Senior Indenture, dated March
25, 1998. (Reference is made to Exhibit 4(c) to Ferro
Corporation's Form 10-Q for the three months ended March 31,
1998, which Exhibit is incorporated here by reference.)
(d) Form of Security (7-1/8% Debentures due 2028). (Reference is
made to Exhibit 4(a- 1) to Ferro Corporation's Form 8-K filed
March 31, 1998, which Exhibit is incorporated here by
reference.)
<PAGE> 11
*(11) Statement Regarding Computation of Earnings per Share.
*(12) Ratio of Earnings to Fixed Charges.
*(27) Financial Data Schedule for the Quarter Ended September 30,
1998
*(99) The Condensed Consolidated Balance Sheets as of September 30,
1998 (Unaudited) and December 31, 1997, and the Condensed
Consolidated Statements of Income and Condensed Consolidated
Statements of Cash Flows for the three and nine months ended
September 30, 1998 and 1997 (Unaudited) of Ferro Corporation
and Subsidiaries.
<PAGE> 1
EXHIBIT 11
FERRO CORPORATION AND SUBSIDIARIES
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
9 Months 9 Months
(Dollars in thousands, except per share data) September September
1998 1997
------------ ------------
<S> <C> <C>
BASIC:
Weighted Average Common Shares Outstanding 36,755,125 38,343,472
Net Income (Loss) 52,219 (53,388)
Less Preferred Stock Dividend, Net of Tax (2,840) (2,817)
------------ ------------
Net Income (Loss) Available to Common Shareholders $ 49,379 ($ 56,205)
BASIC EARNINGS (LOSS) PER COMMON SHARE $ 1.34 ($ 1.47)
DILUTED:
Weighted Average Common Shares Outstanding 36,755,125 38,343,472
Adjustments for assumed conversion of convertible
preferred stock and common stock options 4,097,147 4,144,779
------------ ------------
40,852,272 42,488,251
Net Income (Loss) $ 52,219 ($ 53,388)
Additional ESOP Contribution, Net of Tax (1,220) (1,388)
------------ ------------
Adjusted Net Income (Loss) $ 50,999 ($ 54,776)
DILUTED EARNINGS (LOSS) PER SHARE $ 1.25 ($ 1.29)
Note: Due to the anti-dilutive effect of the net loss in 1997, basic earnings per share is reported
for both basic and diluted earnings per share.
</TABLE>
<PAGE> 1
EXHIBIT 12
FERRO CORPORATION AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
September September
(Dollars in Thousands) 1998 1997
------- -------
<S> <C> <C>
Earnings:
Pre-Tax Income (Loss) 83,249 (73,826)
Add: Fixed Charges 13,932 11,315
Less: Interest Capitalization (459) (356)
------- -------
Total Earnings (Loss) 96,722 (62,867)
======= =======
Fixed Charges:
Interest Expense 11,033 9,021
Interest Capitalization 459 356
Interest Portion of Rental Expense 2,440 1,938
------- -------
Total Fixed Charges 13,932 11,315
======= =======
Total Earnings (Loss) 96,722 (62,867)
Divided By:
Total Fixed Charges 13,932 11,315
------- -------
Ratio 6.94 (5.56)
</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.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000035214
<NAME> FERRO CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 22,391
<SECURITIES> 0
<RECEIVABLES> 261,095
<ALLOWANCES> 0
<INVENTORY> 137,121
<CURRENT-ASSETS> 475,606
<PP&E> 614,802
<DEPRECIATION> 351,749
<TOTAL-ASSETS> 859,336
<CURRENT-LIABILITIES> 296,026
<BONDS> 156,720
0
0
<COMMON> 47,323
<OTHER-SE> 228,900
<TOTAL-LIABILITY-AND-EQUITY> 859,336
<SALES> 1,022,155
<TOTAL-REVENUES> 1,022,155
<CGS> 749,498
<TOTAL-COSTS> 925,659
<OTHER-EXPENSES> 13,247
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,033
<INCOME-PRETAX> 83,249
<INCOME-TAX> 31,030
<INCOME-CONTINUING> 52,219
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,219
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.25
</TABLE>
<PAGE> 1
CONDENSED CONSOLIDATED BALANCE SHEET
FERRO CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
(Dollars in Thousands)
(Unaudited) (Audited)
ASSETS 1998 1997
- ------ ------------------- --------------------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 22,391 $ 16,337
Net Receivables 261,095 232,927
Inventories 137,120 127,175
Other Current Assets 55,000 50,591
------------------- --------------------
Total Current Assets $475,606 $427,030
Unamortized Excess of Cost Over Net Assets Acquired 51,741 54,355
Other Assets 68,935 64,114
Net Plant & Equipment 263,054 240,180
------------------- --------------------
$859,336 $785,679
=================== ====================
LIABILITIES
- -----------
Current Liabilities:
Notes and Loans Payable $ 33,590 $ 23,269
Accounts Payable, Trade 110,638 109,958
Income Taxes 6,039 6,563
Accrued Payrolls 21,728 17,501
Accrued Expenses and Other Current Liabilities 124,031 120,416
------------------- --------------------
Total Current Liabilities $296,026 $277,707
Long - Term Debt 156,720 102,020
ESOP Loan Guarantee 6,576 13,815
Postretirement Liabilities 46,752 45,643
Other Liabilities 77,039 73,343
Shareholders' Equity 276,223 273,151
------------------- --------------------
$859,336 $785,679
=================== ====================
</TABLE>
<PAGE> 2
CONSOLIDATED STATEMENTS OF CASH FLOWS
FERRO CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(Unaudited) (Unaudited) (Unaudited) (Audited)
(Dollars in Thousands) 1998 1997 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Cash Provided from Operating Activities ......... $ 20,875 $ 40,203 $ 49,386 $ 102,711
Cash Flow from Investing Activities:
Capital Expenditures for Plant and Equipment ... (18,248) (9,680) (42,047) (30,376)
Proceeds From Divestitures ..................... 0 4,623 0 4,623
Other Investing Activities ..................... (418) 1 (1,942) 3,276
- ----------------------------------------------------------------------------------------------------------
Net Cash (Used for) Provided by Investing Activities (18,666) (5,056) (43,989) (22,477)
Cash Flow from Financing Activities:
Net Borrowings (Payments) Under Short-Term Lines 8,200 (504) 10,322 (18,403)
Proceeds from Long-Term Debt ................ 13 0 54,283
Purchase of Treasury Stock .................. (24,087) (10,660) (54,783) (20,374)
Cash Dividend Paid ............................. (5,333) (4,992) (16,334) (15,084)
Other Financing Activities ..................... (120) 707 2,619 2,786
- ----------------------------------------------------------------------------------------------------------
Net Cash (Used for) Provided by Financing Activities (21,327) (15,449) (3,893) (51,075)
Effect of Exchange Rate Changes on Cash ............. 5,493 (195) 4,550 (1,480)
- ----------------------------------------------------------------------------------------------------------
Increase (Decrease) in Cash and Cash Equivalents .... (13,625) 19,503 6,054 27,679
Cash and Cash Equivalents at Beginning of Period .... 36,016 22,202 16,337 14,026
- ----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period .......... $ 22,391 $ 41,705 $ 22,391 $ 41,705
==========================================================================================================
Cash Paid During the Period for:
Interest, net of amounts capitalized ........... $ 3,099 $ 920 $ 8,993 $ 7,466
Income Taxes ................................... $ 6,508 $ 9,135 $ 27,364 $ 23,623
==========================================================================================================
</TABLE>
<PAGE> 3
Condensed Consolidated Statements of Cash Flows
Ferro Corporation and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(Unaudited) (Unaudited) (Unaudited) (Audited)
(Dollars in Thousands) 1998 1997 1998 1997
- -------------------------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C>
Net Cash Provided from Operating Activities $ 49,386 $102,711 $ 49,386 $102,711
Cash Flow from Investing Activities:
Capital Expenditures for Plant and Equipment (42,047) (30,376) (42,047) (30,376)
Proceeds From Divestitures 0 4,623 0 4,623
Other Investing Activities (1,942) 3,276 (1,942) 3,276
- -------------------------------------------------------------------------------------------- --------------------------------
Net Cash (Used for) Provided by Investing Activities (43,989) (22,477) (43,989) (22,477)
Cash Flow from Financing Activities:
Net Borrowings (Payments) Under Short-Term Lines 10,322 (18,403) 10,322 (18,403)
Proceeds from Long-Term Debt 54,283 0 54,283
Purchase of Treasury Stock (54,783) (20,374) (54,783) (20,374)
Cash Dividend Paid (16,334) (15,084) (16,334) (15,084)
Other Financing Activities 2,619 2,786 2,619 2,786
- -------------------------------------------------------------------------------------------- --------------------------------
Net Cash (Used for) Provided by Financing Activities (3,893) (51,075) (3,893) (51,075)
Effect of Exchange Rate Changes on Cash 4,550 (1,480) 4,550 (1,480)
- -------------------------------------------------------------------------------------------- --------------------------------
Increase (Decrease) in Cash and Cash Equivalents 6,054 27,679 6,054 27,679
Cash and Cash Equivalents at Beginning of Period 36,016 22,202 16,337 14,026
- -------------------------------------------------------------------------------------------- --------------------------------
Cash and Cash Equivalents at End of Period $ 42,070 $ 49,881 $ 22,391 $ 41,705
============================================================================================ ================================
Cash Paid During the Period for:
Interest, net of amounts capitalized $ 8,993 $ 7,466 $ 8,993 $ 7,466
Income Taxes $ 27,364 $ 23,623 $ 27,364 $ 23,623
============================================================================================ ================================
</TABLE>
