Ferro Corporation Urges Shareholders to Vote White Proxy Card

Ferro Corporation Urges Shareholders to Vote White Proxy Card

Highlights Strong First Quarter and Company's Increased Full Year Guidance

Reiterates That the FrontFour Group's Interests Are NOT Aligned With Those of ALL Shareholders

Provides Details Related to A. Schulman Proposal

CLEVELAND--(BUSINESS WIRE)-- Ferro Corporation (NYSE: FOE, the "Company") announced today that it mailed a letter to shareholders in connection with the Company's Annual Meeting of Shareholders to be held on May 15, 2013.

The Ferro Board of Directors unanimously recommends that shareholders protect their investment and vote "FOR" the Company's experienced and highly qualified directors - Richard C. Brown, Gregory E. Hyland and Ronald P. Vargo - by telephone, by Internet or by signing, dating and returning the WHITE proxy card.

The full text of the letter to shareholders is below:

Dear Fellow Shareholder:

We have been pleased to speak with a number of Ferro shareholders over the past few months and, as always, we have appreciated your insights and input. During our discussions and in our recent letters to you, we have reviewed the value creation strategy developed by your Board and management team and the ways in which all of us at Ferro are collaborating to pursue that strategy and drive value for all shareholders.

Now is the time to act to protect your investment. The Annual Meeting of Shareholders of Ferro Corporation will be held on May 15, 2013 - just a couple of weeks away.

We ask that you please take a moment TODAY to vote "FOR" the Ferro Board's nominees - Richard C. Brown, Gregory E. Hyland, and Ronald P. Vargo - using the enclosed WHITE proxy card. You may vote by telephone, by Internet, or by signing and dating the enclosed WHITE proxy card and returning it in the postage-paid envelope provided. Your vote is very important!


Since the Board's decisive actions last fall, the value creation strategy has already begun to generate substantially improved financial results. This is evidenced by Ferro's strong first quarter 2013 earnings report and increased full year earnings guidance, as well as our recently announced additional cost savings:

Adjusted Earnings Per Share

  • In the first quarter of 2013, adjusted EPS from continuing operations was $0.10, exceeding the guidance range of $0.05 to $0.07 and beating analysts' average expectations of $0.04
  • Ferro recently increased full year 2013 adjusted EPS guidance to $0.35-$0.40, a 40% and 33% increase from the initial guidance given on February 6, 2013

Cost Savings

  • Over $30 million in cost savings expected for 2013
  • $70 million in aggregate cost savings in 2014, with $85 million worth of identified cost-reduction projects
  • Selling, general, and administrative costs reduced by 15% in the first quarter of 2013 compared to the first quarter of 2012


The Ferro Board and management team are intensely focused on enhancing shareholder value by divesting non-core businesses, streamlining operations to reduce costs and pursuing high-return growth investments.

As evidenced by Ferro's recent first-quarter 2013 earnings, Ferro's Board is guiding the Company through meaningful, measurable execution of the value creation strategy, which already is driving increased shareholder returns. Moreover, your Board's recognition of the importance of balancing historical knowledge and experience with fresh, new perspectives is reflected in the Board's composition. Five of the nine current independent directors, along with our newly appointed CEO and President, Peter Thomas, have joined the Board within the past four years. These members bring new perspectives, experience, and skills, complementing the historical knowledge and continuity of leadership of the Board as a whole. Below is a tally sheet reflecting your Board's experience:

Director Independent CEO/CFO International 

Chemicals &


Accounting &

Peter Thomas   








Sandra Austin 






Richard Brown 










Richard Hipple 










Jennie Hwang 










Gregory Hyland 










Peter Kong 








William Lawrence 








Timothy Pistell 












Ronald Vargo 














Given the positive earnings achieved by Ferro in the first quarter of 2013, it is unfortunate that a group of short-term shareholders - the FrontFour Capital Group and Quinpario Partners (the "FrontFour Group") - is seeking to elect a slate of self-interested nominees with an agenda to undermine our value creation strategy. The FrontFour Group's stated agenda is to press for the sale of your company, turning a quick profit for themselves without regard to the impact on long-term Ferro investors. This agenda threatens to derail the Board and management team's successful execution against the value creation strategy and the important progress Ferro has made in the past six months.

  • The FrontFour Group has disclosed no specific plan to improve Ferro's financial and operational performance. Instead, it continues to claim credit for actions that Ferro initiated months before the FrontFour Group appeared on the scene.

Inexplicably, the FrontFour Group claims that initiatives undertaken as part of Ferro's value creation plan - including the divestitures of our solar pastes and pharmaceuticals businesses - represent your Board's reaction to a letter from the FrontFour Group dated January 23, 2013. This is nonsense.

Our value creation strategy was announced in October 2012. We said then that we would be cutting expenses and exploring strategic alternatives for our solar pastes business. In fact, by November 2012, we were identifying additional cost savings and had already entered into negotiations with the buyer of the solar pastes assets. We also by then were already in negotiations with the buyer of the pharmaceuticals business. Whatever self-serving version of events the FrontFour Group might present, the fact is that those initiatives were well underway BEFORE the FrontFour Group's January 2013 letter. For the FrontFour Group now to claim credit for those initiatives is disingenuous.

Don't let the FrontFour Group deceive you. It does not understand Ferro's businesses and has no plans to generate value. That's why the best that it can do is try to claim credit for the strategy already produced by your Board and management team.

  • The FrontFour Group is focused on its own interests, not those of all Ferro shareholders.

While none of the three FrontFour Group nominees has proposed a plan for or demonstrated a commitment to adding value for all Ferro shareholders, particular caution is warranted regarding Mr. Quinn, whose actions and statements are inconsistent and self-serving.

Mr. Quinn was a candidate for Ferro's CEO position in December 2012. He interviewed with Ferro's executive-search advisors on December 18, 2012. On the same day, Mr. Quinn's hedge fund, Quinpario Partners, executed its first-ever trade in Ferro stock, buying 300,000 shares. We find the timing of this purchase highly irregular, especially if the trade occurred after the interview. Further, Quinpario sold those 300,000 shares on January 7, 2013, taking what might be viewed as a short-swing profit while Mr. Quinn was still a CEO candidate. Having one's hedge fund make such trades while seeking the top leadership position at the very same public company could create the appearance of impropriety. These actions strike us as a triumph of self-interest over prudent judgment.

Furthermore, although Mr. Quinn holds himself out as an advocate for good governance, in fact, when he was a candidate for our CEO position, he sought special treatment for himself, attempting to circumvent the thorough and fair process established for vetting CEO candidates. He tried to have the process pushed aside because (as he put it) he was "uniquely qualified" for the position. And in an email to Ferro's executive-search advisors on December 20, 2012, Mr. Quinn stated:

"I have several things in the hopper currently and...I do not have much of a desire to be part of a typical search process..."

We find it noteworthy that the FrontFour Group launched its proxy contest the day after Mr. Quinn learned that he was no longer under consideration for the post.

A leading proxy advisory firm also has expressed concern about Mr. Quinn's governance standards. In 2009, when Mr. Quinn served as a director of Tecumseh Products Co., proxy advisory firm Glass-Lewis stated that:

"[We] believe that shareholders and the Company would benefit from the removal of Mr. Quinn from the board . . . [Mr. Quinn's removal] will send a firm message to the remaining members of the board."

Also contrary to the illusion he seeks to create, Mr. Quinn failed to achieve even market-level performance as the leader of a public company. Mr. Quinn holds himself out as having a record of value creation during his tenure as CEO of Solutia, selectively using as a starting point the stock market lows of 2009. What Mr. Quinn fails to tell you is that the period was selected because it provides the illusion of outperformance. The truth is, beginning with Solutia's public listing and exit from bankruptcy on February 28, 2008, until January 26, 2012, the day prior to the announcement of the sale of Solutia to Eastman, Solutia significantly underperformed its peers. For this period - virtually the entirety of Solutia's existence as a public company under Mr. Quinn's leadership - Solutia's 14.1% share price performance was less than half of the 33.9% return generated by its peers.1

The FrontFour Group also has repeatedly criticized Ferro's involvement in the solar pastes business, a business that Ferro had been in for many years, contending that Ferro should have taken "decisive action" to sell the business unit in early 2011.

But just the year before, in March 2010, Mr. Quinn caused Solutia to spend hundreds of millions of dollars to acquire a solar-energy business of its own, Etimex Solar. At that time, Mr. Quinn was effusive about the potential of the solar-energy sector, saying:

"Renewable energy is an acknowledged source of long-term growth...I am extremely excited about Etimex Solar and the role it will play in Solutia's future success."

Now that it suits his purposes to change his tune, Mr. Quinn and his colleagues in the FrontFour Group contend that Ferro should have been exiting the solar-energy sector at the very time that Mr. Quinn was paying a premium to get into it.

  • The FrontFour Group backs A. Schulman's unsolicited and inadequate proposal to acquire Ferro.

The FrontFour Group consists of hedge funds and their managers, a group whose interests are not aligned with those of other Ferro shareholders. Indeed, the FrontFour Group continues to push for a sale of your company to A. Schulman, based on A. Schulman's low-ball $6.50 proposal. Bear in mind that, under the proposal, half of the $6.50 that Ferro shareholders would receive in the transaction would be in the form of A. Schulman shares.

The divergence of interests between the FrontFour Group and Ferro's other shareholders is apparent from the FrontFour Group's continued support of such a transaction when Ferro's earnings results, earnings expectations, and share price have grown stronger while A. Schulman's have weakened. Indeed, since February 13, 2013, when A. Schulman made its proposal, A. Schulman's share price has declined by 22.9%.2 Had your Board accepted the proposal, the value of your investment would have eroded considerably along with the value of the A. Schulman shares you would have received.

It is clear that, despite its supposed interest in the "future of Ferro," what the FrontFour Group is really considering is its short-term investment. Having seen the value of its investment in Ferro shares rise by approximately 76% in a few short months, we believe the FrontFour Group's goal is to liquidate its stake by forcing Ferro into a fire sale of your Company to A. Schulman. The management team and Board should not be diverted from their focused execution of our value creation strategy by negotiations on a low-ball proposal. The better course is to support the value creation strategy, which already has begun to generate enhanced value for all shareholders.

Consider who stands to gain the most from your vote: ALL Ferro shareholders or a short-term-focused hedge fund out to sell your company on the cheap? PLEASE VOTE THE WHITE CARD TODAY.


A great deal of misinformation has arisen regarding Ferro's response to the A. Schulman proposal, misinformation that the FrontFour Group has helped to spread. We want to set the record straight. Here are the facts leading to the Board's determination that A. Schulman's unsolicited proposal of $6.50 per share is inadequate.

  • Joseph Gingo, A. Schulman's CEO, requested to meet with Peter Thomas, then Ferro's Interim CEO, on December 7, 2012. At the meeting, Mr. Gingo expressed that A. Schulman had an interest in acquiring Ferro.
  • Even though no specific proposal had been made, Ferro's Board of Directors, with assistance from the Company's independent advisors, analyzed on its own initiative a potential combination of the two companies. The Board's conclusion following that analysis was that Ferro's value creation strategy presented a better value proposition for Ferro shareholders.
  • Almost two months later, on January 28, 2013, Mr. Gingo called Mr. Lawrence requesting an in-person meeting.
  • Mr. Lawrence and Mr. Gingo met in person on February 13, 2013. At that meeting, Mr. Gingo provided a letter outlining, at a high level, a combination with Ferro at $6.50 per share, half in cash and half in A. Schulman stock.
  • At that meeting, Mr. Gingo also pressed Mr. Lawrence to arrange a quick response to the proposal, but Mr. Lawrence informed Mr. Gingo that the Ferro Board would need adequate time to properly consider the matter, in consultation with its independent advisors.
  • On February 26, 2013, following a second review with its independent advisors of a potential combination with A. Schulman, this time specifically reviewing the $6.50 per share proposal, Ferro notified A. Schulman that it did not believe the proposal was in the best interest of Ferro's shareholders.
  • On March 4, 2013, A. Schulman publicly announced the proposal that A. Schulman had previously made and that Ferro had previously rejected.

As the facts show, your Board carefully considered the A. Schulman proposal. Simply put, A. Schulman's $6.50 proposal was not then and is not now in the best interests of Ferro's shareholders.

Your company is executing on a value creation strategy that we believe will deliver greater value to Ferro shareholders. In fact, your company has been strengthening its performance, reporting higher than expected first-quarter earnings and raising its 2013 earnings guidance, while A. Schulman has stumbled, missing analyst estimates and its own first-quarter guidance and lowering its earnings forecast for 2013. Your Board carefully analyzed the A. Schulman proposal and then stood firm, despite repeated criticism from the FrontFour Group, and refused to negotiate a low-ball sale to a stumbling A. Schulman.


The value of your Ferro investment is at stake. We urge you to vote today by telephone, by Internet, or by signing and dating the enclosed WHITE proxy card and returning it in the postage-paid envelope provided.

We thank you for your continued support of Ferro.


The Ferro Board of Directors


Your Vote Is Important, No Matter How Many Shares You Own.


If you have questions about how to vote your shares on the WHITE proxy card, or need additional assistance, please contact the firm assisting us in the solicitation of proxies:



Shareholders Call Toll-Free: (888) 750-5834
Banks and Brokers Call Collect: (212) 750-5833


We urge you NOT to sign any Green proxy card sent to you by the FrontFour Group, even as a protest vote. If you have previously submitted a Green proxy card, you can revoke that proxy by using the enclosed WHITE proxy card to vote by telephone or by Internet, or by simply signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided.


Ferro's definitive proxy materials are available on the SEC's website at www.sec.gov.

1 The Solutia peer group is comprised of mid-cap specialty chemicals companies including: Albemarle, Ashland, Cabot, Chemtura, Cytec, FMC, HB Fuller, Rockwood, RPM, and Valspar; Source: Bloomberg
2 As of the market close on April 26, 2013, the last trading day prior to the mailing of this letter.

About Ferro Corporation

Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials and chemicals for manufacturers. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,700 employees globally and reported 2012 sales of $1.8 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;

-- Ferro's ability to successfully implement its value creation strategy;

-- Ferro's ability to successfully implement and/or administer its cost-saving initiatives, including its restructuring programs, and to produce the desired results, including projected savings;

-- 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;

-- 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 certain geographic regions, including Latin America and Asia-Pacific, 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 or enter into new growth markets;

-- 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 dispositions, or successfully integrate future acquisitions;

-- 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;

-- management of Ferro's general and administrative expenses;

-- Ferro's multi-jurisdictional tax structure;

-- the impact of the Company's performance on its ability to utilize significant deferred tax assets;

-- the effectiveness of strategies to increase Ferro's return on capital;

-- 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;

-- implementation of new business processes and information systems;

-- the impact of interruption, damage to, failure, or compromise of the Company's information systems;

-- 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 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, 2012.


Reconciliation of Reported Income/Loss to Adjusted Income/Loss

(Dollars in thousands, except per share amounts)
For the Three Months Ended:
March 31, 2012December 31, 2012March 31, 2013
Net IncomeEPSNet IncomeEPSNet IncomeEPS
As Reported ($000)$3,846$0.04($63,876)($0.74)$883$0.01
Special Items:
Discontinued Operations(707)(0.01)371-8,4210.10
Taxes 16230.0120,2050.23(2,569)(0.03)
Pension 2--17,4320.20--
Noncontrolling Interest----(394)-
Other 3 1,576  0.02  16,951  0.20  (4,057) (0.05)
Total Special Items$1,691$0.02$58,535$0.67$7,452$0.09
As Adjusted$5,537 $0.06  ($5,341) ($0.07)$8,335 $0.10 
Net Income = Net income attributable to common shareholders
EPS = Diluted earnings per share
1Adjustment of reported earning and of special items to a normalized 36% rate.
2Pension and other postretirement benefits mark-to-market adjustment of related net liabilities.
3Includes gain/loss on divestitures, certain severance costs, impairments, ongoing costs at facilities that have been idled, and certain business development activities.
Reconciliation of Reported Income/Loss to Adjusted EBITDA
(Dollars in thousands)
For the Three Months Ended:
Net Income Attributable to Ferro Corporation$4($63)$1
Loss (Income) from Discontinued Operations(1)(1)8
Interest Expense677
Income Tax Expense3(4)1
Depreciation & Amortization131612
Other  (3) 
Adjusted EBITDA$28$11$
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