Jul 24 2007
Ferro Corporation announced today that it has entered into an agreement with the direct purchasers in a class action civil lawsuit related to alleged antitrust violations in the heat stabilizer industry. Although Ferro has decided to bring this matter to a close through settlement, the Company does not admit any of the alleged violations and continues to deny its liability. The settlement agreement must be approved by the United States District Court for the Eastern District of Pennsylvania.
The direct purchasers class action lawsuit was filed along with two other actions after the United States Department of Justice requested documents from the Company in 2003 in connection with its investigation into possible antitrust violations in the heat stabilizer industry. In April 2006, the Department of Justice notified Ferro that it had closed its investigation and that the Company was relieved of any obligation to retain documents that were responsive to the Department of Justice's earlier document request. Before closing its investigation, the Department of Justice took no action against the Company or any of its current or former employees.
Ferro is vigorously defending the remaining two civil actions alleging antitrust violations in the heat stabilizer industry. In addition, Ferro believes that it has a claim for indemnification by the former owner of Ferro's heat stabilizer business for the defense of these lawsuits and any resulting payments by Ferro, including the $6.25 million payments to the class of direct purchasers and PolyOne Corporation. As the remaining two actions currently are in their preliminary stages, Ferro cannot determine their outcomes at this time.
As a result of the settlement agreement and as part of Ferro's second quarter financial results, Ferro will record a $6.25 million reserve for a $5.5 million settlement payment to the direct purchasers and a $750,000 settlement payment to PolyOne Corporation, which opted out of the class of direct purchasers and entered into a separate settlement agreement with Ferro. The settlement agreement with PolyOne Corporation did not require payment until Ferro entered into a settlement agreement with the class of direct purchasers. The impact of the reserve settlement is expected to lower net income per share for the second quarter, ended June 30, 2007, by approximately 10 cents. Previously, Ferro had indicated that it expected to earn approximately 16 to 21 cents per share in the quarter, including 4 cents for charges related to its manufacturing rationalization programs.