Sales declined inall segments and all regions compared with the prior-year period. Sales declined in the Color and Glass Performance Materials and PerformanceCoatings segments primarily as a result of weak demand from automotive andconstruction applications. These segments each recorded a loss as a result oflower sales volume. Reductions in inventory during the quarter also contributedto the losses. Sales in Electronic Materials declined, driven by sharpreductions in demand for dielectric materials. A number of capacitormanufacturers who use Ferro`s dielectric materials had extended plant shutdownsduring the quarter. Reduced sales of precious metals also contributed to thedecline in sales.
Segment income declined, driven by the effects of reducedsales volume and a less favorable product mix. Sales in the Polymer Additivesand Specialty Plastics segments declined as a result of reduced demand fromcustomers serving construction, automotive and appliance markets. Segment incomedeclined as a result of the lower sales volume, partially offset by reductionsin manufacturing costs and selling, general and administrative expense. Gross margins were 15.4 percent of sales in the first quarter of 2009, comparedwith 18.5 percent of sales in the prior-year period. The decline in gross marginwas driven by the effects of lower manufacturing volume, which increasedmanufacturing costs per unit.
For the quarter, raw material costs were lower, inaggregate, than in the prior-year period. Changes in product prices generallytracked the change in raw material costs. In the first quarter of 2008, grossprofit was negatively impacted by costs of $3.3 million related to clean-up ofan accidental discharge of product into the wastewater treatment facility at theCompany`s Bridgeport, New Jersey, manufacturing plant. Gross margins in thefirst quarter of 2009 improved compared with margins in the fourth quarter of2008, reflecting the beneficial effects of the Company`s cost containmentefforts. Selling, general and administrative ("SG&A") expense was $68.1 million in thefirst quarter of 2009, a decline of $9.4 million from the first quarter of 2008.The decline was a result of expense reduction efforts, including staffingreductions and lower discretionary spending. Reductions in discretionaryspending included the elimination of incentive compensation accruals.
Partiallyoffsetting the decline in SG&A expense was an increase of approximately $4.8million in pension expense as a result of the decline in value of pension assetsin 2008 and increased health care costs compared with the first quarter of 2008.Included in SG&A expense in the first quarter of 2009 were charges of $1.3million, primarily related to corporate development activities. The 2008 firstquarter SG&A expense included a net benefit of $0.4 million, primarily fromfavorable litigation developments, which was partially offset by expensesrelated to corporate development activities. Restructuring charges of $1.4 million were recorded in the 2009 first quarter,primarily resulting from manufacturing rationalization programs in the Company`sEuropean operations. Restructuring charges of $4.2 million were recorded in thefirst quarter of 2008.
During the 2009 first quarter the Company announced a newphase in its ongoing European restructuring program that will result in theclosing of a manufacturing plant in Limoges, France. The restructuring actionsare expected to reduce staffing by approximately 125 employee positions and toresult in annual cost savings of $14 million when the restructuring project isplanned to be completed by the end of 2010. Interest expense declined primarily as a result of lower average rates onborrowings. As a result of the amendment to the Company`s credit facilitycompleted in March, the interest rate spreads on the Company`s term loans andrevolving credit line borrowing have increased, which will increase interestexpense in future periods.