FOE Ferro Corp

• Net sales increased 15.5%, compared to the prior-year quarter, to $320.6 million
  • Organic sales rose 6.7% on a constant currency basis
• Gross profit margin expanded 40 basis points, compared to the prior-year quarter, to 30.8%
  • Adjusted gross profit margin expanded 120 basis points to 31.6%
• Net income attributable to Ferro Corporation common shareholders improved to $21.9 million from a net loss of $10.0 million in the prior-year quarter
• Earnings per diluted share from continuing operations increased 13%, compared to the prior-year quarter, to $0.26
  • Adjusted earnings per diluted share increased 41% to $0.31
• Adjusted EBITDA grew 29.1%, compared to the prior-year quarter, to $56.4 million

The results and guidance in this release, including in the highlights above, contain references to non-GAAP measures from continuing operations, which are identified by the word “adjusted” preceding the measure. Reconciliation of GAAP to non-GAAP results can be found at the end of this release.

Ferro Corporation (NYSE: FOE) today reported results for the first quarter ended March 31, 2017.

Peter Thomas, Ferro’s Chairman, President and CEO, said, “Ferro delivered another quarter of strong financial performance, as volume and sales growth continued the momentum from the second half of 2016. Over the past three consecutive quarters, we have delivered year-over-year improvements in organic volume and revenue growth, gross margin, and adjusted EBITDA margin.

“As we look toward the remainder of 2017, we expect organic sales growth to remain in line with our prior expectations and raw material headwinds to put pressure on margins consistent with our original guidance. We anticipate the strength we saw in the first quarter will be additive to our original full-year estimates however, and, therefore, are updating our adjusted EPS guidance for the full year to a range of $1.17 to $1.22 per diluted share.

“Along with organic growth, we also continued to extend our market leadership positions in functional coatings and color solutions by acquiring, in the second quarter, Italy based Smalti per Ceramiche, an attractive and complementary addition to our portfolio of high-end tile coating products.

“With intense focus on our strategic priorities, a solid financial position, and ongoing commitment to operational efficiencies, we are driving growth across our portfolio of businesses and have every confidence that we can create significant long-term value for our shareholders.’’

2017 Consolidated First Quarter Results from Continuing Operations

First quarter net sales grew 15.5% to $320.6 million from $277.5 million in the prior-year quarter. On a constant currency basis, first quarter net sales increased 18.8% compared to the prior-year quarter. Gross profit increased 17.3% to $98.8 million from $84.2 million. Adjusted gross profit increased 20.4% to $101.4 million from $84.2 million, while adjusted gross profit margin expanded by 120 basis points to 31.6%. Ferro reported income from continuing operations in the first quarter of $22.1 million, or $0.26 per diluted share, compared with income from continuing operations of $19.8 million, or $0.23 per diluted share, for the prior-year quarter. On an adjusted basis, earnings per diluted share from continuing operations were $0.31, an increase of 40.9% from $0.22 per diluted share for the prior-year quarter.

Continuing Operations

                    Q1 2017                       Q1 2016

Earnings Per Diluted Share

GAAP $ 0.26 $ 0.23 Adjusted (Non-GAAP) $ 0.31 $ 0.22

In the first quarter of 2017, organic net sales (which exclude acquisitions owned less than 12 months) increased 6.7% on a constant currency basis.

Net cash provided by operating activities was $1.6 million, compared to a net use of $10.2 million in the prior-year quarter. Ferro’s adjusted free cash flow from continuing operations was a use of $2.2 million, compared to a use of $2.8 million in the prior-year quarter. Adjusted free cash flow from continuing operations is defined as adjusted EBITDA from continuing operations less cash items used to operate the businesses, including cash taxes and interest, changes in working capital, capital expenditures and other cash items.

First Quarter Segment Results

In the first quarter, Ferro delivered improved financial performance in all three of its reporting segments.

• Color Solutions (CS) (formerly Pigments, Powders and Oxides) increased sales by 47.9%, to $90.5 million, and grew gross profit to $28.2 million and generated a gross profit margin to 31.1%
• Performance Color & Glass (PCG) increased sales by 17.4%, to $103.5 million, and grew gross profit to $37.4 million and gross profit margin to 36.1%
• Performance Coatings (PC) generated relatively flat sales at $126.6 million, while growing gross profit to $33.5 million and gross profit margin to 26.5%. Reformulation efforts – which drive gross margin expansion with higher volume but lower sales – adversely affected sales by approximately 3 to 4%.

Acquisition

On April 24, 2017, Ferro completed the acquisition of 100% of the equity interests of S.P.C. Group s.r.l. and Smalti per Ceramiche, s.r.l., (“SPC”), a high-end tile coatings manufacturer based in Italy that focuses on fast-growing specialty products, for approximately €19.8 million on a cash and debt free basis. SPC products, strong technology, design capabilities, and customer-centric business model are complementary to Ferro’s Tile Coatings operations, and position Ferro for continued growth in the high-end tile markets.

The transaction multiple was 6.0x without full synergies. Ferro expects the transaction to be accretive to earnings in year one.

Outlook

Management is providing adjusted diluted EPS, adjusted EBITDA and adjusted free cash flow from operations guidance on a continuing operations basis. While it is likely that Ferro could incur charges, or have cash flows for items excluded from adjusted diluted EPS, adjusted EBITDA and adjusted free cash flow from continuing operations such as mark-to-market adjustments of pension and other postretirement benefit obligations, restructuring and impairment charges, and legal and professional expenses related to certain business development activities, it is not possible, without unreasonable effort, to identify the amount or significance of these items or the potential for other transactions that may impact future GAAP net income and cash flow from operating activities. Management does not believe these items to be representative of underlying business performance. Management is unable to reconcile, without unreasonable effort, the Company's forecasted range of adjusted EPS, adjusted EBITDA and adjusted free cash from continuing operations to a comparable GAAP measures.

Commenting on the outlook, Mr. Thomas said, “The actions we have taken over the past four years are driving strong financial results and positioning Ferro for sustainable growth. Given the momentum generated over the last four quarters, we remain confident that we can execute on our growth initiatives. As we noted last quarter, however we expect to see some fluctuations in gross profit margin in the remainder of 2017, due to the time lag between raw material price increases and our pricing actions in response. And foreign currency exchange rates may also impact results in 2017, as rates remain volatile. Our updated outlook reflects these considerations.”

Based on the Company’s performance and the full-year outlook, and recognizing potential raw material impacts and currency rates for the remainder of the year equal to rates on 12/31/2016, consistent with prior guidance, Ferro updated its 2017 guidance as follows:

• Adjusted EPS of $1.17 - $1.22 per diluted share, up from $1.12 - $1.17 per dilute share
• Adjusted EBITDA of $214 million - $219 million, up from $207 million - $212 million
• Adjusted Free Cash Flow from Continuing Operations of $85 million - $95 million, up from $80 million - $90 million
• Consolidated sales growth of 8.5% - 9.5%, up from 7% - 8%

The new guidance does not include the recent acquisition of SPC or any additional acquisitions or divestitures in 2017.

Financing Transaction

As announced on February 14, 2017, the Company has completed a successful refinancing of its debt structure, which increased liquidity, extended debt maturities, and provided improved operating flexibility. The refinancing positions Ferro to continue its value creation strategy with flexible financing options to support both organic and inorganic growth opportunities.

Constant Currency

Constant currency results reflect the re-measurement of 2016 reported and adjusted local currency results using 2017 exchange rates, resulting in constant currency comparative figures to 2017 reported and adjusted results. These non-GAAP financial measures presented should not be considered as a substitute for the measures of financial performance prepared in accordance with GAAP.

Conference Call

Ferro will conduct an investor teleconference at 10:00 a.m. EDT April 26, 2017. Investors can access this conference via the following:

• Webcast can be accessed by clicking on the Investor Information link at the top of Ferro’s website at ferro.com.
• Live telephone: Call 888-222-3913 within the U.S. or +1 303-223-4369 outside the U.S. Please join the call at least 10 minutes before the start time.
• Webcast replay: Available on Ferro’s Investor website at ferro.com beginning at approximately 12:00 noon Eastern Time on April 26, 2017
• Telephone replay: Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S. and outside the U.S. access code is 21849794).
• Presentation material & podcast: Earnings presentation material and podcasts can be accessed through the Investor Information portion of the Company’s Web site at ferro.com.

About Ferro Corporation

Ferro Corporation (www.ferro.com) is a leading global supplier of technology-based functional coatings and color solutions. Ferro supplies functional coatings for glass, metal, ceramic and other substrates and color solutions in the form of specialty pigments and colorants for a broad range of industries and applications. Ferro products are sold into the building and construction, automotive, electronics, industrial products, household furnishings and appliance markets. The Company’s reportable segments include: Performance Coatings (metal and ceramic coatings), Performance Colors and Glass (glass coatings), and Color solutions. Headquartered in Mayfield Heights, Ohio, the Company has approximately 5,155 associates globally and reported 2016 sales of $1.15 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 and/or administer its optimization initiatives, including its restructuring programs, and to produce the desired results;
• currency conversion rates and economic, social, political, and regulatory conditions in the U.S. and around the world;
• Ferro’s ability to identify suitable acquisition candidates, complete acquisitions, effectively integrate the businesses and achieve the expected synergies (including, but not limited to, the Smalti per Cermaiche, Cappelle Pigments, Electro-Science Laboratories, Delta Performance Products, Pinturas Benicarló, Ferer, Al Salomi, Nubiola and Vetriceramici transactions), as well as the acquisitions being accretive and Ferro achieving the expected returns on invested capital;
• the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;
• Ferro’s ability to successfully introduce new products or enter into new growth markets;
• the impact of interruption, damage to, failure, or compromise of the Company’s information systems;
• 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 availability of reliable sources of energy and raw materials at a reasonable cost;
• increasingly aggressive domestic and foreign governmental regulations on hazardous materials and regulations affecting health, safety and the environment;
• competitive factors, including intense price competition;
• Ferro’s ability to protect its intellectual property, including trade secrets, or to successfully resolve claims of infringement brought against it;
• sale of products and materials into highly regulated industries;
• the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations;
• limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities;
• management of Ferro’s general and administrative expenses;
• Ferro’s multi-jurisdictional tax structure and its ability to reduce its effective tax rate, including 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 invested capital, and the short-term impact that acquisitions may have on return on invested capital;
• 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, including the outsourcing of functions to third parties;
• risks associated with the manufacture and sale of material into industries making products for sensitive applications;
• 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;
• amount and timing of any repurchase of Ferro’s common stock; 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 year ended December 31, 2016.

    Table 1 Ferro Corporation and Subsidiaries Condensed Consolidated Statements of Operations (unaudited)   (In thousands, except per share amounts) Three Months Ended March 31, 2017 2016   Net sales $ 320,555 $ 277,451 Cost of sales   221,761     193,222   Gross profit 98,794 84,229 Selling, general and administrative expenses 58,958 52,646 Restructuring and impairment charges 3,018 881 Other expense (income): Interest expense 6,224 4,847 Interest earned (180 ) (85 ) Foreign currency (gains) losses, net (314 ) 1,611 Loss on extinguishment of debt 3,905 - Miscellaneous income, net   (2,076 )   (3,453 ) Income before income taxes 29,259 27,782 Income tax expense   7,138     8,018   Income from continuing operations 22,121 19,764 Loss from discontinued operations, net of income taxes   -     (29,494 ) Net income (loss) 22,121 (9,730 ) Less: Net income attributable to noncontrolling interests   223     236   Net income (loss) attributable to Ferro Corporation common shareholders $ 21,898   $ (9,966 )   Earnings (loss) per share attributable to Ferro Corporation common shareholders: Basic earnings (loss): Continuing operations $ 0.26 $ 0.23 Discontinued operations   -     (0.35 ) $ 0.26   $ (0.12 )   Diluted earnings (loss): Continuing operations $ 0.26 $ 0.23 Discontinued operations   -     (0.35 ) $ 0.26   $ (0.12 ) Shares outstanding: Weighted-average basic shares 83,530 83,311 Weighted-average diluted shares 84,888 84,290 End-of-period basic shares 83,634 83,181       Table 2 Ferro Corporation and Subsidiaries Segment Net Sales and Gross Profit (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017 2016 Segment Net Sales Performance Coatings $ 126,565 $ 128,124 Performance Colors and Glass 103,518 88,170 Color Solutions   90,472     61,157   Total segment net sales $ 320,555 $ 277,451   Segment Gross Profit Performance Coatings $ 33,489 $ 32,115 Performance Colors and Glass 37,418 31,838 Color Solutions 28,182 20,286 Other costs of sales   (295 )   (10 ) Total gross profit $ 98,794 $ 84,229   Selling, general and administrative expenses Strategic services $ 31,693 $ 28,404 Functional services 22,712 20,631 Incentive compensation 1,830 1,985 Stock-based compensation   2,723     1,626   Total selling, general and administrative expenses $ 58,958 $ 52,646   Restructuring and impairment charges 3,018 881 Other expense, net   7,559     2,920   Income before income taxes $ 29,259   $ 27,782         Table 3 Ferro Corporation and Subsidiaries Condensed Consolidated Balance Sheets (unaudited)   (Dollars in thousands) March 31, December 31, 2017 2016 ASSETS Current assets Cash and cash equivalents $ 92,829 $ 45,582 Accounts receivable, net 289,476 259,687 Inventories 250,590 229,847 Other receivables 38,280 37,814 Other current assets   10,183   9,087 Total current assets 681,358 582,017 Other assets Property, plant and equipment, net 257,993 262,026 Goodwill 148,203 148,296 Intangible assets, net 136,030 137,850 Deferred income taxes 109,555 106,454 Other non-current assets   51,094   47,126 Total assets $ 1,384,233 $ 1,283,769   LIABILITIES AND EQUITY Current liabilities Loans payable and current portion of long-term debt $ 16,632 $ 17,310 Accounts payable 139,880 127,655 Accrued payrolls 29,858 35,859 Accrued expenses and other current liabilities   70,433   65,203 Total current liabilities 256,803 246,027 Other liabilities Long-term debt, less current portion 618,335 557,175 Postretirement and pension liabilities 163,279 162,941 Other non-current liabilities   59,489   62,594 Total liabilities 1,097,906 1,028,737 Equity Total Ferro Corporation shareholders’ equity 278,145 247,113 Noncontrolling interests   8,182   7,919 Total liabilities and equity $ 1,384,233 $ 1,283,769       Table 4 Ferro Corporation and Subsidiaries Condensed Consolidated Statements of Cash Flows (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017 2016 Cash flows from operating activities Net income (loss) $ 22,121 $ (9,730 ) Loss (gain) on sale of assets and business 419 (4,083 ) Depreciation and amortization 11,375 10,672 Interest amortization 479 315 Restructuring and impairment 2,828 24,164 Loss on extinguishment of debt 3,905 - Accounts receivable (26,619 ) (23,582 ) Inventories (17,114 ) (7,706 ) Accounts payable 8,188 5,555 Other current assets and liabilities, net (3,265 ) 1,876 Other adjustments, net   (687 )   (7,642 ) Net cash provided by (used in) operating activities 1,630 (10,161 )   Cash flows from investing activities Capital expenditures for property, plant and equipment and other long lived assets (6,766 ) (7,365 ) Proceeds from sale of assets 2 3,586 Business acquisitions, net of cash acquired   -     (7,909 ) Net cash used in investing activities (6,764 ) (11,688 )   Cash flows from financing activities Net (repayments) borrowings under loans payable (3,985 ) 3,561 Proceeds from revolving credit facility, maturing 2019 15,628 117,834 Principal payments on revolving credit facility, maturing 2019 (327,183 ) (40,212 ) Principal payments on term loan facility, maturing 2021 (243,250 ) (50,750 ) Proceeds from term loan facility, maturing 2024 623,827 Payment of debt issuance costs (12,712 ) (301 ) Purchase of treasury stock - (11,429 ) Other financing activities   (390 )   497   Net cash provided by financing activities 51,935 19,200 Effect of exchange rate changes on cash and cash equivalents   446     134   Increase (decrease) in cash and cash equivalents 47,247 (2,515 ) Cash and cash equivalents at beginning of period   45,582     58,380   Cash and cash equivalents at end of period $ 92,829   $ 55,865     Cash paid during the period for: Interest $ 6,535 $ 4,763 Income taxes $ 4,097 $ 2,669                 Table 5 Ferro Corporation and Subsidiaries Supplemental Information Reconciliation of Reported Income to Adjusted Income For the Three Months Ended March 31 (unaudited)   Net income Selling Restructuring (loss) Diluted (Dollars in general and and Other attributable earnings thousands, except Cost of administrative impairment expense, Income tax to common (loss) per per share amounts) sales expenses charges net

expense3

shareholders share                                         2017     As reported $ 221,761 $ 58,958 $ 3,018 $ 7,559 $ 7,138 $ 21,898 $ 0.26 Special items: Restructuring - - (3,018 ) - 1,012 2,006 0.02 Other1   (2,637 )     (2,550 )   -     (1,174 )   3,675     2,686     0.03   Total special items4   (2,637 )   (2,550 )   (3,018 )   (1,174 )   4,687     4,692     0.05   As adjusted $ 219,124   $ 56,408   $ -   $ 6,385   $ 11,825   $ 26,590   $ 0.31                                             2016     As reported $ 193,222 $ 52,646 $ 881 $ 2,920 $ 8,018 $ (9,966 ) $ (0.12 ) Special items: Restructuring - - (881 ) - 271 610 0.01 Other2 - (1,431 ) - 3,765 (635 ) (1,699 ) (0.02 ) Discontinued operations   -     -     -     -     -     29,494     0.35   Total special items4   -     (1,431 )   (881 )   3,765     (364 )   28,405     0.34   As adjusted $ 193,222   $ 51,215   $ -   $ 6,685   $ 7,654   $ 18,439   $ 0.22   (1)   The adjustments to “Cost of Sales” primarily include the amortization of purchase accounting adjustments related to our recent acquisitions. The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to certain business development activities. The adjustments to “Other expense, net” primarily relates to debt extinguishment costs and a reduction of a contingent liability in Argentina. (2) The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to certain business development activities. The adjustments to “Other expense, net” primarily relates to the gain on an asset sale that was recognized. (3) The tax rate reflects the reported tax rate, adjusted for non-GAAP adjustments being tax effected at the respective statutory rate where the item originated. (4) Due to rounding, total earnings per share related to special items does not always add to the total adjusted earnings per share. It should be noted that adjusted income, earnings per share and other adjusted items referred to above are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. The adjusted income, earnings per share and other adjusted items presented above exclude certain special items including restructuring charges, certain business development activities, gains on sale of assets, debt extinguishment costs, certain purchase accounting adjustments and discontinued operations. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.                       Table 6 Ferro Corporation and Subsidiaries Supplemental Information Reconciliation of Adjusted Gross Profit (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017 2016   Performance Coatings $ 126,565 $ 128,124 Performance Colors and Glass 103,518 88,170 Color Solutions   90,472     61,157   Total net sales $ 320,555   $ 277,451     Total net sales $ 320,555 $ 277,451 Adjusted cost of sales1   219,124     193,222   Adjusted gross profit $ 101,431   $ 84,229   Adjusted gross profit percentage 31.6 % 30.4 % (1)   Refer to Table 5 for the reconciliation of cost of sales to adjusted cost of sales for the three months ended March 31, 2017 and 2016, respectively. It should be noted that adjusted cost of sales and adjusted gross profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. Adjusted gross profit and adjusted cost of sales exclude certain items, primarily comprised of the amortization of purchase accounting adjustments related to our recent acquisitions. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.         Table 7 Ferro Corporation and Subsidiaries Supplemental Information Constant Currency Schedule of Adjusted Operating Profit (unaudited)   Three Months Ended (Dollars in thousands) March 31, Adjusted 2017 vs 2016

20161

2017 Adjusted 2016 Segment net sales Performance Coatings $ 128,124 $ 122,736 $ 126,565 $ 3,829 Performance Colors and Glass 88,170 86,575 103,518 16,943 Color Solutions   61,157     60,528     90,472     29,944   Total segment net sales $ 277,451   $ 269,839   $ 320,555   $ 50,716     Segment adjusted gross profit Performance Coatings $ 32,115 $ 30,648 $ 33,489 $ 2,841 Performance Colors and Glass 31,838 31,288 37,885 6,597 Color Solutions 20,286 20,071 30,300 10,229 Other costs of sales   (10 )   (10 )   (243 )   (233 ) Total adjusted gross profit2 $ 84,229   $ 81,997   $ 101,431   $ 19,434     Adjusted selling, general and administrative expenses Strategic services $ 28,404 $ 27,585 $ 31,616 $ 4,031 Functional services 19,200 19,030 20,239 1,209 Incentive compensation 1,985 1,946 1,830 (116 ) Stock-based compensation   1,626     1,626     2,723     1,097   Total adjusted selling, general and administrative expenses3 $ 51,215   $ 50,187   $ 56,408   $ 6,221     Adjusted operating profit $ 33,014 $ 31,810 $ 45,023 $ 13,213 Adjusted operating profit as a % of net sales 11.9 % 11.8 % 14.0 % (1)   Reflects the remeasurement of 2016 reported and adjusted local currency results using 2017 exchange rates, resulting in constant currency comparative figures to 2017 reported and adjusted results. See Table 5 for non-GAAP adjustments applicable to the three month period. (2) Refer to Table 6 for the reconciliation of gross profit to adjusted gross profit for the three months ended March 31, 2017 and 2016, respectively. (3) Refer to Table 5 for the reconciliation of SG&A expenses to adjusted SG&A expenses for the three months ended March 31, 2017 and 2016, respectively. It should be noted that the adjusted 2016 results is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.     Table 8 Ferro Corporation and Subsidiaries Supplemental Information Reconciliation of Net income (loss) attributable to Ferro Corporation common shareholders to Adjusted EBITDA (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017 2016   Net income (loss) attributable to Ferro Corporation common shareholders $ 21,898 $ (9,966 ) Net income attributable to noncontrolling interests 223 236 Loss from discontinued operations, net of income taxes - 29,494 Restructuring and impairment charges 3,018 881 Other expense (income), net 1,335 (1,927 ) Interest expense 6,224 4,847 Income tax expense 7,138 8,018 Depreciation and amortization 11,854 10,987 Less: interest amortization expense and other (479 ) (315 ) Cost of sales adjustments1 2,637 - SG&A adjustments1   2,550       1,431     Adjusted EBITDA $ 56,398     $ 43,686       Net sales $ 320,555 $ 277,451 Adjusted EBITDA as a % of net sales 17.6

%

 

15.7

%

 

(1)   For details of Non-GAAP adjustments, refer to Table 5 for the reconciliation of cost of sales to adjusted cost of sales and SG&A to adjusted SG&A for the three months ended March 31, 2017 and 2016, respectively. It should be noted that adjusted EBITDA is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). This non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. Adjusted EBITDA is net income (loss) attributable to Ferro Corporation common shareholders before the effects of net income attributable to noncontrolling interest, discontinued operations, restructuring and impairment charges, other expense (income), net, interest expense, income tax expense, depreciation and amortization, non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.     Table 9 Ferro Corporation and Subsidiaries Supplemental Information Return on Invested Capital For the Rolling Twelve Months Ended (unaudited)   (Dollars in thousands) March 31, December 31, 2017 2016   Gross profit $ 365,782 $ 351,217 Selling, general and administrative expenses 248,014   241,702   Total operating profit 117,768 109,515 Non-GAAP adjustments1 46,444   42,688   Adjusted operating profit before tax 164,212 152,203 Less: Tax expense2   (45,979 )   (40,182 ) Net adjusted operating profit after tax $ 118,233   $ 112,021     Recent acquisitions3 NOPAT gain   5,946     2,535   Net adjusted operating profit after tax excluding recent acquisitions $ 112,287   $ 109,486     Equity 286,327 255,032 Debt 634,967 574,485 Off balance sheet precious metal leases 31,860 28,743 Postretirement and pension liabilities 163,279 162,941 Environmental liabilities 13,290 15,531 Cash   (92,829 )   (45,582 ) Invested capital $ 1,036,894   $ 991,150     Return on invested capital 11.4 % 11.3 %   Less: recent acquisitions3 invested capital   138,773     143,047   Invested capital excluding recent acquisitions $ 898,121   $ 848,103     Return on invested capital excluding recent acquisitions 12.5 % 12.9 % (1)   The “Non-GAAP adjustments” include non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A for the rolling twelve months ended March 31, 2017 and December 31, 2016. The “Non-GAAP adjustments” also includes precious metal lease fees which were $0.8 million and $0.8 million for the rolling twelve months ended March 31, 2017 and December 31, 2015, respectively. (2) Operating profit for 2017 and 2016 is tax effected at 28.0% and 26.4%, respectively. (3) For the rolling twelve months ended March 31, 2017, the recent acquisitions include Pinturas, Delta Performance Products, ESL and Cappelle. For the rolling twelve months ended December 31, 2016, the recent acquisitions include Ferer, Pinturas, Delta Performance Products, ESL and Cappelle. Acquisitions are removed from being included in the recent acquisitions line item after the acquisitions are included in the Company for a full year. It should be noted that net adjusted operating profit after tax and return on invested capital are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. Net adjusted operating profit after tax is operating profit from continuing operations, adjusted for non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A tax effected. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.             Table 10 Ferro Corporation and Subsidiaries Supplemental Information Change in Net Debt (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017 March 31, 2016 Beginning of period Gross debt $ 578,205 $ 478,087 Cash   45,582     58,380   Gross debt 532,623 419,707   Unamortized debt issuance costs included in debt   3,720     4,533   Net debt 528,903 415,174   End of period Gross debt 643,173 508,689 Cash   92,829     55,865   Gross debt 550,344 452,824   Unamortized debt issuance costs included in debt   8,206     4,329   Net debt 542,138 448,495         Period increase in gross debt $ (17,721 ) $ (33,117 )         Period increase in net debt $ (13,235 ) $ (33,321 ) We believe that given the significant cash and cash equivalents on its balance sheet that net cash against outstanding debt, net debt, between periods is a meaningful measure.           Table 11 Ferro Corporation and Subsidiaries Supplemental Information Adjusted Free Cash Flow from Continuing Operations (unaudited)   (Dollars in thousands) Three Months Ended March 31, 2017     March 31, 2016 As Adjusted   Adjusted EBITDA1 $ 56,398 $ 43,686 Capital expenditures (6,766 ) (7,206 ) Working capital (35,545 ) (22,684 ) Cash income taxes (4,097 ) (2,669 ) Cash interest (6,535 ) (4,763 ) Pension (619 ) (922 ) Incentive compensation payments (12,224 ) (8,802 ) Other   7,173     607   Free Cash Flow from Continuing Operations $ (2,215 ) $ (2,753 )   Discontinued operations - (8,583 ) Restructuring/Other (436 ) (805 ) Outflows from M&A activity (2,358 ) (9,547 ) Debt issuance costs (12,712 ) - Stock repurchase - (11,429 )         Increase in Gross Debt2 $ (17,721 ) $ (33,117 )   Change in unamortized debt issuance costs, included in debt 4,486 (204 )         Increase in Net Debt2 $ (13,235 ) $ (33,321 ) (1)   See Table 8 for the reconciliation of net income (loss) attributable to Ferro Corporation common shareholders to adjusted EBITDA. (2) See Table 10 for the reconciliation of gross debt and net debt. It should be noted that adjusted EBITDA and adjusted free cash flow from continuing operations are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. Adjusted EBITDA is net income (loss) attributable to Ferro Corporation common shareholders before the effects of income attributable to noncontrolling interest, discontinued operations, restructuring and impairment charges, other expense (income) net, interest expense, income tax expense, depreciation and amortization, non-GAAP adjustments to cost of sales, and non-GAAP adjustments to SG&A. Adjusted Free Cash Flow from Continuing Operations is adjusted EBITDA less capital expenditures, changes in working capital, cash income taxes, cash interest, pension contributions, incentive compensation payments, and other continuing operations cash items. We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

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Ferro CorporationInvestor Contact:Kevin Cornelius Grant, 216-875-5451Manager, Investor Relationskevincornelius.grant@ferro.comorMedia Contact:Mary Abood, 216-875-5401Director, Corporate Communicationsmary.abood@ferro.com