- 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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version on businesswire.com: http://www.businesswire.com/news/home/20170425006894/en/
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
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