Ferro Reports Significantly Higher Adjusted EPS from Continuing Operations for First Quarter 2015
April 29, 2015 | By Business Wire News
CLEVELAND
Ferro Corporation (NYSE: FOE, the “Company”) today reported results for the first quarter ended March 31, 2015. First quarter income from continuing operations attributable to common shareholders was $0.17 per diluted share compared with $0.12 per diluted share in the first quarter of 2014. On an adjusted basis, earnings per diluted share were $0.23 compared with earnings of $0.14 per diluted share in the first quarter of 2014. The results in both years include a number of charges relating to, among other items, restructuring activities, and the impact of currency devaluations in Venezuela. Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.
First quarter 2015 net sales were $263 million, while value-added sales, which exclude precious metal sales, were $253 million. In the same period last year, net sales and value-added sales were $281 million and $267 million, respectively. On a constant currency basis, value-added sales increased 7%, with foreign currency translation adversely impacting value-added sales by approximately $31 million.
The Company attributed the increase in adjusted earnings to improved profitability in the Performance Colors and Glass and Pigments, Powders and Oxides (“PPO”) segments, on a constant currency basis, coupled with reduced selling, general and administrative (“SG&A”) expenses and a lower effective tax rate, partially offset by unfavorable currency translation impacts.
Peter Thomas, Chairman, President and Chief Executive Officer, commented, “We’re off to a strong start for 2015 with solid earnings for the first quarter and continued progress on our inorganic growth strategy with the announced acquisition of Nubiola. For the quarter, adjusted earnings per share from continuing operations increased by 64% on a 7% increase in constant currency value-added sales. Earnings benefited from higher gross profit on a constant currency basis, our cost optimization initiatives, which drove a further reduction in SG&A expenses for the base business, and a lower income tax rate.
“While first-quarter global economic conditions were weaker than expected, we remain optimistic about higher sales growth for the full year. We are beginning to see positive economic developments in key regions and markets, including higher domestic auto demand in Europe, signs of recovery in Spain, and stronger demand in the Middle East. We expect the momentum in Performance Color and Glass will carry through 2015 and believe we will see improved sales growth throughout 2015 in both the Performance Coatings and PPO segments.”
Mr. Thomas continued, “We also announced an agreement to acquire Nubiola, a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue. The combination will substantially improve our position in inorganic pigments by expanding our product portfolio and geographic reach. The transaction is expected to close within the next 60 days, and we expect it to be immediately accretive to earnings. For this reason, we are increasing our 2015 adjusted diluted earnings guidance to $0.89 to $0.96 per share. Meanwhile, we continue to actively pursue additional business opportunities to strengthen our position in glass-based coatings and as a provider of color solutions for industrial applications.”
2015 First-Quarter Results
Ferro reported net sales of $263 million in the first quarter of 2015, compared with net sales of $281 million in the first quarter of 2014. Value-added sales, which exclude precious metal sales, were $253 million in the first quarter of 2015 versus $267 million in the first quarter of the prior year. Consolidated value-added sales, reported on a constant currency basis, increased by 7%.
Gross profit was $71 million for the quarter, compared with $75 million for the first quarter of 2014. Excluding special charges, adjusted gross profit was $73 million (28.9% of value-added sales) compared with $75 million (27.9% of value-added sales) in the prior-year period. On a constant currency basis, adjusted gross profit increased by $7 million, or 10%.
SG&A expenses were $49 million compared with expenses of $51 million in the prior-year quarter. Excluding special items in both periods, SG&A expenses declined to $47 million from $51 million. On a constant currency basis, and excluding SG&A expenses associated with acquisitions, adjusted SG&A for the historical business declined 7%.
Income from continuing operations for the quarter ended March 31, 2015, was $13 million, or $0.17 per diluted share, compared with $10 million, or $0.12 per diluted share, in the first quarter of 2014. Adjusted income attributable to common shareholders was $20 million, or $0.23 per diluted share, compared with $12 million, or $0.14 per diluted share, in the prior-year quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $35 million, compared with $32 million in the same period last year. Adjusted EBITDA margins, as a percentage of value-added sales, were 13.6% in the first quarter of 2015 and 11.9% in the same period last year.
Outlook
The Company anticipates stronger global economic growth for the remainder of 2015. Economic growth is expected to increase in the U.S. and Europe, though conditions in certain developing economies, including Indonesia, China, Russia and Ukraine, are expected to remain weak. The net impact is expected to provide a catalyst for increased sales growth over the remainder of the year relative to the 7% constant currency value-added sales growth experienced in the first quarter.
The Company expects full-year constant currency value-added sales growth, excluding the impact of Nubiola, in line with prior guidance of approximately 10% – 11%, offset by an unfavorable impact of currency translation estimated at 13%. Gross profit, as a percent of value-added sales, is expected to be in the range of 29.0% – 29.5%, and operating profit is expected to be in the range of 11.5% – 12.0% of value-added sales. The effective tax rate for the first quarter of 2015 was 16% due to the Company’s ability to recognize certain tax assets previously fully reserved. For the full year, the Company expects the effective tax rate to be in the range of 24% – 25%.
Given these expectations, and assuming closing of the Nubiola transaction within the next 60 days, the Company is increasing its adjusted earnings per share guidance to $0.89 – $0.96 compared with prior guidance of $0.85 – $0.90 per diluted share.
Nubiola Acquisition
On April 29, 2015 the Company announced that it signed a definitive agreement with Barcelona-based Nubiola Pigmentos to acquire 100% of Nubiola’s equity, on a cash-free and debt-free basis, for €146 million in cash. The transaction will be funded with excess cash and a draw on the Company’s existing revolving credit facility and is expected to close within the next 60 days, subject to customary closing conditions. Nubiola is a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue. Other products include Iron Oxides, Chrome Oxide Greens and Corrosion Inhibitors. Nubiola had 2014 annual sales of $119 million, based on the current euro exchange rate, and achieved compound annual growth of 4.1% over the last three years. The transaction is expected to be accretive to adjusted earnings by more than $0.15 per diluted share in 2016, and by $0.04 – $0.06 in 2015. Based on 2014 EBITDA and expected synergies in excess of $8 million, the acquisition purchase price represents a transaction multiple of approximately 5X.
Conference Call
The Company will host a conference call to discuss its first-quarter financial results, its current outlook for 2015, and the Nubiola transaction on Thursday, April 30, 2015, at 10:00 a.m. Eastern Time. To listen to the call, dial 800-755-6634 if calling from the United States or Canada, or dial 212-231-2912 if calling from outside North America. Please call approximately 10 minutes before the conference call is scheduled to begin.
An audio replay of the call will be available through noon Eastern Time on May 7. To access the replay, dial 800-633-8284 if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America. Use the program ID #21766957 to access the audio replay.
The conference call also will be broadcast live over the Internet and will be available for replay through May 31, 2015. The live broadcast and replay can be accessed through the Investor Information portion of the Company’s Web site at www.ferro.com. A podcast of the conference call also will be available on the site.
About Ferro Corporation
Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. 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 3,985 employees globally and reported 2014 sales of $1.1 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:
- Ferro’s ability to complete acquisitions, including the Nubiola transaction, effectively integrate the businesses, and achieve the expected synergies, as well as the acquisitions being accretive and Ferro achieving the expected returns on invested capital;
- Ferro’s ability to successfully introduce new products or enter into new growth markets;
- 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 cost-saving initiatives, including its restructuring programs, and to produce the desired results;
- currency conversion rates and economic, social, regulatory, and political conditions around the world;
- 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 impact of interruption, damage to, failure, or compromise of the Company’s information systems;
- the availability of reliable sources of energy and raw materials at a reasonable cost;
- 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;
- 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;
- competitive factors, including intense price competition;
- Ferro’s ability to protect its intellectual property or to successfully resolve claims of infringement brought against it;
- the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations;
- 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 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 functions to third parties;
- 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, 2014.
| Table 1 | ||||||||
| Ferro Corporation and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Operations (unaudited) | ||||||||
| (Dollars in thousands, except per share amounts) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| Net sales | $ | 262,772 | $ | 280,727 | ||||
| Cost of sales | 192,137 | 205,774 | ||||||
| Gross profit | 70,635 | 74,953 | ||||||
| Selling, general and administrative expenses | 49,456 | 51,369 | ||||||
| Restructuring and impairment charges | 509 | 4,350 | ||||||
| Other expense (income): | ||||||||
| Interest expense | 3,150 | 4,511 | ||||||
| Interest earned | (37 | ) | (15 | ) | ||||
| Foreign currency losses, net | 1,728 | 1,346 | ||||||
| Miscellaneous expense, net | 399 | 762 | ||||||
| Income before income taxes | 15,430 | 12,630 | ||||||
| Income tax expense | 2,459 | 2,482 | ||||||
| Income from continuing operations | 12,971 | 10,148 | ||||||
| (Loss) income from discontinued operations, net of taxes | (3,956 | ) | 6,584 | |||||
| Net income | 9,015 | 16,732 | ||||||
| Less: Net loss attributable to noncontrolling interests | (1,955 | ) | (472 | ) | ||||
| Net income attributable to Ferro Corporation common shareholders | 10,970 | 17,204 | ||||||
| Earnings (loss) per share attributable to Ferro Corporation common shareholders: | ||||||||
| Basic earnings (loss): | ||||||||
| Continuing operations | $ | 0.17 | $ | 0.12 | ||||
| Discontinued operations | (0.05 | ) | 0.08 | |||||
| $ | 0.12 | $ | 0.20 | |||||
| Diluted earnings (loss): | ||||||||
| Continuing operations | $ | 0.17 | $ | 0.12 | ||||
| Discontinued operations | (0.04 | ) | 0.08 | |||||
| $ | 0.13 | $ | 0.20 | |||||
| Shares outstanding: | ||||||||
| Weighted-average basic shares | 87,114 | 86,778 | ||||||
| Weighted-average diluted shares | 88,298 | 87,990 | ||||||
| End-of-period basic shares | 87,259 | 86,924 | ||||||
| Table 2 | ||||||||
| Ferro Corporation and Subsidiaries | ||||||||
| Segment Net Sales and Gross Profit (unaudited) | ||||||||
| (Dollars in thousands) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| Segment net sales | ||||||||
| Performance Coatings | $ | 136,786 | $ | 145,160 | ||||
| Performance Colors and Glass | 99,464 | 103,370 | ||||||
| Pigments, Powders and Oxides | 26,522 | 32,197 | ||||||
| Total segment net sales | $ | 262,772 | $ | 280,727 | ||||
| Segment gross profit | ||||||||
| Performance Coatings | $ | 28,875 | $ | 33,417 | ||||
| Performance Colors and Glass | 34,489 | 34,372 | ||||||
| Pigments, Powders and Oxides | 7,854 | 7,542 | ||||||
| Other costs of sales | (583 | ) | (378 | ) | ||||
| Total gross profit | $ | 70,635 | $ | 74,953 | ||||
| Selling, general and administrative expenses | $ | 49,456 | $ | 51,369 | ||||
| Restructuring and impairment charges | 509 | 4,350 | ||||||
| Other expense, net | 5,240 | 6,604 | ||||||
| Income before income taxes | $ | 15,430 | $ | 12,630 | ||||
| Table 3 | ||||||
| Ferro Corporation and Subsidiaries | ||||||
| Condensed Consolidated Balance Sheets (unaudited) | ||||||
| (Dollars in thousands) | March 31, | December 31, | ||||
| 2015 | 2014 | |||||
| ASSETS | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 105,175 | $ | 140,500 | ||
| Accounts receivable, net | 231,482 | 236,749 | ||||
| Inventories | 153,334 | 158,368 | ||||
| Deferred income taxes | 7,886 | 7,532 | ||||
| Other receivables | 22,729 | 25,635 | ||||
| Other current assets | 16,980 | 17,912 | ||||
| Current assets held-for-sale | 19,575 | 27,087 | ||||
| Total current assets | 557,161 | 613,783 | ||||
| Other assets | ||||||
| Property, plant and equipment, net | 193,138 | 212,642 | ||||
| Goodwill | 91,562 | 93,733 | ||||
| Intangible assets, net | 57,092 | 57,309 | ||||
| Deferred income taxes | 33,592 | 39,712 | ||||
| Other non-current assets | 59,949 | 60,982 | ||||
| Non-current assets held-for-sale | 24,810 | 18,737 | ||||
| Total assets | $ | 1,017,304 | $ | 1,096,898 | ||
| LIABILITIES AND EQUITY | ||||||
| Current liabilities | ||||||
| Loans payable and current portion of long-term debt | $ | 6,097 | $ | 8,382 | ||
| Accounts payable | 126,017 | 129,236 | ||||
| Accrued payrolls | 22,296 | 36,051 | ||||
| Accrued expenses and other current liabilities | 40,550 | 53,133 | ||||
| Current liabilities held-for-sale | 6,930 | 10,016 | ||||
| Total current liabilities | 201,890 | 236,818 | ||||
| Other liabilities | ||||||
| Long-term debt, less current portion | 302,178 | 303,629 | ||||
| Postretirement and pension liabilities | 157,397 | 167,772 | ||||
| Other non-current liabilities | 44,365 | 50,359 | ||||
| Non-current liabilities held-for-sale | 2,180 | 2,304 | ||||
| Total liabilities | 708,010 | 760,882 | ||||
| Total Ferro Corporation shareholders’ equity | 300,755 | 324,384 | ||||
| Noncontrolling interests | 8,539 | 11,632 | ||||
| Total liabilities and equity | $ | 1,017,304 | $ | 1,096,898 | ||
| Table 4 | ||||||||
| Ferro Corporation and Subsidiaries | ||||||||
| Condensed Consolidated Statements of Cash Flows (unaudited) | ||||||||
| (Dollars in thousands) | Three Months Ended | |||||||
| March 31, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities | ||||||||
| Net income | $ | 9,015 | $ | 16,732 | ||||
| Gain on sale of assets and business | 294 | 104 | ||||||
| Depreciation and amortization | 8,111 | 11,336 | ||||||
| Restructuring and impairment charges | (807 | ) | (5,134 | ) | ||||
| Devaluation of Venezuela | 3,343 | 1,094 | ||||||
| Accounts receivable | (11,845 | ) | (32,755 | ) | ||||
| Inventories | 1,427 | (21,427 | ) | |||||
| Accounts payable | 921 | 36,590 | ||||||
| Other changes in current assets and liabilities, net | (23,626 | ) | (13,918 | ) | ||||
| Other adjustments, net | 2,898 | (14,862 | ) | |||||
| Net cash used by operating activities | (10,269 | ) | (22,240 | ) | ||||
| Cash flows from investing activities | ||||||||
| Capital expenditures for property, plant and equipment and other long lived assets | (14,879 | ) | (12,163 | ) | ||||
| Proceeds from sale of assets | 91 | 652 | ||||||
| Acquisition of TherMark | (5,479 | ) | – | |||||
| Net cash used in investing activities | (20,267 | ) | (11,511 | ) | ||||
| Cash flows from financing activities | ||||||||
| Net borrowings (repayments) under loans payable (1) | (2,567 | ) | 523 | |||||
| Proceeds from revolving credit facility | – | 155,301 | ||||||
| Principal payments on term loan facility | (750 | ) | – | |||||
| Principal payments on revolving credit facility | – | (109,008 | ) | |||||
| Other financing activities | 769 | (221 | ) | |||||
| Net cash (used in) provided by financing activities | (2,548 | ) | 46,595 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (2,241 | ) | (84 | ) | ||||
| (Decrease) increase in cash and cash equivalents | (35,325 | ) | 12,760 | |||||
| Cash and cash equivalents at beginning of period | 140,500 | 28,328 | ||||||
| Cash and cash equivalents at end of period | $ | 105,175 | $ | 41,088 | ||||
| Cash paid during the period for: | ||||||||
| Interest | $ | 3,409 | $ | 10,870 | ||||
| Income taxes | $ | 6,141 | $ | 941 | ||||
| (1) | Includes cash related to our domestic accounts receivable program and international accounts receivable sales program as well as loans payable to banks. | |||
| Table 5 | |||||||||||||||||||||||||||
| Ferro Corporation and Subsidiaries | |||||||||||||||||||||||||||
| Supplemental Information | |||||||||||||||||||||||||||
| Reconciliation of Reported Income to Adjusted Income | |||||||||||||||||||||||||||
| For the Three Months Ended March 31 (unaudited) | |||||||||||||||||||||||||||
| Net (loss) | |||||||||||||||||||||||||||
| Selling general | Restructuring | Income tax | income | Diluted | |||||||||||||||||||||||
|
|
and | and | Other | expense | attributable | earnings | |||||||||||||||||||||
|
(Dollars in thousands, |
Cost of | administrative | impairment | expense, | (benefit) | to common | (loss) | ||||||||||||||||||||
|
except per share amounts) |
sales | expenses | charges | net | (2) | shareholders | per share | ||||||||||||||||||||
| 2015 | |||||||||||||||||||||||||||
| As reported | $ | 192,137 | $ | 49,456 | $ | 509 | $ | 5,240 | $ | 2,459 | $ | 10,970 | $ | 0.13 | |||||||||||||
| Special items: | |||||||||||||||||||||||||||
| Restructuring | – | – | (509 | ) | – | 162 | 347 | – | |||||||||||||||||||
| Other1 | (2,638 | ) | (2,415 | ) | – | (2,060 | ) | 962 | 6,151 | 0.07 | |||||||||||||||||
| Discontinued operations | – | – | – | – | – | 3,956 | 0.05 | ||||||||||||||||||||
| Noncontrolling Interest | – | – | – | – | – | (1,453 | ) | (0.02 | ) | ||||||||||||||||||
| Total special items | (2,638 | ) | (2,415 | ) | (509 | ) | (2,060 | ) | 1,124 | 9,001 | 0.10 | ||||||||||||||||
| As adjusted | $ | 189,499 | $ | 47,041 | $ | – | $ | 3,180 | $ | 3,583 | $ | 19,971 | $ | 0.23 | |||||||||||||
| 2014 | |||||||||||||||||||||||||||
| As reported | $ | 205,774 | $ | 51,369 | $ | 4,350 | $ | 6,604 | $ | 2,482 | $ | 17,204 | $ | 0.20 | |||||||||||||
| Special items: | |||||||||||||||||||||||||||
| Restructuring | – | – | (4,350 | ) | – | 1,566 | 2,784 | 0.03 | |||||||||||||||||||
| Other1 | 209 | (235 | ) | – | (1,859 | ) | 679 | 1,206 | 0.01 | ||||||||||||||||||
| Taxes2 | – | – | – | – | 2,065 | (2,065 | ) | (0.02 | ) | ||||||||||||||||||
| Discontinued operations | – | – | – | – | – | (6,584 | ) | (0.07 | ) | ||||||||||||||||||
| Noncontrolling Interest | – | – | – | – | – | (461 | ) | (0.01 | ) | ||||||||||||||||||
| Total special items | 209 | (235 | ) | (4,350 | ) | (1,859 | ) | 4,309 | (5,119 | ) | (0.06 | ) | |||||||||||||||
| As adjusted | $ | 205,983 | $ | 51,134 | $ | – | $ | 4,745 | $ | 6,791 | $ | 12,085 | $ | 0.14 | |||||||||||||
| 1 | Primarily includes certain business development activities and the overall financial impact of currency related items in Venezuela. | |||
| 2 | Adjustment of reported earnings to a normalized 36% rate for 2014. In 2015, the adjusted items are taxed at the statutory rate where the adjustment occurred. | |||
| It should be noted that adjusted income, earnings per share and other adjusted items referred above are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted income, earnings per share and other adjusted items presented above exclude certain special items including restructuring charges, certain business development activities, the overall financial impact of currency related items in Venezuela and discontinued operations. We believe this data provides investors with additional information on the underlying operations 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 6 | ||||||||||
| Ferro Corporation and Subsidiaries | ||||||||||
| Supplemental Information | ||||||||||
| Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales | ||||||||||
| and Schedule of Adjusted Gross Profit (unaudited) | ||||||||||
| (Dollars in thousands) | Three months ended | |||||||||
| March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Performance Coatings | $ | 136,786 | $ | 145,160 | ||||||
| Performance Colors and Glass | 89,928 | 93,140 | ||||||||
| Pigments, Powders and Oxides | 26,446 | 29,142 | ||||||||
| Total segment net sales excluding precious metals | 253,160 | 267,442 | ||||||||
| Sales of precious metals | 9,612 | 13,285 | ||||||||
| Total net sales | $ | 262,772 | $ | 280,727 | ||||||
| Net sales excluding precious metals | $ | 253,160 | $ | 267,442 | ||||||
| Adjusted cost of sales1 | 189,499 | 205,983 | ||||||||
| Cost of sales from precious metals | (9,612 | ) | (13,285 | ) | ||||||
| Adjusted cost of sales excluding precious metals | 179,887 | 192,698 | ||||||||
| Adjusted gross profit | $ | 73,273 | $ | 74,744 | ||||||
| Adjusted gross profit percentage | 28.9 | % | 27.9 | % | ||||||
| 1 | Adjusted cost of sales reflects pro forma adjustments of $2.6 and $0.2 million for the three months ended March 31, 2015 and 2014, respectively. | |||
| It should be noted that segment net sales excluding precious metals, 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). The sales are presented here to exclude the impact of volatile precious metal raw material costs. The precious metal raw material costs are generally passed through directly to customers with minimal margin. Adjusted gross profit and adjusted cost of sales excludes special items, primarily comprised of certain business development activities, and the overall financial impact of currency related items in Venezuela. We believe this data provides investors with additional useful information on the underlying operations 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) | 2015 | |||||||||||||||
| Adjusted | 2015 vs Adjusted | |||||||||||||||
| 2014 | 2014 (1) | 2015 | 2014 | |||||||||||||
| Segment net sales excluding precious metals | ||||||||||||||||
| Performance Coatings | $ | 145,160 | $ | 124,959 | $ | 136,786 | $ | 11,827 | ||||||||
| Performance Colors and Glass | 93,140 | 83,799 | 89,928 | 6,129 | ||||||||||||
| Pigments, Powders and Oxides | 29,142 | 27,533 | 26,446 | (1,087 | ) | |||||||||||
| Total segment net sales excluding precious metals | $ | 267,442 | $ | 236,291 | $ | 253,160 | $ | 16,869 | ||||||||
| Segment gross profit | ||||||||||||||||
| Performance Coatings | 33,417 | 28,953 | 28,875 | (78 | ) | |||||||||||
| Performance Colors and Glass | 34,372 | 31,085 | 34,489 | 3,404 | ||||||||||||
| Pigments, Powders and Oxides | 7,542 | 7,213 | 7,854 | 641 | ||||||||||||
| Other costs of sales | (378 | ) | (378 | ) | (583 | ) | (205 | ) | ||||||||
| Total gross profit | $ | 74,953 | $ | 66,873 | $ | 70,635 | $ | 3,762 | ||||||||
| Adjusted gross profit | 74,744 | 66,632 | 73,273 | 6,641 | ||||||||||||
| Selling, general and administrative expenses | 51,369 | 46,742 | 49,456 | 2,714 | ||||||||||||
| Adjusted selling, general and administrative expenses | 51,134 | 46,703 | 47,041 | 338 | ||||||||||||
| Operating profit | 23,584 | 20,131 | 21,179 | 1,048 | ||||||||||||
| Adjusted operating profit | 23,610 | 19,929 | 26,232 | 6,303 | ||||||||||||
| (1) | The adjusted 2014 column represents actual 2014 local currency results remeasured using the respective 2015 exchange rate. | |||
| It should be noted that the adjusted 2014 results is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). Adjusted 2014 results is remeasured using the respective 2015 exchange rate. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. |
| Table 8 | ||||||||||
| Ferro Corporation and Subsidiaries | ||||||||||
| Reconciliation of Net Income to Adjusted EBITDA (unaudited) | ||||||||||
| (Dollars in thousands) | Three months ended | |||||||||
| March 31, | ||||||||||
| 2015 | 2014 | |||||||||
| Net income attributable to Ferro Corporation common shareholders | $ | 10,970 | $ | 17,204 | ||||||
| Loss (income) from discontinued operations, net of taxes | 3,956 | (6,584 | ) | |||||||
| Interest expense | 3,150 | 4,511 | ||||||||
| Income tax expense | 2,459 | 2,482 | ||||||||
| Depreciation and amortization | 8,111 | 8,827 | ||||||||
| Less interest amortization expense and other | (297 | ) | (366 | ) | ||||||
| Cost of sales adjustments | 2,638 | (209 | ) | |||||||
| SG&A Adjustments | 2,415 | 235 | ||||||||
| Restructuring and Impairment | 509 | 4,350 | ||||||||
| Other expense and (income) adjustments | 2,060 | 1,859 | ||||||||
| Noncontrolling interest adjustments | (1,453 | ) | (461 | ) | ||||||
| Adjusted EBITDA | $ | 34,518 | $ | 31,848 | ||||||
| Net sales excluding precious metals | $ | 253,160 | $ | 267,442 | ||||||
| Adjusted EBITDA as a % of net sales excluding precious metals | 13.6 | % | 11.9 | % | ||||||
| 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). Adjusted EBITDA is net income before the effects of discontinued operations, interest, income taxes, depreciation and amortization, non-recurring adjustments to cost of sales, non-recurring adjustments to SG&A, restructuring and impairment charges, and non-recurring adjustments to miscellaneous income and expense. We believe this data provides investors with additional information on the underlying operations 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 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, | ||||||
| 2015 | 2014 | |||||||
| Gross profit | $ | 280,767 | $ | 285,085 | ||||
| Selling, general and administrative expenses | 284,849 | 286,762 | ||||||
| Total operating loss | (4,082 | ) | (1,677 | ) | ||||
| Pro forma adjustments1 | 106,024 | 101,624 | ||||||
| Adjusted operating profit before tax | 101,942 | 99,947 | ||||||
| Less: Tax at pro forma rate2 | (29,563 | ) | (35,981 | ) | ||||
| Net operating profit after tax | $ | 72,379 | $ | 63,966 | ||||
| Vetriceramici NOPAT gain (loss) | 676 | (536 | ) | |||||
| Net operating profit after tax | $ | 71,703 | $ | 64,502 | ||||
| Equity | 309,294 | 336,016 | ||||||
| Equity – discontinued operations | (35,275 | ) | (33,507 | ) | ||||
| Debt | 308,275 | 312,011 | ||||||
| Off balance sheet precious metal leases | 30,081 | 26,535 | ||||||
| Postretirement and pension liabilities | 157,397 | 167,772 | ||||||
| Environmental liabilities | 13,697 | 14,440 | ||||||
| Cash | (105,175 | ) | (140,500 | ) | ||||
| Invested capital including Vetriceramici | $ | 678,294 | $ | 682,767 | ||||
| Return on invested capital including Vetriceramici | 10.7 | % | 9.4 | % | ||||
| Less: Vetriceramici invested capital | 92,781 | 100,430 | ||||||
| Invested capital excluding Vetriceramici | $ | 585,513 | $ | 582,337 | ||||
| Return on invested capital excluding Vetriceramici | 12.2 | % | 11.1 | % | ||||
| 1 | Primary includes ongoing certain business development activities, and the overall financial impact of currency related items in Venezuela. All noted items are not expected to recur, and we believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance. | |||
| 2 | Tax at the pro forma rate in 2015 is 29% and tax at the pro forma rate in 2014 is 36%. | |||
| It should be noted that adjusted operating profit 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). Adjusted operating profit is operating profit before the effects of discontinued operations, non-recurring adjustments to cost of sales, and non-recurring adjustments to SG&A. We believe this data provides investors with additional information on the underlying operations 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. |
Ferro Corporation
Investors:
John Bingle, 216-875-5411
Treasurer and Director of Investor Relations
john.bingle@ferro.com
or
Media:
Mary Abood, 216-875-5401
Director, Corporate Communications
mary.abood@ferro.com
