FERRO REPORTS THIRD QUARTER 2018 RESULTS Strong organic growth and momentum toward Vision 2020 continues. |
2018 Third Quarter * |
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Key Results * (amounts in millions, except EPS) |
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Sales and Gross Profits | Q3 2018 | % Change | YTD | % Change | ||||
Net Sales | $ | 395,163 |
| 12.9% | $ | 1,216,934 |
| 19.4% |
Net Sales (Constant Currency) |
| 395,163 |
| 16.3% |
| 1,216,934 |
| 16.9% |
Gross Profit (GAAP) |
| 105,487 |
| 1.8% |
| 350,818 |
| 12.9% |
Adjusted Gross Profit (Constant Currency) |
| 106,592 |
| 3.5% |
| 353,508 |
| 8.7% |
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Net Income, EBITDA and EPS | Q3 2018 | % Change | YTD | % Change | ||||
Net Income 1 | $ | 16,058 |
| -29.6% | $ | 69,117 |
| 5.1% |
Adjusted EBITDA |
| 63,713 |
| 8.4% |
| 202,923 |
| 13.7% |
GAAP diluted EPS | $ | 0.19 |
| -29.6% | $ | 0.81 |
| 5.2% |
Adjusted EPS |
| 0.37 |
| 12.1% |
| 1.17 |
| 15.8% |
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* Comparative information is relative to prior-year third quarter and year-to-date.
1 Note: Net Income attributable to Ferro Corporation common shareholders.
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Third Quarter Commentary |
The Company delivered strong revenue growth in the quarter, with both organic and inorganic growth contributing to the results. Demand in end markets was strong and is expected to continue in the fourth quarter.
Ferro significantly increased its Adjusted Free Cash Flow in the third quarter by tightening alignment between sales and plant utilization and satisfying a portion of customer demand with existing inventory. These initiatives generated Net Cash provided by Operating Activities of $73.4 million and Adjusted Free Cash Flow conversion of 124%, propelling the Company toward the upper end of its full-year cash generation targets.
Ferro’s above initiatives to drive cash, together with expected raw material headwinds, resulted in reduced gross margins in the quarter. However, the Company expects gross margins to rebound in the fourth quarter, as raw material prices decrease and Ferro pricing more than offsets any raw material headwinds relative to the prior year quarter for the first time since early 2017.
The cash generation initiatives taken in the third quarter provide the Company with additional levers to achieve its Vision 2020 performance goals. The Company ended the quarter with liquidity of approximately $510 million.
Segment Results * (amounts in millions, except EPS) |
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| Performance Coatings | Q3 2018 | % Change | YTD | % Change | |||||
| Net Sales | $ | 175,939 |
| 20.3% | $ | 554,036 |
| 30.5% | |
| Net Sales (Constant Currency) |
| 175,939 |
| 26.2% |
| 554,036 |
| 28.8% | |
| Gross Profit (GAAP) |
| 36,257 |
| 2.2% |
| 130,319 |
| 19.3% | |
| Adjusted Gross Profit (Constant Currency) |
| 36,257 |
| 4.2% |
| 130,186 |
| 14.5% | |
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| Performance Colors & Glass | Q3 2018 | % Change | YTD | % Change | |||||
| Net Sales | $ | 123,277 |
| 11.5% | $ | 369,809 |
| 15.3% | |
| Net Sales (Constant Currency) |
| 123,277 |
| 13.5% |
| 369,809 |
| 12.1% | |
| Gross Profit (GAAP) |
| 40,095 |
| 5.8% |
| 128,785 |
| 11.6% | |
| Adjusted Gross Profit (Constant Currency) |
| 40,095 |
| 5.5% |
| 128,789 |
| 7.1% | |
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| Color Solutions | Q3 2018 | % Change | YTD | % Change | |||||
| Net Sales | $ | 95,947 |
| 3.0% | $ | 293,089 |
| 7.0% | |
| Net Sales (Constant Currency) |
| 95,947 |
| 4.6% |
| 293,089 |
| 4.4% | |
| Gross Profit (GAAP) |
| 30,174 |
| -2.8% |
| 93,864 |
| 7.1% | |
| Adjusted Gross Profit (Constant Currency) |
| 31,018 |
| 1.3% |
| 95,661 |
| 3.8% |
* Comparative information is relative to prior-year third quarter
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“Dynamic Innovation and Optimization” and Vision 2020 |
Ferro continues to progress through the “dynamic innovation and optimization” phase of its strategy and toward achieving the Company’s Vision 2020 goals. These goals include 3% – 4% annual organic growth; gross margins of 33% – 34% (achieved in part through 2% annual optimization efficiencies already underway); Adjusted EBITDA margins of at least 20%; and Adjusted Free Cash Flow conversion of 50% – 60%.
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“Dynamic Innovation and Optimization” and Vision 2020 continued |
Ferro’s innovation and optimization initiatives are broad-based and global. Significant investments are being made in plant efficiency, new equipment and technologies, technical and manufacturing Centers of Excellence, footprint rationalization, integration of acquisitions, and supply chain efficiencies. While certain information regarding these initiatives remains confidential to protect Ferro’s competitive position, management currently expects the most significant of these initiatives to increase Adjusted EBITDA relative to 2018 by approximately $30 million in 2020, with approximately $8 million of that being realized in 2019.
Ferro continues to expect to achieve its Vision 2020 performance goals without the benefit of acquisitions; nevertheless, Ferro aims to invest $100 million - $150 million in strategic investments each year from 2018 through 2020, adding to the Company’s growth and performance.
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Full Year 2018 Guidance |
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The Company expects full year 2018 Adjusted EPS and Adjusted EBITDA to be at the lower end of the range of guidance and Adjusted Free Cash Flow Conversion to be at the upper end of the range of guidance.
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| Adjusted Free Cash |
| Adjusted | Adjusted | Flow from Operations |
| EBITDA | EPS | Conversion1 |
2018 Guidance | $270M - $275M | $1.55 - $1.60 | 40% - 45% |
Currency Exposure 2017 Weighting |
| 2018 Guidance FX sensitivity | ||
EUR - Euro | 35% to 40% |
| % Change | Operating Profit |
CNY -Yuan Renminbi | 5% to 7% |
| +1% all FX change | ~ $1.4 million to ~$1.6 million |
MXN – Mexican Peso | 4% to 6% |
| +1% Euro change | ~$0.9 million to ~$1.1 million |
EGP – Egyptian Pound | 2% to 5% |
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The results and guidance in this release, including in the highlights above, contain references to non-GAAP measures from continuing operations. Reconciliations of historical GAAP to non-GAAP results can be found at the end of this release.
1 Note: Adjusted Free Cash Flow is defined as GAAP Net Cash provided by operating activities, less Capex, plus cash used for restructuring, acquisition-related professional fees, divested businesses and assets, and certain optimization projects (including Capital).
Ferro is providing Adjusted diluted EPS, Adjusted EBITDA and Adjusted Free Cash Flow from Operations Conversion guidance on a continuing operations basis. While it is likely that Ferro could incur charges for items excluded from adjusted diluted EPS, adjusted EBITDA and adjusted free cash flow from operations conversion 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 these adjusted non-GAAP financial measures to their most directly comparable GAAP financial measures.
Share Repurchase
During the third quarter, the Company purchased $11 million of its common stock, or approximately 0.5 million shares. Since the beginning of 2018 through the close of trading on November 7, the Company purchased a total of $27.5 million of its common stock or approximately 1.4 million shares.
The Company’s Board of Directors has approved a new share repurchase program under which the Company is authorized to repurchase up to an additional $50 million of the Company’s outstanding common stock on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, or otherwise. With this additional program, the Company has a total of approximately $72.5 million of authorized but unused capacity to repurchase Company stock.
Constant Currency
Constant currency results reflect the remeasurement of 2017 reported and adjusted local currency results using 2018 exchange rates, which reproduces constant currency comparative figures to 2018 reported and adjusted results. These non-GAAP financial measures 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 Friday, November 9, 2018. Investors can access this conference via any of the following:
• Webcast can be accessed by clicking on the Investors link at the top of Ferro’s website at ferro.com.
• Live telephone: Call 800-909-7944 within the U.S. or +1 212-231-2935 outside the U.S. Please join the call at least 10 minutes before the start time.
• Webcast replay: Available in the Investors section of Ferro’s website at ferro.com beginning at approximately 12:00 noon Eastern Time on November 9, 2018
• 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 21891850).
• Presentation material & podcast: Earnings presentation material and podcasts can be accessed through the Investors section of the Company’s website 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 5,850 associates globally and reported 2017 sales of $1.4 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 investment and 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 including the impact of tariffs; |
· | challenges associated with a multi-national company such as Ferro competing lawfully with local competitors in certain regions of the world; |
· | Ferro’s ability to identify suitable acquisition candidates, complete acquisitions, effectively integrate the acquired businesses and achieve the expected synergies, 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 and services or enter into new growth markets; |
· | the impact of damage to, or the interruption, failure or compromise of the Company’s information systems; |
· | the implementation and operations of business information systems and processes; |
· | 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 regulation of hazardous and other 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; |
· | our ability to address safety, human health, product liability and environmental risks associated with our current and historical products, product life cycle and production processes; |
· | 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; |
Cautionary Note on Forward-Looking Statements (continued)
· | 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 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; |
· | the impact of the Tax Cuts and Jobs Act on our business; |
· | exposure to lawsuits, governmental investigations and proceedings relating to current and historical operations and products; |
· | 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; |
· | 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, 2017.
Ferro Corporation
Investor Contact:
Kevin Cornelius Grant, 216.875.5451
Head of Investor Relations
kevincornelius.grant@ferro.com
or
Media Contact:
Mary Abood, 216.875.5401
Director, Corporate Communications
mary.abood@ferro.com
Table 1
Ferro Corporation and Subsidiaries
Consolidated Statements of Operations (unaudited)
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(In thousands, except per share amounts) |
| Three Months Ended |
| Nine Months Ended | ||||||||
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| September 30, |
| September 30, | ||||||||
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| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
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Net sales |
| $ | 395,163 |
| $ | 350,012 |
| $ | 1,216,934 |
| $ | 1,019,199 |
Cost of sales |
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| 289,676 |
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| 246,396 |
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| 866,116 |
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| 708,447 |
Gross profit |
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| 105,487 |
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| 103,616 |
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| 350,818 |
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| 310,752 |
Selling, general and administrative expenses |
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| 64,344 |
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| 65,941 |
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| 207,560 |
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| 188,368 |
Restructuring and impairment charges |
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| 2,561 |
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| 1,471 |
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| 10,435 |
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| 7,713 |
Other expense (income): |
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Interest expense |
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| 8,553 |
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| 7,248 |
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| 24,715 |
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| 19,921 |
Interest earned |
|
| (110) |
|
| (201) |
|
| (497) |
|
| (556) |
Foreign currency losses, net |
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| 2,554 |
|
| 1,021 |
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| 7,054 |
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| 5,575 |
Loss on extinguishment of debt |
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| - |
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| - |
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| 3,226 |
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| 3,905 |
Miscellaneous expense (income), net |
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| 74 |
|
| (2,182) |
|
| (523) |
|
| (3,675) |
Income before income taxes |
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| 27,511 |
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| 30,318 |
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| 98,848 |
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| 89,501 |
Income tax expense |
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| 11,368 |
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| 7,353 |
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| 29,246 |
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| 23,186 |
Net income |
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| 16,143 |
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| 22,965 |
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| 69,602 |
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| 66,315 |
Less: Net income attributable to noncontrolling interests |
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| 85 |
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| 148 |
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| 485 |
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| 575 |
Net income attributable to Ferro Corporation common shareholders |
| $ | 16,058 |
| $ | 22,817 |
| $ | 69,117 |
| $ | 65,740 |
Earnings per share attributable to Ferro Corporation common shareholders: |
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Basic earnings per share |
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| 0.19 |
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| 0.27 |
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| 0.82 |
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| 0.79 |
Diluted earnings per share |
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| 0.19 |
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| 0.27 |
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| 0.81 |
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| 0.77 |
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Shares outstanding: |
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Weighted-average basic shares |
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| 83,893 |
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| 83,735 |
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| 84,154 |
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| 83,646 |
Weighted-average diluted shares |
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| 85,162 |
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| 85,450 |
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| 85,428 |
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| 85,174 |
End-of-period basic shares |
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| 83,657 |
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| 83,798 |
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| 83,657 |
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| 83,798 |
Table 2
Ferro Corporation and Subsidiaries
Segment Net Sales and Gross Profit (unaudited)
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(Dollars in thousands) |
| Three Months Ended |
| Nine Months Ended | ||||||||
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| September 30, |
| September 30, | ||||||||
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| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Segment Net Sales |
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Performance Coatings |
| $ | 175,939 |
| $ | 146,238 |
| $ | 554,036 |
| $ | 424,549 |
Performance Colors and Glass |
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| 123,277 |
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| 110,578 |
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| 369,809 |
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| 320,733 |
Color Solutions |
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| 95,947 |
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| 93,196 |
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| 293,089 |
|
| 273,917 |
Total segment net sales |
| $ | 395,163 |
| $ | 350,012 |
| $ | 1,216,934 |
| $ | 1,019,199 |
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Segment Gross Profit |
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Performance Coatings |
| $ | 36,257 |
| $ | 35,470 |
| $ | 130,319 |
| $ | 109,205 |
Performance Colors and Glass |
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| 40,095 |
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| 37,880 |
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| 128,785 |
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| 115,385 |
Color Solutions |
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| 30,174 |
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| 31,044 |
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| 93,864 |
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| 87,642 |
Other costs of sales |
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| (1,039) |
|
| (778) |
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| (2,150) |
|
| (1,480) |
Total gross profit |
| $ | 105,487 |
| $ | 103,616 |
| $ | 350,818 |
| $ | 310,752 |
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Selling, general and administrative expenses |
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Strategic services |
| $ | 37,084 |
| $ | 34,408 |
| $ | 117,905 |
| $ | 99,081 |
Functional services |
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| 26,388 |
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| 26,386 |
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| 79,430 |
|
| 74,454 |
Incentive compensation |
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| (489) |
|
| 3,637 |
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| 5,008 |
|
| 7,932 |
Stock-based compensation |
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| 1,361 |
|
| 1,510 |
|
| 5,217 |
|
| 6,901 |
Total selling, general and administrative expenses |
| $ | 64,344 |
| $ | 65,941 |
| $ | 207,560 |
| $ | 188,368 |
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Table 3
Ferro Corporation and Subsidiaries
Consolidated Balance Sheets (unaudited)
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(Dollars in thousands) |
| September 30, |
| December 31, | ||
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| 2018 |
| 2017 | ||
ASSETS |
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Current assets |
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Cash and cash equivalents |
| $ | 126,278 |
| $ | 63,551 |
Accounts receivable, net |
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| 381,435 |
|
| 354,416 |
Inventories |
|
| 377,555 |
|
| 324,180 |
Other receivables |
|
| 70,261 |
|
| 67,137 |
Other current assets |
|
| 27,084 |
|
| 16,448 |
Total current assets |
|
| 982,613 |
|
| 825,732 |
Other assets |
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|
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Property, plant and equipment, net |
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| 353,878 |
|
| 321,742 |
Goodwill |
|
| 214,750 |
|
| 195,369 |
Intangible assets, net |
|
| 189,689 |
|
| 187,616 |
Deferred income taxes |
|
| 102,606 |
|
| 108,025 |
Other non-current assets |
|
| 38,423 |
|
| 43,718 |
Total assets |
| $ | 1,881,959 |
| $ | 1,682,202 |
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LIABILITIES AND EQUITY |
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Current liabilities |
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Loans payable and current portion of long-term debt |
| $ | 9,637 |
| $ | 25,136 |
Accounts payable |
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| 217,266 |
|
| 211,711 |
Accrued payrolls |
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| 38,855 |
|
| 48,201 |
Accrued expenses and other current liabilities |
|
| 78,809 |
|
| 70,151 |
Total current liabilities |
|
| 344,567 |
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| 355,199 |
Other liabilities |
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|
|
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|
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Long-term debt, less current portion |
|
| 923,640 |
|
| 726,491 |
Postretirement and pension liabilities |
|
| 159,895 |
|
| 166,680 |
Other non-current liabilities |
|
| 65,856 |
|
| 77,152 |
Total liabilities |
|
| 1,493,958 |
|
| 1,325,522 |
Equity |
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|
|
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|
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Total Ferro Corporation shareholders’ equity |
|
| 379,029 |
|
| 344,814 |
Noncontrolling interests |
|
| 8,972 |
|
| 11,866 |
Total liabilities and equity |
| $ | 1,881,959 |
| $ | 1,682,202 |
Table 4
Ferro Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows (unaudited)
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(Dollars in thousands) |
| Three Months Ended |
| Nine Months Ended | ||||||||
|
| September 30, |
| September 30, | ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Cash flows from operating activities |
|
|
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|
|
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|
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Net income |
| $ | 16,143 |
| $ | 22,965 |
| $ | 69,602 |
| $ | 66,315 |
Loss (gain) on sale of assets |
|
| 197 |
|
| (2,499) |
|
| 485 |
|
| (1,214) |
Depreciation and amortization |
|
| 13,272 |
|
| 12,884 | �� |
| 40,238 |
|
| 36,040 |
Interest amortization |
|
| 911 |
|
| 943 |
|
| 2,684 |
|
| 2,375 |
Restructuring and impairment |
|
| (1,202) |
|
| (245) |
|
| 4,277 |
|
| 3,629 |
Loss on extinguishment of debt |
|
| - |
|
| - |
|
| 3,226 |
|
| 3,905 |
Accounts receivable |
|
| 14,325 |
|
| 3,231 |
|
| (36,439) |
|
| (44,952) |
Inventories |
|
| 6,531 |
|
| (2,720) |
|
| (58,833) |
|
| (31,379) |
Accounts payable |
|
| 12,634 |
|
| (13,541) |
|
| 11,103 |
|
| 581 |
Other current assets and liabilities, net |
|
| 1,469 |
|
| (6,544) |
|
| (17,331) |
|
| (11,655) |
Other adjustments, net |
|
| 9,081 |
|
| 5,512 |
|
| 16,674 |
|
| 11,046 |
Net cash provided by operating activities |
|
| 73,361 |
|
| 19,986 |
|
| 35,686 |
|
| 34,691 |
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property, plant and equipment and other long lived assets |
|
| (20,585) |
|
| (13,240) |
|
| (64,154) |
|
| (30,134) |
Proceeds from sale of equity method investment |
|
| - |
|
| 2,268 |
|
| - |
|
| 2,268 |
Business acquisitions, net of cash acquired |
|
| (42,882) |
|
| (57,178) |
|
| (47,802) |
|
| (71,930) |
Other investing activities |
|
| 6 |
|
| 406 |
|
| 37 |
|
| 551 |
Net cash used in investing activities |
|
| (63,461) |
|
| (67,744) |
|
| (111,919) |
|
| (99,245) |
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net (repayments) under loans payable |
|
| (15,354) |
|
| (5,158) |
|
| (17,182) |
|
| (10,803) |
Proceeds from revolving credit facility - 2014 Credit Facility |
|
| - |
|
| - |
|
| - |
|
| 15,628 |
Principal payments on revolving credit facility - 2014 Credit Facility |
|
| - |
|
| - |
|
| - |
|
| (327,183) |
Principal payments on term loan facility - 2014 Credit Facility |
|
| - |
|
| - |
|
| - |
|
| (243,250) |
Proceeds from term loan facility - Credit Facility |
|
| - |
|
| - |
|
| - |
|
| 623,827 |
Principal payments on term loan facility - Credit Facility |
|
| - |
|
| (1,636) |
|
| (304,060) |
|
| (3,232) |
Principal payments on term loan facility - Amended Credit Facility |
|
| (2,050) |
|
| - |
|
| (4,100) |
|
| - |
Proceeds from revolving credit facility - Credit Facility |
|
| - |
|
| 69,787 |
|
| 134,950 |
|
| 69,787 |
Principal payments on revolving credit facility - Credit Facility |
|
| - |
|
| (42,400) |
|
| (212,950) |
|
| (42,400) |
Proceeds from revolving credit facility - Amended Credit Facility |
|
| 167,443 |
|
| - |
|
| 168,023 |
|
| - |
Principal payments on revolving credit facility - Amended Credit Facility |
|
| (56,090) |
|
| - |
|
| (56,090) |
|
| - |
Proceeds from term loan facility - Amended Credit Facility |
|
| - |
|
| - |
|
| 466,075 |
|
| - |
Principal payments on other long-term debt |
|
| - |
|
| (2,978) |
|
| - |
|
| (2,978) |
Proceeds on other long-term debt |
|
| - |
|
| 2,700 |
|
| - |
|
| 2,700 |
Payment of debt issuance costs |
|
| - |
|
| - |
|
| (3,466) |
|
| (12,927) |
Acquisition related contingent consideration payment |
|
| (9,116) |
|
| (1,315) |
|
| (9,464) |
|
| (1,315) |
Purchase of treasury stock |
|
| (10,985) |
|
| - |
|
| (16,999) |
|
| - |
Other financing activities |
|
| (1,129) |
|
| 1,112 |
|
| (3,516) |
|
| 182 |
Net cash provided by financing activities |
|
| 72,719 |
|
| 20,112 |
|
| 141,221 |
|
| 68,036 |
Effect of exchange rate changes on cash and cash equivalents |
|
| (1,227) |
|
| 991 |
|
| (2,261) |
|
| 3,147 |
Increase (decrease) in cash and cash equivalents |
|
| 81,392 |
|
| (26,655) |
|
| 62,727 |
|
| 6,629 |
Cash and cash equivalents at beginning of period |
|
| 44,886 |
|
| 78,866 |
|
| 63,551 |
|
| 45,582 |
Cash and cash equivalents at end of period |
| $ | 126,278 |
| $ | 52,211 |
| $ | 126,278 |
| $ | 52,211 |
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
| $ | 8,407 |
| $ | 5,880 |
| $ | 24,857 |
| $ | 20,594 |
Income taxes |
| $ | 3,199 |
| $ | 7,106 |
| $ | 17,577 |
| $ | 16,619 |
Table 5
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Reported Income to Adjusted Income
For the Three Months Ended September 30 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share amounts) |
|
| Cost of sales |
|
| Selling general and administrative expenses |
|
| Restructuring and impairment charges |
|
| Other expense, net |
|
| Income tax expense3 |
|
| Net income attributable to common shareholders |
|
| Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
| $ | 289,676 |
| $ | 64,344 |
| $ | 2,561 |
| $ | 11,071 |
| $ | 11,368 |
| $ | 16,058 |
| $ | 0.19 |
Special items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| - |
|
| - |
|
| (2,561) |
|
| - |
|
| - |
|
| 2,561 |
|
| 0.03 |
Acquisition related professional fees |
|
| (789) |
|
| (5,684) |
|
| - |
|
| - |
|
| - |
|
| 6,473 |
|
| 0.08 |
Costs related to optimization projects |
|
| (316) |
|
| (2,509) |
|
| - |
|
| - |
|
| - |
|
| 2,825 |
|
| 0.03 |
Other1 |
|
| - |
|
| - |
|
| - |
|
| (1,255) |
|
| - |
|
| 1,255 |
|
| 0.01 |
Tax on special items |
|
| - |
|
| - |
|
| - |
|
| - |
|
| (2,405) |
|
| 2,405 |
|
| 0.03 |
Total special items4 |
|
| (1,105) |
|
| (8,193) |
|
| (2,561) |
|
| (1,255) |
|
| (2,405) |
|
| 15,519 |
|
| 0.18 |
As adjusted |
| $ | 288,571 |
| $ | 56,151 |
| $ | - |
| $ | 9,816 |
| $ | 8,963 |
| $ | 31,577 |
| $ | 0.37 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
| $ | 246,396 |
| $ | 65,941 |
| $ | 1,471 |
| $ | 5,886 |
| $ | 7,353 |
| $ | 22,817 |
| $ | 0.27 |
Special items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| - |
|
| - |
|
| (1,471) |
|
| - |
|
| - |
|
| 1,471 |
|
| 0.02 |
Acquisition related professional fees |
|
| (1,230) |
|
| (4,903) |
|
| - |
|
| - |
|
| - |
|
| 6,133 |
|
| 0.07 |
Costs related to optimization projects |
|
| (135) |
|
| (586) |
|
| - |
|
| - |
|
| - |
|
| 721 |
|
| 0.01 |
Costs related to divested businesses and assets |
|
| - |
|
| (1,364) |
|
| - |
|
| - |
|
| - |
|
| 1,364 |
|
| 0.02 |
Other2 |
|
| - |
|
| - |
|
| - |
|
| 2,272 |
|
| - |
|
| (2,272) |
|
| (0.03) |
Tax on special items |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 2,384 |
|
| (2,384) |
|
| (0.03) |
Total special items4 |
|
| (1,365) |
|
| (6,853) |
|
| (1,471) |
|
| 2,272 |
|
| 2,384 |
|
| 5,033 |
|
| 0.06 |
As adjusted |
| $ | 245,031 |
| $ | 59,088 |
| $ | - |
| $ | 8,158 |
| $ | 9,737 |
| $ | 27,850 |
| $ | 0.33 |
(1) | The adjustments to “Other expense, net” primarily relate to impacts of currency related items in Argentina. |
(2) | The adjustments to “Other expense, net” primarily relate to a gain on purchase of an equity method investment. |
(3) | The tax rate reflects the reported tax rate, adjusted for special items 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. 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 Reported Income to Adjusted Income
For the Nine Months Ended September 30 (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except per share amounts) |
|
| Cost of sales |
|
| Selling general and administrative expenses |
|
| Restructuring and impairment charges |
|
| Other expense, net |
|
| Income tax expense3 |
|
| Net income attributable to common shareholders |
|
| Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2018 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
| $ | 866,116 |
| $ | 207,560 |
| $ | 10,435 |
| $ | 33,975 |
| $ | 29,246 |
| $ | 69,117 |
| $ | 0.81 |
Special items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| - |
|
| - |
|
| (10,435) |
|
| - |
|
| - |
|
| 10,435 |
|
| 0.12 |
Acquisition related professional fees |
|
| (1,741) |
|
| (11,479) |
|
| - |
|
| - |
|
| - |
|
| 13,220 |
|
| 0.15 |
Costs related to optimization projects |
|
| (949) |
|
| (4,874) |
|
| - |
|
| - |
|
| - |
|
| 5,823 |
|
| 0.07 |
Costs related to divested businesses and assets |
|
| - |
|
| (384) |
|
| - |
|
| - |
|
| - |
|
| 384 |
|
| - |
Other1 |
|
| - |
|
| - |
|
| - |
|
| (3,690) |
|
| - |
|
| 3,690 |
|
| 0.04 |
Tax on special items |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 2,862 |
|
| (2,862) |
|
| (0.03) |
Total special items4 |
|
| (2,690) |
|
| (16,737) |
|
| (10,435) |
|
| (3,690) |
|
| 2,862 |
|
| 30,690 |
|
| 0.35 |
As adjusted |
| $ | 863,426 |
| $ | 190,823 |
| $ | - |
| $ | 30,285 |
| $ | 32,108 |
| $ | 99,807 |
| $ | 1.17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2017 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported |
| $ | 708,447 |
| $ | 188,368 |
| $ | 7,713 |
| $ | 25,170 |
| $ | 23,186 |
| $ | 65,740 |
| $ | 0.77 |
Special items: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| - |
|
| - |
|
| (7,713) |
|
| - |
|
| - |
|
| 7,713 |
|
| 0.09 |
Acquisition related professional fees |
|
| (5,317) |
|
| (11,260) |
|
| - |
|
| - |
|
| - |
|
| 16,577 |
|
| 0.19 |
Costs related to optimization projects |
|
| (246) |
|
| (1,017) |
|
| - |
|
| - |
|
| - |
|
| 1,263 |
|
| 0.01 |
Costs related to divested businesses and assets |
|
| (70) |
|
| (2,149) |
|
| - |
|
| - |
|
| - |
|
| 2,219 |
|
| 0.03 |
Other2 |
|
| - |
|
| - |
|
| - |
|
| (3,061) |
|
| - |
|
| 3,061 |
|
| 0.04 |
Tax on special items |
|
| - |
|
| - |
|
| - |
|
| - |
|
| 10,922 |
|
| (10,922) |
|
| (0.13) |
Total special items4 |
|
| (5,633) |
|
| (14,426) |
|
| (7,713) |
|
| (3,061) |
|
| 10,922 |
|
| 19,911 |
|
| 0.23 |
As adjusted |
| $ | 702,814 |
| $ | 173,942 |
| $ | - |
| $ | 22,109 |
| $ | 34,108 |
| $ | 85,651 |
| $ | 1.01 |
(1) | The adjustments to “Other expense, net” primarily relate to impacts of currency related items in Argentina, debt extinguishment charges, fees expensed associated with the Amended Credit Facility, a gain recognized on increasing our ownership interest in FMU, earn out adjustments for acquisitions and other acquisition related costs. |
(2) | The adjustments to “Other expense, net” primarily relate to the FX loss incurred on our Euro-denominated term loan, a loss on an equity method investment, the loss/gain on an asset sale, debt extinguishment costs, a reduction of a contingent liability in Argentina and a gain on purchase of an equity method invesmtent. |
(3) | The tax rate reflects the reported tax rate, adjusted for special items 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. 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) |
| September 30, | ||||||||||
|
| 2017 |
| Adjusted 20171 |
| 2018 |
| 2018 vs Adjusted 2017 | ||||
Segment net sales |
|
|
|
|
|
|
|
|
|
|
|
|
Performance Coatings |
| $ | 146,238 |
| $ | 139,441 |
| $ | 175,939 |
| $ | 36,498 |
Performance Colors and Glass |
|
| 110,578 |
|
| 108,609 |
|
| 123,277 |
|
| 14,668 |
Color Solutions |
|
| 93,196 |
|
| 91,753 |
|
| 95,947 |
|
| 4,194 |
Total segment net sales |
| $ | 350,012 |
| $ | 339,803 |
| $ | 395,163 |
| $ | 55,360 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
Performance Coatings |
| $ | 35,866 |
| $ | 34,807 |
| $ | 36,257 |
| $ | 1,450 |
Performance Colors and Glass |
|
| 38,633 |
|
| 38,004 |
|
| 40,095 |
|
| 2,091 |
Color Solutions |
|
| 31,044 |
|
| 30,633 |
|
| 31,018 |
|
| 386 |
Other costs of sales |
|
| (562) |
|
| (482) |
|
| (778) |
|
| (296) |
Total adjusted gross profit2 |
| $ | 104,981 |
| $ | 102,962 |
| $ | 106,592 |
| $ | 3,631 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Strategic services |
| $ | 33,674 |
| $ | 32,879 |
| $ | 36,313 |
| $ | 3,434 |
Functional services |
|
| 20,267 |
|
| 19,592 |
|
| 18,966 |
|
| (626) |
Incentive compensation |
|
| 3,637 |
|
| 3,569 |
|
| (489) |
|
| (4,058) |
Stock-based compensation |
|
| 1,510 |
|
| 1,510 |
|
| 1,361 |
|
| (149) |
Total adjusted selling, general and administrative expenses3 |
| $ | 59,088 |
| $ | 57,550 |
| $ | 56,151 |
| $ | (1,399) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
| $ | 45,893 |
| $ | 45,412 |
| $ | 50,441 |
| $ | 5,030 |
Adjusted operating profit as a % of net sales |
|
| 13.1% |
|
| 13.4% |
|
| 12.8% |
|
|
|
(1) | Reflects the remeasurement of 2017 reported and adjusted local currency results using 2018 exchange rates, resulting in constant currency comparative figures to 2018 reported and adjusted results. See Table 5 for non-GAAP adjustments applicable to the three month period. |
(2) | Refer to Table 5 for the reconciliation of adjusted gross profit for the three months ended September 30, 2018 and 2017, respectively. |
(3) | Refer to Table 5 for the reconciliation of SG&A expenses to adjusted SG&A expenses for the three months ended September 30, 2018 and 2017, respectively. |
It should be noted that adjusted 2017 results 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 this financial measure 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
Constant Currency Schedule of Adjusted Operating Profit (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Nine Months Ended | ||||||||||
(Dollars in thousands) |
| September 30, | ||||||||||
|
| 2017 |
| Adjusted 20171 |
| 2018 |
| 2018 vs Adjusted 2017 | ||||
Segment net sales |
|
|
|
|
|
|
|
|
|
|
|
|
Performance Coatings |
| $ | 424,549 |
| $ | 430,201 |
| $ | 554,036 |
| $ | 123,835 |
Performance Colors and Glass |
|
| 320,733 |
|
| 329,970 |
|
| 369,809 |
|
| 39,839 |
Color Solutions |
|
| 273,917 |
|
| 280,693 |
|
| 293,089 |
|
| 12,396 |
Total segment net sales |
| $ | 1,019,199 |
| $ | 1,040,864 |
| $ | 1,216,934 |
| $ | 176,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
Performance Coatings |
| $ | 110,244 |
| $ | 113,663 |
| $ | 130,186 |
| $ | 16,523 |
Performance Colors and Glass |
|
| 116,923 |
|
| 120,242 |
|
| 128,789 |
|
| 8,547 |
Color Solutions |
|
| 90,306 |
|
| 92,184 |
|
| 95,661 |
|
| 3,477 |
Other costs of sales |
|
| (1,088) |
|
| (960) |
|
| (1,128) |
|
| (168) |
Total adjusted gross profit2 |
| $ | 316,385 |
| $ | 325,129 |
| $ | 353,508 |
| $ | 28,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Strategic services |
| $ | 97,974 |
| $ | 101,545 |
| $ | 116,993 |
| $ | 15,448 |
Functional services |
|
| 61,135 |
|
| 60,826 |
|
| 63,612 |
|
| 2,786 |
Incentive compensation |
|
| 7,932 |
|
| 8,099 |
|
| 5,001 |
|
| (3,098) |
Stock-based compensation |
|
| 6,901 |
|
| 6,901 |
|
| 5,217 |
|
| (1,684) |
Total adjusted selling, general and administrative expenses3 |
| $ | 173,942 |
| $ | 177,371 |
| $ | 190,823 |
| $ | 13,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
| $ | 142,443 |
| $ | 147,758 |
| $ | 162,685 |
| $ | 14,927 |
Adjusted operating profit as a % of net sales |
|
| 14.0% |
|
| 14.2% |
|
| 13.4% |
|
|
|
(1) | Reflects the remeasurement of 2017 reported and adjusted local currency results using 2018 exchange rates, resulting in constant currency comparative figures to 2018 reported and adjusted results. See Table 6 for non-GAAP adjustments applicable to the nine month period. |
(2) | Refer to Table 6 for the reconciliation of adjusted gross profit for the nine months ended September 30, 2018 and 2017, respectively. |
(3) | Refer to Table 6 for the reconciliation of SG&A expenses to adjusted SG&A expenses for the nine months ended September 30, 2018 and 2017, respectively. |
It should be noted that adjusted 2017 results 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 this financial measure 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 9
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net income attributable to Ferro Corporation
common shareholders to Adjusted EBITDA (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended |
| Nine Months Ended | ||||||||||||
|
| September 30, |
| September 30, | ||||||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Ferro Corporation common shareholders |
| $ | 16,058 |
|
| $ | 22,817 |
|
| $ | 69,117 |
|
| $ | 65,740 |
|
Net income attributable to noncontrolling interests |
|
| 85 |
|
|
| 148 |
|
|
| 485 |
|
|
| 575 |
|
Restructuring and impairment charges |
|
| 2,561 |
|
|
| 1,471 |
|
|
| 10,435 |
|
|
| 7,713 |
|
Other expense (income), net |
|
| 2,518 |
|
|
| (1,362) |
|
|
| 9,260 |
|
|
| 5,249 |
|
Interest expense |
|
| 8,553 |
|
|
| 7,248 |
|
|
| 24,715 |
|
|
| 19,921 |
|
Income tax expense |
|
| 11,368 |
|
|
| 7,353 |
|
|
| 29,246 |
|
|
| 23,186 |
|
Depreciation and amortization |
|
| 14,183 |
|
|
| 13,827 |
|
|
| 42,922 |
|
|
| 38,415 |
|
Less: interest amortization expense and other |
|
| (911) |
|
|
| (943) |
|
|
| (2,684) |
|
|
| (2,375) |
|
Cost of sales adjustments1 |
|
| 1,105 |
|
|
| 1,365 |
|
|
| 2,690 |
|
|
| 5,633 |
|
SG&A adjustments1 |
|
| 8,193 |
|
|
| 6,853 |
|
|
| 16,737 |
|
|
| 14,426 |
|
Adjusted EBITDA |
| $ | 63,713 |
|
| $ | 58,777 |
|
| $ | 202,923 |
|
| $ | 178,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 395,163 |
|
| $ | 350,012 |
|
| $ | 1,216,934 |
|
| $ | 1,019,199 |
|
Adjusted EBITDA as a % of net sales |
|
| 16.1 | % |
|
| 16.8 | % |
|
| 16.7 | % |
|
| 17.5 | % |
(1) | For details of Non-GAAP adjustments, refer to Table 5 and Table 6 for the reconciliation of cost of sales to adjusted cost of sales and SG&A to adjusted SG&A for the three and nine months ended September 30, 2018 and 2017, 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 this financial measure to the most comparable U.S. GAAP financial measure 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 10
Ferro Corporation and Subsidiaries
Supplemental Information
Change in Net Debt (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended |
| Nine Months Ended |
| ||||||||
|
| September 30, |
| September 30, |
| ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 |
| ||||
Beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross debt |
| $ | 846,039 |
| $ | 668,993 |
| $ | 759,078 |
| $ | 578,205 |
|
Cash |
|
| 44,886 |
|
| 78,866 |
|
| 63,551 |
|
| 45,582 |
|
Debt, net of cash |
|
| 801,153 |
|
| 590,127 |
|
| 695,527 |
|
| 532,623 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| 5,285 |
|
| 8,079 |
|
| 7,451 |
|
| 3,720 |
|
Debt, net of cash and unamortized debt issuance costs |
|
| 795,868 |
|
| 582,048 |
|
| 688,076 |
|
| 528,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross debt |
|
| 938,340 |
|
| 699,684 |
|
| 938,340 |
|
| 699,684 |
|
Cash |
|
| 126,278 |
|
| 52,211 |
|
| 126,278 |
|
| 52,211 |
|
Debt, net of cash |
|
| 812,062 |
|
| 647,473 |
|
| 812,062 |
|
| 647,473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| 5,063 |
|
| 7,743 |
|
| 5,063 |
|
| 7,743 |
|
Debt, net of cash and unamortized debt issuance costs |
|
| 806,999 |
|
| 639,730 |
|
| 806,999 |
|
| 639,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change from FX on Euro term loan debt |
|
| - |
|
| (9,646) |
|
| (5,657) |
|
| (28,878) |
|
FX on Cash |
|
| (1,227) |
|
| 991 |
|
| (2,261) |
|
| 3,147 |
|
Assumption of debt from acquisitions |
|
| - |
|
| - |
|
| - |
|
| (7,975) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period increase in debt, net of cash, unamortized debt issuance costs and FX |
| $ | (9,682) |
| $ | (48,691) |
| $ | (108,617) |
| $ | (81,144) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period increase in debt, net of cash and unamortized debt issuance costs |
| $ | (11,131) |
| $ | (57,682) |
| $ | (118,923) |
| $ | (110,827) |
|
It should be noted that the change in net debt 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 this financial measure to the most comparable U.S. GAAP financial measure is presented. We believe that given the significant cash and cash equivalents on the balance sheet that the change in cash against outstanding debt, net debt, between periods is a meaningful measure.
Table 11
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to
Adjusted Free Cash Flow from Continuing Operations (Non-GAAP) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended September 30, |
| Nine Months Ended September 30, | ||||||||
|
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
| $ | 16,143 |
| $ | 22,965 |
| $ | 69,602 |
| $ | 66,315 |
Loss (gain) on sale of assets |
|
| 197 |
|
| (2,499) |
|
| 485 |
|
| (1,214) |
Depreciation and amortization |
|
| 13,272 |
|
| 12,884 |
|
| 40,238 |
|
| 36,040 |
Interest amortization |
|
| 911 |
|
| 943 |
|
| 2,684 |
|
| 2,375 |
Restructuring and impairment |
|
| (1,202) |
|
| (245) |
|
| 4,277 |
|
| 3,629 |
Loss on extinguishment of debt |
|
| - |
|
| - |
|
| 3,226 |
|
| 3,905 |
Accounts receivable |
|
| 14,325 |
|
| 3,231 |
|
| (36,439) |
|
| (44,952) |
Inventories |
|
| 6,531 |
|
| (2,720) |
|
| (58,833) |
|
| (31,379) |
Accounts payable |
|
| 12,634 |
|
| (13,541) |
|
| 11,103 |
|
| 581 |
Other current assets and liabilities, net |
|
| 1,469 |
|
| (6,544) |
|
| (17,331) |
|
| (11,655) |
Other adjustments, net |
|
| 9,081 |
|
| 5,512 |
|
| 16,674 |
|
| 11,046 |
Net cash provided by operating activities (GAAP) |
| $ | 73,361 |
| $ | 19,986 |
| $ | 35,686 |
| $ | 34,691 |
Less: Capital Expenditures |
|
| (20,585) |
|
| (13,240) |
|
| (64,154) |
|
| (30,134) |
Free Cash Flow provided by (used in) Continuing Operations (Non-GAAP) |
|
| 52,776 |
|
| 6,746 |
|
| (28,468) |
|
| 4,557 |
Plus: cash used for restructuring |
|
| 2,638 |
|
| 1,717 |
|
| 6,158 |
|
| 4,084 |
Plus: cash used for capital expenditures related to optimization projects(1) |
|
| 11,885 |
|
| 2,464 |
|
| 31,787 |
|
| 7,875 |
Plus: Cash used for net working capital investment related to optimization projects(2) |
|
| 3,372 |
|
| 2,173 |
|
| 5,423 |
|
| 2,173 |
Plus: Cash used for acquisition related professional fees(3) |
|
| 5,591 |
|
| 5,585 |
|
| 10,297 |
|
| 9,797 |
Plus: Cash used for optimization projects(3) |
|
| 2,825 |
|
| 721 |
|
| 5,823 |
|
| 1,263 |
Plus: Cash used for divested businesses and assets(3) |
|
| - |
|
| 1,398 |
|
| 384 |
|
| 2,149 |
Adjusted Free Cash Flow from Continuing Operations (Non-GAAP) |
|
| 79,087 |
|
| 20,804 |
|
| 31,404 |
|
| 31,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income Attributable to Ferro Corporation Common Shareholders |
|
| 16,058 |
|
| 22,817 |
|
| 69,117 |
|
| 65,740 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities Conversion of Net Income Attributable to Ferro Corporation Common Shareholders |
|
| 456.9% |
|
| 87.6% |
|
| 51.6% |
|
| 52.8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA (Non-GAAP) - From Table 9 |
|
| 63,713 |
|
| 58,777 |
|
| 202,923 |
|
| 178,483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow Conversion of Adjusted EBITDA from Continuing Operations (Non-GAAP) |
|
| 124.1% |
|
| 35.4% |
|
| 15.5% |
|
| 17.9% |
(1) | The adjustment to capital expenditures represents capital spend for certain optimization projects that are not expected to recur in the long-term at the current rate. See Table 10 for the reconciliation of period change in debt, net of cash, unamortized debt issuance costs, FX and assumption of debt from acquisitions. |
(2) | The adjustment to net working capital represents spend for the build in inventory related to optimization projects noted in (1) above. This build in inventory is considered to be outside of the normal operations of the underlying business, and expected to be temporary in nature. |
(3) | The adjustment represents those cash outlays for (a) acquisitions related professional fees, (b) costs related to certain optimization projects, and (c) costs related to divested businesses and assets, as detailed in the description of adjustments in Table 5 and Table 6 for the three and nine months ended September 30, 2018 and 2017, respectively. |
It should be noted that adjusted free cash flow from continuing operations is a financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (GAAP). The non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with GAAP and a reconciliation of the 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 the financial performance of the business. Additionally, certain elements of these measures are used in the calculation of certain incentive compensation programs for management.