FERRO REPORTS STRONG FOURTH QUARTER PERFORMANCE, ANNOUNCES COMPLETION OF TILE COATINGS SYSTEMS DIVESTITURE, AND PROVIDES FULL YEAR 2021 GUIDANCE | |||||||
Fourth Quarter Continuing Operations* |
| Full Year Continuing Operations* | |||||
| Net Sales increased 6.2% to $260.0M |
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| Net Sales declined 5.5% to $959.0M | |||
| Net Sales increased 3.5% on a constant currency basis |
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| Net Sales declined 5.3% on a constant currency basis | |||
| Gross Profit increased 5.6% to $79.1M, Gross Profit Margin of 30.4% |
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| Gross Profit declined 4.6% to $293.8M, Gross Profit Margin of 30.6% |
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| Adjusted Gross Profit increased 3.7% to $80.6M, Adjusted Gross Profit Margin of 31.0% |
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| Adjusted Gross Profit declined 4.6%, Adjusted Gross Profit Margin of 31.3% | |||
| GAAP diluted EPS increased to $0.08 from a loss of $0.03, Adjusted diluted EPS increased 47.1% to $0.25 |
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| GAAP diluted EPS declined 14.6% to $0.35, Adjusted diluted EPS declined 2.2% to $0.81 | |||
| Net Income1 increased to $17.7M, Adjusted EBITDA increased 22.1% to $45.2M, Adjusted EBITDA Margin increased 227 basis points to 17.4% |
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| Net Income1 increased to $42.8M, Adjusted EBITDA declined 2.7% to $153.7M, Adjusted EBITDA Margin increased 46 basis points to 16.0% |
*Comparative information is relative to prior-year fourth quarter and full year for Continuing Operations
1 Note: Net Income attributable to Ferro Corporation common shareholders.
| Ferro associates around the world delivered strong performance during 2020. Despite the challenges of the global pandemic, our teams adapted very well, keeping safety and health paramount while delivering strong business and financial performance. Fourth quarter results were substantially stronger than the same period the prior year, exceeding our expectations and providing positive momentum as we moved into 2021. We were particularly pleased with the continued expansion of our adjusted gross margins during the quarter, which have achieved a level we expect to maintain or exceed in 2021.
Full-year results were lower than the prior year, primarily due to effects of the COVID-19 pandemic. However, as we noted in earlier reporting, Ferro experienced a “V-shaped” recovery during the second half of 2020 as our customers’ markets began to recover and demand grew for certain Ferro products as a result of pandemic-induced changes in behavior. We expect to continue to benefit from these trends in 2021.
We are optimistic about the opportunities for Ferro in 2021. In addition to favorable macro-economic circumstances, we intend to further strengthen Ferro’s market leadership positions with new functional coatings and color solutions products and applications. We remain focused on innovation and are committed to addressing customer needs with creative solutions and market-leading products and services. We also intend to continue with optimization initiatives across our global operations, removing stranded costs and improving efficiency.
At this time, we also are happy to report the completion of the previously announced divestiture of our Tile Coatings Systems business to Pigments Spain, S.L. This transaction has been an extraordinary undertaking, and with its completion, Ferro becomes a more focused, nimble, higher-margin, higher-growth business. We can all take pride in what we accomplished expanding and strengthening the Tile Coating business. On a more personal note, many of us have enjoyed close relationships with our Tile Coatings colleagues over the years. We will miss working with them and wish them much success as they join another internationally recognized leader in the tile coatings space.
Over the last several years, we have executed a strategy that has transformed our Company. I am very proud of the business we have created. My sincere thanks are sent to all the dedicated people of Ferro who have executed the strategy. They have transformed Ferro into a leading functional coatings and color solutions company.
Peter Thomas Chairman, President and CEO, Ferro Corporation
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Phase V. Genesis - Tile Coatings System Sale Completed |
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On Thursday, February 25, 2021, the Company successfully completed the sale of its Tile Coatings Systems business to Pigments Spain, S.L., a company in the Esmalglass-Itaca-Fritta group, which is a portfolio company of certain Lone Star Funds, for $460 million in cash, subject to post-closing adjustments.
With the completion of the sale of the Tile Coatings Systems business, Ferro shifts to the next phase of its strategy as a technology-focused higher-margin, higher-growth business. Ferro’s fourth quarter 2020 results and guidance for 2021 demonstrate the performance potential of its current portfolio. In this phase, Ferro expects higher sustained margins, stronger underlying market growth, more focus on innovation, more balance among end markets and geographies, less raw material consumption, lower capital intensity, a streamlined manufacturing footprint and less cyclicality. In addition, with the proceeds from the sale of the Tile Coatings Systems business, the Company substantially strengthens its balance sheet.
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Key Results from Continuing Operations* (amounts in millions, except EPS) |
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Sales and Gross Profits | Q4 2020 | % Change | 2020 | % Change | |||||
Net Sales | $ | 259,950 |
| 6.2% | $ | 958,954 |
| -5.5% | |
Net Sales (constant currency) |
| 259,950 |
| 3.5% |
| 958,954 |
| -5.3% | |
Gross Profit (GAAP) |
| 79,108 |
| 5.6% |
| 293,756 |
| -4.6% | |
Gross Profit Margin |
| 30.4% |
| (18) bps |
| 30.6% |
| 27 bps | |
Adjusted Gross Profit (constant currency) |
| 80,601 |
| 3.7% |
| 300,372 |
| -4.6% | |
Adjusted Gross Profit Margin |
| 31.0% |
| 7 bps |
| 31.3% |
| 25 bps | |
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Net Income, EBITDA and EPS | Q4 2020 | % Change | 2020 | % Change | |||||
Net Income 1 | $ | 17,742 |
| NM | $ | 42,799 |
| NM | |
Adjusted EBITDA |
| 45,246 |
| 22.1% |
| 153,720 |
| -2.7% | |
Adjusted EBITDA Margin |
| 17.4% |
| 227 bps |
| 16.0% |
| 46 bps | |
GAAP diluted EPS | $ | 0.08 |
| NM | $ | 0.35 |
| -14.6% | |
Adjusted EPS |
| 0.25 |
| 47.1% |
| 0.81 |
| -2.4% |
Cash Flow | Q4 2020 | % Change | 2020 | % Change | ||||||
Net Cash provided by (used in) operating activities (GAAP) 2 | $ | 93,289 |
| 9.8% | $ | (13,192) |
| NM | ||
Adjusted Free Cash Flow from Operating Activities (Non-GAAP)3 |
| 115,857 |
| 37.2% |
| 84,994 |
| 127.8% |
* Comparative information is relative to prior-year fourth quarter and full year for Continuing Operations
1 Note: Net Income attributable to Ferro Corporation common shareholders
2 Note: Table 4 Condensed Consolidated Statements of Cash Flows
3 Note: Table 11 Adjusted Free Cash Flow from Operating Activities (Non-GAAP)
Fourth Quarter and Full Year 2020 Highlights |
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Net sales in the fourth quarter of 2020 increased 6.2% to $260.0 million (an increase of 3.5% on a constant currency basis) compared to the fourth quarter of 2019. This improvement is attributable to continuing increases in demand as global markets strengthened following COVID-19 pandemic shutdowns in the second quarter and was the second consecutive quarter of increased top line revenue.
Demand continued to strengthen from late in the second quarter through the fourth quarter across the business, including for our automotive, industrial, construction, electronics and porcelain enamel products. This was offset by lower sales in our industrial printing applications, which had a relatively strong prior-year quarter, and continued weakness in demand for our decoration products, which are sold into the pandemic-afflicted travel and leisure industry.
Compared to the prior year quarter, gross profit in the fourth quarter increased 5.6% to $79.1 million (an increase of 3.7% to $80.6 million on an adjusted constant currency basis). This is the second consecutive quarter of gross profit increases. Gross Profit Margin in the fourth quarter was 30.4% compared to 30.6% in the prior year fourth quarter. Adjusted Gross Profit Margin was 31.0% compared to 30.9% in the prior year fourth quarter.
Fourth quarter GAAP diluted EPS was $0.08, compared to a loss of $0.03 in the prior year fourth quarter. Adjusted diluted EPS for the fourth quarter was $0.25, an increase of 47.1% from the prior year fourth quarter. Net Income1 increased to $17.7 million for the fourth quarter compared to a loss of $31.3 million in the prior year fourth quarter, and Adjusted EBITDA increased 22.1% to $45.2 million.
Full-year 2020 net sales declined 5.5% to $959.0 million, a decline of 5.3% on a constant currency basis. The primary driver for the decline was the impact of the COVID-19 pandemic. Total Selling, General and Administrative (SG&A) expenses declined 4.7% to $202.4 million and on an adjusted constant currency basis declined 6.3% to $186.9 million compared to the full year 2019.
The 2020 full-year GAAP Net Income1 from Continuing Operations was $42.8 million compared to $6.0 million in the prior year. Adjusted EBITDA from Continuing Operations was $153.7 million compared to $157.9 million. Adjusted EBITDA margins improved 46 basis points in 2020 to 16.0%. Diluted GAAP EPS for Continuing Operations was $0.35 compared to $0.41 and Adjusted EPS was $0.81 compared to $0.83.
Ferro’s strong fourth quarter performance resulted in the Company exceeding its most recent 2020 guidance for Adjusted EPS of $0.71 to $0.76 and Adjusted EBITDA of $141 million to $146 million.
As of December 31, 2020, total debt was approximately $800 million and debt, net of cash and unamortized debt issuance costs, was approximately $623 million. Net proceeds from the Tile Coatings Systems sale are expected to be approximately $420 million. The Company expects to use the net proceeds to reduce debt. As of December 31, 2020, giving effect to the closing of the sale of the Tile Coatings Systems business and the application of the net proceeds therefrom, we would have debt, net of cash and unamortized issuance costs, of approximately $203 million and our estimated debt, net of cash and unamortized issuance costs, to Adjusted EBITDA ratio would have been approximately 1.3x.
1 Note: Net Income attributable to Ferro Corporation common shareholders.
Segment Results Continuing Operations * (amounts in millions, except EPS) |
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| Functional Coatings | Q4 2020 | % Change | 2020 | % Change | |||||||
| Net Sales | $ | 166,867 |
| 4.7% | $ | 608,192 |
| -5.7% | |||
| Net Sales (Constant Currency) |
| 166,867 |
| 2.0% |
| 608,192 |
| -5.5% | |||
| Gross Profit (GAAP) |
| 49,759 |
| 4.0% |
| 175,601 |
| -8.9% | |||
| Gross Profit Margin |
| 29.8% |
| (22) bps |
| 28.9% |
| (101) bps | |||
| Adjusted Gross Profit (Constant Currency) |
| 51,157 |
| 3.6% |
| 181,059 |
| -7.2% | |||
| Adj. Gross Profit Margin (Constant Currency) |
| 30.7% |
| 50 bps |
| 29.8% |
| (54) bps | |||
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| Color Solutions | Q4 2020 | % Change | 2020 | % Change | |||||||
| Net Sales | $ | 93,083 |
| 8.9% | $ | 350,762 |
| -5.1% | |||
| Net Sales (Constant Currency) |
| 93,083 |
| 6.4% |
| 350,762 |
| -5.1% | |||
| Gross Profit (GAAP) |
| 29,849 |
| 7.7% |
| 119,071 |
| 3.6% | |||
| Gross Profit Margin |
| 32.1% |
| (37) bps |
| 33.9% |
| 285 bps | |||
| Adjusted Gross Profit (Constant Currency) |
| 29,851 |
| 5.9% |
| 119,550 |
| 2.2% | |||
| Adj. Gross Profit Margin (Constant Currency) |
| 32.1% |
| (17) bps |
| 34.1% |
| 243 bps |
* Comparative information is relative to prior-year fourth quarter and full-year for Continuing Operations
Full-Year 2021 Guidance * (amounts in millions, except EPS) |
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Further details and assumptions regarding the 2021 guidance will be discussed on the fourth quarter and full-year earnings teleconference at 8:00 a.m. EDT Tuesday March 2, 2021.
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Net Sales | Adjusted | Adjusted | |
| (% of PY Sales) | EBITDA | Diluted EPS |
2020 Results | $959.0M | $153.7M | $0.81 |
2021 Guidance |
| $175M - $185M | $0.90 - $1.00 |
YoY Change | 8% to 12% | 14% to 20% | 11% to 23% |
The 2021 Full Year outlook assumes no acquisitions, divestitures, restructuring, acquisition related professional fees, optimization programs spend, or repurchase of common stock.
Note: The Full Year 2021 outlook uses foreign exchange rates as of December 31, 2020 which includes a USD/EUR exchange rate at 1.20.
Ferro is providing Adjusted Diluted EPS and Adjusted EBITDA guidance on a continuing operations basis. While it is likely that Ferro could incur charges for items excluded from Adjusted Diluted EPS and Adjusted EBITDA 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.
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Currency Exposure 2020 Weighting |
| FX sensitivity | ||
EUR – Euro | 35% to 40% |
| % Change | Operating Profit |
CNY -Yuan Renminbi | 7% to 9% |
| +1% all FX change | ~$0.7 million to ~$0.9 million |
MXN – Mexican Peso | 2% to 4% |
| +1% Euro change | ~$0.3 million to ~$0.5 million |
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Constant currency
Constant currency results reflect the remeasurement of 2019 reported and adjusted local currency results using 2020 exchange rates, which produces constant currency comparatives for 2020 reported and adjusted results. These non-GAAP financial measures should not be considered a substitute for the measures of financial performance prepared in accordance with GAAP.
Conference Call
Ferro will conduct an investor teleconference at 8:00 a.m. EDT Tuesday March 2, 2021. 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 877-210-0456 within the U.S. or +1 212-231-2924 outside the U.S. Please join the call at least 10 minutes before the start time.
• Webcast replay: Available on Ferro’s Investor website at ferro.com beginning at approximately 4:30 p.m. Eastern Time on March 2, 2021.
• 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 21991713).
• Presentation material and podcast: Earnings presentation material and podcasts can be accessed through the Investors portion 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: Functional Coatings and Color Solutions. Headquartered in Mayfield Heights, Ohio, the Company has approximately 5,600 associates globally and reported 2020 sales of $959 million. Included within our employee count are approximately 2,100 employees in our foreign consolidated subsidiaries associated with the Tile Coatings Systems business.
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:
· | factors affecting the Company’s business that are beyond its control, including disasters, pandemics (such as COVID-19), accidents and governmental actions; |
· | demand in the industries into which Ferro sells its products may be unpredictable, cyclical, or heavily influenced by consumer spending; |
· | the effectiveness of the Company’s efforts to improve operating margin through sales growth, price increases, productivity gains, and improved purchasing techniques; |
· | currency conversion rates and economic, social, political, and regulatory conditions in the U.S. and around the world; |
· | the availability of reliable sources of energy and raw materials at a reasonable cost; |
· | 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 successfully implement and/or administer its optimization initiatives, including its investment and restructuring programs, and to produce the desired results; |
· | Ferro’s ability to successfully introduce new products and services or enter into new growth markets; |
· | 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; |
Cautionary Note on Forward-Looking Statements (continued)
· | the impact of damage to, or the interruption, failure or compromise of the Company’s information systems due to events including but not limited to aging information systems infrastructure, computer viruses and cyber security breaches; |
· | the implementation and operations of business information systems and processes; |
· | increasingly aggressive domestic and foreign governmental regulation of hazardous and other materials and regulations affecting health, safety and the environment; |
· | our ability to address safety, human health, social, product liability and environmental risks associated with our current and historical products, product life cycles and production processes; |
· | competitive factors, including intense price competition; |
· | increased, and possibly inconsistent, domestic and foreign regulations of privacy and data security; |
· | changes in U.S. and other governments’ trade policies; |
· | 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; sale of products and materials into highly regulated industries; |
· | limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities; |
· | our ability to attract and retain key personnel; |
· | exposure to lawsuits, governmental investigations and proceedings relating to current and historical operations and products; |
· | Ferro’s ability to protect its intellectual property, including trade secrets, or to successfully resolve claims of infringement brought against it; |
· | 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; |
· | borrowing costs that could be affected adversely by interest rate increases; |
· | management of Ferro’s general and administrative expenses; |
· | 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; |
· | risks and uncertainties associated with intangible assets; |
· | the effectiveness of strategies to increase Ferro’s return on invested capital, internal rate of return and other return metrics, and the short-term impact that acquisitions may have on such metrics; |
· | liens on the Company’s assets by its lenders affect its ability to dispose of property and businesses; and |
· | amount and timing of any repurchase of Ferro’s common stock. |
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, 2020 and in our subsequent Quarterly Reports on Form 10-Q.
Ferro Corporation
Investor & Media Contact:
Kevin Cornelius Grant, 216.875.5451
Director of Investor Relations and Corporate Communications
kevincornelius.grant@ferro.com
Table 1
Ferro Corporation and Subsidiaries
Consolidated Statements of Operations
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(Dollars in thousands, except per share amounts) |
| Three Months Ended |
| Twelve Months Ended | ||||||||
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| December 31, (Unaudited) |
| December 31, | ||||||||
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| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
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Net sales |
| $ | 259,950 |
| $ | 244,778 |
| $ | 958,954 |
| $ | 1,014,457 |
Cost of sales |
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| 180,842 |
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| 169,853 |
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| 665,198 |
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| 706,481 |
Gross profit |
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| 79,108 |
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| 74,925 |
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| 293,756 |
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| 307,976 |
Selling, general and administrative expenses |
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| 48,006 |
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| 54,642 |
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| 202,413 |
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| 212,365 |
Restructuring and impairment charges |
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| 5,194 |
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| 3,093 |
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| 17,425 |
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| 10,955 |
Other expense (income): |
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Interest expense |
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| 5,406 |
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| 5,724 |
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| 21,880 |
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| 24,302 |
Interest earned |
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| (960) |
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| (869) |
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| (1,995) |
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| (3,325) |
Foreign currency losses, net |
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| 2,349 |
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| 1,504 |
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| 3,627 |
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| 9,166 |
Miscellaneous expense, net |
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| 8,109 |
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| 13,825 |
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| 5,505 |
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| 11,722 |
Income before income taxes |
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| 11,004 |
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| (2,994) |
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| 44,901 |
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| 42,791 |
Income tax (benefit) expense |
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| 4,497 |
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| (928) |
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| 14,861 |
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| 7,965 |
Income (loss) from continuing operations |
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| 6,507 |
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| (2,066) |
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| 30,040 |
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| 34,826 |
Income (loss) from discontinued operations, net of taxes |
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| 11,653 |
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| (28,716) |
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| 14,003 |
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| (27,411) |
Net income (loss) |
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| 18,160 |
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| (30,782) |
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| 44,043 |
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| 7,415 |
Less: Net income attributable to noncontrolling interests |
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| 418 |
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| 475 |
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| 1,244 |
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| 1,377 |
Net income (loss) attributable to Ferro Corporation common shareholders |
| $ | 17,742 |
| $ | (31,257) |
| $ | 42,799 |
| $ | 6,038 |
Amounts attributable to Ferro Corporation: |
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Net income (loss) attributable to Ferro Corporation from continuing operations, net of income tax |
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| 6,226 |
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| (2,492) |
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| 28,967 |
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| 33,739 |
Net income (loss) attributable to Ferro Corporation from discontinued operations, net of income tax |
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| 11,516 |
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| (28,765) |
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| 13,832 |
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| (27,701) |
Earnings (loss) per share attributable to Ferro Corporation common shareholders: |
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Basic earnings: |
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Continuing operations |
| $ | 0.08 |
| $ | (0.03) |
| $ | 0.35 |
| $ | 0.41 |
Discontinued operations |
| $ | 0.14 |
| $ | (0.35) |
| $ | 0.17 |
| $ | (0.34) |
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Diluted earnings: |
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Continuing operations |
| $ | 0.08 |
| $ | (0.03) |
| $ | 0.35 |
| $ | 0.41 |
Discontinued operations |
| $ | 0.14 |
| $ | (0.35) |
| $ | 0.17 |
| $ | (0.34) |
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Shares outstanding: |
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Weighted-average basic shares |
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| 82,325 |
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| 81,977 |
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| 82,232 |
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| 82,083 |
Weighted-average diluted shares |
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| 82,938 |
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| 82,471 |
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| 83,024 |
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| 82,891 |
End-of-period basic shares |
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| 82,365 |
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| 82,004 |
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| 82,365 |
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| 82,004 |
Table 2
Ferro Corporation and Subsidiaries
Segment Net Sales and Gross Profit from Continuing Operations (unaudited)
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(Dollars in thousands) |
| Three Months Ended |
| Twelve Months Ended | ||||||||
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| December 31, |
| December 31, | ||||||||
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| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
Segment Net Sales |
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Functional Coatings |
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| 166,867 |
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| 159,321 |
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| 608,192 |
|
| 644,783 |
Color Solutions |
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| 93,083 |
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| 85,457 |
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| 350,762 |
|
| 369,674 |
Total segment net sales |
| $ | 259,950 |
| $ | 244,778 |
| $ | 958,954 |
| $ | 1,014,457 |
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Segment Gross Profit |
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Functional Coatings |
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| 49,759 |
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| 47,856 |
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| 175,601 |
|
| 192,668 |
Color Solutions |
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| 29,849 |
|
| 27,719 |
|
| 119,071 |
|
| 114,939 |
Other costs of sales |
|
| (500) |
|
| (650) |
|
| (916) |
|
| 369 |
Total gross profit |
| $ | 79,108 |
| $ | 74,925 |
| $ | 293,756 |
| $ | 307,976 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Strategic services |
|
| 23,205 |
|
| 23,502 |
|
| 92,679 |
|
| 103,603 |
Functional services |
|
| 22,083 |
|
| 28,779 |
|
| 94,357 |
|
| 98,897 |
Incentive compensation |
|
| 1,270 |
|
| 900 |
|
| 7,379 |
|
| 2,459 |
Stock-based compensation |
|
| 1,448 |
|
| 1,461 |
|
| 7,998 |
|
| 7,406 |
Total selling, general and administrative expenses |
| $ | 48,006 |
| $ | 54,642 |
| $ | 202,413 |
| $ | 212,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Table 3
Ferro Corporation and Subsidiaries
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| December 31, |
| December 31, | ||
|
| 2020 |
| 2019 | ||
ASSETS |
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
Cash and cash equivalents |
| $ | 174,077 |
| $ | 96,202 |
Accounts receivable, net |
|
| 137,008 |
|
| 139,333 |
Inventories |
|
| 260,332 |
|
| 264,476 |
Other receivables |
|
| 72,272 |
|
| 69,365 |
Other current assets |
|
| 18,261 |
|
| 22,373 |
Current assets held-for-sale |
|
| 307,854 |
|
| 291,420 |
Total current assets |
|
| 969,804 |
|
| 883,169 |
Other assets |
|
|
|
|
|
|
Property, plant and equipment, net |
|
| 315,330 |
|
| 302,672 |
Goodwill |
|
| 175,351 |
|
| 172,212 |
Intangible assets, net |
|
| 119,500 |
|
| 127,815 |
Deferred income taxes |
|
| 115,962 |
|
| 98,714 |
Operating leased assets |
|
| 15,446 |
|
| 20,088 |
Other non-current assets |
|
| 80,618 |
|
| 72,020 |
Non-current assets held-for-sale |
|
| 168,922 |
|
| 157,931 |
Total assets |
| $ | 1,960,933 |
| $ | 1,834,621 |
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
Loans payable and current portion of long-term debt |
| $ | 8,839 |
| $ | 8,703 |
Accounts payable |
|
| 135,296 |
|
| 138,799 |
Accrued payrolls |
|
| 27,166 |
|
| 27,447 |
Accrued expenses and other current liabilities |
|
| 124,770 |
|
| 73,016 |
Current liabilities held-for-sale |
|
| 107,545 |
|
| 133,780 |
Total current liabilities |
|
| 403,616 |
|
| 381,745 |
Other liabilities |
|
|
|
|
|
|
Long-term debt, less current portion |
|
| 791,509 |
|
| 798,862 |
Postretirement and pension liabilities |
|
| 181,610 |
|
| 174,021 |
Operating leased non-current liabilities |
|
| 10,064 |
|
| 14,474 |
Other non-current liabilities |
|
| 62,050 |
|
| 56,976 |
Non-current liabilities held-for-sale |
|
| 71,149 |
|
| 38,341 |
Total liabilities |
|
| 1,519,998 |
|
| 1,464,419 |
Equity |
|
|
|
|
|
|
Total Ferro Corporation shareholders’ equity |
|
| 429,967 |
|
| 360,376 |
Noncontrolling interests |
|
| 10,968 |
|
| 9,826 |
Total liabilities and equity |
| $ | 1,960,933 |
| $ | 1,834,621 |
Table 4
Ferro Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended |
| Twelve Months Ended | ||||||||
|
| December 31, (Unaudited) |
| December 31, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | 18,160 |
| $ | (30,782) |
| $ | 44,043 |
| $ | 7,415 |
Loss (gain) on sale of assets and businesses |
|
| 168 |
|
| 31 |
|
| 246 |
|
| (916) |
Depreciation and amortization |
|
| 9,636 |
|
| 13,838 |
|
| 40,289 |
|
| 55,879 |
Interest amortization |
|
| 1,108 |
|
| 975 |
|
| 3,974 |
|
| 3,755 |
Restructuring and impairment charges |
|
| 2,843 |
|
| 34,865 |
|
| 9,787 |
|
| 44,702 |
Changes in current assets and liabilities, net of effects of acquisitions: |
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
| (33,779) |
|
| 3,638 |
|
| (141,330) |
|
| (74,444) |
Inventories |
|
| 26,463 |
|
| (1,396) |
|
| 36,485 |
|
| (10,578) |
Accounts payable |
|
| 51,905 |
|
| 53,377 |
|
| (26,671) |
|
| (10,075) |
Other current assets and liabilities, net |
|
| 7,701 |
|
| (7,492) |
|
| 18,451 |
|
| (3,757) |
Other adjustments, net |
|
| 9,084 |
|
| 17,896 |
|
| 1,534 |
|
| 5,729 |
Net cash provided by (used in) operating activities |
|
| 93,289 |
|
| 84,950 |
|
| (13,192) |
|
| 17,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures for property, plant and equipment and other long-lived assets |
|
| (10,102) |
|
| (24,150) |
|
| (31,783) |
|
| (64,970) |
Collections of financing receivables |
|
| 32,670 |
|
| 23,663 |
|
| 129,969 |
|
| 84,567 |
Business acquisitions, net of cash acquired |
|
| — |
|
| — |
|
| — |
|
| (251) |
Other investing activities |
|
| 4 |
|
| 27 |
|
| 807 |
|
| 1,957 |
Net cash (used in) provided by investing activities |
|
| 22,572 |
|
| (460) |
|
| 98,993 |
|
| 21,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings (repayments) under loans payable |
|
| (26) |
|
| (8,175) |
|
| (709) |
|
| 45 |
Principal payments on term loan facility - Amended Credit Facility |
|
| (2,050) |
|
| (2,050) |
|
| (8,200) |
|
| (8,200) |
Proceeds from revolving credit facility - Amended Credit Facility |
|
| 774 |
|
| 11,035 |
|
| 399,110 |
|
| 227,101 |
Principal payments on revolving credit facility - Amended Credit Facility |
|
| (6,514) |
|
| (33,506) |
|
| (399,110) |
|
| (227,101) |
Acquisition related contingent consideration payment |
|
| — |
|
| — |
|
| — |
|
| (5,200) |
Proceeds from exercise of stock options |
|
| 756 |
|
| 1,052 |
|
| 756 |
|
| 1,052 |
Purchase of treasury stock |
|
| — |
|
| — |
|
| — |
|
| (25,000) |
Other financing activities |
|
| (1,167) |
|
| (1,135) |
|
| (1,895) |
|
| (1,892) |
Net cash (used in) provided by financing activities |
|
| (8,227) |
|
| (32,779) |
|
| (10,048) |
|
| (39,195) |
Effect of exchange rate changes on cash and cash equivalents |
|
| 1,948 |
|
| 950 |
|
| 2,122 |
|
| 283 |
Increase in cash and cash equivalents |
|
| 109,582 |
|
| 52,661 |
|
| 77,875 |
|
| 101 |
Cash and cash equivalents at beginning of period |
|
| 72,695 |
|
| 51,741 |
|
| 104,402 |
|
| 104,301 |
Cash and cash equivalents at end of period |
|
| 182,277 |
|
| 104,402 |
|
| 182,277 |
|
| 104,402 |
Less: Cash and cash equivalents of discontinued operations at end of period |
|
| 8,200 |
|
| 8,200 |
|
| 8,200 |
|
| 8,200 |
Cash and cash equivalents of continuing operations at end of period |
| $ | 174,077 |
| $ | 96,202 |
| $ | 174,077 |
| $ | 96,202 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the period for: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
| $ | 11,109 |
| $ | 9,053 |
| $ | 31,285 |
| $ | 33,429 |
Income taxes |
| $ | 6,643 |
| $ | 19,212 |
| $ | 19,648 |
| $ | 21,682 |
Table 5
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Reported Income from Continuing Operations to Adjusted Income
From Continuing Operations for the Three Months Ended December 31 (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 expense6 |
|
| Net income (loss) attributable to common shareholders |
|
| Diluted earnings (loss) per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported from Continuing Operations |
| $ | 180,842 |
| $ | 48,006 |
| $ | 5,194 |
| $ | 14,904 |
| $ | 4,497 |
| $ | 6,226 |
| $ | 0.08 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| — |
|
| — |
|
| (5,194) |
|
| — |
|
| — |
|
| 5,194 |
|
| 0.06 |
Pension1 |
|
| — |
|
| — |
|
| — |
|
| (10,029) |
|
| — |
|
| 10,029 |
|
| 0.12 |
Acquisition related costs2 |
|
| — |
|
| (146) |
|
| — |
|
| 653 |
|
| — |
|
| (507) |
|
| (0.01) |
Costs related to optimization projects4 |
|
| (1,494) |
|
| (2,068) |
|
| — |
|
| — |
|
| — |
|
| 3,562 |
|
| 0.04 |
Costs related to divested businesses and assets |
|
| — |
|
| (799) |
|
| — |
|
| (172) |
|
| — |
|
| 971 |
|
| 0.01 |
Tax on adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 4,583 |
|
| (4,583) |
|
| (0.06) |
Total adjustments7 |
|
| (1,494) |
|
| (3,013) |
|
| (5,194) |
|
| (9,549) |
|
| 4,583 |
|
| 14,667 |
|
| 0.18 |
As adjusted from Continuing Operations |
| $ | 179,348 |
| $ | 44,993 |
| $ | — |
| $ | 5,355 |
| $ | 9,080 |
| $ | 20,893 |
| $ | 0.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported from Continuing Operations |
| $ | 169,853 |
| $ | 54,642 |
| $ | 3,093 |
| $ | 20,184 |
| $ | (928) |
| $ | (2,492) |
| $ | (0.03) |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| — |
|
| — |
|
| (3,093) |
|
| — |
|
| — |
|
| 3,093 |
|
| 0.04 |
Pension1 |
|
| — |
|
| — |
|
| — |
|
| (13,192) |
|
| — |
|
| 13,192 |
|
| 0.16 |
Acquisition related costs3 |
|
| (15) |
|
| (518) |
|
| — |
|
| — |
|
| — |
|
| 533 |
|
| 0.01 |
Costs related to optimization projects5 |
|
| (924) |
|
| (3,542) |
|
| — |
|
| — |
|
| — |
|
| 4,466 |
|
| 0.05 |
Costs related to divested businesses and assets |
|
| — |
|
| (1,239) |
|
|
|
|
| (54) |
|
| — |
|
| 1,293 |
|
| 0.02 |
Tax on adjustments | �� |
| — |
|
| — |
|
| — |
|
| — |
|
| 6,290 |
|
| (6,290) |
|
| (0.08) |
Total adjustments7 |
|
| (939) |
|
| (5,299) |
|
| (3,093) |
|
| (13,246) |
|
| 6,290 |
|
| 16,287 |
|
| 0.20 |
As adjusted from Continuing Operations |
| $ | 168,914 |
| $ | 49,343 |
| $ | — |
| $ | 6,938 |
| $ | 5,362 |
| $ | 13,795 |
| $ | 0.17 |
(1) | The adjustments relate to pension and other postretirement benefit mark-to-market adjustments and settlements. |
(2) | The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to acquisition costs. |
(3) | The adjustments to “Cost of Sales” primarily include environmental costs related to our recent acquisitions. The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to acquisition costs. |
(4) | Costs related to Optimization projects of $3.6 million include costs associated with our Americas manufacturing optimization initiative of $2.5 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $1.1 million of costs relate to global optimization projects and discrete projects at our previous acquisitions |
(5) | Costs related to Optimization projects of $4.5 million include costs associated with our Americas manufacturing optimization initiative of $3.0 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $1.5 million of costs relate to global optimization projects and discrete projects at our previous acquisitions. |
(6) | Income tax expense reflects the reported expense, adjusted for adjustments being tax effected at the respective statutory rate where the item originated, as well as the impacts associated with the Tax Cuts and Jobs Act that were recorded in 2020 and 2019. |
(7) | Due to rounding, total earnings per share related to adjustments does not always add to the total adjusted earnings per share. |
It should be noted that adjusted net 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 by excluding these costs, our adjusted earnings per share better reflect our underlying business performance, as well as being considered in our internal evaluation of financial performance. These costs are ones that we have concluded are not normal, recurring cash operating expenses necessary to operate our business, and we believe it is useful to present this non-GAAP financial measure to provide investors greater comparability of our base business.
Table 6
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Reported Income from Continuing Operations to Adjusted Income
From Continuing Operations for the Twelve Months Ended December 31 (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 expense8 |
|
| Net income attributable to common shareholders |
|
| Diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2020 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported from Continuing Operations |
| $ | 665,198 |
| $ | 202,413 |
| $ | 17,425 |
| $ | 29,017 |
| $ | 14,861 |
| $ | 28,967 |
| $ | 0.35 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| — |
|
| — |
|
| (17,425) |
|
| — |
|
| — |
|
| 17,425 |
|
| 0.21 |
Pension1 |
|
| — |
|
| — |
|
| — |
|
| (10,029) |
|
| — |
|
| 10,029 |
|
| 0.12 |
Acquisition related costs2 |
|
| (9) |
|
| (1,369) |
|
| — |
|
| 653 |
|
| — |
|
| 726 |
|
| 0.01 |
Costs related to optimization projects4 |
|
| (6,156) |
|
| (9,296) |
|
| — |
|
| — |
|
| — |
|
| 15,452 |
|
| 0.19 |
Costs related to divested businesses and assets |
|
| — |
|
| (4,805) |
|
| — |
|
| (479) |
|
| — |
|
| 5,284 |
|
| 0.06 |
Other6 |
|
| (453) |
|
| — |
|
| — |
|
| (1,044) |
|
| — |
|
| 1,497 |
|
| 0.02 |
Tax on adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 11,842 |
|
| (11,842) |
|
| (0.14) |
Total adjustments9 |
|
| (6,618) |
|
| (15,470) |
|
| (17,425) |
|
| (10,900) |
|
| 11,842 |
|
| 38,571 |
|
| 0.46 |
As adjusted from Continuing Operations |
| $ | 658,580 |
| $ | 186,943 |
| $ | — |
| $ | 18,117 |
| $ | 26,703 |
| $ | 67,538 |
| $ | 0.81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2019 | |||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As reported from Continuing Operations |
| $ | 706,481 |
| $ | 212,365 |
| $ | 10,955 |
| $ | 41,865 |
| $ | 7,965 |
| $ | 33,739 |
| $ | 0.41 |
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restructuring |
|
| — |
|
| — |
|
| (10,955) |
|
| — |
|
| — |
|
| 10,955 |
|
| 0.13 |
Pension1 |
|
| — |
|
| — |
|
| — |
|
| (13,192) |
|
| — |
|
| 13,192 |
|
| 0.16 |
Acquisition related costs3 |
|
| (890) |
|
| (3,486) |
|
| — |
|
| (768) |
|
| — |
|
| 5,144 |
|
| 0.06 |
Costs related to optimization projects5 |
|
| (6,307) |
|
| (7,230) |
|
| — |
|
| (50) |
|
| — |
|
| 13,587 |
|
| 0.16 |
Costs related to divested businesses and assets |
|
| — |
|
| (2,971) |
|
| — |
|
| (255) |
|
| — |
|
| 3,226 |
|
| 0.04 |
Other7 |
|
| — |
|
| — |
|
| — |
|
| (86) |
|
| — |
|
| 86 |
|
| - |
Tax on adjustments |
|
| — |
|
| — |
|
| — |
|
| — |
|
| 11,539 |
|
| (11,539) |
|
| (0.14) |
Total adjustments9 |
|
| (7,197) |
|
| (13,687) |
|
| (10,955) |
|
| (14,351) |
|
| 11,539 |
|
| 34,651 |
|
| 0.42 |
As adjusted from Continuing Operations |
| $ | 699,284 |
| $ | 198,678 |
| $ | — |
| $ | 27,514 |
| $ | 19,504 |
| $ | 68,390 |
| $ | 0.83 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) | The adjustments relate to pension and other postretirement benefit mark-to-market adjustments and settlements. |
(2) | The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to acquisition costs. |
(3) | The adjustments to “Cost of Sales” primarily include the amortization of purchase accounting adjustments related to our recent acquisitions and environmental costs related to our recent acquisitions. The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to acquisition costs. The adjustments to “Other expense, net” primarily relate to earn out adjustments related to an acquisition that are beyond the measurement period. |
(4) | Cost related to Optimization projects of $15.5 million includes costs associated with our Americas manufacturing optimization initiative of $9.8 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $5.7 million of costs relate to global optimization projects and discrete projects at our previous acquisitions. |
(5) | Cost related to Optimization projects of $13.6 million includes costs associated with our Americas manufacturing optimization initiative of $12.0 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $1.6 million of costs relate to global optimization projects and discrete projects at our previous acquisitions. |
(6) | The adjustments to “Other expense, net” relate to losses from fire in Columbia and impacts of currency related items in Thailand. |
(7) | The adjustments to “Other expense, net” relate to gains and losses on asset sales and impacts of currency related items in Argentina. |
(8) | Income tax expense reflects the reported expense, adjusted for adjustments being tax effected at the respective statutory rate where the item originated, as well as the impacts associated with the Tax Cuts and Jobs Act that were recorded in 2020 and 2019. |
(9) | Due to rounding, total earnings per share related to adjustments does not always add to the total adjusted earnings per share. |
It should be noted that adjusted net 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 by excluding these costs, our adjusted earnings per share better reflect our underlying business performance, as well as being considered in our internal evaluation of financial performance. These costs are ones that we have concluded are not normal, recurring cash operating expenses necessary to operate our business, and we believe it is useful to present this non-GAAP financial measure to provide investors greater comparability of our base business.
Table 7
Ferro Corporation and Subsidiaries
Supplemental Information
Constant Currency Schedule of Adjusted Operating Profit from Continuing Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Three Months Ended | ||||||||||
(Dollars in thousands) |
| December 31, | ||||||||||
|
| 2019 |
| Adjusted 20191 |
| 2020 |
| 2020 vs Adjusted 2019 | ||||
Segment net sales |
|
|
|
|
|
|
|
|
|
|
|
|
Functional Coatings |
|
| 159,321 |
|
| 163,668 |
|
| 166,867 |
|
| 3,199 |
Color Solutions |
|
| 85,457 |
|
| 87,487 |
|
| 93,083 |
|
| 5,596 |
Total segment net sales |
| $ | 244,778 |
| $ | 251,155 |
| $ | 259,950 |
| $ | 8,795 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
Functional Coatings |
|
| 48,272 |
|
| 49,359 |
|
| 51,157 |
|
| 1,798 |
Color Solutions |
|
| 27,823 |
|
| 28,201 |
|
| 29,851 |
|
| 1,650 |
Other costs of sales |
|
| 166 |
|
| 130 |
|
| (407) |
|
| (537) |
Total adjusted gross profit2 |
| $ | 76,261 |
| $ | 77,690 |
| $ | 80,601 |
| $ | 2,911 |
Adjusted gross profit percentage |
|
| 31.2% |
|
| 30.9% |
|
| 31.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Strategic services |
|
| 26,174 |
|
| 26,803 |
|
| 22,643 |
|
| (4,160) |
Functional services |
|
| 19,192 |
|
| 20,085 |
|
| 19,656 |
|
| (429) |
Incentive compensation |
|
| 1,678 |
|
| 1,733 |
|
| 1,246 |
|
| (487) |
Stock-based compensation |
|
| 2,299 |
|
| 2,299 |
|
| 1,448 |
|
| (851) |
Total adjusted selling, general and administrative expenses3 |
| $ | 49,343 |
| $ | 50,920 |
| $ | 44,993 |
| $ | (5,927) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
| $ | 26,918 |
| $ | 26,770 |
| $ | 35,608 |
| $ | 8,838 |
Adjusted operating profit as a % of net sales |
|
| 11.0% |
|
| 10.7% |
|
| 13.7% |
|
|
|
(1) | Reflects the remeasurement of 2019 reported and adjusted local currency results using 2020 exchange rates, resulting in constant currency comparative figures to 2020 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 December 31, 2020 and 2019, respectively. |
(3) | Refer to Table 5 for the reconciliation of adjusted SG&A expenses for the three months ended December 31, 2020 and 2019, respectively. |
It should be noted that adjusted net sales, gross profit, SG&A expenses, and operating profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures are presented within this table, as well as Table 5. We believe this data provides investors with additional useful 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 from Continuing Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Twelve Months Ended | ||||||||||
(Dollars in thousands) |
| December 31, | ||||||||||
|
| 2019 |
| Adjusted 20191 |
| 2020 |
| 2020 vs Adjusted 2019 | ||||
Segment net sales |
|
|
|
|
|
|
|
|
|
|
|
|
Functional Coatings |
|
| 644,783 |
|
| 643,520 |
|
| 608,192 |
|
| (35,328) |
Color Solutions |
|
| 369,674 |
|
| 369,634 |
|
| 350,762 |
|
| (18,872) |
Total segment net sales |
| $ | 1,014,457 |
| $ | 1,013,154 |
| $ | 958,954 |
| $ | (54,200) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment adjusted gross profit |
|
|
|
|
|
|
|
|
|
|
|
|
Functional Coatings |
|
| 195,811 |
|
| 195,054 |
|
| 181,059 |
|
| (13,995) |
Color Solutions |
|
| 116,951 |
|
| 116,995 |
|
| 119,550 |
|
| 2,555 |
Other costs of sales |
|
| 2,965 |
|
| 2,744 |
|
| (237) |
|
| (2,981) |
Total adjusted gross profit2 |
| $ | 315,727 |
| $ | 314,793 |
| $ | 300,372 |
| $ | (14,421) |
|
|
| 31.1% |
|
| 31.1% |
|
| 31.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted selling, general and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Strategic services |
|
| 106,220 |
|
| 106,463 |
|
| 91,867 |
|
| (14,596) |
Functional services |
|
| 81,592 |
|
| 82,202 |
|
| 79,699 |
|
| (2,503) |
Incentive compensation |
|
| 3,148 |
|
| 3,212 |
|
| 7,379 |
|
| 4,167 |
Stock-based compensation |
|
| 7,718 |
|
| 7,718 |
|
| 7,998 |
|
| 280 |
Total adjusted selling, general and administrative expenses3 |
| $ | 198,678 |
| $ | 199,595 |
| $ | 186,943 |
| $ | (12,652) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted operating profit |
| $ | 117,049 |
| $ | 115,198 |
| $ | 113,429 |
| $ | (1,769) |
Adjusted operating profit as a % of net sales |
|
| 11.5% |
|
| 11.4% |
|
| 11.8% |
|
|
|
(1) | Reflects the remeasurement of 2019 reported and adjusted local currency results using 2020 exchange rates, resulting in constant currency comparative figures to 2019 reported and adjusted results. See Table 6 for Non-GAAP adjustments applicable to the twelve month period. |
(2) | Refer to Table 6 for the reconciliation of adjusted gross profit for the twelve months ended December 31, 2020 and 2019, respectively. |
(3) | Refer to Table 6 for the reconciliation of adjusted SG&A expenses for the twelve months ended December 31, 2020 and 2019, respectively. |
It should be noted that adjusted net sales, gross profit, SG&A expenses, and operating profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These Non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures are presented within this table, as well as Table 6. We believe this data provides investors with additional useful 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 (loss) from Continuing Operations
to Adjusted EBITDA from Continuing Operations (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended |
| Twelve Months Ended | ||||||||||||
|
| December 31, |
| December 31, | ||||||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Ferro Corporation from continuing operations, net of income tax |
| $ | 6,226 |
|
| $ | (2,492) |
|
| $ | 28,967 |
|
| $ | 33,739 |
|
Less: Net income attributable to noncontrolling interests |
|
| 281 |
|
|
| 475 |
|
|
| 1,073 |
|
|
| 1,087 |
|
Restructuring and impairment charges |
|
| 5,194 |
|
|
| 3,093 |
|
|
| 17,425 |
|
|
| 10,955 |
|
Other expense (income), net |
|
| 9,498 |
|
|
| 14,460 |
|
|
| 7,137 |
|
|
| 17,563 |
|
Interest expense |
|
| 5,406 |
|
|
| 5,724 |
|
|
| 21,880 |
|
|
| 24,302 |
|
Income tax (benefit) expense |
|
| 4,497 |
|
|
| (928) |
|
|
| 14,861 |
|
|
| 7,965 |
|
Depreciation and amortization |
|
| 10,745 |
|
|
| 11,449 |
|
|
| 44,263 |
|
|
| 45,178 |
|
Less: interest amortization expense and other |
|
| (1,108) |
|
|
| (975) |
|
|
| (3,974) |
|
|
| (3,755) |
|
Cost of sales adjustments1 |
|
| 1,494 |
|
|
| 939 |
|
|
| 6,618 |
|
|
| 7,197 |
|
SG&A adjustments1 |
|
| 3,013 |
|
|
| 5,299 |
|
|
| 15,470 |
|
|
| 13,687 |
|
Adjusted EBITDA from Continuing Operations |
| $ | 45,246 |
|
| $ | 37,044 |
|
| $ | 153,720 |
|
| $ | 157,918 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
| $ | 259,950 |
|
| $ | 244,778 |
|
| $ | 958,954 |
|
| $ | 1,014,457 |
|
Adjusted EBITDA from Continuing Operations as a % of net sales |
|
| 17.4 | % |
|
| 15.1 | % |
|
| 16.0 | % |
|
| 15.6 | % |
(1) | For details of Non-GAAP adjustments, refer to Table 5 and Table 6 for the reconciliation of adjusted cost of sales and adjusted SG&A for the three and twelve months ended December 31, 2020 and 2019, 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 useful 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 |
| Twelve Months Ended | ||||||||
|
| December 31, |
| December 31, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
Beginning of period |
|
|
|
|
|
|
|
|
|
|
|
|
Gross debt |
| $ | 811,556 |
| $ | 850,048 |
| $ | 811,450 |
| $ | 826,224 |
Cash |
|
| 64,495 |
|
| 51,741 |
|
| 96,202 |
|
| 104,301 |
Debt, net of cash |
|
| 747,061 |
|
| 798,307 |
|
| 715,248 |
|
| 721,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| 4,017 |
|
| 4,121 |
|
| 3,885 |
|
| 4,827 |
Debt, net of cash and unamortized debt issuance costs |
|
| 743,044 |
|
| 794,186 |
|
| 711,363 |
|
| 717,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
End of period |
|
|
|
|
|
|
|
|
|
|
|
|
Gross debt |
|
| 800,348 |
|
| 811,450 |
|
| 800,348 |
|
| 811,450 |
Cash |
|
| 174,077 |
|
| 96,202 |
|
| 174,077 |
|
| 96,202 |
Debt, net of cash |
|
| 626,271 |
|
| 715,248 |
|
| 626,271 |
|
| 715,248 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| 3,719 |
|
| 3,885 |
|
| 3,719 |
|
| 3,885 |
Debt, net of cash and unamortized debt issuance costs |
|
| 622,552 |
|
| 711,363 |
|
| 622,552 |
|
| 711,363 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs |
|
| (298) |
|
| (236) |
|
| (166) |
|
| (942) |
FX on cash |
|
| 1,948 |
|
| 950 |
|
| 2,122 |
|
| 283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Period decrease (increase) in debt, net of cash, unamortized debt issuance costs, FX, and assumption of debt from acquisitions |
| $ | 118,842 |
| $ | 82,109 |
| $ | 86,855 |
| $ | 6,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Period decrease (increase) in debt, net of cash and unamortized debt issuance costs |
| $ | 120,492 |
| $ | 82,823 |
| $ | 88,811 |
| $ | 5,733 |
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 this data provides investors with additional useful information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.
Table 11
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Cash Provided by Operating Activities (GAAP) to
Adjusted Free Cash Flow from Operating Activities (Non-GAAP) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||||||
|
| 2020 |
| 2019 |
| 2020 |
| 2019 | ||||
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
| $ | 18,160 |
| $ | (30,782) |
| $ | 44,043 |
| $ | 7,415 |
Loss (gain) on sale of assets and businesses |
|
| 168 |
|
| 31 |
|
| 246 |
|
| (916) |
Depreciation and amortization |
|
| 9,636 |
|
| 13,838 |
|
| 40,289 |
|
| 55,879 |
Interest amortization |
|
| 1,108 |
|
| 975 |
|
| 3,974 |
|
| 3,755 |
Restructuring and impairment charges |
|
| 2,843 |
|
| 34,865 |
|
| 9,787 |
|
| 44,702 |
Accounts receivable |
|
| (33,779) |
|
| 3,638 |
|
| (141,330) |
|
| (74,444) |
Inventories |
|
| 26,463 |
|
| (1,396) |
|
| 36,485 |
|
| (10,578) |
Accounts payable |
|
| 51,905 |
|
| 53,377 |
|
| (26,671) |
|
| (10,075) |
Other current assets and liabilities, net |
|
| 7,701 |
|
| (7,492) |
|
| 18,451 |
|
| (3,757) |
Other adjustments, net |
|
| 9,084 |
|
| 17,896 |
|
| 1,534 |
|
| 5,729 |
Net cash provided by (used in) operating activities (GAAP) |
| $ | 93,289 |
| $ | 84,950 |
| $ | (13,192) |
| $ | 17,710 |
Less: Capital Expenditures |
|
| (10,102) |
|
| (24,150) |
|
| (31,783) |
|
| (64,970) |
Plus: Cash collected for AR securitization |
|
| 32,670 |
|
| 23,663 |
|
| 129,969 |
|
| 84,567 |
Adjusted Free Cash Flow (Non-GAAP) |
|
| 115,857 |
|
| 84,463 |
|
| 84,994 |
|
| 37,307 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income (Loss) Attributable to Ferro Corporation Common Shareholders |
|
| 17,742 |
|
| (31,257) |
|
| 42,799 |
|
| 6,038 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free Cash Flow Conversion of Net Income Attributable to Ferro Corporation Common Shareholders |
|
| 309.8% |
|
| 282.2% |
|
| 114.2% |
|
| 74.2% |
It should be noted that Adjusted Free Cash Flow is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The Non-GAAP financial measure should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented. Adjusted Free Cash Flow (Non-GAAP) is calculated as Cash Flow used in operating activities (GAAP), less capital expenditures and adding cash collected from the Accounts Receivable Securitization program. We believe this data provides investors with additional useful information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.
Table 12
Ferro Corporation and Subsidiaries
Supplemental Information
Reconciliation of Net Sales and Gross Profit (GAAP) to
Adjusted Net Sales and Gross Profit (Non-GAAP) (unaudited)
|
|
|
|
|
|
|
(Dollars in thousands) |
|
| Net Sales |
|
| Gross Profit |
|
|
|
|
|
|
|
|
| 2020 | ||||
As Reported (GAAP) |
| $ | 958,954 |
| $ | 293,756 |
Non-GAAP Adjustments1 |
|
| - |
|
| 6,618 |
Constant Currency FX Impact2 |
|
| - |
|
| - |
As Adjusted from Continuing Operations (Non-GAAP measure) |
| $ | 958,954 |
| $ | 300,374 |
|
|
|
|
|
|
|
|
| 2019 | ||||
As Reported (GAAP) |
| $ | 1,014,457 |
| $ | 307,976 |
Non-GAAP Adjustments1 |
|
| - |
|
| 7,197 |
Constant Currency FX Impact2 |
|
| (9,716) |
|
| (1,838) |
As Adjusted from Continuing Operations (Non-GAAP measure) |
| $ | 1,004,741 |
| $ | 313,335 |
|
|
|
|
|
|
|
|
| 2018 | ||||
As Reported (GAAP) |
| $ | 1,074,696 |
| $ | 338,389 |
Non-GAAP Adjustments1 |
|
| - |
|
| 6,347 |
Constant Currency FX Impact2 |
|
| (35,462) |
|
| (11,122) |
As Adjusted from Continuing Operations (Non-GAAP measure) |
| $ | 1,039,234 |
| $ | 333,614 |
|
|
|
|
|
|
|
|
| 2017 | ||||
As Reported (GAAP) |
| $ | 996,382 |
| $ | 326,719 |
Non-GAAP Adjustments1 |
|
| - |
|
| 8,774 |
Constant Currency FX Impact2 |
|
| (25,275) |
|
| (5,874) |
As Adjusted from Continuing Operations (Non-GAAP measure) |
| $ | 971,107 |
| $ | 329,619 |
|
|
|
|
|
|
|
|
| 2016 | ||||
As Reported (GAAP) |
| $ | 794,465 |
| $ | 270,226 |
Non-GAAP Adjustments1 |
|
| - |
|
| 3,792 |
Constant Currency FX Impact2 |
|
| (13,628) |
|
| (3,165) |
As Adjusted from Continuing Operations (Non-GAAP measure) |
| $ | 780,837 |
| $ | 270,853 |
|
|
|
|
|
|
|
1. For 2020 and 2019, refer to Table 6 for a description of the Non-GAAP adjustments that were recorded in "Cost of Sales”. For 2018, 2017, and 2016, the Non-GAAP adjustments relate to acquisitions related costs, costs related to certain optimization projects, and costs related to divested businesses and assets.
2. Reflects the remeasurement of 2019, 2018, 2017, and 2016 reported and adjusted results using 2020 average exchange rates, resulting in a constant currency comparative figures to 2020 reported and adjusted results.
It should be noted that adjusted net sales and adjusted gross profit 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 useful information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.