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8-K - LIVE FILING - FERRO CORP | htm_48668.htm |
For Immediate Release
FERRO REPORTS THIRD QUARTER 2013 ADJUSTED EPS OF $0.14
| Full-year 2013 adjusted EPS guidance raised to $0.42 $0.45 |
| Cost savings for 2013 now expected to be approximately $45 million |
| Company reaffirms 2015 adjusted EPS target in excess of $1.00 |
CLEVELAND, Ohio October 23, 2013 Ferro Corporation (NYSE: FOE, the Company) today reported results for the third quarter ended September 30, 2013. The third-quarter net income attributable to common shareholders was $0.15 per diluted share compared with a net loss of $3.66 per share in the third quarter of 2012. On an adjusted basis, earnings per diluted share were $0.14 compared with a net loss of $0.02 per share in the third quarter of 2012. The Company attributed the increase in profitability to managements continued progress executing on its value creation strategy. The Company raised its full-year 2013 adjusted earnings guidance to $0.42 to $0.45 per diluted share, versus previous guidance of $0.35 to $0.40 per diluted share, reflecting lower selling, general and administrative (SG&A) expenses and improving gross profit margins, primarily as a result of successful execution of cost reduction initiatives and improved business mix. Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.
Peter Thomas, President and Chief Executive Officer, commented, We continue to make progress on our value creation strategy, making Ferro more competitive and driving increased profitability. We are realizing the benefits of our cost saving initiatives more quickly than previously anticipated and are now expecting total savings for 2013 to be approximately $45 million. More importantly, we estimate that our annual savings run rate at the beginning of 2014 will be approximately $70 million.
2013 Third-Quarter Results
Ferro reported net sales of $408.1 million in the third quarter of 2013, compared with net sales of $408.9 million in the third quarter of 2012. Value-added sales, which exclude precious metal sales, increased 3.8%, to $387.0 million from $372.9 million in the third quarter last year. Adjusting for the impact of exiting the solar pastes product line (approximately $4 million), value-added sales increased by 5.0%.
Gross profit was $84.2 million for the 2013 third quarter, compared with $60.7 million for the third quarter of 2012. Excluding special charges, adjusted gross profit was $84.8 million (21.9% of value-added sales) compared with $66.5 million (17.8% of value-added sales) in the prior-year period. During the third quarter of 2013, gross profit was reduced by special charges of $0.6 million compared with special charges of $5.8 million in the same period last year. The special charges in the 2012 period were primarily related to inventory write-downs associated with the solar pastes assets and residual costs at manufacturing sites closed as part of earlier restructuring initiatives.
SG&A expenses declined 7.5% to $59.1 million during the third quarter of 2013 from $63.9 million in the prior-year quarter. Excluding special charges in both periods, SG&A expenses declined 6.3% to $56.8 million from $60.6 million. Included in both periods is the impact of incentive compensation accruals, including a charge of approximately $7 million in the third quarter of 2013 and a credit of approximately $4 million in the same quarter last year. Excluding special charges and the impact of incentive compensation, SG&A expenses for the third quarter were reduced by over $15 million on a year-over-year basis. The Company estimates that its current normalized run-rate for quarterly SG&A expenses is approximately $54 million, adjusting for special charges, normalized incentive compensation expenses and seasonal effects.
Net income attributable to common shareholders for the quarter ended September 30, 2013, was $12.7 million, or $0.15 per diluted share compared with a net loss of $316.1 million, or $3.66 per diluted share, in the third quarter of 2012. Adjusted net income from continuing operations attributable to common shareholders was $12.5 million, or $0.14 per diluted share, compared with a net loss of $1.9 million, or $0.02 per diluted share, in the year-ago quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were approximately $38.0 million in the third quarter of 2013, compared with $16.9 million in the same period last year. Adjusted EBITDA margins, represented as a percentage of value-added sales, were 9.8% in the third quarter of 2013 and 4.5% in the same period last year.
Total debt as of the end of the third quarter was $337.8 million, a reduction of $9.0 million from December 31, 2012. In addition, cash balances increased $6.3 million during the first nine months of the year to $35.9 million, resulting in a reduction in net debt (debt less cash) of $15.3 million during the first nine months of the year. In comparison, net debt increased by $26.2 million during the first nine months of 2012.
Outlook
The Company expects adjusted earnings for the 2013 fourth quarter to be in the range of $0.04 to $0.07 per diluted share, resulting in full-year adjusted earnings of $0.42 to $0.45 per diluted share. The expected increase in earnings compared with the Companys previous guidance is primarily a result of the accelerated pace of cost savings during the year. Full-year cost savings are now expected to be approximately $45 million.
Adjusting for the impact of divested operations and before the impact of changes in foreign currency rates, fourth-quarter and full-year value-added sales are expected to be essentially flat compared with the prior-year periods. Guidance for fourth quarter sales has been lowered, primarily due to an increase in product deselection of phthalate-based plasticizers in the Polymer Additives segment. The pace of deselection has increased, as U.S. vinyl flooring producers have begun migrating to more eco-friendly alternatives. Ferro currently is building dibenzoates manufacturing capacity in Europe to address growing demand for eco-friendly plasticizers.
For the year, the Company expects cash flow to be $15 million to $20 million, which is expected to be used to reduce net debt.
The Company also reaffirms its financial targets for 2015, including cost savings of greater than $100 million and adjusted earnings per share in excess of $1.00 per diluted share.
Conference Call
The Company will host a conference call to discuss its third-quarter financial results and current outlook for 2013 on Thursday, October 24, 2013, at 10:00 a.m. Eastern Time. To listen to the call, dial 800-354-6885 if calling from the United States or Canada, or dial 303-223-2685 if calling from outside North America. Please call approximately 10 minutes before the conference call is scheduled to begin.
An audio replay of the call will be available through noon Eastern Time on October 30. To access the replay, dial 800-633-8284 if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America. Use the program ID #21676629 to access the audio replay.
The conference call also will be broadcast live over the Internet and will be available for replay through November 30, 2013. The live broadcast and replay can be accessed through the Investor Information portion of the Companys Web site at www.ferro.com. A podcast of the conference call will also be available on the site.
About Ferro Corporation
Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials and chemicals for manufacturers. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,550 employees globally and reported 2012 sales of $1.8 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 Companys 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 Companys 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; |
| Ferros ability to successfully implement its value creation strategy; |
| Ferros ability to successfully implement and/or administer its cost-saving initiatives, including its restructuring programs and indirect spend optimization initiative, and to produce the desired results, including projected savings; |
| restrictive covenants in the Companys credit facilities could affect its strategic initiatives and liquidity; |
| Ferros ability to access capital markets, borrowings, or financial transactions; |
| the effectiveness of the Companys efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques; |
| the availability of reliable sources of energy and raw materials at a reasonable cost; |
| currency conversion rates and economic, social, regulatory, and political conditions around the world; |
| Ferros presence in certain geographic regions, including Latin America and Asia-Pacific, where it can be difficult to compete lawfully; |
| increasingly aggressive domestic and foreign governmental regulations on hazardous materials and regulations affecting health, safety and the environment; |
| Ferros ability to successfully introduce new products or enter into new growth markets; |
| sale of products into highly regulated industries; |
| limited or no redundancy for certain of the Companys manufacturing facilities and possible interruption of operations at those facilities; |
| Ferros ability to complete future acquisitions or dispositions, or successfully integrate future acquisitions; |
| competitive factors, including intense price competition; |
| Ferros ability to protect its intellectual property or to successfully resolve claims of infringement brought against it; |
| management of Ferros general and administrative expenses; |
| Ferros multi-jurisdictional tax structure; |
| the impact of the Companys performance on its ability to utilize significant deferred tax assets; |
| the effectiveness of strategies to increase Ferros return on capital; |
| the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations; |
| stringent labor and employment laws and relationships with the Companys employees; |
| the impact of requirements to fund employee benefit costs, especially post-retirement costs; |
| implementation of new business processes and information systems; |
| the impact of interruption, damage to, failure, or compromise of the Companys information systems; |
| exposure to lawsuits in the normal course of business; |
| risks and uncertainties associated with intangible assets; |
| Ferros borrowing costs could be affected adversely by interest rate increases; |
| liens on the Companys assets by its lenders affect its ability to dispose of property and businesses; |
| Ferro may not pay dividends on its common stock in the foreseeable future; and |
| other factors affecting the Companys 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 managements best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after the date of this release. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the period ended December 31, 2012.
# # #
Contacts:
Investor Contact:
John Bingle, 216-875-5411
Treasurer and Director of Investor Relations
john.bingle@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) | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||
(Dollars in thousands, except share and per share | ||||||||||||||||||||||||||||||||
amounts) | 2013 | As adjusted 2012 | 2013 | As adjusted 2012 | ||||||||||||||||||||||||||||
Net sales |
$ | 408,104 | $ | 408,865 | $ | 1,261,083 | $ | 1,344,836 | ||||||||||||||||||||||||
Cost of sales |
323,857 | 348,155 | 1,009,945 | 1,112,587 | ||||||||||||||||||||||||||||
Gross profit |
84,247 | 60,710 | 251,138 | 232,249 | ||||||||||||||||||||||||||||
Selling, general and administrative expenses |
59,078 | 63,863 | 184,986 | 202,675 | ||||||||||||||||||||||||||||
Restructuring and impairment charges |
3,834 | 198,695 | 26,738 | 203,734 | ||||||||||||||||||||||||||||
Other expense (income): |
||||||||||||||||||||||||||||||||
Interest expense |
6,766 | 6,716 | 21,034 | 19,566 | ||||||||||||||||||||||||||||
Interest earned |
(48 | ) | (57 | ) | (171 | ) | (192 | ) | ||||||||||||||||||||||||
Foreign currency losses, net |
1,308 | 869 | 4,016 | 792 | ||||||||||||||||||||||||||||
Miscellaneous (income) expense, net |
(209 | ) | 797 | (9,493 | ) | 3,038 | ||||||||||||||||||||||||||
Income (loss) before income taxes |
13,518 | (210,173 | ) | 24,028 | (197,364 | ) | ||||||||||||||||||||||||||
Income tax expense |
474 | 105,447 | 4,025 | 113,115 | ||||||||||||||||||||||||||||
Income (loss) from continuing operations |
13,044 | (315,620 | ) | 20,003 | (310,479 | ) | ||||||||||||||||||||||||||
(Loss) income from discontinued operations, net of
income taxes |
| (118 | ) | (8,421 | ) | 917 | ||||||||||||||||||||||||||
Net income (loss) |
13,044 | (315,738 | ) | 11,582 | (309,562 | ) | ||||||||||||||||||||||||||
Less: Net income attributable to noncontrolling interests |
392 | 376 | 177 | 830 | ||||||||||||||||||||||||||||
Net income (loss) attributable to Ferro Corporation
common shareholders |
$ | 12,652 | $ | (316,114 | ) | $ | 11,405 | $ | (310,392 | ) | ||||||||||||||||||||||
Earnings (loss) per share attributable to Ferro
Corporation common shareholders: |
||||||||||||||||||||||||||||||||
Basic earnings (loss): |
||||||||||||||||||||||||||||||||
From continuing operations |
$ | 0.15 | $ | (3.66 | ) | $ | 0.23 | $ | (3.61 | ) | ||||||||||||||||||||||
From discontinued operations |
| | (0.10 | ) | 0.01 | |||||||||||||||||||||||||||
$ | 0.15 | $ | (3.66 | ) | $ | 0.13 | $ | (3.60 | ) | |||||||||||||||||||||||
Diluted earnings (loss): |
||||||||||||||||||||||||||||||||
From continuing operations |
$ | 0.15 | $ | (3.66 | ) | $ | 0.23 | $ | (3.61 | ) | ||||||||||||||||||||||
From discontinued operations |
| | (0.10 | ) | 0.01 | |||||||||||||||||||||||||||
$ | 0.15 | $ | (3.66 | ) | $ | 0.13 | $ | (3.60 | ) | |||||||||||||||||||||||
Shares outstanding: |
||||||||||||||||||||||||||||||||
Weighted-average basic shares |
86,425,550 | 86,295,512 | 86,464,363 | 86,274,082 | ||||||||||||||||||||||||||||
Weighted-average diluted shares |
87,250,026 | 86,295,512 | 87,033,992 | 86,274,082 | ||||||||||||||||||||||||||||
End-of-period basic shares |
86,304,829 | 86,295,512 | 86,304,829 | 86,295,512 |
Table 2 | ||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Segment Net Sales and Segment Gross Profit | ||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, | September 30, | ||||||||||||||||||||||||||||||
2013 | As adjusted 2012 | 2013 | As adjusted 2012 | |||||||||||||||||||||||||||||
Segment Net Sales |
||||||||||||||||||||||||||||||||
Pigments, Powders and Oxides |
$ | 47,647 | $ | 64,053 | $ | 155,948 | $ | 219,398 | ||||||||||||||||||||||||
Performance Colors and Glass |
94,059 | 86,398 | 298,633 | 294,806 | ||||||||||||||||||||||||||||
Performance Coatings |
151,873 | 137,228 | 445,969 | 447,065 | ||||||||||||||||||||||||||||
Polymer Additives |
71,599 | 79,881 | 229,266 | 251,055 | ||||||||||||||||||||||||||||
Specialty Plastics |
42,926 | 41,305 | 131,267 | 132,512 | ||||||||||||||||||||||||||||
Total segment net sales |
$ | 408,104 | $ | 408,865 | $ | 1,261,083 | $ | 1,344,836 | ||||||||||||||||||||||||
Segment Gross Profit |
||||||||||||||||||||||||||||||||
Pigments, Powders and Oxides |
$ | 8,390 | $ | 7,231 | $ | 25,882 | $ | 28,363 | ||||||||||||||||||||||||
Performance Colors and Glass |
28,713 | 21,086 | 87,203 | 77,220 | ||||||||||||||||||||||||||||
Performance Coatings |
36,410 | 23,858 | 100,237 | 85,328 | ||||||||||||||||||||||||||||
Polymer Additives |
6,251 | 8,907 | 20,616 | 26,871 | ||||||||||||||||||||||||||||
Specialty Plastics |
6,881 | 6,984 | 22,116 | 23,207 | ||||||||||||||||||||||||||||
Other cost of sales |
(2,398 | ) | (7,356 | ) | (4,916 | ) | (8,740 | ) | ||||||||||||||||||||||||
Total gross profit |
84,247 | 60,710 | 251,138 | 232,249 | ||||||||||||||||||||||||||||
Selling, general and administrative expenses |
59,078 | 63,863 | 184,986 | 202,675 | ||||||||||||||||||||||||||||
Restructuring and impairment charges |
3,834 | 198,695 | 26,738 | 203,734 | ||||||||||||||||||||||||||||
Other expense, net |
7,817 | 8,325 | 15,386 | 23,204 | ||||||||||||||||||||||||||||
Income (loss) before income taxes |
$ | 13,518 | $ | (210,173 | ) | $ | 24,028 | $ | (197,364 | ) | ||||||||||||||||||||||
Table 3 | ||||||||
Ferro Corporation and Subsidiaries | ||||||||
Consolidated Balance Sheets (Unaudited) | ||||||||
(Dollars in thousands) | September 30, | |||||||
2013 | December 31, 2012 | |||||||
ASSETS |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 35,853 | $ | 29,576 | ||||
Accounts receivable, net |
331,847 | 306,463 | ||||||
Inventories |
195,617 | 200,824 | ||||||
Deferred income taxes |
8,011 | 7,995 | ||||||
Other receivables |
32,371 | 31,554 | ||||||
Other current assets |
14,571 | 10,802 | ||||||
Current assets of discontinued operations |
| 6,289 | ||||||
Total current assets |
618,270 | 593,503 | ||||||
Property, plant and equipment, net |
299,619 | 309,374 | ||||||
Goodwill |
63,234 | 62,975 | ||||||
Amortizable intangible assets, net |
12,268 | 14,410 | ||||||
Deferred income taxes |
20,527 | 21,554 | ||||||
Other non-current assets |
55,444 | 61,941 | ||||||
Other assets of discontinued operations |
| 15,346 | ||||||
Total assets |
$ | 1,069,362 | $ | 1,079,103 | ||||
LIABILITIES AND EQUITY |
||||||||
Current liabilities |
||||||||
Loans payable and current portion of long-term debt |
$ | 59,665 | $ | 85,152 | ||||
Accounts payable |
183,044 | 182,024 | ||||||
Accrued payrolls |
44,081 | 31,643 | ||||||
Accrued expenses and other current liabilities |
67,514 | 76,384 | ||||||
Current liabilities of discontinued operations |
| 1,300 | ||||||
Total current liabilities |
354,304 | 376,503 | ||||||
Long-term debt, less current portion |
278,119 | 261,624 | ||||||
Postretirement and pension liabilities |
199,922 | 216,167 | ||||||
Other non-current liabilities |
20,316 | 18,135 | ||||||
Total liabilities |
852,661 | 872,429 | ||||||
Shareholders equity |
203,356 | 193,527 | ||||||
Noncontrolling interests |
13,345 | 13,147 | ||||||
Total liabilities and equity |
$ | 1,069,362 | $ | 1,079,103 | ||||
Table 4 | ||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Consolidated Statements of Cash Flows (Unaudited) | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, | September 30, | ||||||||||||||||||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||||||||||||||||||
Cash flows from operating activities |
||||||||||||||||||||||||||||||||
Net income (loss) |
$ | 13,044 | $ | (315,738 | ) | $ | 11,582 | $ | (309,562 | ) | ||||||||||||||||||||||
(Gain) loss on sale of assets and business |
(291 | ) | 277 | (10,686 | ) | 1,018 | ||||||||||||||||||||||||||
Restructuring and impairment charges |
(1,602 | ) | 306,933 | 4,355 | 311,084 | |||||||||||||||||||||||||||
Depreciation and amortization |
11,940 | 13,727 | 38,000 | 41,734 | ||||||||||||||||||||||||||||
Accounts receivable |
14,091 | 27,617 | (23,079 | ) | (23,006 | ) | ||||||||||||||||||||||||||
Inventories |
2,017 | 7,060 | 12,118 | 15,637 | ||||||||||||||||||||||||||||
Accounts payable |
(11,448 | ) | (19,505 | ) | (5,864 | ) | (4,254 | ) | ||||||||||||||||||||||||
Other changes in current assets and liabilities, net |
(3,443 | ) | (317 | ) | (8,363 | ) | 7,814 | |||||||||||||||||||||||||
Other adjustments, net |
(12,751 | ) | (5,696 | ) | (15,060 | ) | (20,929 | ) | ||||||||||||||||||||||||
Net cash provided by operating activities |
11,557 | 14,358 | 3,003 | 19,536 | ||||||||||||||||||||||||||||
Cash flows from investing activities |
||||||||||||||||||||||||||||||||
Capital expenditures for property, plant and equipment |
(5,285 | ) | (10,737 | ) | (21,187 | ) | (46,245 | ) | ||||||||||||||||||||||||
Proceeds from sale of assets |
586 | 1,194 | 16,034 | 2,386 | ||||||||||||||||||||||||||||
Proceeds from sale of stock of Ferro Pfanstiehl
Laboratories, Inc. |
| | 16,912 | | ||||||||||||||||||||||||||||
Dividends received from affiliates |
| (340 | ) | 1,119 | 96 | |||||||||||||||||||||||||||
Net cash (used for) provided by investing activities |
(4,699 | ) | (9,883 | ) | 12,878 | (43,763 | ) | |||||||||||||||||||||||||
Cash flow from financing activities |
||||||||||||||||||||||||||||||||
Net borrowings (repayments) under loans payable |
17,937 | (12,819 | ) | 9,223 | 22,087 | |||||||||||||||||||||||||||
Proceeds from revolving credit facility |
152,116 | 110,155 | 368,317 | 323,151 | ||||||||||||||||||||||||||||
Principal payments on revolving credit facility |
(136,584 | ) | (104,752 | ) | (351,404 | ) | (319,926 | ) | ||||||||||||||||||||||||
Extinguishment of convertible senior notes |
(35,066 | ) | | (35,066 | ) | | ||||||||||||||||||||||||||
Other financing activities |
(347 | ) | 1,820 | (734 | ) | 760 | ||||||||||||||||||||||||||
Net cash (used for) provided by financing activities |
(1,944 | ) | (5,596 | ) | (9,664 | ) | 26,072 | |||||||||||||||||||||||||
Effect of exchange rate changes on cash and cash equivalents |
277 | 571 | 60 | (19 | ) | |||||||||||||||||||||||||||
Increase (decrease) in cash and cash equivalents |
5,191 | (550 | ) | 6,277 | 1,826 | |||||||||||||||||||||||||||
Cash and cash equivalents at beginning of period |
30,662 | 25,367 | 29,576 | 22,991 | ||||||||||||||||||||||||||||
Cash and cash equivalents at end of period |
$ | 35,853 | $ | 24,817 | $ | 35,853 | $ | 24,817 | ||||||||||||||||||||||||
Cash paid during the period for: |
||||||||||||||||||||||||||||||||
Interest |
$ | 12,088 | $ | 12,147 | $ | 25,484 | $ | 25,343 | ||||||||||||||||||||||||
Income taxes |
526 | 1,032 | 2,905 | 3,130 |
Table 5 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Reported Income (Loss) to Adjusted Income (Loss) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
for the Three Months Ended September 30 (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, | Selling, general and | Net income (loss) | ||||||||||||||||||||||||||||||||||||||||||||||||||
except per share amounts) | administrative | Restructuring and | Other expense | Income tax expense | attributable to common | Diluted earnings | ||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales | expenses | impairment charges | (income), net | (benefit) | shareholders | (loss) per share | ||||||||||||||||||||||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
As reported |
$ | 323,857 | $ | 59,078 | $ | 3,834 | $ | 7,817 | $ | 474 | $ | 12,652 | $ | 0.15 | ||||||||||||||||||||||||||||||||||||||
Special items: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
| | (3,834 | ) | | 1,380 | 2,454 | 0.02 | ||||||||||||||||||||||||||||||||||||||||||||
Other (1) |
(601 | ) | (2,256 | ) | | | 1,029 | 1,828 | 0.02 | |||||||||||||||||||||||||||||||||||||||||||
Taxes (2) |
| | | | 4,392 | (4,392 | ) | (0.05 | ) | |||||||||||||||||||||||||||||||||||||||||||
Total special items |
(601 | ) | (2,256 | ) | (3,834 | ) | | 6,801 | (110 | ) | (0.01 | ) | ||||||||||||||||||||||||||||||||||||||||
As adjusted |
$ | 323,256 | $ | 56,822 | $ | | $ | 7,817 | $ | 7,275 | $ | 12,542 | $ | 0.14 | ||||||||||||||||||||||||||||||||||||||
2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
As reported |
$ | 348,155 | $ | 63,863 | $ | 198,695 | $ | 8,325 | $ | 105,447 | $ | (316,114 | ) | $ | (3.66 | ) | ||||||||||||||||||||||||||||||||||||
Special items: |
||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
| | (198,695 | ) | | 71,530 | 127,165 | 1.47 | ||||||||||||||||||||||||||||||||||||||||||||
Other (1) |
(5,813 | ) | (3,245 | ) | | | 3,261 | 5,797 | 0.07 | |||||||||||||||||||||||||||||||||||||||||||
Taxes (2) |
| | | | (181,109 | ) | 181,109 | 2.10 | ||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations |
| | | | | 118 | | |||||||||||||||||||||||||||||||||||||||||||||
Total special items |
(5,813 | ) | (3,245 | ) | (198,695 | ) | | (106,318 | ) | 314,189 | 3.64 | |||||||||||||||||||||||||||||||||||||||||
As adjusted |
$ | 342,342 | $ | 60,618 | $ | | $ | 8,325 | $ | (871 | ) | $ | (1,925 | ) | $ | (0.02 | ) | |||||||||||||||||||||||||||||||||||
1) | Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development activities. |
2) | Adjustment of reported earnings and of special items to a normalized 36% rate for 2013 and 2012. |
It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items, including restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development costs. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.
Table 6 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Information | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Reported Income (Loss) to Adjusted Income | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
for the Nine Months Ended September 30 (Unaudited) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Selling, general and | Net income (loss) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, | administrative | Restructuring and | Other expense | Income tax expense | attributable to common | Diluted earnings | ||||||||||||||||||||||||||||||||||||||||||||||||||
except per share amounts) | Cost of sales | expenses | impairment charges | (income), net | (benefit) | shareholders | (loss) per share | |||||||||||||||||||||||||||||||||||||||||||||||||
2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As reported |
$ | 1,009,945 | $ | 184,986 | $ | 26,738 | $ | 15,386 | $ | 4,025 | $ | 11,405 | $ | 0.13 | ||||||||||||||||||||||||||||||||||||||||||
Special items: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
| | (26,738 | ) | | 9,626 | 17,112 | 0.20 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other (1) |
(3,465 | ) | (6,782 | ) | | 8,856 | 501 | 890 | 0.01 | |||||||||||||||||||||||||||||||||||||||||||||||
Taxes (2) |
| | | | 4,625 | (4,625 | ) | (0.05 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Solar Pastes (3) |
| | | | | 205 | | |||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations |
| | | | | 8,421 | 0.10 | |||||||||||||||||||||||||||||||||||||||||||||||||
Noncontrolling interest |
| | | | | (394 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Total special items |
(3,465 | ) | (6,782 | ) | (26,738 | ) | 8,856 | 14,752 | 21,609 | 0.25 | ||||||||||||||||||||||||||||||||||||||||||||||
As adjusted |
$ | 1,006,480 | $ | 178,204 | $ | | $ | 24,242 | $ | 18,777 | $ | 33,014 | $ | 0.38 | ||||||||||||||||||||||||||||||||||||||||||
2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
As reported |
$ | 1,112,587 | $ | 202,675 | $ | 203,734 | $ | 23,204 | $ | 113,115 | $ | (310,392 | ) | $ | (3.60 | ) | ||||||||||||||||||||||||||||||||||||||||
Special items: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring |
| | (203,734 | ) | | 73,344 | 130,390 | 1.51 | ||||||||||||||||||||||||||||||||||||||||||||||||
Other (1) |
(7,204 | ) | (5,969 | ) | | (808 | ) | 5,033 | 8,948 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Taxes (2) |
| | | | (184,166 | ) | 184,166 | 2.14 | ||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations |
| | | | | (917 | ) | (0.01 | ) | |||||||||||||||||||||||||||||||||||||||||||||||
Total special items |
(7,204 | ) | (5,969 | ) | (203,734 | ) | (808 | ) | (105,789 | ) | 322,587 | 3.74 | ||||||||||||||||||||||||||||||||||||||||||||
As adjusted |
$ | 1,105,383 | $ | 196,706 | $ | | $ | 22,396 | $ | 7,326 | $ | 12,195 | $ | 0.14 | ||||||||||||||||||||||||||||||||||||||||||
1) | Includes certain severance costs, impairments, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development activities. |
2) | Adjustment of reported earnings and of special items to a normalized 36% rate for 2013 and 2012. |
3) | Adjustment to exclude the operations of the Solar Pastes product line prior to the completion of the transaction on February 6, 2013 where certain Solar Pastes assets were sold and the Company exited the product line. We believe this adjustment, in combination with the adjustment to exclude the gain on the sale of Solar Pastes assets of $8,954 included within the adjustments to the Other Expense, Net, provides investors with additional information on the underlying operations of the business. |
It should be noted that adjusted earnings and earnings per share are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The adjusted earnings and earnings per share presented here exclude certain special items, including restructuring and impairment charges, severance costs, ongoing costs at facilities that have been idled, gain/loss on divestitures, proxy contest related costs and certain business development costs. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.
Table 7 | ||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Supplemental Information | ||||||||||||||||||||||||||||||||
Segment Sales Excluding Precious Metals and | ||||||||||||||||||||||||||||||||
Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales and Schedule of | ||||||||||||||||||||||||||||||||
Adjusted Gross Profit (Unaudited) | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||
(Dollars in thousands) | 2013 | As adjusted 2012 | 2013 | As adjusted 2012 | ||||||||||||||||||||||||||||
Pigments, Powders and Oxides |
$ | 35,551 | $ | 38,286 | $ | 110,146 | $ | 124,429 | ||||||||||||||||||||||||
Performance Colors and Glass |
85,076 | 76,204 | 264,822 | 256,931 | ||||||||||||||||||||||||||||
Performance Coatings |
151,873 | 137,228 | 445,969 | 447,065 | ||||||||||||||||||||||||||||
Polymer Additives |
71,599 | 79,881 | 229,266 | 251,055 | ||||||||||||||||||||||||||||
Specialty Plastics |
42,926 | 41,305 | 131,267 | 132,512 | ||||||||||||||||||||||||||||
Total segment sales excluding precious metals |
387,025 | 372,904 | 1,181,470 | 1,211,992 | ||||||||||||||||||||||||||||
Sales of precious metals |
21,079 | 35,961 | 79,613 | 132,844 | ||||||||||||||||||||||||||||
Total net sales |
$ | 408,104 | $ | 408,865 | $ | 1,261,083 | $ | 1,344,836 | ||||||||||||||||||||||||
Net sales excluding precious metals |
$ | 387,025 | $ | 372,904 | $ | 1,181,470 | $ | 1,211,992 | ||||||||||||||||||||||||
Adjusted cost of sales |
323,256 | 342,342 | 1,006,480 | 1,105,383 | ||||||||||||||||||||||||||||
Cost of sales from precious metals |
(21,079 | ) | (35,961 | ) | (79,613 | ) | (132,844 | ) | ||||||||||||||||||||||||
Adjusted cost of sales excluding precious metals |
302,177 | 306,381 | 926,867 | 972,539 | ||||||||||||||||||||||||||||
Adjusted gross profit |
$ | 84,848 | $ | 66,523 | $ | 254,603 | $ | 239,453 | ||||||||||||||||||||||||
Adjusted gross profit percentage |
21.9 | % | 17.8 | % | 21.5 | % | 19.8 | % |
It should be noted that segment net sales excluding precious metals, adjusted cost of sales and adjusted gross profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The sales are presented here to exclude the impact of volatile precious metal raw material costs. The precious metal raw material costs are generally passed through directly to customers with minimal margin. Adjusted cost of sales and adjusted gross profit presented here exclude certain special items including impairment charges and ongoing costs at facilities that have been idled. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.
Table 8 | ||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||
Supplemental Information | ||||||||||||||||
Segment Detail | ||||||||||||||||
Performance Materials | ||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
(Dollars in thousands) | September 30, | September 30, | ||||||||||||||
2013 | As adjusted 2012 | 2013 | As adjusted 2012 | |||||||||||||
Sales |
||||||||||||||||
Pigments, Powders & Oxides |
$ | 47,647 | $ | 64,053 | $ | 155,948 | $ | 219,398 | ||||||||
Performance Colors & Glass |
94,059 | 86,398 | 298,633 | 294,806 | ||||||||||||
Performance Coatings |
151,873 | 137,228 | 445,969 | 447,065 | ||||||||||||
Total Performance Materials Sales |
293,579 | 287,679 | 900,550 | 961,269 | ||||||||||||
Gross profit |
||||||||||||||||
Pigments, Powders & Oxides |
8,390 | 7,231 | 25,882 | 28,363 | ||||||||||||
Performance Colors & Glass |
28,713 | 21,086 | 87,203 | 77,220 | ||||||||||||
Performance Coatings |
36,410 | 23,858 | 100,237 | 85,328 | ||||||||||||
Total Performance Materials Gross Profit |
73,513 | 52,175 | 213,322 | 190,911 | ||||||||||||
Selling, general and administrative charges |
34,205 | 42,620 | 113,700 | 137,393 | ||||||||||||
Performance Materials Operating Profit |
$ | 39,308 | $ | 9,555 | $ | 99,622 | $ | 53,518 | ||||||||
Performance Chemicals |
||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2013 | As adjusted 2012 | 2013 | As adjusted 2012 | |||||||||||||
Sales |
||||||||||||||||
Polymer Additives |
$ | 71,599 | $ | 79,881 | $ | 229,266 | $ | 251,055 | ||||||||
Specialty Plastics |
42,926 | 41,305 | 131,267 | 132,512 | ||||||||||||
Total Performance Chemicals Sales |
114,525 | 121,186 | 360,533 | 383,567 | ||||||||||||
Gross Profit |
||||||||||||||||
Polymer Additives |
6,251 | 8,907 | 20,616 | 26,871 | ||||||||||||
Specialty Plastics |
6,881 | 6,984 | 22,116 | 23,207 | ||||||||||||
Total Performance Chemicals Gross Profit |
13,132 | 15,891 | 42,732 | 50,078 | ||||||||||||
Selling, general and administrative charges |
5,864 | 6,709 | 17,575 | 24,294 | ||||||||||||
Performance Chemicals Operating Profit |
$ | 7,268 | $ | 9,182 | $ | 25,157 | $ | 25,784 | ||||||||
Table 9 | ||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Supplemental Information | ||||||||||||||||||||||||||||||||
Reconciliation of Operating Group Non-GAAP Measures to | ||||||||||||||||||||||||||||||||
Consolidated GAAP Balances | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
(Dollars in thousands) | September 30, | September 30, | ||||||||||||||||||||||||||||||
2013 | As adjusted 2012 | 2013 | As adjusted 2012 | |||||||||||||||||||||||||||||
Total Sales |
$ | 408,104 | $ | 408,865 | $ | 1,261,083 | $ | 1,344,836 | ||||||||||||||||||||||||
Performance Materials |
73,513 | 52,175 | 213,322 | 190,911 | ||||||||||||||||||||||||||||
Performance Chemicals |
13,132 | 15,891 | 42,732 | 50,078 | ||||||||||||||||||||||||||||
Other cost of sales |
(2,398 | ) | (7,356 | ) | (4,916 | ) | (8,740 | ) | ||||||||||||||||||||||||
Total gross profit |
84,247 | 60,710 | 251,138 | 232,249 | ||||||||||||||||||||||||||||
Performance Materials |
34,205 | 42,620 | 113,700 | 137,393 | ||||||||||||||||||||||||||||
Performance Chemicals |
5,864 | 6,709 | 17,575 | 24,294 | ||||||||||||||||||||||||||||
Corporate |
19,009 | 14,534 | 53,711 | 40,988 | ||||||||||||||||||||||||||||
Total selling, general and administrative charges |
59,078 | 63,863 | 184,986 | 202,675 | ||||||||||||||||||||||||||||
Total operating profit |
25,169 | (3,153 | ) | 66,152 | 29,574 | |||||||||||||||||||||||||||
Restructuring and impairment charges |
3,834 | 198,695 | 26,738 | 203,734 | ||||||||||||||||||||||||||||
Interest expense |
6,766 | 6,716 | 21,034 | 19,566 | ||||||||||||||||||||||||||||
Interest earned |
(48 | ) | (57 | ) | (171 | ) | (192 | ) | ||||||||||||||||||||||||
Foreign currency losses, net |
1,308 | 869 | 4,016 | 792 | ||||||||||||||||||||||||||||
Miscellaneous (income) expense, net |
(209 | ) | 797 | (9,493 | ) | 3,038 | ||||||||||||||||||||||||||
Income (loss) from continuing operations before taxes |
$ | 13,518 | $ | (210,173 | ) | $ | 24,028 | $ | (197,364 | ) | ||||||||||||||||||||||
It should be noted that operating group sales, gross profit, selling, general and administrative charges, 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). The respective information has been aggregated in a manner consistent with the operating groups of the Company. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.
Table 10 | ||||||||||||||||||||||||||||||||
Ferro Corporation and Subsidiaries | ||||||||||||||||||||||||||||||||
Reconciliation of Net Income (Loss) to Adjusted | ||||||||||||||||||||||||||||||||
EBITDA | ||||||||||||||||||||||||||||||||
Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||||||||||||||
(Dollars in thousands) | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||||||||||||||
Net Income (Loss) Attributable to Ferro Corporation |
$ | 12,652 | $ | (316,114 | ) | $ | 11,405 | $ | (310,392 | ) | ||||||||||||||||||||||
Loss (Income) from Discontinued Operations, net of
Income Tax |
| 118 | 8,421 | (917 | ) | |||||||||||||||||||||||||||
Interest Expense |
6,766 | 6,716 | 21,034 | 19,566 | ||||||||||||||||||||||||||||
Income Tax Expense |
474 | 105,447 | 4,025 | 113,115 | ||||||||||||||||||||||||||||
Depreciation and Amortization |
11,940 | 13,727 | 38,000 | 41,734 | ||||||||||||||||||||||||||||
Less Interest Amortization Expense and Other |
(545 | ) | (718 | ) | (2,616 | ) | (2,150 | ) | ||||||||||||||||||||||||
Cost of Sales Adjustments |
601 | 5,813 | 3,465 | 7,204 | ||||||||||||||||||||||||||||
SG&A Adjustments |
2,256 | 3,245 | 6,782 | 5,969 | ||||||||||||||||||||||||||||
Restructuring and Impairment |
3,834 | 198,695 | 26,738 | 203,734 | ||||||||||||||||||||||||||||
Other (Income) and Expense Adjustments |
| | (520 | ) | 808 | |||||||||||||||||||||||||||
Noncontrolling Interest Adjustments |
| | (394 | ) | | |||||||||||||||||||||||||||
Gain on Sale of Solar Pastes Assets |
| | (8,954 | ) | | |||||||||||||||||||||||||||
Solar Pastes Operations |
| | 323 | | ||||||||||||||||||||||||||||
Adjusted EBITDA |
$ | 37,978 | $ | 16,929 | $ | 107,709 | $ | 78,671 | ||||||||||||||||||||||||
Net sales excluding precious metals |
$ | 387,025 | $ | 372,904 | $ | 1,181,470 | $ | 1,211,992 | ||||||||||||||||||||||||
Adjusted EBITDA as a % of net sales excluding
precious metals |
9.8 | % | 4.5 | % | 9.1 | % | 6.5 | % |
It should be noted that adjusted EBITDA is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). Adjusted EBITDA is net income before the effects of discontinued operations, interest, income taxes, depreciation and amortization, nonrecurring adjustments to cost of sales, nonrecurring adjustments to SG&A, restructuring and impairment charges, nonrecurring adjustments to miscellaneous income and expense, and the gain and impact of solar pastes operations on Q1 2013. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.