§

Net sales increased 15.5%, compared to the prior-year quarter, to $320.6 million

o

Organic sales rose 6.7% on a constant currency basis

§

Gross profit margin expanded 40 basis points, compared to the prior-year quarter, to 30.8%

o

Adjusted gross profit margin expanded 120 basis points to 31.6%

§

Net income attributable to Ferro Corporation common shareholders improved to $21.9 million from a net loss of $10.0 million in the prior-year quarter

§

Earnings per diluted share from continuing operations increased 13%, compared to the prior-year quarter, to $0.26

o

Adjusted earnings per diluted share increased 41% to $0.31

§

Adjusted EBITDA grew 29.1%, compared to the prior-year quarter, to $56.4 million



Continuing Operations

Earnings Per Diluted Share

Q1 2017

Q1 2016

GAAP

$ 0.26

$ 0.23

Adjusted (Non-GAAP)

$ 0.31

$ 0.22

·

Color Solutions (CS) (formerly Pigments, Powders and Oxides) increased sales by 47.9%, to $90.5 million, and grew gross profit to $28.2 million and generated a gross profit margin to 31.1%

·

Performance Color & Glass (PCG) increased sales by 17.4%, to $103.5 million, and grew gross profit to $37.4 million and gross profit margin to 36.1%

·

Performance Coatings (PC) generated relatively flat sales at $126.6 million, while growing gross profit to $33.5 million and gross profit margin to 26.5%.  Reformulation efforts – which drive gross margin expansion with higher volume but lower sales – adversely affected sales by approximately 3 to 4%.

·

Adjusted EPS of $1.17 - $1.22 per diluted share, up from $1.12 - $1.17 per dilute share

·

Adjusted EBITDA of $214 million - $219 million, up from $207 million - $212 million

·

Adjusted Free Cash Flow from Continuing Operations of $85 million - $95 million, up from $80 million - $90 million

·

Consolidated sales growth of 8.5% - 9.5%, up from 7% - 8%

·

Webcast can be accessed by clicking on the Investor Information link at the top of Ferro’s website at ferro.com.

·

Live telephone: Call 888-222-3913 within the U.S. or +1 303-223-4369 outside the U.S. Please join the call at least 10 minutes before the start time.

·

Webcast replay: Available on Ferro’s Investor website at ferro.com beginning at approximately 12:00 noon Eastern Time on April 26, 2017

·

Telephone replay: Call 800-633-8284 within the U.S. or +1 402-977-9140 outside the U.S. (for both U.S. and outside the U.S. access code is 21849794).

·

Presentation material & podcast: Earnings presentation material and podcasts can be accessed through the Investor Information portion of the Company’s Web site at  ferro.com. 

·

demand in the industries into which Ferro sells its products may be unpredictable, cyclical, or heavily influenced by consumer spending;

·

Ferro’s ability to successfully implement and/or administer its optimization initiatives, including its restructuring programs, and to produce the desired results;

·

currency conversion rates and economic, social, political, and regulatory conditions in the U.S. and around the world;

·

Ferro’s ability to identify suitable acquisition candidates, complete acquisitions, effectively integrate the businesses and achieve the expected synergies (including, but not limited to, the Smalti per Cermaiche, Cappelle Pigments, Electro-Science Laboratories, Delta Performance Products, Pinturas Benicarló, Ferer, Al Salomi, Nubiola and Vetriceramici transactions), as well as the acquisitions being accretive and Ferro achieving the expected returns on invested capital;

·

the effectiveness of the Company’s efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques;

·

Ferro’s ability to successfully introduce new products or enter into new growth markets;

·

the impact of interruption, damage to, failure, or compromise of the Company’s information systems;

·

restrictive covenants in the Company’s credit facilities could affect its strategic initiatives and liquidity;

·

Ferro’s ability to access capital markets, borrowings, or financial transactions;

·

the availability of reliable sources of energy and raw materials at a reasonable cost;

·

increasingly aggressive domestic and foreign governmental regulations on hazardous materials and regulations affecting health, safety and the environment;

·

competitive factors, including intense price competition;

·

Ferro’s ability to protect its intellectual property, including trade secrets, or to successfully resolve claims of infringement brought against it;

·

sale of products and materials into highly regulated industries;

·

the impact of operating hazards and investments made in order to meet stringent environmental, health and safety regulations;

·

limited or no redundancy for certain of the Company’s manufacturing facilities and possible interruption of operations at those facilities;

·

management of Ferro’s general and administrative expenses;

·

Ferro’s multi-jurisdictional tax structure and its ability to reduce its effective tax rate, including the impact of the Company’s performance on its ability to utilize significant deferred tax assets;

·

the effectiveness of strategies to increase Ferro’s return on invested capital, and the short-term impact that acquisitions may have on return on invested capital;

·

stringent labor and employment laws and relationships with the Company’s employees;

·

the impact of requirements to fund employee benefit costs, especially post-retirement costs;

·

implementation of new business processes and information systems, including the outsourcing of functions to third parties;

·

risks associated with the manufacture and sale of material into industries making products for sensitive applications;

·

exposure to lawsuits in the normal course of business;

·

risks and uncertainties associated with intangible assets;

·

Ferro’s borrowing costs could be affected adversely by interest rate increases;

·

liens on the Company’s assets by its lenders affect its ability to dispose of property and businesses;

·

Ferro may not pay dividends on its common stock in the foreseeable future;

·

amount and timing of any repurchase of Ferro’s common stock; and

·

other factors affecting the Company’s business that are beyond its control, including disasters, accidents and governmental actions.





(In thousands, except per share amounts)

Three Months Ended



March 31,



2017

2016



Net sales

$

$

Cost of sales

Gross profit

Selling, general and administrative expenses

Restructuring and impairment charges

Other expense (income):

Interest expense

Interest earned

Foreign currency (gains) losses, net

Loss on extinguishment of debt

 -

Miscellaneous income, net

Income before income taxes

Income tax expense

Income from continuing operations

Loss from discontinued operations, net of income taxes

 -

Net income (loss)

Less: Net income attributable to noncontrolling interests

Net income (loss) attributable to Ferro Corporation common shareholders

$

$



Earnings (loss) per share attributable to Ferro Corporation common shareholders:

Basic earnings (loss):

Continuing operations

$

$

Discontinued operations

 -



$

$



Diluted earnings (loss):

Continuing operations

$

$

Discontinued operations

 -



$

$

Shares outstanding:

Weighted-average basic shares

Weighted-average diluted shares

End-of-period basic shares





(Dollars in thousands)

Three Months Ended



March 31,



2017

2016

Segment Net Sales

Performance Coatings

$

$

Performance Colors and Glass

Color Solutions

Total segment net sales

$

$



Segment Gross Profit

Performance Coatings

$

$

Performance Colors and Glass

Color Solutions

Other costs of sales

Total gross profit

$

$



Selling, general and administrative expenses

Strategic services

$

$

Functional services

Incentive compensation

Stock-based compensation

Total selling, general and administrative expenses

$

$



Restructuring and impairment charges

Other expense, net

Income before income taxes

$

$





(Dollars in thousands)

March 31,

December 31,



2017

2016

ASSETS

Current assets

Cash and cash equivalents

$

$

Accounts receivable, net

Inventories

Other receivables

Other current assets

Total current assets

Other assets

Property, plant and equipment, net

Goodwill

Intangible assets, net

Deferred income taxes

Other non-current assets

Total assets

$

$



LIABILITIES AND EQUITY

Current liabilities

Loans payable and current portion of long-term debt

$

$

Accounts payable

Accrued payrolls

Accrued expenses and other current liabilities

Total current liabilities

Other liabilities

Long-term debt, less current portion

Postretirement and pension liabilities

Other non-current liabilities

Total liabilities

Equity

Total Ferro Corporation shareholders’ equity

Noncontrolling interests

Total liabilities and equity

$

$





(Dollars in thousands)

Three Months Ended



March 31,



2017

2016

Cash flows from operating activities

Net income (loss)

$

$

Loss (gain) on sale of assets and business

Depreciation and amortization

Interest amortization

Restructuring and impairment

Loss on extinguishment of debt

 -

Accounts receivable

Inventories

Accounts payable

Other current assets and liabilities, net

Other adjustments, net

Net cash provided by (used in) operating activities



Cash flows from investing activities

Capital expenditures for property, plant and equipment and other long lived assets

Proceeds from sale of assets

Business acquisitions, net of cash acquired

 -

Net cash used in investing activities



Cash flows from financing activities

Net (repayments) borrowings under loans payable

Proceeds from revolving credit facility, maturing 2019

Principal payments on revolving credit facility, maturing 2019

Principal payments on term loan facility, maturing 2021

Proceeds from term loan facility, maturing 2024

Payment of debt issuance costs

Purchase of treasury stock

 -

Other financing activities

Net cash provided by financing activities

Effect of exchange rate changes on cash and cash equivalents

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

$

$



Cash paid during the period for:

Interest

$

$

Income taxes

$

$







(Dollars in thousands, except per share amounts)

Cost of sales

Selling general and administrative expenses

Restructuring and impairment charges

Other expense, net

Income tax expense3  

Net income (loss) attributable to common shareholders

Diluted earnings (loss) per share





2017



As reported

$

$

$

$

$

$

$

Special items:

Restructuring

 -

 -

 -

Other1

 -

Total special items4

As adjusted

$

$

$

 -

$

$

$

$







2016



As reported

$

$

$

$

$

$

$

Special items:

Restructuring

 -

 -

 -

Other2

 -

 -

Discontinued operations

 -

 -

 -

 -

 -

Total special items4

 -

As adjusted

$

$

$

 -

$

$

$

$

(1)

The adjustments to “Cost of Sales” primarily include the amortization of purchase accounting adjustments related to our recent acquisitions.  The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to certain business development activities.  The adjustments to “Other expense, net” primarily relates to debt extinguishment costs and a reduction of a contingent liability in Argentina.

(2)

The adjustments to “Selling general and administrative expenses” primarily include legal, professional and other expenses related to certain business development activities.  The adjustments to “Other expense, net” primarily relates to the gain on an asset sale that was recognized.

(3)

The tax rate reflects the reported tax rate, adjusted for non-GAAP adjustments being tax effected at the respective statutory rate where the item originated.

(4)

Due to rounding, total earnings per share related to special items does not always add to the total adjusted earnings per share.





(Dollars in thousands)

Three Months Ended



March 31,



2017

2016



Performance Coatings

$

$

Performance Colors and Glass

Color Solutions

Total net sales

$

$



Total net sales

$

$

Adjusted cost of sales1

Adjusted gross profit

$

$

Adjusted gross profit percentage

%

%

(1)

Refer to Table 5 for the reconciliation of cost of sales to adjusted cost of sales for the three months ended March 31, 2017 and 2016, respectively.







Three Months Ended

(Dollars in thousands)

March 31,



2016

Adjusted 20161

2017

2017 vs  Adjusted 2016

Segment net sales

Performance Coatings

$

$

$

$

Performance Colors and Glass

Color Solutions

Total segment net sales

$

$

$

$



Segment adjusted gross profit

Performance Coatings

$

$

$

$

Performance Colors and Glass

Color Solutions

Other costs of sales

Total adjusted gross profit2

$

$

$

$



Adjusted selling, general and administrative expenses

Strategic services

$

$

$

$

Functional services

Incentive compensation

Stock-based compensation

Total adjusted selling, general and administrative expenses3

$

$

$

$



Adjusted operating profit

$

$

$

$

Adjusted operating profit as a % of net sales

(1)

Reflects the remeasurement of 2016 reported and adjusted local currency results using 2017 exchange rates, resulting in constant currency comparative figures to 2017 reported and adjusted results.  See Table 5 for non-GAAP adjustments applicable to the three month period.

(2)

Refer to Table 6 for the reconciliation of gross profit to adjusted gross profit for the three months ended March 31, 2017 and 2016, respectively.

(3)

Refer to Table 5 for the reconciliation of SG&A expenses to adjusted SG&A expenses for the three months ended March 31, 2017 and 2016, respectively.





(Dollars in thousands)

Three Months Ended



March 31,



2017

2016

Net income (loss) attributable to Ferro Corporation common shareholders

$

$

Net income attributable to noncontrolling interests

Loss from discontinued operations, net of income taxes

 -

Restructuring and impairment charges

Other expense (income), net

Interest expense

Income tax expense

Depreciation and amortization

Less: interest amortization expense and other

Cost of sales adjustments1

 -

SG&A adjustments1

Adjusted EBITDA

$

$



Net sales

$

$

Adjusted EBITDA as a % of net sales

%

%

(1)

For details of Non-GAAP adjustments, refer to Table 5 for the reconciliation of cost of sales to adjusted cost of sales and SG&A to adjusted SG&A for the three months ended March 31, 2017 and 2016, respectively.





(Dollars in thousands)

March 31,

December 31,



2017

2016



Gross profit

$

$

Selling, general and administrative expenses

Total operating profit

Non-GAAP adjustments1

Adjusted operating profit before tax

Less: Tax expense2

Net adjusted operating profit after tax

$

$



Recent acquisitions3 NOPAT gain

Net adjusted operating profit after tax excluding recent acquisitions

$

$



Equity

Debt

Off balance sheet precious metal leases

Postretirement and pension liabilities

Environmental liabilities

Cash

Invested capital

$

$



Return on invested capital



Less: recent acquisitions3 invested capital

Invested capital excluding recent acquisitions

$

$



Return on invested capital excluding recent acquisitions



(1)

The “Non-GAAP adjustments” include non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A for the rolling twelve months ended March 31, 2017 and December 31, 2016.  The “Non-GAAP adjustments” also includes precious metal lease fees which were $0.8 million and $0.8 million for the rolling twelve months ended March 31, 2017 and December 31, 2015, respectively.

(2)

Operating profit for 2017 and 2016 is tax effected at 28.0% and 26.4%, respectively.    

(3)

For the rolling twelve months ended March 31, 2017, the recent acquisitions include Pinturas, Delta Performance Products, ESL and Cappelle. For the rolling twelve months ended December 31, 2016, the recent acquisitions  include Ferer, Pinturas, Delta Performance Products, ESL and Cappelle.    Acquisitions are removed from being included in the recent acquisitions line item after the acquisitions are included in the Company for a full year.



(Dollars in thousands)

Three Months Ended



March 31, 2017

March 31, 2016

Beginning of period

  Gross debt

$

$

  Cash

  Gross debt



  Unamortized debt issuance costs included in debt

  Net debt



End of period

  Gross debt

  Cash

  Gross debt



  Unamortized debt issuance costs included in debt

  Net debt



Period increase in gross debt

$

$



Period increase in net debt

$