For Immediate Release

 

 

 

 

FERRO REPORTS SIGNIFICANTLY HIGHER ADJUSTED EPS FROM CONTINUING OPERATIONS FOR FIRST QUARTER 2015

 

RAISES ADJUSTED EPS GUIDANCE FOR RECENTLY ANNOUNCED NUBIOLA ACQUISTION

 

 

 

 

 

 

 

 

CLEVELAND, Ohio – April 29, 2015 – Ferro Corporation (NYSE: FOE, the “Company”) today reported results for the first quarter ended March 31, 2015.  First quarter income from continuing operations attributable to common shareholders was $0.17 per diluted share compared with $0.12 per diluted share in the first quarter of 2014.  On an adjusted basis, earnings per diluted share were $0.23 compared with earnings of $0.14 per diluted share in the first quarter of 2014.  The results in both years include a number of charges relating to, among other items, restructuring activities, and the impact of currency devaluations in Venezuela.  Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.

First quarter 2015 net sales were $263 million, while value-added sales, which exclude precious metal sales, were $253 million.  In the same period last year, net sales and value-added sales

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were $281 million and $267 million, respectively.  On a constant currency basis, value-added sales increased 7%, with foreign currency translation adversely impacting value-added sales by approximately $31 million. 

The Company attributed the increase in adjusted earnings to improved profitability in the Performance Colors and Glass and Pigments, Powders and Oxides (“PPO”) segments, on a constant currency basis, coupled with reduced selling, general and administrative (“SG&A”) expenses and a lower effective tax rate, partially offset by unfavorable currency translation impacts.     

Peter Thomas, Chairman, President and Chief Executive Officer, commented, “We’re off to a strong start for 2015 with solid earnings for the first quarter and continued progress on our inorganic growth strategy with the announced acquisition of Nubiola.  For the quarter, adjusted earnings per share from continuing operations increased by 64% on a 7% increase in constant currency value-added sales.  Earnings benefited from higher gross profit on a constant currency basis, our cost optimization initiatives, which drove a further reduction in SG&A expenses for the base business, and a lower income tax rate.

“While first-quarter global economic conditions were weaker than expected, we remain optimistic about higher sales growth for the full year.  We are beginning to see positive economic developments in key regions and markets, including higher domestic auto demand in Europe, signs of recovery in Spain, and stronger demand in the Middle East.  We expect the momentum in Performance Color and Glass will carry through 2015 and believe we will see improved sales growth throughout 2015 in both the Performance Coatings and PPO segments. 

“Yesterday, we also announced an agreement to acquire Nubiola, a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue.  The combination will substantially improve our position in inorganic pigments by expanding our product portfolio and geographic reach.  The transaction is expected to close within the next 60 days, and we expect it to be immediately accretive to earnings.  For this reason, we are increasing our 2015 adjusted diluted earnings guidance to $0.89 to $0.96 per share.  Meanwhile, we continue to actively pursue additional business opportunities to strengthen our position in glass-based coatings and as a provider of color solutions for industrial applications.” 

 

2015 First-Quarter Results

Ferro reported net sales of $263 million in the first quarter of 2015, compared with net sales of $281 million in the first quarter of 2014.  Value-added sales, which exclude precious metal sales, were $253 million in the first quarter of 2015 versus $267 million in the first quarter of the prior year.  Consolidated value-added sales, reported on a constant currency basis, increased by 7%. 

Gross profit was $71 million for the quarter, compared with $75 million for the first quarter of 2014.  Excluding special charges, adjusted gross profit was $73 million (28.9% of value-added sales) compared with $75 million (27.9% of value-added sales) in the prior-year period.  On a constant currency basis, adjusted gross profit increased by $7 million, or 10%.     

SG&A expenses were $49 million compared with expenses of $51 million in the prior-year quarter.  Excluding special items in both periods, SG&A expenses declined to $47 million from $51 million. 

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On a constant currency basis, and excluding SG&A expenses associated with acquisitions, adjusted SG&A for the historical business declined 7%.

Income from continuing operations for the quarter ended March 31, 2015, was $13 million, or $0.17 per diluted share, compared with $10 million, or $0.12 per diluted share, in the first quarter of 2014. Adjusted income attributable to common shareholders was $20 million, or $0.23 per diluted share, compared with $12 million, or $0.14 per diluted share, in the prior-year quarter. 

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $35 million, compared with $32 million in the same period last year. Adjusted EBITDA margins, as a percentage of value-added sales, were 13.6% in the first quarter of 2015 and 11.9% in the same period last year.

 

Outlook

The Company anticipates stronger global economic growth for the remainder of 2015.  Economic growth is expected to increase in the U.S. and Europe, though conditions in certain developing economies, including Indonesia, China, Russia and Ukraine, are expected to remain weak.  The net impact is expected to provide a catalyst for increased sales growth over the remainder of the year relative to the 7% constant currency value-added sales growth experienced in the first quarter. 

The Company expects full-year constant currency value-added sales growth, excluding the impact of Nubiola, in line with prior guidance of approximately 10% - 11%, offset by an unfavorable impact of currency translation estimated at 13%.  Gross profit, as a percent of value-added sales, is expected to be in the range of 29.0% - 29.5%, and operating profit is expected to be in the range of 11.5% - 12.0% of value-added sales.  The effective tax rate for the first quarter of 2015 was 16% due to the Company’s ability to recognize certain tax assets previously fully reserved.  For the full year, the Company expects the effective tax rate to be in the range of 24% - 25%.

Given these expectations, and assuming closing of the Nubiola transaction within the next 60 days, the Company is increasing its adjusted earnings per share guidance to $0.89 - $0.96 compared with prior guidance of $0.85 - $0.90 per diluted share.   

 

Nubiola Acquisition

On April 29, 2015 the Company announced that it signed a definitive agreement with Barcelona-based Nubiola Pigmentos to acquire 100% of Nubiola’s equity, on a cash-free and debt-free basis, for €146 million in cash.  The transaction will be funded with excess cash and a draw on the Company’s existing revolving credit facility and is expected to close within the next 60 days, subject to customary closing conditions.  Nubiola is a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue.  Other products include Iron Oxides, Chrome Oxide Greens and Corrosion Inhibitors.  Nubiola had 2014 annual sales of $119 million, based on the current euro exchange rate, and achieved compound annual growth of 4.1% over the last three years.  The transaction is expected to be accretive to adjusted earnings by more than $0.15 per diluted share in 2016, and by $0.04 - $0.06 in 2015.    Based on 2014 EBITDA and expected synergies in excess of $8 million, the acquisition purchase price represents a transaction multiple of approximately 5X.

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 Conference Call

The Company will host a conference call to discuss its first-quarter financial results, its current outlook for 2015, and the Nubiola transaction on Thursday, April 30, 2015, at 10:00 a.m. Eastern Time.  To listen to the call, dial 800-755-6634 if calling from the United States or Canada, or dial 212-231-2912 if calling from outside North America.  Please call approximately 10 minutes before the conference call is scheduled to begin.

An audio replay of the call will be available through noon Eastern Time on May 7.  To access the replay, dial 800-633-8284 if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America.  Use the program ID #21766957 to access the audio replay. 

The conference call also will be broadcast live over the Internet and will be available for replay through May 31, 2015.  The live broadcast and replay can be accessed through the Investor Information portion of the Company’s Web site at www.ferro.com.  A podcast of the conference call also will be available on the site.

About Ferro Corporation

 

Ferro Corporation (http://www.ferro.com) is a leading global supplier of technology-based performance materials, including glass-based coatings, pigments and colors, and polishing materials. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 3,985 employees globally and reported 2014 sales of $1.1 billion.

 

Cautionary Note on Forward-Looking Statements

 

Certain statements in this press release may constitute “forward-looking statements” within the meaning of Federal securities laws. These statements are subject to a variety of uncertainties, unknown risks, and other factors concerning the Company’s operations and business environment. Important factors that could cause actual results to differ materially from those suggested by these forward-looking statements and that could adversely affect the Company’s future financial performance include the following:

 

 

The risks and uncertainties identified above are not the only risks the Company faces. Additional risks and uncertainties not presently known to the Company or that it currently believes to be immaterial also may adversely affect the Company. Should any known or unknown risks and uncertainties develop into actual events, these developments could have material adverse effects on our business, financial condition and results of operations.

 

This release contains time-sensitive information that reflects management’s best analysis only as of the date of this release. The Company does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information, or circumstances that arise after the date of this release. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the period ended December 31, 2014.

 

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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

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 2

Ferro Corporation and Subsidiaries

Segment Net Sales and Gross Profit (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 3

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 4

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

 

Table 5

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Reported Income to Adjusted Income

For the Three Months Ended March 31 (unaudited)

 

 

 

 

 

   1        Primarily includes certain business development activities and the overall financial impact of currency related items in Venezuela.  

 

   2       Adjustment of reported earnings to a normalized 36% rate for 2014.  In 2015, the adjusted items are taxed at the statutory rate where the adjustment occurred.

 

 

It should be noted that adjusted income, earnings per share and other adjusted items referred above are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  The adjusted income, earnings per share and other adjusted items presented above exclude certain special items including restructuring charges, certain business development activities,  the overall financial impact of currency related items in Venezuela and discontinued operations.  We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.  In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

 

 

 

 

 

 

 

Table 6

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales

and Schedule of Adjusted Gross Profit (unaudited)

 

 

 

 

 

 

  1Adjusted cost of sales reflects pro forma adjustments of $2.6 and $0.2 million for the three months ended March 31, 2015 and 2014, respectively.

 

It should be noted that segment net sales excluding precious metals, adjusted cost of sales and adjusted gross profit are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). The sales are presented here to exclude the impact of volatile precious metal raw material costs. The precious metal raw material costs are generally passed through directly to customers with minimal margin. Adjusted gross profit and adjusted cost of sales excludes special items, primarily comprised of certain business development activities, and the overall financial impact of currency related items in Venezuela. We believe this data provides investors with additional useful information on the underlying operations of the business and enables period-to-period comparability of financial performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 7

Ferro Corporation and Subsidiaries

Supplemental Information

Constant Currency Schedule of Adjusted Operating Profit (unaudited)

 

 

 

 

 

 

It should be noted that the adjusted 2014 results is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  Adjusted 2014 results is remeasured using the respective 2015 exchange rate.  We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance.

 

 

 

 

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Table 8

Ferro Corporation and Subsidiaries

Reconciliation of Net Income to Adjusted EBITDA (unaudited)

 

 

 

 

 

It should be noted that adjusted EBITDA is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  Adjusted EBITDA is net income before the effects of discontinued operations, interest, income taxes, depreciation and amortization, non-recurring adjustments to cost of sales, non-recurring adjustments to SG&A, restructuring and impairment charges, and non-recurring adjustments to miscellaneous income and expense. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 9

Ferro Corporation and Subsidiaries

Supplemental Information

Return on Invested Capital

For the Rolling Twelve Months Ended (unaudited)

 

 

 

 

 

 

 

It should be noted that adjusted operating profit and return on invested capital are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  Adjusted operating profit is operating profit before the effects of discontinued operations, non-recurring adjustments to cost of sales, and non-recurring adjustments to SG&A. We believe this data provides investors with additional information on the underlying operations of the business and enables period-to-period comparability of financial performance. In addition, these measures are used in the calculation of certain incentive compensation programs for selected employees.

 

 

 

 

 

 

 

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