Form 8-K FERRO CORP For: Jul 29

 

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

 

 

Ferro Corporation

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(Exact name of registrant as specified in its charter)

 

 

 

 

Not Applicable

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Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: 

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

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Item 2.02 Results of Operations and Financial Condition.

On Wednesday,  July 29, 2015, Ferro Corporation ("the Company") issued a press release that discussed financial results for the three-month and six-month periods ended June 30, 2015 and provided the Company’s outlook for the remainder of 2015. The press release also provided information regarding a conference call to be held on Thursday,  July 30, 2015, in which the Company’s management will discuss the financial results and outlook. Among other things, the press release reports:

 

 

 

 

 

 

 

A copy of the press release is attached hereto as Exhibit 99.1.

 

 

 

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

Exhibit 99.1: Press release

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

 

 

 

 

 

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Exhibit Index

 

Exhibit No.Description

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99.1Press Release

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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FERRO REPORTS SECOND QUARTER ADJUSTED EARNINGS FROM CONTINUING OPERATIONS OF $0.20 PER SHARE

 

 

 

 

 

CLEVELAND, Ohio – July 29, 2015 – Ferro Corporation (NYSE: FOE, the “Company”) today reported results for the second quarter ended June 30, 2015.  Second quarter income from continuing operations attributable to common shareholders was $0.14 per diluted share compared with $0.15 per diluted share in the second quarter of 2014.  On an adjusted basis, earnings per diluted share were $0.20, versus $0.19 for the second quarter of 2014.  The results in both years include a number of charges relating to, among other items, restructuring activities.  Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.

Second quarter 2015 net sales were $268 million, while value-added sales, which exclude precious metal sales, were $257 million.  In the same period last year, net sales and value-added sales were $294 million and $282 million, respectively.  On a constant currency basis, value-added sales increased 5%.  The impact of foreign currency translation reduced value-added sales by approximately $36 million. 

On a constant currency basis, all three business segments recorded increased value-added sales:  Performance Coatings increased by 5%; Performance Colors and Glass increased by 3%; and Pigments, Powders and Oxides increased by 9%.  Vetriceramici, a producer of coatings for high-end ceramic tile, which Ferro acquired in December 2014, contributed $17 million to value-added sales growth in the quarter, primarily in the Performance Coatings segment.  Excluding the value-added sales contribution from Vetriceramici, Ferro’s base business declined by 2%, due solely to reduced

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sales in the Performance Coatings Segment.  On a constant currency basis, all three segments also delivered increased gross profit, compared with the second quarter of 2014.              

Adjusted earnings for the second quarter of 2015 benefited from increased sales and improved gross profit in all three segments, on a constant currency basis, and lower interest expense partially offset by increased selling, general and administrative (“SG&A”) expenses, primarily related to increased incentive compensation costs.     

Peter Thomas, Chairman, President and Chief Executive Officer, commented, “We continue to make progress on creating value through organic and inorganic sales growth and by improving our profit margins.  For the quarter, value-added sales increased by 5% on a constant currency basis, aided by the Vetriceramici acquisition and organic growth in the Pigments, Powders, and Oxides and Performance Colors and Glass segments. 

“In addition, we continue to drive improved profitability, with our gross profit margin increasing by approximately 250 basis points over the prior year to 30.3% and our adjusted EBITDA margin improving by approximately 75 basis points to 14.5%.  Adjusted operating profit, on a constant currency basis, improved by 16% to $29 million.  Adjusted for currency, we were able to achieve sales growth and profitability improvement despite continued economic weakness in certain regions where we conduct business, including in Asia and the Middle East and North Africa (“MENA”) region.”

Mr. Thomas continued, “In early July, we completed our €149 million acquisition of Nubiola, a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue.  The acquisition substantially improves our position in inorganic pigments by expanding our product portfolio and geographic reach.  We expect the transaction to add approximately $55 million - $60 million to our sales in the second half of 2015 and to be immediately accretive to earnings.  Meanwhile, we are actively pursuing additional business opportunities to further strengthen our position in glass-based coatings and color solutions for industrial applications.

“Looking ahead, we anticipate economic conditions will continue to be challenging in certain regions, including Asia and in certain countries in Eastern Europe, including Russia and Ukraine.  We expect this weakness to be offset by modest economic growth in the United States and Western Europe and an improving outlook for MENA.  Despite the challenging economic conditions, particularly for our tile business, we expect to maintain profit margins, and will continue to execute against our strategy of pursuing value-creating growth while being keenly focused on cost controls.”

2015 Second-Quarter Results

Ferro reported net sales of $268 million in the second quarter of 2015, compared with net sales of $294 million in the second quarter of 2014.  Value-added sales, which exclude precious metal sales, were $257 million in the second quarter of 2015 versus $282 million in the second quarter of the prior year. Consolidated value-added sales, reported on a constant currency basis, increased by 5%. 

Gross profit was $78 million for the quarter, consistent with $78 million for the second quarter of 2014.  Special charges in both periods were not significant.  The adjusted gross profit margin, as a percent of value-added sales, for the second quarter of 2015 was 30.3% compared with 27.8% in the prior-year period.  On a constant currency basis, adjusted gross profit increased by $9 million, or 13%.     

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SG&A expenses were $53 million in the second quarter of 2015 compared with $49 million in the prior-year quarter.  Excluding special items in both periods, SG&A expenses increased to $49 million from $47 million.  On a constant currency basis, and excluding SG&A expenses associated with acquisitions, adjusted SG&A for the historical business increased by approximately $1 million.  The change in SG&A expenses for the quarter was primarily associated with increased incentive compensation expenses.

Income from continuing operations for the quarter ended June 30, 2015, was $12 million, or $0.14 per diluted share, compared with $14 million, or $0.15 per diluted share, in the second quarter of 2014. Adjusted income attributable to common shareholders was $17 million, or $0.20 per diluted share, compared with $17 million, or $0.19 per diluted share, in the prior-year quarter.

During 2014, the Company used a proforma effective tax rate of 36% in calculating adjusted earnings.  For 2015, the Company is using an effective rate that is reflective of the progress being made on strategic tax restructuring projects and more in line with statutory tax rates in the legal entities where business is conducted.  As a result, the adjusted effective tax rate for the second quarter of 2015 was 32.9% compared with 36.0% in the same period last year.  The adjusted effective tax rate for the second quarter of 2015 was higher than the 15.2% for the first quarter of 2015.  The higher rate in the second quarter of 2015 compared with the first quarter reflects recognizing tax expense on a year-to-date basis consistent with the Company’s expected rate for the full year of 2015.  The Company continues to forecast its full-year 2015 effective tax rate to be approximately 25%. 

Adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) were $37 million compared with $39 million in the same period last year. Adjusted EBITDA margins, as a percentage of value-added sales, were 14.5% in the second quarter of 2015 and 13.8% in the same period last year.

Outlook

The Company expects continued global growth, but at a relatively low rate.  Economic conditions in certain developing economies, including Indonesia, China, and Thailand, and certain Eastern European countries, including Russia and Ukraine, are expected to remain weak throughout the remainder of 2015, adversely impacting legacy business sales growth.  In addition, the Company anticipates that foreign currency translation will continue to have a significant negative impact on reported results.

Including the recent acquisition of Nubiola and adjusting for expected foreign currency difference between periods, the Company expects second-half constant currency value-added sales growth of approximately 20% - 22% relative to the same period in 2014.  Value-added sales in the second half of 2014 were $517 million, but would have been approximately $60 million lower if recorded using current foreign currency rate expectations.  From this adjusted base of approximately $457 million, the legacy businesses are expected to add approximately 1% - 2% of organic sales growth, with acquisitions adding $85 million - $90 million.  Precious metal sales in the second half are expected to be in the range of $15 million - $20 million.

For the second half of 2015, 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 adjusted effective tax rate for the second quarter of 2015 was 32.9%, but the Company anticipates the full-year effective tax rate will be approximately 25%.

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Given these expectations, the Company anticipates full-year adjusted earnings per share to be in the range of $0.82 - $0.87 compared with prior guidance of $0.89 - $0.96 per diluted share.   

Stock Repurchase

The Company’s Board of Directors has approved a stock repurchase program under which the Company is authorized to repurchase up to $25 million of the Company’s outstanding shares of common stock on the open market, including through a Rule 10b5-1 plan, in privately negotiated transactions, or otherwise. 

The timing and amount of any stock repurchases will be determined by the Company’s management based on its evaluation of market and business conditions, share price, and other factors.  The stock repurchase program does not obligate the Company to repurchase any dollar amount or number of common shares and may be suspended or discontinued at any time.   

Nubiola Acquisition

On July 7, 2015, the Company announced that it had completed the acquisition of the Nubiola Group (“Nubiola”) on a cash-free and debt-free basis for €149 million in cash, subject to customary working capital and other purchase price adjustments.  Nubiola is a worldwide producer of specialty inorganic pigments and the world’s largest producer of Ultramarine Blue, a pigment for the plastics and construction industries, highly valued for its durability, unique color attributes and whitening capability. Nubiola also produces specialty Iron Oxides, Chrome Oxide Greens and Corrosion Inhibitors. Nubiola employs approximately 750 people around the world, including temporary employees, and has production facilities in Spain, Colombia, Romania, and India and a joint venture in China.  Nubiola had 2014 annual sales of €105 million and achieved compound annual growth of 4.1% over the last three years.    

Conference Call

The Company will host a conference call to discuss its second-quarter financial results and its current outlook for 2015 on Thursday, July 30, 2015, at 10:00 a.m. Eastern Time.  To listen to the call, dial 800-940-2599 if calling from the United States or Canada, or dial 212-271-4651 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 August 6.  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 #21772542 to access the audio replay. 

The conference call also will be broadcast live over the Internet and will be available for replay through August 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,

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household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the Company has approximately 4,710 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:

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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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Company Contacts:

 

Investor Contact:

John Bingle, 216-875-5411

Treasurer and Director of Investor Relations

[email protected] 

 

Media Contact:

Mary Abood, 216-875-5401

Director, Corporate Communications

[email protected] 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 1

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 2

Ferro Corporation and Subsidiaries

Segment Net Sales and Gross Profit (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 3

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 4

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

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Table 5

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Reported Income to Adjusted Income

For the Three Months Ended June 30 (unaudited)

 

 

 

 

 

 

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 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.

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Table 6

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Reported Income to Adjusted Income

For the Six Months Ended June 30 (unaudited)

 

 

 

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.

 

 

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Table 7

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Segment Net Sales Excluding Precious Metals to Net Sales

and Schedule of Adjusted Gross Profit (unaudited)

 

 

 

 

 

 

 

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 8

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 9

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 10

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.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Table 11

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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