Form 8-K FERRO CORP For: Nov 02





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

__________________________________________

(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,  November 2, 2016, Ferro Corporation ("the Company") issued a press release that discussed financial results for the three-month and nine-month periods ended September 30, 2016, and provided the Company’s outlook for the remainder of 2016. The press release also provided information regarding a conference call to be held on Thursday,  November 3, 2016, in which the Company’s management will discuss the financial results and outlook.



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



















































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FERRO GROWS SALES AND PROFITABILITY IN THIRD QUARTER;

AFFIRMS 2016 GUIDANCE













CLEVELAND, Ohio – November 2, 2016 – Ferro Corporation (NYSE: FOE, the “Company”) today reported results for the third quarter ended September 30, 2016.  Third-quarter income from continuing operations attributable to common shareholders was $0.24 per diluted share compared with $0.17 per diluted share in the third quarter of 2015.  On an adjusted basis, earnings per diluted share from continuing operations were $0.27 compared with $0.24 in the third quarter of 2015.  Adjusted earnings exclude charges relating to, among other items, restructuring activities, transaction-related expenses and gains and losses on asset sales.  Please refer to the supplemental tables at the end of this release for additional information concerning adjusted financial results.



2016 Third-Quarter Results from Continuing Operations 

Third-quarter 2016 net sales increased 3.3% to $289 million, compared with $279 million in the prior year quarter.  Foreign currency translation reduced net sales by approximately $6 million.  On a constant currency basis, net sales increased by 5.7%.  Sales growth was driven by acquisitions, primarily in the Performance Coatings segment, and organic growth in the Pigments, Powders and Oxides segment. The organic growth was driven by strong sales volume growth and gross margin improvement in both the Pigments and Surface Technology product lines that comprise the majority of the Pigments, Powders and Oxides segment.

Reported Earnings from Continuing Operations:  Third-quarter 2016 reported earnings per diluted share were $0.24 versus $0.17 in the same period last year.  Results in the third quarter of 2016 benefited from higher sales and profitability in all three reporting segments.  Results were particularly strong in the Pigments, Powders and Oxides segment where results benefited from higher volumes and

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improved gross margins.  Higher gross profit was partially offset by increases in Selling, General and Administrative (“SG&A”) expenses, as well as interest expense and a higher effective tax rate. 

The gross profit margin for the third quarter of 2016 increased by more than 320 basis points to 30.8%, while SG&A expenses increased by approximately $7 million to $56 million, primarily due to higher incentive and stock-based compensation and a decrease in pension income.  Included in the third quarter of 2015 gross profit was a nonrecurring purchase accounting adjustment of approximately $6 million reflecting additional cost in the quarter related to the acquired Nubiola inventory.  Other expenses were approximately $1 million higher in the third quarter of 2016 compared with the third quarter of 2015.  The effective tax rate was 23.1% compared with 19.6% in the same period last year.

Income from continuing operations was $21 million in the third quarter of 2016, compared with $16 million in the same period last year. The Company recorded a net loss of $9 million for the third quarter of 2016 compared with a net loss of $4 million in the prior year same period.  Both losses were primarily due to losses from discontinued operations of $29 million in the third quarter of 2016 and $19 million in the third quarter of 2015. 

Adjusted Earnings from Continuing Operations:  Third-quarter 2016 adjusted earnings per diluted share were $0.27 versus $0.24 in the same period last year.  Results in the third quarter of 2016 benefited from a stronger adjusted gross profit margin.  Higher gross profit was partially offset by increases in SG&A expense and interest expense and a higher effective tax rate. 

The adjusted gross profit margin for the third quarter of 2016 increased to 30.8% from 27.5% in the third quarter of 2015.  Adjusted SG&A expenses were approximately $8 million higher in the third quarter of 2016 compared with the prior-year period.  Again, the increase in SG&A expense was primarily associated with higher incentive and stock-based compensation and a decrease in pension income.   

In the third quarter of 2016, Adjusted Earnings before Interest, Taxes, Depreciation and Amortization (“Adjusted EBITDA”) was $49 million, equivalent to the prior year period. 



Peter Thomas Comments on Results

“The Ferro team delivered another quarter of strong results, with increased sales and profitability,” said Peter Thomas, Chairman, President and Chief Executive Officer. “Our acquisitions are clearly creating value, as new businesses integrated in the past 12 months are making significant contributions to consolidated results. The Pigments, Powders and Oxides segment experienced a particularly strong quarter, with double-digit sales growth in both the Pigments and Surface Technology product lines. In our Performance Colors and Glass segment, performance was lifted by growing demand in Asia, which offset weaker demand for glass enamels used in the automotive industry.  In the Performance Coatings segment, volume grew 27.3 percent in tile frits and glazes, while demand also increased for porcelain enamel products.”

Mr. Thomas continued, “During the quarter, we took a number of actions to sustain the momentum we’ve achieved with our growth strategy and in October and November we announced three

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acquisitions, each of which aligns with and extends our existing markets and product portfolio.  The acquisition of Cappelle Pigments, which has sales of approximately $70 million, is expected to close by year end and will enhance our pigments portfolio with high-performance specialty inorganic and organic pigments.  The Delta Performance Products assets, which generate approximately $5 million in annual sales, adds to our technical capabilities in color manufacturing.  And, our most recently announced acquisition of Electro-Science Laboratories, which has sales of approximately $40 million, extends our presence in the electronic packaging materials space and provides a very attractive platform for future growth in our Performance Colors and Glass business.

“In addition to the acquisitions, we added talented leaders to support our continued growth. Andrew Ross and Allen Spizzo were appointed to our Board of Directors, bringing extensive experience in growing specialty chemical and materials businesses. Ben Schlater was appointed Vice President and Chief Financial Officer. Joseph Vitale rejoined Ferro as Vice President of Corporate Development. And Kevin Cornelius Grant was named head of Investor Relations. These individuals join a team dedicated to driving Ferro’s strategy, continuing to deliver profitable results and creating value for our shareholders.

“Looking ahead to the fourth quarter, we expect some global economic headwinds in what is traditionally our softest quarter. We believe we have factored these into our planning and are affirming our 2016 adjusted earnings guidance.”



Outlook

As a result of the performance of the business, and global economics forecasts, Ferro is maintaining its full-year earnings outlook.  The Company expects Adjusted EPS of $1.00 to $1.05 and Adjusted EBITDA of $190 to $195 million. The Company expects full-year 2016 free cash flow from continuing operations will be in a range of $70 - $80 million.  Free cash flow from continuing operations is defined as adjusted EBITDA from continuing operations less cash items used to operate the business, including cash taxes and interest, investment in working capital, capital expenditures and other cash items.





Adjusted Guidance:  Earnings, EBITDA, and Free Cash Flow from Continuing Operations

The Company’s guidance relating to adjusted earnings per diluted share, EBITDA and free cash flow from continuing operations exclude the impact of certain items, primarily associated with restructuring activities, transaction-related expenses, gains and losses on asset sales, and mark-to-market adjustments to the Company’s pension and postretirement benefit liabilities.  The impact of adjusting for these items for the first nine months of 2016 was a benefit of approximately $9.0 million to pre-tax income, which resulted in an increase to GAAP earnings per diluted share from continuing operations of $0.06, from $0.77 to $0.83, as presented and reconciled in Table 6, as well as corresponding impacts to Adjusted EBITDA as presented and reconciled in Table 10, and Adjusted Free Cash Flow from Continuing Operations, as presented in Table 13.  It is not possible at this time to identify the potential amount or significance of these items for the balance of the year, as they have not occurred yet.  Therefore, the Company is unable to reconcile its full-year 2016 adjusted earnings per diluted share, and related EBITDA and free cash flow from continuing operations guidance.

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Conference Call

The Company will host a conference call to discuss its third-quarter financial results and its current outlook for 2016 on Thursday, November 3, 2016, at 10:00 a.m. Eastern Time.  To listen to the call, dial 888-222-3913 if calling from the United States or Canada, or dial 303-223-2686 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 November 10, 2016.  To access the replay, dial 800-633-8284 (toll free) if calling from the United States or Canada, or dial 402-977-9140 if calling from outside North America.  Use the program ID #21820061 to access the audio replay. 

The conference call will also be broadcast live over the Internet and will be available for replay for 30 days.  The live broadcast, replay and earnings presentation material 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 functional coatings and color solutions company that supplies 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 4,990 employees globally and reported 2015 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.

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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, 2015.







Company Contacts:



Investor Contact:

Kevin Cornelius Grant, 216-875-5451

Manager, 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 September 30 (unaudited)













It should be noted that adjusted income, earnings per share and other adjusted items referred to above are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.  The adjusted income, earnings per share and other adjusted items presented above exclude certain special items including restructuring charges, certain business development activities,  gains on sale of assets, and discontinued operations.  We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.   



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Table 6

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Reported Income to Adjusted Income

For the Nine Months Ended September 30 (unaudited)











It should be noted that adjusted income, earnings per share and other adjusted items referred to above are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.   The adjusted income, earnings per share and other adjusted items presented above exclude certain special items including restructuring charges, certain business development activities, gains on sale of assets, 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 and trends of the business and enables period-to-period comparability of financial performance.

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Table 7

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Adjusted Gross Profit (unaudited)















It should be noted that 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). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.   Adjusted gross profit and adjusted cost of sales excludes certain items, primarily comprised of the impact of currency-related items in Venezuela in the nine months ended September 30, 2015.  We believe this data provides investors with additional information on the underlying operations and trends 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 2015 results is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.   Adjusted 2015 results are remeasured using the respective 2016 exchange rates.  We believe this data provides investors with additional information on the underlying operations and trends 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 2015 results is a financial measure not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP).  These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.   Adjusted 2015 results are remeasured using the respective 2016 exchange rates.  We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.



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Table 10

Ferro Corporation and Subsidiaries

Supplemental Information

Reconciliation of Net  income attributable to Ferro Corporation

common shareholders 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). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.    Adjusted EBITDA is net income attributable to Ferro Corporation common shareholders before the effects of net income (loss) attributable to noncontrolling interest, discontinued operations, restructuring and impairment charges, other (income) expense, net, interest expense, income tax expense, depreciation and amortization, non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A.  We believe this data provides investors with additional information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.





























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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 net adjusted operating profit after tax 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). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.    Net adjusted operating profit after tax is operating profit before the effects of discontinued operations, non-GAAP adjustments to cost of sales and non-GAAP adjustments to SG&A tax effected.  We believe this data provides investors with additional information on the underlying operations and trends 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 12

Ferro Corporation and Subsidiaries

Supplemental Information

Change in Net Debt (unaudited)







































































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Table 13

Ferro Corporation and Subsidiaries

Supplemental Information

Adjusted Free Cash Flow from Continuing Operations (unaudited)













It should be noted that adjusted EBITDA and free cash flow from continuing operations are financial measures not required by, or presented in accordance with, accounting principles generally accepted in the United States (U.S. GAAP). These non-GAAP financial measures should be considered as a supplement to, and not as a substitute for, the financial measures prepared in accordance with U.S. GAAP and a reconciliation of these financial measures to the most comparable U.S. GAAP financial measures is presented.    Adjusted EBITDA is net income before the effects of income (loss) attributable to noncontrolling interest, discontinued operations, restructuring and impairment charges, other (income) expense net, interest expense, income tax expense, depreciation and amortization, non-GAAP adjustments to cost of sales, and non-GAAP adjustments to SG&A. Free cash flow from Continuing Operations is adjusted EBITDA less capital expenditures, working capital, cash income taxes, cash interest, pension contributions, incentive compensation payments, and other continuing operating cash items. We believe this data provides investors with additional information on the underlying operations and trends 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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