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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission File Number 1-584

FERRO CORPORATION

(Exact name of registrant as specified in its charter)

OH

(State or other jurisdiction of

incorporation or organization)

34-0217820

(I.R.S. Employer Identification No.)

6060 Parkland Boulevard

Suite 250

Mayfield Heights, OH

(Address of principal executive offices)

44124

(Zip Code)

216-875-5600

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x NO o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES x NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

x

Accelerated Filer

o

Non-accelerated Filer

o

Smaller Reporting Company

o

Emerging Growth Company

o

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO x

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $1.00

FOE

NYSE

At June 30, 2020, there were 82,250,817 shares of Ferro Common Stock, par value $1.00, outstanding.


Table of Contents

TABLE OF CONTENTS

Page

PART I

Item 1. Financial Statements (Unaudited)

3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3. Quantitative and Qualitative Disclosures about Market Risk

38

Item 4. Controls and Procedures

39

PART II

Item 1. Legal Proceedings

40

Item 1A. Risk Factors

40

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3. Defaults Upon Senior Securities

41

Item 4. Mine Safety Disclosures

41

Item 5. Other Information

41

Item 6. Exhibits

41

Exhibit 31.1

Exhibit 31.2

Exhibit 32.1

Exhibit 32.2

2


Table of Contents

PART I — FINANCIAL INFORMATION

Item 1.  Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

Three Months Ended

Six Months Ended

June 30,

June 30,

(Dollars in thousands, except per share amounts)

2020

2019

2020

2019

Net sales

$

204,801

$

260,958

$

457,127

$

524,340

Cost of sales

141,057

181,828

312,645

367,351

Gross profit

63,744

79,130

144,482

156,989

Selling, general and administrative expenses

50,541

53,249

106,587

110,180

Restructuring and impairment charges

8,619

4,057

9,784

5,797

Other expense (income):

Interest expense

6,177

6,281

11,707

12,576

Interest earned

(307)

(832)

(561)

(1,643)

Foreign currency losses (gains), net

1,143

2,043

(172)

4,007

Miscellaneous expense (income), net

(703)

318

(2,166)

364

Income (loss) before income taxes

(1,726)

14,014

19,303

25,708

Income tax expense

200

2,653

5,317

5,546

Income (loss) from continuing operations

(1,926)

11,361

13,986

20,162

Income (loss) from discontinued operations, net of income taxes

(3,238)

(252)

(3,017)

4,825

Net income (loss)

(5,164)

11,109

10,969

24,987

Less: Net income attributable to noncontrolling interests

376

238

386

512

Net income (loss) attributable to Ferro Corporation common shareholders

$

(5,540)

$

10,871

$

10,583

$

24,475

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

Basic earnings (loss):

Continuing operations

$

(0.03)

$

0.13

$

0.17

$

0.24

Discontinued operations

(0.04)

(0.04)

0.06

$

(0.07)

$

0.13

$

0.13

$

0.30

Diluted earnings (loss):

Continuing operations

$

(0.03)

$

0.13

$

0.16

$

0.23

Discontinued operations

(0.04)

(0.04)

0.06

$

(0.07)

$

0.13

$

0.12

$

0.29

See accompanying notes to condensed consolidated financial statements.

3


Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

June 30,

June 30,

(Dollars in thousands)

2020

2019

2020

2019

Net income (loss)

$

(5,164)

$

11,109

$

10,969

$

24,987

Other comprehensive income (loss), net of income tax:

Foreign currency translation income (loss)

3,857

3,873

(14,509)

7,381

Cash flow hedging instruments, unrealized loss

(1,560)

(7,349)

(10,600)

(11,663)

Other comprehensive income (loss), net of income tax

2,297

(3,476)

(25,109)

(4,282)

Total comprehensive income (loss)

(2,867)

7,633

(14,140)

20,705

Less: Comprehensive income attributable to noncontrolling interests

340

122

256

502

Comprehensive income (loss) attributable to Ferro Corporation

$

(3,207)

$

7,511

$

(14,396)

$

20,203

See accompanying notes to condensed consolidated financial statements.

4


Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

June 30,

December 31,

(Dollars in thousands)

2020

2019

ASSETS

Current assets

Cash and cash equivalents

$

62,031

$

96,202

Accounts receivable, net

133,349

139,333

Inventories

290,659

264,476

Other receivables

71,913

69,365

Other current assets

19,072

22,373

Current assets held-for-sale

279,576

291,420

Total current assets

856,600

883,169

Other assets

Property, plant and equipment, net

296,290

302,672

Goodwill

171,545

172,209

Intangible assets, net

122,024

127,815

Deferred income taxes

101,114

98,714

Operating leased assets

15,042

20,088

Other non-current assets

75,211

72,023

Non-current assets held-for-sale

157,389

157,931

Total assets

$

1,795,215

$

1,834,621

LIABILITIES AND EQUITY

Current liabilities

Loans payable and current portion of long-term debt

$

20,379

$

8,703

Accounts payable

117,856

138,799

Accrued payrolls

27,799

27,447

Accrued expenses and other current liabilities

76,685

73,016

Current liabilities held-for-sale

103,466

133,780

Total current liabilities

346,185

381,745

Other liabilities

Long-term debt, less current portion

810,793

798,862

Postretirement and pension liabilities

168,643

174,021

Operating leased non-current liabilities

9,716

14,474

Other non-current liabilities

60,037

56,976

Non-current liabilities held-for-sale

39,186

38,341

Total liabilities

1,434,560

1,464,419

Equity

Ferro Corporation shareholders’ equity:

Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 82.3 million and 82.0 million shares outstanding at June 30, 2020, and December 31, 2019, respectively

93,436

93,436

Paid-in capital

293,645

294,543

Retained earnings

272,599

262,016

Accumulated other comprehensive loss

(134,355)

(109,376)

Common shares in treasury, at cost

(174,752)

(180,243)

Total Ferro Corporation shareholders’ equity

350,573

360,376

Noncontrolling interests

10,082

9,826

Total equity

360,655

370,202

Total liabilities and equity

$

1,795,215

$

1,834,621

See accompanying notes to condensed consolidated financial statements.

5


Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

Ferro Corporation Shareholders

Common Shares

Accumulated

in Treasury

Other

Non-

Common

Paid-in

Retained

Comprehensive

controlling

Total

(In thousands)

Shares

Amount

Stock

Capital

Earnings

Loss

Interests

Equity

Balances at December 31, 2019

11,431 

$

(180,243)

$

93,436 

$

294,543 

$

262,016 

$

(109,376)

$

9,826 

$

370,202 

Net income

16,123 

10 

16,133 

Other comprehensive loss

(27,312)

(94)

(27,406)

Stock-based compensation transactions

(238)

5,332 

(2,723)