FOE - Earnings call transcript Q4 2019

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Operator

Good morning. Thank you for joining the Ferro Corporation's Fourth Quarter and Full Year 2019 Earnings Conference Call. An archived replay of this teleconference will be available through the investor information section at ferro.com later today and will be available for approximately seven days.

I would now like to turn the conference over to Kevin Grant, Director of Investor Relations and Corporate Communications. Please go ahead.

Kevin Grant

morning, good and you, everyone. Thank Fourth Welcome Earnings Call. XXXX to Ferro's Conference Quarter Ferro's we'll for ended XX, morning, be financial full December This reviewing XXXX. year and results quarter the fourth be Schlater, Group President our to I'm Peter Financial Vice by CEO; Ben and and Thomas, pleased and Chairman, joined Officer. President Chief today

statements of call today deck website. remind to I'd available release are the we the making in and some are comments earnings forward-looking our we The conditions presentation Investors on and are like circumstances everyone conference and are see view section our based that of them. of as

However, statement and circumstances disclosure those the change. forward-looking earnings as the the and release to views may in earnings change Please conditions presentation. refer

a measures adjusted non-GAAP that with and to today's of these information reconciliations Descriptions and presentation reported you conjunction and the Also, contain deck. on will call earnings financial basis. review in included various are in operating encourage release discussion. We both today's results

now pass is pleasure to over the my to It Peter. call

Peter Thomas

Thank fourth and provide on this commentary have you year with We're opportunity our everyone. you, pleased good and performance. to full XXXX Kevin, quarter to morning,

We also thoughts for the the some once this will you see of is we tile with the sale business completed. morning Ferro coatings opportunities on share

Also that the began indications in And this our Regarding macroeconomic us performance of showed of financial of of year, adjusted including XXXX but of EBITDA our certain not XXXX we completed through It managing stellar helped was near our to by sure, we midpoint the year in range margin. performance, the operating improving guidance. tenacity macroeconomic Ferro, end at our adjusted and the quarter, see tile conditions business, encountered. coatings considerable challenges markets. the EPS a for guidance fourth regain the team encouraging was

the initiatives tile through our taken As of of through we us put on the our to coatings track reposition business we steps for optimization remain optimistic first have the the and sale a and good beyond. XXXX, move that quarter business we XXXX

the which of about half words in to few business, the anticipated a expect tile coatings our XXXX. continue sale of Now to be second completed we

putting Let's transaction context by the of into strategy. our start the

we it creation implemented efficient functional we business. of generate new our By in value our investing for rather and create constantly set This operations, XXXX, assets, focused, you strategy to cover out coatings and have a us a improve options to set appreciate, our as simplifying in high-value harvesting underperforming management our When to and materials I opportunities higher Those not With business innovation specialty in be optimization, appropriate on we value time to concluded accomplishments we company from but delivered created focused signal strategy. would value. diversified the strategy, value that business. Ferro mindset, that introduced hope opportunities focusing and that completion chemicals company. and generate evaluates we did and that solutions of successfully coatings tile to the additional value. a harvest went this materials on team, a

how be concentrated see to and well and more several end across more move construction sale talked gross rates. how so centric in underlying we materials, and balanced higher to Ferro about We've the concentration version next coatings portfolio our technology quarters leadership that advances strategy. on the and market to be advantage evenly our We higher building we to sector. positions you step to We you and innovation take focused specialty business margins itself. less a the better rebound with our markets euro a continuing past less company of Ferro's can sharing said about might portfolio the with the back you thinking wanted for greater over tightly the growth of would If get moment, tile of been toward

innovation, result we all tile technology toward objectives With this will underlying and coatings end consumption sale having more. regions, geographic The across emphasis growth, believe these markets manufacturing and higher formula and for end markets and for is materials. to exposure sustainable cyclical in raw on operations, more market of streamlined more move a this more transaction, balance less We success. less margins, stronger

EBITDA. on Ferro's expect we As presentation transaction gross Slide margin benefit profit, and you deck, can our gross to tile coatings adjusted see X the profit of

We XX% foreign XX%, also euro sensitivities with irrelevant. exchange expect essentially reduce for becoming to exposure decreasing and Egyptian pound Ferro's it from example, to the

more East and will how market, on X end markets. with Slide be portfolio less shows reliance Africa balanced by and geographically Middle our Europe,

markets markets, the away growth, coatings namely Northern for construction we from are the the end From Europe and sale shifting Ferro's markets, goods. EMEA tile and presence segments, the which of part higher towards perspective Eastern targeting electronics than and Within exposure the growing southern the of we to and industrial more are region. and slower our cyclical building reduces are

are the very excited the We opportunities in phase our of ahead strategy. about next

higher decorative electronic more serving These are ports. growth automotive coatings like glass, areas in glass services and world-class Our expertise. functional world-class technology-driven sensors, we and and focused on markets, will products which portfolio be have defense systems,

is of markets say, this challenges own, these don't not do. their present of to Now they that course,

help anticipate and for are to made economic ramp-down in intend are in the These this staying higher customers assisting to demand products. gladly which demand transitions markets. Ferro technology these We occur and generation address some higher-margin manage to their close our of lumpiness one next, periods for cause higher we there embrace growth, the our of these development could for challenges production to by in benefits from this when and of and that example, ramp-up products. For are should the markets products, products next-generation us

Now a for company better get XXXX will transition that of next itself. be version to the to Ferro year of

and an X disciplined main manner. in which have XXXX, we orderly pursue We intend objectives for to

moving business and costs the of because our the of rightsize eliminate stranded assets on we the continuing Systems can taking they are Coatings transaction, Specifically, closing that tile initiatives business. sale to coatings Tile optimization the throughout company,

XXXX. one main our is for objectives of optimization noted, As

have said taking and costs, footprint just We also increasing our cost. manufacturing out that efficiency, optimization controlling operations. It's is rightsizing adjusting not our previously

Our things. optimization do these initiatives all of

coatings the pull of the have, timing and as opportunities the we we we Given of change transaction, tile levers XXXX. may the significance certain move actions through the

look we have us positioned realize to and into year this well be can more have in transition should frankly XXXX. taking get the rate this that previous year We to opportunities the to through moving this are XXXX, taken and creation we actions Ferro enabled for benefits normalized run a value the actions years of we when forward the of in point.

financials. call Now I'm I will also Then guidance. comment turn walk going XXXX the operations the I to to will continuing performance you our discuss our fourth quarter year for through on Ben our segment to and XXXX. over full

Benjamin Schlater

quarter morning, good I'd mentioned fourth and numbers XXXX. to start out Peter, currency basis comparisons non-GAAP for All this adjusted the on consolidated the rates I versus you, XXXX. refer Please are operations our full Thank note for everyone. quarter basis. are to full that year are the year morning and fourth an and discussing results constant and a like on continuing financial growth

call through of X the to remarks, intend of operations our guidance the the continuing X, and in closely in closing prepared and you manage and and tile on is so our to operations presentation slides that continue format To forward primarily will in context on highlights our we do to find future this terms be ferro.com intention and in in our section. reviewed the anticipated the of While regard. and X results calls, review divestiture, going be today's financial that which accompanying call, Investors end, can that can

was In XX%, declined $XXX.X X.X% the profit EPS gross X.X% net $X.XX. profit sales $XX.X net fourth margins X. gross million declined XX.X% quarter, SG&A to $XX.X to million. sales adjusted to $XX.X and million, were Slide EBITDA to or Adjusted adjusted adjusted declined of million, adjusted declined expense Turning

XX%, year go profit was to in adjusted $XXX.X The adjusted sales, $XXX.X X. adjusted declined to net $X $XXX.X gross compared sales million, was $X.XX. I was performance. billion. and will the declined SG&A million, Adjusted prior X.X% year. to quarter performance Net through was X.X% Slide was margin our XX.X% profit adjusted EBITDA full XXXX turning of million gross Now the lower to or expense EPS

within As reflect optimization to corporate the X can These our tables markets. the divestiture Peter discussed of and and our press experienced the which we primarily events development, Setting year-to-date in non-GAAP products. our figures some adjustments basis the details fourth performed in X those his aside, events off-cycle an some remarks, and related adjusted on be of activities, the following found with related we line results in on release. for quarter,

quarter. fourth the for adjustments the on detail more provide now I'll

professional In First, to North have quarter, onetime other legal, initiatives. for including and in $XXX,XXX, $X.X million of in costs related due primarily manufacturing to corporate expenses optimization American initiatives, the divested cost optimization of to to the of cost sales, and and of in we SG&A, we approximately January development related XXXX initiative announced adjustments of and adjustments we businesses related consisting have certain assets. primarily $X million optimization

related initiatives and was there synergies. an $X.X approximately acquisition of restructuring ongoing to to to Turning achieve million adjustment impairment, optimization our actions

an And and adjustment income Finally, mark-to-market an This in other where for million. we at items item $XX.X rate pension was the and being other primarily to the of $X.X quarter, about benefit million under we special tax statutory of the respective adjustment the expense, adjustments. had affected had quarter, related originated. for post-retirement

net the compared as prior quarter million a with constant $XX.X sales of on fourth adjusted net year was SG&A or in of basis. currency or The sales quarter $XX.X million expense stated XX.X% XX.X%

primarily quarter, $X.X Interest accounted expense $XX.X million in the to was increase. million compared the to was expense in compared prior prior the year. for $XX.X $X Newly businesses year acquired the million interest million and year, for

cash of cash flow which to a Ferro, operations. consolidated free was quarter both $XXX back and flow the define Then announced for by restructuring manufacturing This cash for We activities brings less recently flow operating activity. details. discontinued cash inflow minutes Adjusted for I'll add spend used me Capex. and adjusted few cash acquisition-related an free free the continuing more through walking million. our GAAP provided includes items as optimization, adjusted we

$XX.X capital, million of as The the of activities net of operating figures attributable loss $XX those noncash million depreciation $XX.X to This operations. and restructuring $XX to balance components remaining receivables at tile other The with the sits for on working of impairments. charge are of impairment the million provided GAAP change charge Then million amortization, in other we amount $XX.X equals starting $XX.X million million $XX.X and other Corporation P&L goodwill free Ferro in of fourth sheet flow items, quarter add million, business. million an primarily add $X finally, items; in reflects for million GAAP we most from follows: $X.X for of cash on cash That and of meaningful million approximately cash million and of sum subtract of to discontinued the expenditures our $XX.X arrive basis. capital received quarter. $XX.X a of

this cash related to related related to the free flow; table These back flow GAAP million been for reconciliation flow follows: to The of to restructuring. quarter brings details number X M&A the The our cash programs. cash this for optimization optimization and are press cash $XX.X to can cash When adjust million quarter one, practice related found of earnings flow quantification adjustments of as quarter GAAP million. XXXX; numbers, Our this to the XX in flow $X calculation these we cash be the related first strategic operating items $XXX those for include: $X.X on the our the for release. M&A-related activities. million and our add announced three, restructuring has adjusted to projects, to and of two, manufacturing

adjusted strong, Regarding our free leverage, at flows, and we year expectations. the is in balance sheet and finished our quarter line with fourth X.Xx flow net cash cash

call now business the through our I'll units. XXXX you that, I'll the of With over in to to return later back walk walk Peter? each the guidance. turn call Peter to through

Peter Thomas

Thank you, Ben.

performance main year summaries see reporting two full on quarter the and you quarter can our and year segments. full X of continuing fourth fourth operations our X presentation deck, through and in you take segments. business I'll Slides performance Now In for

begin Glass let's Colors with our Performance So and segment.

decoration and down to fourth weakness in XX.X%, volumes global in a the enamel constant net basis businesses. glass as currency of on declined as were well lower by production driven auto X.X% quarter, In continued porcelain demand the gross primarily Despite sales improved $XX.X $XX.X XXX million. the a profit the XX.X% basis in points the prior from million currency increased lower basis, XX.X%. quarter Adjusted by fourth sales, gross to year over moving margins from constant on

In Colors serves to part decline our weak automotive experience double-digit demand. Glass continued decline. in single-digit and had that industry low The low quarter, and Europe, Americas of Performance the business the

to automotive we However, improvement, X% their the in year-end saw approximately gains Asia, business fourth levels. down share. in in inventory our we were sales as attribute quarter market mid-single-digit which down Overall, customers our work

Our orders the year. the glass companies were in not from digits quarter decoration average off-cycle business compared was year, that mainly repeated down because prior mid-single year, substantial we large this received last two to

addition, In other have working are of glass as customers we inventories. within our business some seen markets, through decoration

the materials continue markets electronic to inventories year prior like Our customers appliances, over work construction, used automotive. was in business relatively as flat through end

the orders most of digital the installation placed saw work digital materials around industrial and end the to and printers placement typically logistics normal the In closer year primarily Ferro's of business, the printing from of we through occur of This is a year middle customers' as single-digit improvement, machines. within facilities. installations pattern are driven high to

Turning the and business, U.S. declines reported appliance is demand quarter to sectors. in roofing to now the the European being from high lower due the experienced and porcelain segment. Performance under single-digit We which Glass enamel Colors

year year declined sales and for declined For was Adjusted to Gross $XXX.X X.X% the margin net Performance XX.X%. Glass to XXXX, XX.X%. declined million million. and the profit full year-over-year Colors gross $XXX volumes profit

XX.X%. Solutions turning prior in XX.X%. Solutions gross on Now XX.X% Color constant down $XX.X quarter In net year our were fourth decreased million to margins profit basis quarter, currency declined million. to from Color from $XX.X the a to Gross sales segment. the Adjusted

for declined full year net Adjusted sales year X.X%. XX.X%. was the $XXX.X margin Solutions the volumes year-over-year For declined declined profit to Color to $XXX million, X% XXXX, Gross while gross million. profit

The decline technology primary surface in business. the the driver sales to quarter in related our of was

the XXXX call, we through up in quarter, experienced built compared quarter the the we across work prior noted technology. XXXX adoption inventories the in earnings second for remained during weaker XG year automobile related as half production of the due to half to second customers that strong demand the As during the continued to see Also globe in applications to the we year we XXXX the use second auto of weak. through of anticipated demand

Perhaps the Now the of in chains We the macroeconomic as most in markets trends I fourth quarter are mentioned outbreak uncertainties stabilization we of its and XXXX. including accompanying uncertainties geopolitical clearly, regions call, saw but signs that impact of end hope the earlier in remain in manufacturing, some the continue, potential coronavirus, XXXX. these macroeconomic notably on sentiment. supply and consumer and

Our focus as leveraging leadership such gains our can controlling notwithstanding and to on to continue uncertainties. make is, market usual, we control what

Ben? ask guidance. said, I'm that comment our to to going XXXX Ben With on

Benjamin Schlater

Thank Peter. you,

Now I'd our some spend like reviewing to XXXX time guidance.

the a operations. of deliver sales X% to translates in flat This the full expect basis. or to range for to X% We to on growth X% continuing following guidance currency constant year XXXX

close. nominally currency $XXX million, over X% Tile to a million an forma to sale of $XXX Adjusted constant basis currency cash the range X% of to or constant our closing which over to and approximately or X.Xx $X.XX EBITDA in for of we X% Adjusted on to to would on flow basis through X% at a leverage EPS XXXX. XX% And $X.XX, Coating pro of X% the of anticipate increase a flat range to in the be net XXXX, end Systems the XXXX. be XX% up

exchange $X.XXX. exchange February guidance U.S. rate euro XXXX of XXXX, reflect XX, Our to rates as foreign reflects spot roughly which a of dollar

would earnings We to dollars. change approximately that estimate for million of countries currency business of operations, where $XXX,XXX. impact $X we overall a U.S. XX% Ferro, generated sensitivity in to release. a euros guidance in XX% its FX XX% X% sales by In operating the foreign rates weighted by million excluding XXXX, and approximately to $X in XX% we the profit in to practice, exchange and $XXX,XXX common do approximately As revenue the discontinued have section provided

on X% approximately euro, isolate for sensitivity operating $XXX,XXX would you impact $XXX,XXX. a If profit to change by the

plans, spend compensation $X minutes range $X point, of subtract EBITDA million you a million our expense to I'd optimization from incentive reflecting million million XXXX, then XXXX million million programs, in At investments; few finally, for of $X add practices, to $X guidance to of FX. with million. subtract $XXX and million for guidance. to for million million EBITDA to to adjusted prior equals million adjusted to to to due million, $X of and million bridging EPS a adjusted keeping from growth $XXX those reduced a $XX EBITDA million $XX SG&A like a our you we XXXX; headwind Starting items sum this the $X of of organic our with headwind $XXX $XXX The $X $X

EPS. comp, EPS $X.XX, $X.XX to to we to our XXXX. reflect $X.XX $X.XX to to Starting SG&A of turning our $X.XX optimization to to Now incentive for from at $X.XX walk $X.XX subtract growth, an $X.XX $X.XX increase from adjusted our programs, then increased for in for for effective XXXX $X.XX rate and from we tax $X.XX our organic investments add

$X.XX FX the for of sum subtract of Finally, guidance $X.XX. The range to we XXXX those of equals $X.XX adjusted $X.XX to about our pieces to headwinds. EPS $X.XX

gross quarter. to to in fourth extent to we and supply the And headwind of occur the basis. to of the we on by to distribution or $X million customers similar expect expect approximately first the million which a first, the adjusted guidance the by chain, our have our operations profit, in an of terms we and most included of distribution the COVID-XX unknown impacts coronavirus strongest to of $X quarter finally followed In be earnings given the earning quarters, XXXX then quarter, continuing and second in our third the

we our regular mentioned, will too limited in in Peter be contact be field. to our to expectation And the current is the while the in it's As year impact are teams range. early with certain, that

call now open With the we over it that, Peter? back before Q&A. up to few I'll Peter comments provide turn closing a to for

Peter Thomas

Ben. Thank you,

questions take we morning, year. to your this that a want Before transition reiterate I is XXXX

role focused with line at the performance a this the have will modest be continue will to I earlier. driving objectives least at significant year, growth point. expected, during mentioned only We on Optimization in

in $XX coatings of related be a portion costs the in tile the To expect do transaction year. benefits last before only sell to year discuss be of of XXXX. quarter we and closes earlier business. million to the benefits a in realized fully coatings be still realized to this million business, half were we XXXX. to to we small million range $XX the expect from because We extent portion agreement into rest total those second the $XX second the million and remove actions benefits range amount, the Of Currently, disposition stranded the XXXX of million anticipate tile we $XX associated in call on benefits to tile the XXXX, this those the million in the Further, the low to $XX mid-$XX the business. through the with about expect in coatings we may benefit optimization those tile entered

enhance investments infrastructure certain XXXX in will We and strategic beyond. of Ferro to making the SG&A performance also be and in

concentrated sale materials will we the and a of said in and of more end businesses to specialty complete into once Now we growth move business what targeted the higher coatings markets. have amplifying tile XXXX, earlier, more I portfolio

billion addressable significant with that growing approximately and is an and nicely. $X scope in market will expansion have applications markets We for

have balanced geographic a footprint. will more We

stronger in and have more to R&D growth invest strategic with inorganic balance flexibility organic and will acquisitions. We a sheet financial through

of product positions will majority our across leadership We vast lines. the have

plus very functional in participating are coatings and to for going we These are applications, XG next growth for LED Looking cars, several be growth Internet products exciting participate, lighting, we markets performance. of levels digital, will in on out efficiency the to focused environmental over smart health at in be care energy the which developing them digital printing, market. market years, Things, of next-generation and chemistry, markets

when the we characteristics more times realized are We expect gross are EBITDA subsequent fully exceeding expect new These and our XX%. adjusted XXXX approaching XX% margin EBITDA of our for high margin adjusted Ferro. years, company exciting would in XX% margins

business, through higher We transition the are the sale coatings to of growth, taking step the the profit higher a tile company.

ahead. enthusiastic are We path about the

question-and-answer the the to I'll now And start of call. our call over to Kevin turn segment

Kevin Grant

Thanks, Peter. for the open call that, up With operator, questions. let's

Operator

[Operator Instructions].

Our first with question from G the of Rosemarie line Morbelli comes Research.

Rosemarie Morbelli

could that steps you more geared you details coatings, give of a tile Peter, get to you have prior solidly what the And that. tile insinuated of look little if I are details was and to a meaning actually just remainco wondering towards are that wondering a better the more is probably on could you picture more if sale taking coatings, we am doing us than little going like. I a of

Peter Thomas

Okay.

there may think in questions be I two there.

the one of address one, Number Number fully have the tile and as perspective we So from let going our to plan here focusing have costs. laid-out we immediately me closing activity lot developed and around the first what transaction. attack year. the priorities stranded of into on a a moving strategic mentioned, two, our we

there organization market hard the around technology on more structure. four, of to The we're are really working kind and realigning innovation around to a that moved and to third piece rightsize the go of remainco certain assets, business; be which is an need

that's those So into priorities the year. going are -- strategic the

not doesn't However, we're that that not certainly it mean other -- doing things. we're or

of months put do in clear, it again, And out pipeline, we call, about just that that year the in we last we call but everyone those to refocus the with our a us programs be doing may laid business. should as we the mention, think in. have -- had now that You I energy second mode in us XX X plans, has that what on tile quarter optimization which be the different the last heard understand were to last

saying that So of bucket. what we're is out

We and to next million we're have million $XX $XX at the million programs, looking million to optimization at stranded $XX do million of year. to million $XX those looking cost. realizing $XX We're $XX

as year and hopefully, XXXX, framework, we doing math would for as So we're transition define this the that why you're saying remainco. what see the an on a etch-a-sketch you'll moment new

that's So question. the one of part

be what strategy that second is part everyone the of paying are to. buckets attention The the question should

just does XX As day. is everyone hours for our what I course else a normal mentioned of business, everything

let's about with what strategic So focusing course business. talk we X. of do normal X for pillars our on our Phase that's And

launching again, We're And surprise the phase. with And the the quarters, have our Phase have create for or now strategy. be you it's probably just are We shouldn't have, have of called And today, anyone X it anyone tagline we've moving Phase way portfolio. that put value shouldn't more the the genesis starting doing a something last value -- surprise created. starting we're we've -- we because a call we what higher that That would would with we that been we what harvest gravity a higher margin, phase since we pieces business. higher name we're a of for X business, our that tile if felt together, business. notch. it, a X, And that, shifting X is the in up were genesis and the center you focused our to goes a of

be and would our around pillars three X Phase continued growth, continued optimization. innovation the specialties So

has pipeline it XX%. value gross at you at a next years growth, So specialty over to organic have over organic million margin of relates $XXX particular this five program. the as an Again,

now year XX%, last portfolio, because at was it the to unlike XX%. up So we're of new

point. that's So important very a reference

call part The things. second that on be the of what focused we growth. our innovation innovation be would would growth And will

areas going would into green trends applications. be going automotive more market electronics of type Another theme and our the or

about to So program. OLEDs the and IOT, it think those X as to range innovation rises LEDs, organic of our AVs, above base others, XG, you have relates where a

have running. organic we X So pipelines

in our the next be inorganic growth The would growth.

we in organic important has changed to regarding that's with our have discipline growth, that the have should you Now a with pipeline. going same the the the with continue opportunities. past. is strategic We that activity. and And very We're that we inorganic think replete pipeline options, have about, still nothing this around what

we we replete is way strengthen The where with and our optimize pipeline is. portfolio first can fill those acquisitions that bolt-on been, have can capability continue gaps. opportunities, extend our we We're the and with typically the

the will both bit The Color what define These would second will be piece broaden of or scope be are X X needle opportunities functional Solutions bigger move acquisitions little before. coatings. we've doing that can what that scale on of have than business. And all we X always, as still in we a really the and a keep And again, constant would X still those. the there of been remainco And bunch other And are again, people. though our new with We have even we're the going conversations this capacity communication. work or on, we're to talking the moving. those

end day, about deals more transformational. the would talked we've there. out be look, There are the next always at something of -- bigger The that's

a spaces those be the And serious in. and X.X fourth getting know, leverage maybe have quarter, there the market, on be we recognized Our X.X, very, sheet, you things in move things. opportunistic is us acquirer of being better. expect into into we participate are leverage, the to third, to on to good Many very that are like very of some as coming would with for that a of second, balance those flexibility

like may The at is, said are also, that activities for And the sense. in of creates value, we're everything, there them. very the as we'll other opportunities know, of XXXX, study look, And we very we're opportunities portfolio, piece afraid listen, merger margins, do and a not many you of pursue we've attractive. make whatever day, were transaction. look one We pure the of and a the at end math, those

So the the how essence of that's year. we're kind starting of

motion, everything good. activities. that's in We the prepared our feel of people around keeping on plateful remarks you heard have that pretty we a and prioritized bandwidth We've why

We have a bright a much a lot company of with future. optionality, and we're more attractive

what's So feel good going. really we about

year. We a a of bit is -- have just transition XXXX

up put -- lot cleanup. remarks, We out a have math we But of there. a in lot we the prepared of

You X we've that no do, strategy XXXX been everything path detail. should about reason in believe years. executing said the that there's if good And not what because to and the feel -- like. We've we would for devil's done we're the looks the down pretty continue to we going

the being executing, it. incented is and have and We everyone we're pipelines, against

Rosemarie Morbelli

That be that are and announce you very idle, based of offer to like someone And that. -- of I at the you something What am the the wondering the you am happen time may or tile sale to I would was come for likelihood merge anything if sure acquire announcement the closure waiting business? an or helpful. of not

Peter Thomas

no. no, No,

we can't those. thank hey, know out. of But concepts like your types answer But no any have asking. you in I position options those look, any developed one every those we have laid mentioned, to strategic we're around -- of point for of of fully You I To discussions.

Rosemarie Morbelli

preference welcome. You're Any options? all your in of

Peter Thomas

plans excited Every give very these a of the exciting. is at feel like special X about. them Hey, And very the around whichever look, feel lot just the we No, at value of creating, X that's I'll looking really lot done right every direction end if just with because one streams that's where of here very something we a point you we've a you beautiful our data day, technology. in path we presented going one is no, or of and and had we board. the we the have innovation, what's to of the spreadsheets we're take, luxury what about pathways, of

markets, one look within from you real we like only we eight Color two. of them, major one we coatings then And and at have them, In X. of X the If one Solutions, high have of competitor. a very level, functional submarkets have the

the to relates you it unique markets, them a the structure most leadership in than if different are what way, position, if to of of XX% two by chasm to ourselves industry we've those twice. mentioned a which, of coming as our intensity, And you X, with our from revenues very X the jumping winning those listen more I nothing about put has that competitors competitive as lot we're just at subsegments, in technology So situation move over that, just forward. we're and the and high-level look

about where like isolated -- us where years a clearly now, a that period that generation. are and new look But around making into couple the were just moving customer technology, that of in last We're hard what forward. XXXX where progress the relationships on in the what really get to proprietary We to over lot we the of the very double-step if feel as new next take leader for is, good example, and tech us. we a we're that's with everything sides so we've views displace to versus feel move have it. products you And is. and gestation been in We two electronics automotive, ago It's feel we motion surface industry years. some at is

Operator

Our with next of McNulty line question comes John Markets. Capital BMO from the

John McNulty

both about with cash of should free I change the I guess, accomplish them the the I or And able in guess how be the how don't about know, Ferro guess, -- costs? XXXX, be thinking cash new restructuring we what flow. in and then, conversion there? kind the the without should newco was Ferro higher-growth two cash given to on thinking past free portfolio, the Ferro of or versus I we the of

Benjamin Schlater

John, Yes. it's Ben.

lot there. So in there's a

company with the X.Xx XXXX relate that and back that leverage start to of total sort me for the on call. mentioned we Let

year that a tile, the for is half. may that flow for as leverage So well that the of own cash tile in -- flow the we the in the flow period as second the is the remainco number of again, sometime combination inherent cash that end cash

would doesn't for those that of the flow profile together a great what from XXXX, have two you cash because create look in businesses remainco so be And perspective. a

let should expect from So through separately. just remainco flow go only. we And me what a cash profile we for that think

-- when and over free all we that's for the over flow about And in so think free flow EBITDA. cash our for conversion us, cash overall, our cash again, EBITDA flow

believe for to that's so And XX% that's remainco, XX%. we -- that

been. couple that. pieces So of And total would there's company significantly of what higher than have the a

So to CapEx more XX%. sales. percentage in an XXs. reminco, CapEx to heard on is XX% low benefit high working percentage about that closer regular of goes the With there's number X as us XXs talk capital. of to a in of ongoing basis, capital amount a a X.XX sort to of big and working you've Previously, sales or range the total XX%

takes asset-light sort much we'll feel get again, it So strategic to that. a more CapEx into on CapEx. of initiatives, That specific remainco would with normal to respect not from and include

in, look we and available, right, much XX% deployment. number. expect that of XX% converting, cash then be that's for that's an the we at investments and would all to EBITDA are So how number, unadjusted not again, capital strategic would And we if

the So profile sort of that's remainco. of

would me XXXX. the in and XXXX. come what do spending CapEx have incremental, Let to We to we optimization call, some strategic related back

completion And for in and million some number well It to expect to an optimizations of some Peter we discussed a the the would XXXX, also somewhere as CapEx with total the and elevated transaction. includes CapEx be company, that that and restructuring million. both that's respect related between it so That's the includes as CapEx from those number $XX of because optimization. perspective, $XX to tile expense

me let where So you that there, to John, and you be. if see need gets stop

John McNulty

Yes, And one last helpful. just hugely I no, then guess that's question.

would where applications thinking some the like are about? in just you with remarks, off-cycle guess got I call markets, necessarily -- nicking don't but events of, bit. it, of how know commented some terms that prepared in should look had of you be know in new end you you've maybe I a some they're I to XXXX growth not we kind events So growing that we on on-cycle as are little the Anything your that kicking

Benjamin Schlater

Yes.

year-over-year, in the would you about adjusted in material from I say, perspective, constant anything wouldn't sales happened would XXXX XXXX, I there basis, guidance. what So a if Meaning, say onetime don't XXXX. in decline that would the or related of anything happen so sort was of of magnitude to or what half to call the events. We expect sales we of currency think be on any a for off-cycle deals

what going continued on innovation see success a refer are However, you and we and as I to continued in XXXX there. the to new expect to see pipeline focus the product is think what

we're Peter there. making investments As mentioned,

And as there of that a growth so focus. result we expect would incremental

Operator

question Fargo. Wells Sison comes next from with Our line Mike the of

Michael Sison

you Can see tile, understand own you what that out can reconcile there, had have folks numbers so just kind if folks your outlook just it XXXX, you tile, of can would been are so walk? if for given consensus where

Benjamin Schlater

Yes.

bit the it's of So adjust we to a Mike, sort tile do, because don't little results. hard

release, there to the -- sort where we through the so some an of In And we XXXX. way I growth marginal in it. tile from or discontinued went EBITDA do right? sort best would in of press ended Here's ops XXXX perspective, would expect

the close. happening guidance that We so of just And EBITDA think significant, would But to what's remainco for tile. the take in to our pretty close. bit way that nominal reconciliation midpoint get we a expect the be nothing to glass. pretty then I from you add be but that in and some XXXX careful And you little tile, ought have would with about that think easiest to XXXX should for get of that growth again, because to

Michael Sison

through Is your start tempo you and Understood. just of us X% QX? unfolds? see of to QX be can to because And are for down year for and the sales year currency going in you give You that for want the COVID-XX growth year. growth the constant X% how then looking just full sort to as you build where

Benjamin Schlater

Yes.

of with what sort about Michael, just in earnings terms here talk talk distribution of let's may months. in couple relevant let's be of the QX respect to So the next about --

consistent what So XXXX the with of of if the exception distribution have QX done happening same 'XX, coronavirus. we you we the think right, did about would with That we total company. for pretty did, in what in what's $X.XX should be

that that's the probably think bring down But incrementally. will way about to that easiest QX. So

Operator

question Our Begleiter line the Deutsche Bank. David comes from of with next

David Begleiter

just us portion you from cash cash free of for just bridge Ben, for to the flow, just remainco in going flow flow can cash XXXX? business to back EBITDA the just give remainco or

Benjamin Schlater

Yes. Yes.

total, expense, think to capital, at tax, interest pension with sort $XX and again, is and there's $XX cash of then about way midpoint, expect that, and the easiest cash So and start items, CapEx think about EBITDA working I items somewhere million the this, of we type if the flow to restructuring for for expense. only use. $XX then of would and normal as David, flow $XX in be transaction such right, between million, then $XX And remainco of another million million million we

up of a X.X -- less used the X.Xx. with And actually that, flow something so somewhere is conservative. the that little you cash The sort than gets come plan that to to That X.X. that you and the gets yield to we between X.Xx will

business year. the that cash get also for the it. will EBITDA the approximate period We the the from for over that And own the that tile would course we of business

helpful you. hopefully, to So that's

David Begleiter

No, EBITDA. those on in that headwind this mentioned very for Can little you're helpful. think a to on $X the items year? bit And Peter, I can detail you're investments investing more SG&A talk million you making for a million in? a you more you $X just little detail give

Peter Thomas

Sure.

in just couple. of do terms a have buckets. it I'll We

we've working be that what a to in We uniform all now activities we're bring organization that type have a IT together platform one conditioned range of is. on the of to it remainco of

and organization. new to we like from We behavior to R&D we have an processes newer what of perspective type we're and complement things SG&A would technology That need that the keep include some advancing building and the that technology. innovation to some have systems levels into of

work to mimic the that into We we there also that have, going things as equipment like to had before we haven't those spaces, more leaders need are with. we we're market that move needs

even that -- do to be a keep more around past can -- relationship. them service fence we more we the have the in to So putting

level. that And have like in an to so it's or the it's different and that entity like range business doing, it move Ferro think of free-standing we're But to are you together is things that, a as all X a become, way. shape should X of, to -- we're what nature With or with trying to come this forward way, form an additive in as every entity. David, what

Kevin Grant

question. one last for Operator, time have we

Operator

right. All

Securities. of line Harrison the with from Mike Seaport comes question last Our Global

Michael Harrison

the if guidance. could bit little EPS a Ben, modeling terms of get in some help I to was questions wondering to you just

think sense there? a guide going to interest certain interest the that is what at your to the going a be was be interest in assume guess assumption of I Does relief little that we bit. And should EPS also, rate a I you we And for tax get mentioned get expense what just trying up expense expense. modeling point?

Benjamin Schlater

problem. no Yes, Sure.

or So I modeled $XX is $XX quarter. the $XX at be fluid. to transaction that, But is that, third And that that Mike, interest million. in the expense can't million point We've enough million stress some and fluid going happens a between, the somewhere is number. obviously,

around. in that so EPS tax that move rate And obviously, interest The the expense number could to that's is XX%. guidance inherent XX%

Michael Harrison

that D&A remainco $XX full business, the for million, is And year? like $XX million of the

Benjamin Schlater

Yes.

say just Mike? So did remainco, you D&A for --

Michael Harrison

Yes.

Benjamin Schlater

Yes. Yes, million $XX to exactly. million $XX

Michael Harrison

And Peter. a for Okay. question then

cyclical in apply business, Just take less and we et cetera. is balance is better to focus to it to inorganic as on we're have be going sheet toward into continue to stable that fifth phase, and kind obviously, the of growth capital opportunities? dividend moving this be Or going organic defined Any more and a the exposure, shape, forward? going thoughts

Peter Thomas

we X business kind the around to what some we've then bit now that may is and we else. more assured that like the more Like perspective do do we to And for I strategic move that quarter, -- forward. months first the have a those the little have everything a discussions outstanding on major we well us purchase, here it's priorities through funnel quarter, right you rest really on always providing mentioned and in probably discussion year, a a said, constant capacity by X what's important plan we Yes. always get have. guidance to second It's have to always as a part is priorities. that we of before, discussed. available of our of first as But more And certain

Benjamin Schlater

see we've remarks talked done say a in his costs. Yes, to EPS to of -- we XXXX year XXXX the develop of that is with full the to at $XX That's more that when both really the thing is terms and other and million in a Mike, our lot look, call, to XXXX enhanced And wanted just I transition realization in to what Peter start really start would is I to we the we've that's top the thesis fully. of add profile think see reiterate, million stranded about if just behind an mean we remainco. when benefit. about that going the portfolio what EBITDA view heard we're the would the $XX an and for

the XXXX to the to Peter $XX we're run rate $X with $XX benefit addition That's in interest the In got we another then of anticipated that, million of transaction. mentioned. optimization to of going $X tile million see million closing the to of benefit, the that full million EPS and

we're the business So that enhanced laid on of to if gets XX of the that XX profile when reiterating over really profile is of course once And make the we cash we XXXX the look about we transformation along like, to sure that wanted profile phase of sort slide, new what even take what months. complete, that looks as out pre-transition that think the the we next with like. the in business

Kevin Grant

to forward you on joining Ferro, thank discussing We would rest for next your today. We us and with of to in call the day. look quarter. interest everyone like appreciate your the Enjoy again we results

Operator

for call. line. participation does and the please you conference thank That that We ask your disconnect you conclude your

Ferro (FOE) 3 Mar 202019 Q4 Earnings call transcript