Ferro : Q2 20202 Earnings Presentation

Second-Quarter 2020 Earnings

Regulatory Statements

Certain statements in this presentation 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: Ferro's ability to successfully complete the sale of its Tile Coatings Systems Business, including obtaining the requisite regulatory approvals; demand in the industries into which Ferro sells its products may be unpredictable, cyclical, or heavily influenced by consumer spending; the effectiveness of the Company's efforts to improve operating margins through sales growth, price increases, productivity gains, and improved purchasing techniques; currency conversion rates and economic, social, political, and regulatory conditions in the U.S. and around the world; the availability of reliable sources of energy and raw materials at a reasonable cost; challenges associated with a multi-national company such as Ferro competing lawfully with local competitors in certain regions of the world; Ferro's ability to successfully implement and/or administer its optimization initiatives, including its investment and restructuring programs, and to produce the desired results; Ferro's ability to successfully introduce new products and services or enter into new growth markets; Ferro's ability to identify suitable acquisition candidates, complete acquisitions, effectively integrate the acquired businesses and achieve the expected synergies, as well as the acquisitions being accretive and Ferro achieving the expected returns on invested capital; the impact of damage to, or the interruption, failure or compromise of the Company's information systems due to events including but not limited to aging information systems infrastructure, computer viruses and cyber security breaches; the implementation and operations of business information systems and processes; increasingly aggressive domestic and foreign governmental regulation of hazardous and other materials and regulations affecting health, safety and the environment; our ability to address safety, human health, social, product liability and environmental risks associated with our current and historical products, product life cycles and production processes; competitive factors, including intense price competition; increased, and possibly inconsistent, domestic and foreign regulations of privacy and data security; changes in U.S. and other governments' trade policies; restrictive covenants in the Company's credit facilities could affect its strategic initiatives and liquidity; Ferro's ability to access capital markets, borrowings or financial transactions; sale of products and materials into highly regulated industries; limited or no redundancy for certain of the Company's manufacturing facilities and possible interruption of operations at those facilities; our ability to attract and retain key personnel; exposure to lawsuits, governmental investigations and proceedings relating to current and historical operations and products; Ferro's ability to protect its intellectual property, including trade secrets, or to successfully resolve claims of infringement brought against it; Ferro's multi-jurisdictional tax structure and its ability to reduce its effective tax rate, including the impact of the Company's performance on its ability to utilize significant deferred tax assets; Ferro's borrowing costs could be affected adversely by interest rate increases; management of Ferro's general and administrative expenses; the impact of the Tax Cuts and Jobs Act on our business; stringent labor and employment laws and relationships with the Company's employees; the impact of requirements to fund employee benefit costs, especially post- retirement costs; implementation of business processes and information systems, including the outsourcing of functions to third parties; risks associated with the manufacture and sale of material into industries making products for sensitive applications; risks and uncertainties associated with intangible assets; the effectiveness of strategies to increase Ferro's return on invested capital, internal rate of return and other return metrics, and the short-term impact that acquisitions may have on such metrics; liens on the Company's assets by its lenders affect its ability to dispose of property and businesses; amount and timing of any repurchase of Ferro's common stock; and other factors affecting the Company's business that are beyond its control, including disasters, pandemics (such as COVID-19), accidents and governmental actions.

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 presentation contains time-sensitive information that reflects management's best analysis only as of the date of this presentation. 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 presentation. Additional information regarding these risks can be found in our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Reports on form 10-Q for the quarterly periods ended March 31, 2020 and June 30,2020.

Also, this presentation includes certain financial measurers that were not prepared in accordance with generally accepted accounting principles. Reconciliations of the historical non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the Appendices included in this presentation. This presentation includes adjusted EBITDA, adjusted EPS and adjusted cash flow conversion guidance. It is not possible, without unreasonable effort, for the Company to identify the amount or significance of future charges that would be excluded from adjusted EBITDA, adjusted EPS and adjusted free cash flow from operations conversion or the potential for other transactions that may impact such guidance. Accordingly, the Company is unable to reconcile, without unreasonable effort, the Company's forecasted range of these adjusted non-GAAP financial measures to their most directly comparable GAAP financial measures.

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2020 Second Quarter Summary

• Net Sales declined 21.5% to $204.8M, or 19.6% on a constant currency basis
• Gross Profit declined 19.4% to $63.7M, Gross Profit Margin improved 80 bps to 31.1%
• Adjusted Gross Profit Margin improved 30 bps to 32.1%
• GAAP diluted EPS of $(0.03), Adjusted diluted EPS of $0.12
• Net Loss1 declined 151.0% to $5.5M, Adjusted EBITDA declined 29.5% to $30.9M, Adjusted EBITDA Margin declined to 15.1%

1 Note: Non-GAAP measures, see reconciliations in the appendix

Note: Comparative information is relative to prior-year quarter

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2020 Second Quarter Financial Results

Dollars in Millions, except for EPS

		Total Net	Gross	Total	2	Diluted
	GAAP	Sales	Profit	SG&A	Net (Loss)	EPS
	Q2 2020	$204.8M	$63.7M	$50.5M	$(5.5)M	$(0.03)
%	-21.5%	-19.4%	-5.1%	NM	NM
			Adjusted	Adjusted		Adjusted
		Total Net	Gross	Total	Adjusted	Diluted EPS
	Adjusted	Sales	Profit	SG&A	EBITDA	(Non-GAAP)
	Q2 2020	$204.8Mcc	$65.7M cc	$45.2Mcc	$30.9M	$0.12
	% cc	-19.6%cc	-19.0%cc	-6.9%cc	-29.5%1	50.5% 1
1 Comparison in nominal currency				Note: Non-GAAP measures, see reconciliations in the appendix
			Note: Comparative information is relative to prior-year quarter
2 Net Income attributable to Ferro Corporation common shareholders		cc Constant Currency

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2020 Year to Date Financial Results

Dollars in Millions, except for EPS

	Total Net	Gross	Total	Net Income2	Diluted
GAAP	Sales	Profit	SG&A	EPS

	YTD	$457.1M		$144.5M		$106.6M		$10.6M	$0.16
	2020
%	-12.8%		-8.0%		3.2%		-56.8%	-30.4%
				Adjusted		Adjusted			Adjusted
		Total Net		Gross		Total		Adjusted	Diluted EPS
	Adjusted	Sales		Profit		SG&A		EBITDA	(Non-GAAP)
	YTD	$457.1M	cc	$147.6M	cc	$96.8M	cc	$71.6M	$0.37
	2020
	% cc	-10.9%cc		-7.1%cc		-5.6%cc		-8.5%1	-2.6%1
1 Comparison in nominal currency							Note: Non-GAAP measures, see reconciliations in the appendix
						Note: Comparative information is relative to prior-year to date
2 Net Income attributable to Ferro Corporation common shareholders				cc Constant Currency

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2020 Second Quarter Segment Results

Dollars in Millions

Segment	Net Sales	Adjusted Gross Profit
Functional	$131.7M	$37.8M cc
Coatings	Down 17.3%	28.7% GPM
	1
Color Solutions	$73.1M	$27.0M cc
Down 23.4 %1	36.9% GPM

1 - Adjusted comparison of prior year quarter at constant currency

cc Constant Currency	Note: Non-GAAP measures, see reconciliations in the appendix
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2020 Year to Date Segment Results

Dollars in Millions

Segment	Net Sales	Adjusted Gross Profit
Functional	$287.1M	$86.7M cc
Coatings	Down -11.0%1	30.2% GPM
Color Solutions	$170.0M	$60.8M cc
Down 10.7% 1	35.8% GPM

1 - Adjusted comparison of prior year to date at constant currency

cc Constant Currency	Note: Non-GAAP measures, see reconciliations in the appendix
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Ferro Investor Relations Contact

Email:[e-mail]

Phone: [phone]

Internet:Ferro Investor Relations

Appendix

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Reconciliation of Q2 Reported to Adjusted Financials

Ferro Corporation and Subsidiaries
Reconciliation of Reported to Adjusted Financials
For the Three Months Ended June 30 2020 and 2019 (Unaudited)
			Net Sales						Gross Profit				Total SG&A	Operating Income
(Dollars in millions)		FC		CS	Ferro Total		FC		CS		Other		Ferro Total		Ferro Total		Ferro Total
											Q2 2020
As Reported (GAAP)	$	131.7	$	73.1	$	204.8	$	36.1	$	27.0	$	0.6	$	63.7	$	50.5	$	13.2
Adjustments:

Acquisition related costs2														-			(0.5)			0.5
Costs related to optimization projects4								1.7				0.2		1.9			(3.3)			5.2
Costs related to divested businesses and assets														-			(1.5)			1.5
Total Adjustments		-		-		-		1.7		-		0.2		1.9			(5.3)			7.3
Constant Currency FX Impact1
As Adjusted (Non-GAAP)	$	131.7	$	73.1	$	204.8	$	37.8	$	27.0	$	0.8	$	65.7	$	45.2	$	20.5
										Q2 2019
As Reported (GAAP)	$	163.7	$	97.3	$	261.0	$	49.3	$	29.7	$	0.1	$	79.1		$	53.2		$	25.9
Adjustments:
Acquisition related costs3								0.4		(0.0)				0.3			(0.8)			1.1
Costs related to optimization projects5								1.2		1.1		1.0		3.3			(2.7)			6.0
Costs related to divested businesses and assets														-			(0.5)			0.5
Total Adjustments		-		-		-		1.6		1.1	$	1.0		3.6			(3.9)			7.6
Constant Currency FX Impact1		(4.6)		(1.8)		(6.3)		(1.3)		(0.4)		-		(1.7)			(0.8)			(0.9)
As Adjusted (Non-GAAP)	$	159.1	$	95.5	$	254.6	$	49.6	$	30.4	$	1.1	$	81.1		$	48.5		$	32.5

1. Reflects the remeasurement of 2019 reported and adjusted local currency results using 2020 exchange rates, resulting in a constant currency comparative figures to 2020 reported and adjusted results.

2 The adjustments to "Selling general and administrative expenses" primarily include legal, professional and other expenses related to acquisition costs. "

3.The adjustments to "Cost of Sales" primarily include environmental costs related to our recent acquisitions. The adjustments to "Selling general and administrative expenses" primarily include legal, professional and other expenses related to acquisition costs. The adjustments to "Other expense, net" relate to purchase price adjustments related to an acquisition that is beyond the measurement period."

4.Costs related to Optimization projects of $5.2 million include costs associated with our Americas manufacturing optimization initiative of $2.7 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $2.5 million of costs relate to global optimization projects and discrete projects at our previous acquisitions."

5.Costs related to Optimization projects of $6.0 million include costs associated with our Americas manufacturing optimization initiative of $5.0 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $1.0 million of costs relate to global optimization projects and discrete projects at our previous acquisitions."

It should be noted that adjusted net 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. We believe by excluding these costs, our adjusted earnings per share better reflect our underlying business performance, as well as being considered in our internal evaluation of financial performance. These costs are ones that we have concluded are not normal, recurring cash operating expenses necessary to operate our business, and we believe it is useful to present this non-GAAP financial measure to provide investors greater comparability of our base business.

Reconciliation of YTD Reported to Adjusted Financials

Ferro Corporation and Subsidiaries
Reconciliation of Reported to Adjusted Financials
For the Six Months Ended June 30 2020 and 2019 (Unaudited)
			Net Sales						Gross Profit				Total SG&A	Operating Income
(Dollars in millions)		FC		CS	Ferro Total		FC		CS		Other		Ferro Total		Ferro Total		Ferro Total
										YTD 2020
As Reported (GAAP)	$	287.1	$	170.0	$	457.1	$	83.9	$	60.8	$	(0.2)	$	144.5	$	106.6	$	37.9
Adjustments:

Acquisition related costs2										0.0				0.0			(1.1)			1.1
Costs related to optimization projects4								2.8				0.3		3.1			(5.4)			8.5
Costs related to divested businesses and assets														-			(3.2)			3.2
Total Adjustments		-		-		-		2.8		0.0		0.3		3.1			(9.8)			12.9
Constant Currency FX Impact1
As Adjusted (Non-GAAP)	$	287.1	$	170.0	$	457.1	$	86.7	$	60.8	$	0.1	$	147.6	$	96.8	$	50.7
										YTD 2019
As Reported (GAAP)	$	330.7	$	193.6	$	524.3	$	97.5	$	58.1	$	1.4	$	157.0		$	110.2		$	46.8
Adjustments:
Acquisition related costs3								0.4		0.0		-		0.4			(2.4)			2.8
Costs related to optimization projects5								1.3		2.0		1.0		4.3			(2.6)			6.9
Costs related to divested businesses and assets														-			(0.8)			0.8
Total Adjustments		-		-		-		1.6		2.0		1.0		4.7			(5.9)			10.6
Constant Currency FX Impact1		(8.0)		(3.3)		(11.3)		(2.1)		(0.6)		(0.2)		(2.9)			(1.7)			(1.2)
As Adjusted (Non-GAAP)	$	322.7	$	190.4	$	513.1	$	97.0	$	59.6	$	2.2	$	158.8		$	102.6		$	56.2

1. Reflects the remeasurement of 2019 reported and adjusted local currency results using 2020 exchange rates, resulting in a constant currency comparative figures to 2019 reported and adjusted results.

2.The adjustments to "Selling general and administrative expenses" primarily include legal, professional and other expenses related to acquisition costs. "

1. The adjustments to "Cost of Sales" primarily include the amortization of purchase accounting adjustments related to our recent acquisitions and environmental costs related to our recent acquisitions. The adjustments to "Selling general and administrative expenses" primarily include legal, professional and other expenses related to acquisition costs. The adjustments to "Other expense, net" primarily relate to earn out adjustments related to an acquisition that are beyond the measurement period.
2. Cost related to Optimization projects of $8.5 million includes costs associated with our Americas manufacturing optimization initiative of $5.0 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing. The remaining $3.5 million of costs relate to global optimization projects and discrete projects at our previous acquisitions.
3. Cost related to Optimization projects of $7.0 million includes costs associated with our Americas manufacturing optimization initiative of $7.0 million, which is comprised of costs for process development and production testing, professional fees for legal and tax services, supplies and equipment commissioning, and utility setup and testing.

It should be noted that adjusted net 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. We believe by excluding these costs, our adjusted earnings per share better reflect our underlying business performance, as well as being considered in our internal evaluation of financial performance. These costs are ones that we have concluded are not normal, recurring cash operating expenses necessary to operate our business, and we believe it is useful to present this non-GAAP financial measure to provide investors greater comparability of our base business.

Reconciliation of Q2 Adjusted EBITDA

Ferro Corporation and Subsidiaries

Reconciliation of Net income attributable to Ferro Corporation common shareholders to Adjusted EBITDA

For the Three Months and Six Months Ended June 30 2020 and 2019 (Unaudited)

(Dollars in millions)		Q2 2020		Q2 2019		YTD 2020		YTD 2019
				1
Net income attributable to Ferro Corporation from Continuing
Operations, net of income tax	$	(2.3)	$	11.1	$	13.6	$	19.7
Net income attributable to noncontrolling interests		0.4		0.2		0.4		0.5
Restructuring and impairment charges		8.6		4.1		9.8		5.8
Other expense, net		0.1		1.5		(2.9)		2.7
Interest expense		6.2		6.3		11.7		12.6
Income tax expense		0.2		2.7		5.3		5.5
Depreciation and amortization		11.3		11.3		22.6		22.7
Less: interest amortization expense and other		(0.9)		(0.9)		(1.8)		(1.8)
Cost of sales Non-GAAP adjustments1		1.9		3.6		3.1		4.7
SG&A Non-GAAP adjustments1		5.4		3.9		9.8		5.9
Adjusted EBITDA (Non-GAAP)	$	30.9	$	43.8		71.6		78.3

1. The Non-GAAP adjustments to cost of sales and SG&A are described in the "Reconciliation of Q2 Reported to Adjusted Financials" and "Reconciliation of YTD Reported to Adjusted Financials" appendices.

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). This Non-GAAP financial measure 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 this financial measure to the most comparable U.S. GAAP financial measure is presented. We believe this data provides investors with additional useful information on the underlying operations and trends of the business and enables period-to-period comparability of financial performance.

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Reconciliation of Adjusted Diluted Earnings Per Share

Ferro Corporation and Subsidiaries

Reconciliation of Reported to Adjusted Diluted Earnings per Share

For Quarterly Periods in 2020 and 2019

		Q1 2020		Q2 2020		FY 2020		Q1 2019		Q2 2019		FY 2019
Diluted earnings per share (GAAP)	$	0.19	$	(0.03)	$	0.16	$	0.10	$	0.13	$	0.24
Adjustments:
Restructuring		0.01		0.10		0.12		0.02		0.05		0.07
Other1		0.07		0.09		0.16		0.04		0.09		0.12
Tax2		(0.02)		(0.05)		(0.07)		(0.01)		(0.04)		(0.05)
Adjustments3		0.06		0.14		0.21		0.05		0.10		0.14
Adjusted diluted earnings per share (Non-GAAP)	$	0.26	$	0.12	$	0.37	$	0.15	$	0.23	$	0.38

1. For 2020 and 2019, the description of adjustments for cost of sales and SG&A are detailed in the "Reconciliation of Q2 Reported to Adjusted Financials" and "Reconciliation of YTD Reported to Adjusted Financials" appendices.
2. Income tax expense reflects the reported expense, adjusted for adjustments being tax effected at the respective statutory rate where the item originated.
3. Due to rounding, total earnings per share related to adjustments does not always add to the total adjusted earnings per share.

It should be noted that adjusted net 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. We believe by excluding these costs, our adjusted earnings per share better reflect our underlying business performance, as well as being considered in our internal evaluation of financial performance. These costs are ones that we have concluded are not normal, recurring cash operating expenses necessary to operate our business, and we believe it is useful to present this non-GAAP financial measure to provide investors greater comparability of our base business.

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