Overview


Net sales for the three months ended September 30, 2021, increased by $35.4
million, or 14.6%, compared with the prior-year same period. Net sales increased
by $25.4 million in Functional Coatings and $10.0 million in Color Solutions.
During the three months ended September 30, 2021, gross profit increased $13.2
million, or 18.8%, compared with the prior-year same period; as a percentage of
net sales, it increased approximately 110 basis points to 30.1%. Our total gross
profit for the third quarter of 2021 was $83.4 million, compared with $70.2
million for the three months ended September 30, 2020. The increase in gross
profit was attributable to higher gross profit in Functional Coatings of $9.2
million and in Color Solutions of $4.3 million.
For the three months ended September 30, 2021, selling, general and
administrative ("SG&A") expenses increased $6.7 million, or 14.0%, compared with
the prior-year same period. As a percentage of net sales, it decreased
approximately 10 basis points to 19.7%.
For the three months ended September 30, 2021, net income was $10.9 million,
compared with $14.9 million for the prior-year same period, and net income
attributable to common shareholders was $10.4 million, compared with $14.5
million for the prior-year same period. Income from continuing operations was
$11.7 million for the three months ended September 30, 2021, compared with $9.5
million for the prior-year same period.
Outlook
Ferro experienced higher demand across all business segments in the third
quarter, continuing the trend established throughout 2021 as customer markets
have improved from 2020. The impact of the COVID pandemic through the remainder
of 2021 is unknown, even with the global availability of vaccines. Ferro expects
to continue to benefit from strategic actions taken prior to and during the
pandemic to optimize our business, invest in technology platforms, align with
macrotrends, and focus on higher-margin, higher-growth markets.
Ferro provides products and services that are essential to our customers as they
innovate to address trends in their markets and develop next generation
products. We sell our products and services in multiple markets and geographies
around the world, which limits exposure to any one industry or region. In
addition, we serve a diverse set of industries, including automotive,
construction, appliances, healthcare, food and beverage, information technology,
energy and defense. COVID-related behavior changes have accelerated demand for
certain products, especially those in industries supporting mobility,
entertainment and personal technology, smart appliances, construction, and
sustainable product packaging.
Ferro continues to maintain protocols for the safety and well-being of our
personnel. We monitor the impact of COVID-19 on our business, including how it
may impact our customers, employees, supply chain and distribution network and
take action, as appropriate, to address these circumstances. In some areas
around the world, government mandates have been changed and economic conditions
have improved in certain sectors of the economy relative to 2020. Recently, some
regions have experienced increasing numbers of COVID-19 cases, and if this
continues and if public authorities intensify efforts to contain the spread of
COVID-19, normal business activity may be further disrupted, and economic
conditions could weaken.
In 2021, following the completion of the sale of our Tile Coatings Business, we
are transitioning to a smaller, more agile and more streamlined global business
with a more coherent and focused portfolio aligned with evolving megatrends. On
May 11, 2021, Ferro announced that it has entered into a definitive agreement to
be acquired by an affiliate of Prince International Corporation, a portfolio
company of American Securities LLC. The transaction is anticipated to close in
the first quarter of 2022.
The outlook for the remainder of 2021 and into 2022 may be affected by the rise
of inflation, which could impact raw material and supply chain logistics.
Foreign currency rates may continue to be volatile through 2021 and changes in
interest rates could adversely impact reported results. We continue to expect
cash flow from operating activities to be positive for 2021.
Factors that could adversely affect our future performance include those
described under the heading "Risk Factors" in Item 1A of Part I of the Annual
Report on Form 10-K for the year ended December 31, 2020.
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  Table of Contents
Results of Operations - Consolidated
Comparison of the three months ended September 30, 2021 and 2020
For the three months ended September 30, 2021, net income from continuing
operations was $11.7 million, compared with $9.5 million for the three months
ended September 30, 2020. For the three months ended September 30, 2021, net
income attributable to common shareholders was $10.4 million, or earnings per
share of $0.13, compared with of $14.5 million, or earnings per share of $0.18,
for the three months ended September 30, 2020.

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