FERRO CORPORATION Overview
During the year endedDecember 31, 2021 , net sales increased$167.3 million , or 17.4%, compared with 2020. Net sales increased by$123.9 million and$43.4 million in Functional Coatings and Color Solutions, respectively. Gross profit increased$50.9 million compared with 2020; as a percentage of net sales, it remained unchanged at 30.6%. The increase in gross profit was primarily attributable to increases of$43.0 million and$9.3 million in Functional Coatings and Color Solutions, respectively. For the year endedDecember 31, 2021 , selling, general and administrative ("SG&A") expenses increased$15.4 million , or 7.6%, compared with 2020. As a percentage of net sales, SG&A expenses decreased 180 basis points from 21.1% in 2020 to 19.3% in 2021. For the year endedDecember 31, 2021 , net income was$150.5 million , compared with net income of$44.0 million in 2020, and net income attributable to common shareholders was$148.8 million , compared with net income attributable to common shareholders of$42.8 million in 2020. Income from continuing operations was$73.3 million for the year endedDecember 31, 2021 , compared with$30.0 million in 2020. As previously disclosed onJanuary 17, 2019 , the Company has been expanding its production facility inVillagran, Mexico , which has become the Company'sManufacturing Center of Excellence for theAmericas . The expansion of theVillagran facility is expected to significantly increase the revenue generated from products manufactured at that facility. With the expanded capacity inVillagran , the Company has discontinued the production of glass enamels, other industrial specialty products, such as architectural glass coatings, and pigments at itsWashington ,Pennsylvania facility over the course of 2021 and (ii) discontinued production of porcelain enamel products at itsCleveland, Ohio facility. As part of this optimization initiative, the Company expanded itsKing of Prussia, Pennsylvania facility. Conductive glass coatings production was discontinued at theWashington ,Pennsylvania facility and will be produced at theKing of Prussia, Pennsylvania facility, and the Company's operations at itsVista, California facility have been transferred to theKing of Prussia, Pennsylvania facility. In addition, the Company has moved itsAmericas research and development center for glass products to its technology center inIndependence, Ohio , where the Company has expanded laboratory facilities. TheWashington ,Pennsylvania facility discontinued operations during the fourth quarter of 2021. Production of specialty glasses for electronics applications will continue at theCleveland, Ohio facility, and the Company is investing in the facility to equip it to serve as a logistics center. TheCleveland, Ohio facility also will serve as theAmericas research and development center for the porcelain enamel business. Outlook Ferro experienced higher demand across all business segments in 2021, continuing the trend established as customer markets have improved from 2020. The impact of the COVID pandemic through 2022 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. 22
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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. As previously announced, onMay 11, 2021 ,Ferro Corporation entered into a definitive agreement to be acquired by an affiliate ofPrince International Corporation ("Prince"), a portfolio company ofAmerican Securities LLC . We anticipate the transaction to close in the first half of the second quarter of 2022, subject to satisfaction of customary closing conditions, including receipt of regulatory approvals. The outlook for 2022 may be affected by the rise of inflation, which could impact raw material and supply chain. Foreign currency rates may continue to be volatile through 2022 and changes in interest rates could adversely impact reported results. We continue to expect cash flow from operating activities to be positive for 2022.
Factors that could adversely affect our future performance include those
described under the heading "Risk Factors" in Item 1A of Part I of this Annual
Report on Form 10-K for the year ended
Results of Operations - Consolidated
Comparison of the years ended
For the year endedDecember 31, 2021 , net income from continuing operations was$73.3 million , compared with$30.0 million in 2020. For the year endedDecember 31, 2021 , net income attributable to common shareholders was$148.8 million , or$1.78 earnings per share, compared with$42.8 million , or$0.52 earnings per share in 2020.Net Sales (Dollars in thousands) 2021 2020 $ Change % Change Net sales$ 1,126,264 $ 958,954 $ 167,310 17.4 % Cost of sales 781,645 665,198 116,447 17.5 % Gross profit$ 344,619 $ 293,756 $ 50,863 17.3 % Gross profit as a % of net sales 30.6 % 30.6 % Net sales increased by$167.3 million , or 17.4%, in the year endedDecember 31, 2021 , compared with 2020, with increased sales in Functional Coatings and Color Solutions of$123.9 million and$43.4 million , respectively.
Gross Profit
Gross profit increased$50.9 million , or 17.3%, in 2021 to$344.6 million , compared with$293.8 million in 2020 and, as a percentage of net sales, it remained unchanged at 30.6%. The increase in gross profit was attributable to increases in Functional Coatings and Color Solutions of$43.0 million and$9.3 million , respectively. The increase in gross profit was primarily attributable to higher sales volumes and mix of$46.3 million , favorable product pricing of$14.9 million and favorable foreign currency impacts of$5.7 million , partially offset by higher raw material and manufacturing costs of$14.6 million and$1.4 million , respectively. Geographic Revenues
The following table presents our sales on the basis of where sales originated.
(Dollars in thousands) 2021 2020 $ Change % Change Geographic Revenues on a sales origination basis EMEA$ 486,842 $ 396,263 $ 90,579 22.9 % Americas 472,218 421,743 50,475 12.0 % Asia Pacific 167,204 140,948 26,256 18.6 % Net sales$ 1,126,264 $ 958,954 $ 167,310 17.4 % The increase in net sales of$167.3 million , compared with 2020, was driven by higher sales in all regions. The increase in sales from EMEA was attributable to higher sales in Functional Coatings and Color Solutions of$75.4 million and$15.2 million , respectively. The increase in sales from theAmericas was attributable to higher sales in Color Solutions and Functional Coatings of$26.3 million and$24.2 million , respectively. The increase in sales fromAsia Pacific was attributable to higher sales in Functional Coatings and Color Solutions of$22.2 million and$4.1 million , respectively. 23
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Selling, General and Administrative Expense
The following table includes SG&A components with significant changes between 2021 and 2020: (Dollars in thousands) 2021 2020 $ Change % Change Personnel expenses (excluding R&D personnel expenses)$ 84,772 $ 81,852 $ 2,920 3.6 % Research and development expenses 32,587 35,616 (3,029) (8.5) % Business development 22,323 9,051 13,272 146.6 % Incentive compensation 15,828 7,379 8,449 114.5 % Stock-based compensation 4,785 7,998 (3,213) (40.2) % Intangible asset amortization 5,187 5,926 (739) (12.5) % Pension and other postretirement benefits 1,662 2,094 (432) (20.6) % Bad debt 692 255 437 171.4 % All other expenses 49,973 52,242 (2,269) (4.3) %
Selling, general and administrative expenses
$ 15,396 7.6 % SG&A expenses were$15.4 million higher in 2021 compared with 2020. As a percentage of net sales, SG&A expenses decreased 180 basis points from 21.1% in 2020 to 19.3% in 2021. The higher SG&A expenses compared with the prior year were primarily driven by higher personnel expenses, business development, and incentive compensation, partially offset by lower research and development expenses and stock based compensation. The following table presents SG&A expenses attributable to sales, research and development, and operations costs as strategic services and presents other SG&A costs as functional services. (Dollars in thousands) 2021 2020 $ Change % Change Strategic services$ 101,847 $ 94,357 $ 7,490 7.9 % Functional services 95,349 92,679 2,670 2.9 % Incentive compensation 15,828 7,379 8,449 114.5 % Stock-based compensation 4,785 7,998 (3,213) (40.2) % Selling, general and administrative expenses$ 217,809 $ 202,413
Restructuring and Impairment Charges
(Dollars in thousands) 2021 2020 $ Change % Change Employee severance$ 10,471 $ 9,690 $ 781 8.1 % Other restructuring costs 3,939 7,735
(3,796) (49.1) %
Restructuring and impairment charges
Restructuring and impairment charges decreased$3.0 million in 2021, compared with 2020. The decrease primarily relates to costs associated with our Global Optimization and Organizational Optimization Plans, compared with the prior-year same period. Refer to Note 14 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K for a discussion of our optimization plans and related costs. Interest Expense (Dollars in thousands) 2021 2020 $ Change % Change Interest expense$ 28,385 $ 22,303 $ 6,082 27.3 % Amortization of bank fees 2,090 3,974 (1,884) (47.4) % Interest swap amortization (947) (1,263) 316 (25.0) % Interest capitalization (1,362) (3,134) 1,772 (56.5) % Interest expense$ 28,166 $ 21,880 $ 6,286 28.7 % Interest expense in 2021 increased$6.3 million compared with 2020. The increase in interest expense was primarily due to the settlement of several swap terminations, partially offset by a decrease in the average interest rate and average long-term debt balance during 2021. 24
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Income Tax Expense
In 2021, we recorded an income tax expense of$39.2 million , or 34.8% of income before income taxes, compared to an income tax expense of$14.9 million , or 33.1% of income before income taxes in 2020. The 2021 effective tax rate is greater than the statutory income tax rate of 21% primarily as a result of the net effect of a$8.8 million expense related to foreign tax rate differences and a$4.7 million expense related to foreign tax withholding. The 2020 effective tax rate is greater than the statutory income tax rate of 21% primarily as a result of the net effect of a$3.2 million expense related to foreign tax rate differences and a$2.0 million expense related to disallowed expenses.
Comparison of the years ended
For the year endedDecember 31, 2020 , net income from continuing operations was$30.0 million , compared with$34.8 million in 2019. For the year endedDecember 31, 2020 , net income attributable to common shareholders was$42.8 million , or$0.52 earnings per share, compared with$6.0 million , or$0.07 earnings per share in 2019. The increase in net income attributable to shareholders is primarily due to impairment charges of$42.5 million associated with the Tile Coatings business, recorded within Net income (loss) from discontinued operations, during the prior yearNet Sales (Dollars in thousands) 2020 2019 $ Change % Change Net sales$ 958,954 $ 1,014,457 $ (55,503) (5.5) % Cost of sales 665,198 706,481 (41,283) (5.8) % Gross profit$ 293,756 $ 307,976 $ (14,220) (4.6) % Gross profit as a % of net sales 30.6 % 30.4 % Net sales decreased by$55.5 million , or 5.5%, in the year endedDecember 31, 2020 , compared with 2019, with decreased sales in Functional Coatings and Color Solutions of$36.6 million and$18.9 million , respectively.
Gross Profit
Gross profit decreased$14.2 million , or 4.6%, in 2020 to$293.8 million , compared with$308.0 million in 2019 and, as a percentage of net sales, it increased 20 basis points to 30.6%. The decrease in gross profit was attributable to a decrease in Functional Coatings of$17.1 million , partially mitigated by an increase in Color Solutions of$4.1 million . The decrease in gross profit was primarily attributable to lower sales volumes and mix of$30.8 million , unfavorable foreign currency impacts of$2.1 million and higher manufacturing and product costs of$1.1 million , partially mitigated by lower raw material costs of$15.7 million and favorable product pricing of$4.1 million .
Geographic Revenues
The following table presents our sales on the basis of where sales originated.
(Dollars in thousands) 2020 2019 $ Change % Change Geographic Revenues on a sales origination basis EMEA$ 396,263 $ 432,132 $ (35,869) (8.3) % Americas 421,743 443,319 (21,576) (4.9) % Asia Pacific 140,948 139,006 1,942 1.4 % Net sales$ 958,954 $ 1,014,457 $ (55,503) (5.5) % The decrease in net sales of$55.5 million , compared with 2019, was driven by lower sales in the EMEA andAmericas regions, partially mitigated by higher sales in theAsia Pacific region. The decrease in sales from EMEA was attributable to lower sales in Functional Coatings and Color Solutions of$28.2 million and$7.7 million , respectively. The decrease in sales from theAmericas was attributable to lower sales in Color Solutions and Functional Coatings of$13.9 million and$7.6 million , respectively. The increase in sales fromAsia Pacific was attributable to higher sales in Color Solutions of$2.7 million , partially offset by lower sales in Functional Coatings of$0.8 million . 25
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Selling, General and Administrative Expense
The following table includes SG&A components with significant changes between 2020 and 2019. (Dollars in thousands) 2020 2019 $ Change % Change Personnel expenses (excluding R&D personnel expenses)$ 81,852 $ 94,544 $ (12,692) (13.4) % Research and development expenses 35,616 40,962 (5,346) (13.1) % Business development 9,051 4,989 4,062 81.4 % Incentive compensation 7,379 2,459 4,920 200.1 % Stock-based compensation 7,998 7,406 592 8.0 % Intangible asset amortization 5,926 6,949 (1,023) (14.7) % Pension and other postretirement benefits 2,094 1,422 672 47.3 % Bad debt 255 455 (200) (44.0) % All other expenses 52,242 53,179 (937) (1.8) %
Selling, general and administrative expenses
$ (9,952) (4.7) % SG&A expenses were$10.0 million lower in 2020 compared with 2019. As a percentage of net sales, SG&A expenses increased 20 basis points from 20.9% in 2019 to 21.1% in 2020. The lower SG&A expenses compared with the prior year were primarily driven by lower personnel and research and development expenses, partially offset by higher incentive compensation and business development expenses. The following table presents SG&A expenses attributable to sales, research and development, and operations costs as strategic services and presents other SG&A costs as functional services. (Dollars in thousands) 2020 2019 $ Change % Change Strategic services$ 94,357 $ 103,603 $ (9,246) (8.9) % Functional services 92,679 98,897 (6,218) (6.3) % Incentive compensation 7,379 2,459 4,920 200.1 % Stock-based compensation 7,998 7,406 592 8.0 % Selling, general and administrative expenses$ 202,413 $ 212,365
Restructuring and Impairment Charges
(Dollars in thousands) 2020 2019 $ Change % Change Employee severance$ 9,690 $ 7,163 $ 2,527 35.3 % Other restructuring costs 7,735 3,792
3,943 104.0 %
Restructuring and impairment charges
Restructuring and impairment charges increased$6.5 million in 2020, compared with 2019. The increase primarily relates to costs associated with our Global Optimization and Organizational Optimization Plans, compared with the prior-year same period. Refer to Note 14 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K for a discussion of our optimization plans and related costs. Interest Expense (Dollars in thousands) 2020 2019 $ Change % Change Interest expense$ 22,303 $ 24,888 $ (2,585) (10.4) % Amortization of bank fees 3,974 3,755 219 5.8 % Interest swap amortization (1,263) (1,263) - - % Interest capitalization (3,134) (3,078) (56) 1.8 % Interest expense$ 21,880 $ 24,302 $ (2,422) (10.0) %
Interest expense in 2020 decreased
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Income Tax Expense
In 2020, we recorded an income tax expense of$14.9 million , or 33.1% of income before income taxes, compared to an income tax expense of$8.0 million , or 18.6% of income before income taxes in 2019. The 2020 effective tax rate is greater than the statutory income tax rate of 21% primarily as a result of the net effect of a$3.2 million expense related to foreign tax rate differences and a$2.0 million expense related to disallowed expenses. The 2019 effective tax rate is less than the statutory income tax rate of 21% primarily as a result of a net effect of a$7.6 million net benefit related to the release of valuation allowances related to deferred tax assets that were utilized in the current year and which are deemed no longer necessary based upon changes in the current and expected future years of operating profits and a$4.3 million net expense related to foreign tax rate differences.
Results of Operations - Segment Information
Comparison of the years ended
Functional Coatings
Change due to
(Dollars in Volume /
thousands) 2021 2020 $ Change % Change Price Mix Currency Other
Segment net sales $ 732,063 $ 608,192 $ 123,871 20.4 % $ 8,762 $ 104,797 $ 10,312 $ -
Segment gross profit 218,619 175,601 43,018 24.5 % 8,762 34,791 2,986 (3,521)
Segment gross profit
as a % of segment
net sales 29.9 % 28.9 %
Net sales increased $123.9 million compared with the prior year, primarily
driven by higher sales in porcelain enamel, electronics, decoration, industrial
and automotive products of $31.0 million , $29.8 million , $29.5 million , $18.9
million , and $14.7 million , respectively. The increase in net sales was driven
by favorable volume and mix of $104.8 million and favorable foreign currency
impacts of $10.3 million and higher product pricing of $8.8 million . Gross
profit increased from the prior year, primarily due to higher sales volume and
mix of $34.8 million , higher product pricing of $8.8 million , favorable foreign
currency impacts of $3.0 million and favorable manufacturing costs of $1.8
million , partially offset by higher raw material costs of $5.4 million .
(Dollars in thousands) 2021 2020 $ Change % Change
Segment net sales by Region
EMEA $ 342,396 $ 267,041 $ 75,355 28.2 %
Americas 266,745 240,424 26,321 10.9 %
Asia Pacific 122,922 100,727 22,195 22.0 %
Net sales $ 732,063 $ 608,192 $ 123,871 20.4 %
The net sales increase of $123.9 million was driven by higher sales from all
regions. The increase in sales from EMEA was primarily attributable to higher
sales of decoration, industrial, porcelain enamel, electronic and automotive
products of $21.3 million , $18.2 million , $16.2 million , $13.7 million and $6.0
million , respectively. The increase in sales from the Americas was primarily
attributable to higher sales of electronic, porcelain enamel, automotive and
decoration products of $15.0 million , $9.9 million , $3.1 million and $1.6
million , respectively, partially offset by lower sales of industrial products of
$3.3 million . The increase in sales from Asia Pacific was primarily attributable
to higher sales of decoration, automotive, porcelain enamel, industrial and
electronic products of $6.6 million , $5.6 million , $4.9 million , $4.0 million
and $1.1 million , respectively.
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Color Solutions
Change due to
(Dollars in Volume /
thousands) 2021 2020 $ Change % Change Price Mix Currency Other
Segment net sales $ 394,201 $ 350,762 $ 43,439 12.4 %
119,071 9,285 7.8 % 6,165 11,489 2,663 (11,032)
Segment gross profit
as a % of segment
net sales 32.6 % 33.9 %
Net sales increased $43.4 million compared with the prior year primarily due to
higher product sales of pigments, dispersions and colorants, and surface
technology of $38.8 million $4.0 million and $0.6 million , respectively. The
increase in net sales was driven by favorable volume and mix and foreign
currency impacts of $31.0 million and $6.3 million , respectively, and higher
product pricing of $6.2 million . Gross profit increased from the prior year
primarily due to favorable sales volume and mix of $11.5 million , higher product
pricing of $6.2 million , and favorable foreign currency impacts of $2.7 million ,
partially offset by higher raw material and manufacturing costs of $9.2 million
and $1.8 million , respectively.
(Dollars in thousands) 2021 2020 $ Change % Change
Segment net sales by Region
Americas $ 205,473 $ 181,319 $ 24,154 13.3 %
EMEA 144,446 129,222 15,224 11.8 %
Asia Pacific 44,282 40,221 4,061 10.1 %
Net sales $ 394,201 $ 350,762 $ 43,439 12.4 %
The net sales increased of $43.4 million was driven by higher sales from all
regions. The increase in sales from the Americas was primarily driven by higher
sales of pigment, dispersions and colorants and surface technology products of
$17.8 million , $3.2 million and $3.2 million , respectively. The increase in
sales from EMEA was primarily attributable to higher sales of pigment and
dispersions and colorants products of $14.5 million and $0.7 million ,
respectively. The increase in sales from Asia Pacific was primarily attributable
to higher sales of pigment products of $6.5 million , partially offset by surface
technology products of $2.5 million .
Comparison of the years ended
Functional Coatings
Change due to
(Dollars in Volume /
thousands) 2020 2019 $ Change % Change Price Mix Currency Other
Segment net sales $ 608,192 $ 644,783 $ (36,591) (5.7) % $ 4,280 $ (37,771) $ (3,100) $ -
Segment gross profit 175,601 192,668 (17,067) (8.9) % 4,280 (16,544) (2,172) (2,631)
Segment gross profit
as a % of segment
net sales 28.9 % 29.9 %
Net sales decreased $36.6 million compared with the prior year, primarily driven
by lower sales in industrial, decoration and automotive products of $18.9
million , $15.8 million , and $13.3 million , respectively, partially mitigated by
higher sales of electronics products of $18.7 million . The decrease in net sales
was driven by unfavorable volume and mix of $37.8 million and unfavorable
foreign currency impacts of $3.1 million , partially offset by higher product
pricing of $4.3 million . Gross profit decreased from the prior year, primarily
due to lower sales volume and mix of $16.5 million , unfavorable manufacturing
costs of $12.1 million and unfavorable foreign currency impacts of $2.2 million ,
partially offset by lower raw material costs of $9.4 million , higher product
pricing of $4.3 million .
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Table of Contents (Dollars in thousands) 2020 2019 $ Change % Change Segment net sales by Region EMEA$ 267,041 $ 295,198 $ (28,157) (9.5) % Americas 240,424 248,064 (7,640) (3.1) % Asia Pacific 100,727 101,521 (794) (0.8) % Net sales$ 608,192 $ 644,783 $ (36,591) (5.7) % The net sales decrease of$36.6 million was driven by lower sales from all regions. The decrease in sales from EMEA was primarily attributable to lower sales of industrial, decoration and automotive products of$19.2 million ,$10.7 million and$4.7 million , respectively, partially mitigated by higher sales of electronic products of$5.5 million . The decrease in sales from theAmericas was primarily attributable to lower sales of automotive, porcelain enamel, industrial and decoration products of$6.9 million ,$4.9 million ,$4.5 million and$1.1 million , respectively, partially offset by an increase in sales of electronic products of$12.7 million . The decrease in sales fromAsia Pacific was primarily attributable to lower sales of decoration and automotive products of$4.0 million and$1.7 million , respectively, partially mitigated by higher sales of industrial products of$4.8 million . Color Solutions Change due to (Dollars in Volume / thousands) 2020 2019 $ Change % Change Price Mix Currency Other Segment net sales$ 350,762 $ 369,674 $ (18,912) (5.1) %$ (217) $ (18,429) $ (266) $ - Segment gross profit 119,071 114,939 4,132 3.6 % (217) (13,019) 82 17,286 Segment gross profit as a % of segment net sales 33.9 % 31.1 % Net sales decreased$18.9 million compared with the prior year primarily due to lower sales of surface technology products of$12.7 million , pigment products of$5.1 million and dispersions and colorants of$1.1 million . The decrease in net sales was driven by lower volume and mix of$18.4 million and unfavorable foreign currency impacts. Gross profit increased from the prior year primarily due to lower manufacturing costs of$11.0 million and lower raw material costs of$6.3 million , partially offset by unfavorable sales volume and mix of$13.0 million and lower product pricing of$0.2 million . 2020 2019 $ Change % Change Segment net sales by Region Americas$ 181,319 $ 195,255 $ (13,936) (7.1) % EMEA 129,222 136,934 (7,712) (5.6) % Asia Pacific 40,221 37,485 2,736 7.3 % Net sales$ 350,762 $ 369,674 $ (18,912) (5.1) % The net sales decrease of$18.9 million was driven by lower sales from the EMEA andAmericas regions, partially mitigated by higher sales from theAsia Pacific region. The decrease in sales from EMEA was primarily attributable to lower sales of pigment products of$6.5 million and dispersions and colorants of$1.2 million . The decrease in sales from theAmericas was primarily driven by lower sales of surface technology products of$12.7 million and pigment products of$1.3 million , partially mitigated by higher sales of dispersions and colorants of$0.1 million . The increase in sales fromAsia Pacific was primarily attributable to higher sales of pigment products of$2.7 million . 29
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Summary of Cash Flows for the years ended
(Dollars in thousands) 2021 2020 2019
Net cash provided by (used for) operating activities
490,659 98,993 21,303
Net cash used for financing activities (538,052) (10,048) (39,195)
Effect of exchange rate changes on cash and cash
equivalents (2,088) 2,122 283
(Decrease) increase in cash and cash equivalents
Operating activities. Cash flows from operating activities decreased$48.1 million in 2021 compared to 2020. The decrease in cash from operating activities was primarily due to higher cash outflows for other current assets and liabilities of$22.5 million , net working capital of$3.2 million , and a decrease in net income, excluding noncash items and the gain on the sale of the Tile Coatings business. Cash flows from operating activities decreased$30.9 million in 2020 compared to 2019. The decrease was primarily due to higher cash outflows for net working capital of$36.4 million which was offset by lower cash payments for incentive compensation of$5.1 million and lower pension contributions of$2.4 million . Investing activities. Cash flows from investing activities increased$391.7 million in 2021 compared to 2020. The increase was primarily due to proceeds from the sale of our Tile Coatings business of$402.1 million , and lower cash outflows for capital expenditures of$1.8 million , partially offset by lower collections of financing receivables of$11.9 million and lower sales of assets of$0.4 million . Cash flows from investing activities increased$77.7 million in 2020 compared to 2019. The increase was primarily due to higher collections of financing receivables of$45.4 million and lower cash outflows for capital expenditures of$33.2 million . Financing activities. Cash flows from financing activities decreased$528.0 million in 2021 compared with 2020. The decrease is primarily attributable to increased principal payments on the Amended Credit Facility of$535.0 million and decreased other financing activities of$4.6 million , partially offset by increased proceeds from the exercise of stock options of$10.8 million and increased net proceeds from loans payable of$0.8 million . Cash flows from financing activities increased$29.1 million in 2020 compared with 2019. The increase is primarily attributable to decreased cash outflows for the purchase of treasury stock of$25.0 million and decreased cash outflows for acquisition-related contingency payments of$5.2 million .
We have paid no dividends on our common stock since 2009.
Capital Resources and Liquidity
Refer to Note 8 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K for a discussion of major debt instruments that were outstanding during 2021.
Off Balance Sheet Arrangements
Consignment and Customer Arrangements forPrecious Metals . We use precious metals, primarily silver, in the production of some of our products. We obtain most precious metals from financial institutions under consignment agreements. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment. These fees were$2.8 million ,$2.9 million , and$3.1 million for 2021, 2020, and 2019, respectively. We had on hand precious metals owned by participants in our precious metals consignment program of$95.4 million atDecember 31, 2021 and$87.2 million atDecember 31, 2020 , measured at fair value based on market prices for identical assets and net of credits. 30
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The consignment agreements under our precious metals program involve short-term commitments that typically mature within 30 to 90 days of each transaction and are typically renewed on an ongoing basis. As a result, the Company relies on the continued willingness of financial institutions to participate in these arrangements to maintain this source of liquidity. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding atDecember 31, 2021 orDecember 31, 2020 , we may be required to furnish cash collateral in the future based on the quantity and market value of the precious metals under consignment and the amount of collateral-free lines provided by the financial institutions. The amount of cash collateral required is subject to review by the financial institutions and can be changed at any time at their discretion, based in part on their assessment of our creditworthiness.
Bank Guarantees and Standby Letters of Credit.
AtDecember 31, 2021 , the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that totaled$4.5 million . These agreements primarily relate to Ferro's insurance programs, foreign energy purchase contracts and foreign tax payments.
Liquidity Requirements
Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under the Amended Credit Facility, and cash flows from operating activities. As ofDecember 31, 2021 , we had$71.5 million of cash and cash equivalents. Cash generated in theU.S. is generally used to pay down amounts outstanding under our 2018 Revolving Facility and for general corporate purposes, including acquisitions. If needed, we could repatriate the majority of cash held by foreign subsidiaries without the need to accrue and payU.S. income taxes. We do not anticipate a liquidity need requiring such repatriation of these funds to theU.S. During the fourth quarter of 2019, we entered into a definitive agreement to sell our Tile Coatings business which has historically been a part of our Performance Coatings reportable segment. We used the proceeds of the sale to settle long-term obligations. OnFebruary 25, 2021 , we completed the sale of our Tile Coatings business toPigments Spain, S.L ., a company of the Esmalglass-Itaca-Fritta group, which is a portfolio company of certainLone Star Funds . Proceeds from the close of the transaction, in addition to current cash balances, were used to pay down our term loan facility in the amount of$435.0 million onFebruary 25, 2021 . The Company paid down and additional$100.0 million of the Term Loan Facility during the fourth quarter of 2021, and$50.0 million inJanuary 2022 . Our liquidity requirements primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, acquisition costs, capital investments, precious metals cash collateral requirements, and postretirement benefit obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows from operating activities are primarily driven by earnings before noncash charges and changes in working capital needs. Additionally, we used the borrowings available under the Amended Credit Facility for other general business purposes. We had additional borrowing capacity of$521.1 million atDecember 31, 2021 , available under various credit facilities, primarily our revolving credit facility. Our Amended Credit Facility contains customary restrictive covenants, including those described in more detail in Note 8 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K. These covenants include customary restrictions, including, but not limited to, limitations on use of loan proceeds, limitations on the Company's ability to pay dividends and repurchase stock, limitations on acquisitions and dispositions, and limitations on certain types of investments. Specific to the 2018 Revolving Facility, we are subject to a financial covenant regarding the Company's maximum leverage ratio. This covenant under our Amended Credit Facility restricts the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic initiatives. This facility is described in more detail in Note 8 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K. As ofDecember 31, 2021 , we were in compliance with our maximum leverage ratio covenant of 4.00x as our actual ratio was 1.03, providing$171.7 million of EBITDA cushion on the leverage ratio, as defined within the Amended Credit Facility. To the extent that economic conditions in key markets deteriorate or we are unable to meet our business projections and EBITDA falls below approximately$59.4 million for a rolling four quarters, based on reasonably consistent net debt levels with those as ofDecember 31, 2021 , we could become unable to maintain compliance with our leverage ratio covenant. In such case, our lenders could demand immediate payment of outstanding amounts and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all. 31
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Difficulties experienced in global capital markets could affect the ability or willingness of counterparties to perform under our various lines of credit, forward contracts, and precious metals program. These counterparties are major, reputable, multinational institutions, all having investment-grade credit ratings. Accordingly, we do not anticipate counterparty default. However, an interruption in access to external financing could adversely affect our business prospects and financial condition. We assess on an ongoing basis our portfolio of businesses, as well as our financial and capital structure, to ensure that we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate the possible divestiture of businesses that are not critical to our core strategic objectives and, where appropriate, pursue the sale of such businesses and assets. We also evaluate and pursue acquisition opportunities that we believe will enhance our strategic position such as the acquisitions we completed in 2018. Generally, we publicly announce material divestiture and acquisition transactions only when we have entered into a material definitive agreement or closed on those transactions.
The Company's aggregate amount of contractual obligations for the next five years and thereafter is set forth below:
(Dollars in thousands) 2022 2023 2024 2025 2026 Thereafter Totals Long-term debt (1)$ 9,056 $ 8,977 $ 238,645 $ 758 $ 624 $ 3,499 $ 261,559 Interest (2) 254 254 254 254 254 2,785 4,055 Operating lease obligations 5,129 3,325 2,337 1,823 1,422 1,804 15,840 Purchase commitments (3) 2,939 1,897 79 81 84 86 5,166 Taxes (4) 18,275 - - - - - 18,275 Retirement and other postemployment benefits (5) 4,274 - - - - - 4,274$ 39,927 $ 14,453 $ 241,315 $ 2,916 $ 2,384 $ 8,174 $ 309,169
(1)Long-term debt excludes imputed interest and executory costs on capitalized lease obligations and unamortized issuance costs on the term loan facility.
(2)Interest represents only contractual payments for fixed-rate debt.
(3)Purchase commitments are noncancelable contractual obligations for raw materials and energy, and exclude capital expenditures for property, plant and equipment.
(4)We have not projected payments past 2022 due to uncertainties in estimating the amount and period of any payments. The amount above relates to our current income tax liability as ofDecember 31, 2021 . We have$10.0 million in gross liabilities related to unrecognized tax benefits, including$0.8 million of accrued interest and penalties that are not included in the above table since we cannot reasonably predict the timing of cash settlements with various taxing authorities. (5)The funding amounts are based on the minimum contributions required under our various plans and applicable regulations in each respective country. We have not projected contributions past 2022 due to uncertainties regarding the assumptions involved in estimating future required contributions.
Critical Accounting Policies
When we prepare our consolidated financial statements we are required to make estimates and assumptions that affect the amounts we report in the consolidated financial statements and footnotes. We consider the policies discussed below to be more critical than other policies because their application requires our most subjective or complex judgments. These estimates and judgments arise because of the inherent uncertainty in predicting future events. Management has discussed the development, selection and disclosure of these policies with the Audit Committee of the Board of Directors.
Restructuring and Cost Reduction Programs
In recent years, we have developed and initiated global cost reduction programs
with the objectives of leveraging our global scale, realigning and lowering our
cost structure, and optimizing capacity utilization. Management continues to
evaluate our businesses, and therefore, there may be additional provisions for
new optimization and cost-savings initiatives, as well as changes in estimates
to amounts previously recorded, as payments are made or actions are completed.
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Restructuring charges include both termination benefits and asset writedowns. We estimate accruals for termination benefits based on various factors including length of service, contract provisions, local legal requirements, projected final service dates, and salary levels. We also analyze the carrying value of long-lived assets and record estimated accelerated depreciation through the anticipated end of the useful life of the assets affected by the restructuring or record an asset impairment. In all likelihood, this accelerated depreciation will result in reducing the net book value of those assets to zero at the date operations cease. While we believe that changes to our estimates are unlikely, the accuracy of our estimates depends on the successful completion of numerous actions. Changes in our estimates could increase our restructuring costs to such an extent that it could have a material impact on the Company's results of operations, financial position, or cash flows. Other events, such as negotiations with unions and works councils, may also delay the resulting cost savings.Goodwill We review goodwill for impairment each year using a measurement date ofOctober 31st or more frequently in the event of an impairment indicator. We annually, or more frequently as warranted, evaluate the appropriateness of our reporting units utilizing operating segments as the starting point of our analysis. In the event of a change in our reporting units, we would allocate goodwill based on the relative fair value. We estimate the fair values of the reporting units associated with these assets using the average of both the income approach and the market approach, which we believe provides a reasonable estimate of the reporting units' fair values, unless facts and circumstances exist that indicate more representative fair values. The income approach uses projected cash flows attributable to the reporting units and allocates certain corporate expenses to the reporting units. We use historical results, trends and our projections of market growth, internal sales efforts and anticipated cost structure assumptions to estimate future cash flows. Using a risk-adjusted, weighted-average cost of capital, we discount the cash flow projections to the measurement date. The market approach estimates a price reasonably expected to be paid by a market participant in the purchase of similar businesses. If the fair value of any reporting unit was determined to be less than its carrying value, we would recognize an impairment for the difference between fair value and carrying value. The significant assumptions we used in our impairment analyses of goodwill atOctober 31, 2021 and 2020 are the weighted average cost of capital and revenue growth rates. Our estimates of fair value can be adversely affected by a variety of factors. Reductions in actual or projected growth or profitability at our reporting units due to unfavorable market conditions or significant increases in cost structure could lead to the impairment of any related goodwill. Additionally, an increase in inflation, interest rates or the risk-adjusted, weighted-average cost of capital could also lead to a reduction in the fair value of one or more of our reporting units and therefore lead to the impairment of goodwill. Future potential impairments are possible for any of the Company's remaining reporting units if actual results are materially less than forecasted results. Some of the factors that could negatively affect our cash flows and, as a result, not support the carrying values of our reporting units are: new environmental regulations or legal restrictions on the use of our products that would either reduce our product revenues or add substantial costs to the manufacturing process, thereby reducing operating margins; new technologies that could make our products less competitive or require substantial capital investment in new equipment or manufacturing processes; and substantial downturns in economic conditions.
Long-Lived Asset Impairment
The Company's long-lived assets include property, plant and equipment, and intangible assets. We review property, plant and equipment and intangible assets for impairment whenever events or circumstances indicate that their carrying values may not be recoverable. The following are examples of such events or changes in circumstances:
•An adverse change in the business climate of a long-lived asset or asset group;
•An adverse change in the extent or manner in which a long-lived asset or asset group is used or in its physical condition;
•Current operating losses for a long-lived asset or asset group combined with a
history of such losses or projected or forecasted losses that demonstrate that
the losses will continue; or
•A current expectation that, more likely than not, a long-lived asset or asset
group will be sold or otherwise significantly disposed of before the end of its
previously estimated useful life.
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The carrying amount of property, plant and equipment and intangible assets is not recoverable if the carrying value of the asset group exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset group. In the event of impairment, we recognize a loss for the excess of the recorded value over fair value. The long-term nature of these assets requires the estimation of cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of review. Income Taxes The breadth of our operations and complexity of income tax regulations require us to assess uncertainties and make judgments in estimating the ultimate amount of income taxes we will pay. Our income tax expense, deferred tax assets and liabilities, and reserves for unrecognized tax benefits reflect management's best assessment of estimated current and future taxes to be paid. The final income taxes we pay are based upon many factors, including existing income tax laws and regulations, negotiations with taxing authorities in various jurisdictions, outcomes of tax litigation, and resolution of disputes arising from federal, state and international income tax audits. The resolution of these uncertainties may result in adjustments to our income tax assets and liabilities in the future. Deferred income taxes result from differences between the financial and tax basis of our assets and liabilities. We adjust our deferred income tax assets and liabilities for changes in income tax rates and income tax laws when changes are enacted. We record valuation allowances to reduce deferred income tax assets when it is more likely than not that a tax benefit will not be realized. Significant judgment is required in evaluating the need for and the magnitude of appropriate valuation allowances against deferred income tax assets. The realization of these assets is dependent on generating future taxable income, our ability to carry back or carry forward net operating losses and credits to offset tax liabilities, as well as successful implementation of various tax strategies to generate tax where net operating losses or credit carryforwards exist. In evaluating our ability to realize the deferred income tax assets, we rely principally on the reversal of existing temporary differences, the availability of tax planning strategies, and forecasted income. We recognize a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Our estimate of the potential outcome of any uncertain tax positions is subject to management's assessment of relevant risks, facts, and circumstances existing at that time. We record a liability for the difference between the benefit recognized and measured based on a more-likely-than-not threshold and the tax position taken or expected to be taken on the tax return. To the extent that our assessment of such tax positions change, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense.
Derivative Financial Instruments
We use derivative financial instruments in the normal course of business to
manage our exposure to fluctuations in interest rates, foreign currency exchange
rates, and precious metal prices. The accounting for derivative financial
instruments can be complex and can require significant judgment. Generally, the
derivative financial instruments that we use are not complex, and observable
market-based inputs are available to measure their fair value. We do not engage
in speculative transactions for trading purposes. The use of financial
derivatives is managed under a policy that identifies the conditions necessary
to identify the transaction as a financial derivative. Financial instruments,
including derivative financial instruments, expose us to counterparty credit
risk for nonperformance. We manage our exposure to counterparty credit risk
through minimum credit standards and procedures to monitor concentrations of
credit risk. We enter into these derivative financial instruments with major,
reputable, multinational financial institutions. Accordingly, we do not
anticipate counter-party default. We continuously evaluate the effectiveness of
derivative financial instruments designated as hedges to ensure that they are
highly effective. In the event the hedge becomes ineffective, we discontinue
hedge treatment. Except as noted below, we do not expect any changes in our risk
policies or in the nature of the transactions we enter into to mitigate those
risks.
Our exposure to interest rate changes arises from our debt agreements with
variable interest rates. To reduce our exposure to interest rate changes on
variable rate debt, we entered into interest rate swap agreements. These swaps
are settled in cash, and the net interest paid or received is effectively
recognized as interest expense. We mark these swaps to fair value and recognize
the resulting gains or losses as other comprehensive income.
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We have executed cross currency interest rate swaps to minimize our exposure to floating rate debt agreements denominated in a currency other than functional currency. These swaps are settled in cash, and the net interest paid or received is effectively recognized as interest expense as the interest on the debt is accrued. These swaps are designated as cash flow hedges and we mark these swaps to fair value and recognize the resulting gains or losses as other comprehensive income. To help protect the value of the Company's net investment in European operations against adverse changes in exchange rates, the Company, from time-to-time, uses non-derivative financial instruments, such as its foreign currency denominated debt, as economic hedges of its net investments in certain foreign subsidiaries. In addition, we have executed cross currency interest rate swaps to help protect the value of the Company's net investment in European operations. These swaps are settled in cash, and the net interest paid or received is effectively recognized as interest expense. We mark these swaps to fair value and recognize the resulting gains or losses as cumulative translation adjustments (a component of other comprehensive income). We manage foreign currency risks in a wide variety of foreign currencies principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions arising from international trade. Our objective in entering into these forward contracts is to preserve the economic value of nonfunctional currency cash flows. Our principal foreign currency exposures relate to the Euro, the Turkish Lira, the Taiwan Dollar, the Colombian Peso, the Australian Dollar, the Indian Rupee, the Thailand Baht, the Indonesian Rupiah, the Japanese Yen, the Chinese Renminbi and the Romanian Leu. We mark these forward contracts to fair value based on market prices for comparable contracts and recognize the resulting gains or losses as other income or expense from foreign currency transactions. Precious metals (primarily silver, gold, platinum and palladium) represent a significant portion of raw material costs in our electronics products. When we enter into a fixed price sales contract at the customer's request to establish the price for the precious metals content of the order, we may enter into a forward purchase arrangement with a precious metals supplier to completely cover the value of the precious metals content. Our current precious metals contracts are designated as normal purchase contracts, which are not marked to market.
We also purchase portions of our energy requirements, including natural gas and electricity, under fixed price contracts to reduce the volatility of cost changes. Our current energy contracts are designated as normal purchase contracts, which are not marked to market.
Pension and Other Postretirement Benefits
We sponsor defined benefit plans in theU.S. and many countries outside theU.S. , and we also sponsor retiree medical benefits for a segment of our salaried and hourly work force within theU.S. TheU.S. pension plans and retiree medical plans represent approximately 86% of pension plan assets, 71% of benefit obligations and 84% of net periodic pension expense as ofDecember 31, 2021 . The assumptions we use in actuarial calculations for these plans have a significant impact on benefit obligations and annual net periodic benefit costs. We meet with our actuaries annually to discuss key economic assumptions used to develop these benefit obligations and net periodic costs. We determine the discount rate for theU.S. pension and retiree medical plans based on a bond model. Using the pension plans' projected cash flows, the bond model considers all possible bond portfolios that produce matching cash flows and selects the portfolio with the highest possible yield. These portfolios are based on bonds with a quality rating of AA or better under eitherMoody's Investor Services, Inc. or Standard & Poor'sRating Group , but exclude certain bonds, such as callable bonds, bonds with small amounts outstanding, and bonds with unusually high or low yields. The discount rates for the non-U.S. plans are based on a yield curve method, using AA-rated bonds applicable in their respective capital markets. The duration of each plan's liabilities is used to select the rate from the yield curve corresponding to the same duration. 35
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For the market-related value of plan assets, we use fair value, rather than a calculated value. The market-related value recognizes changes in fair value in a systematic and rational manner over several years. We calculate the expected return on assets at the beginning of the year for defined benefit plans as the weighted-average of the expected return for the target allocation of the principal asset classes held by each of the plans. In determining the expected returns, we consider both historical performance and an estimate of future long-term rates of return. The Company consults with and considers the opinion of its actuaries in developing appropriate return assumptions. Our target asset allocation percentages are 35% fixed income, 60% equity, and 5% other investments forU.S. plans. Non-U.S. plan allocations are primarily comprised of fixed income securities. In 2021, our pension plan assets incurred gains of approximately 12% within theU.S. plans and 2% within non-U.S. plans. In 2020, our pension plan assets incurred gains of approximately 11% within theU.S. plans and 7% within non-U.S. plans. Future actual pension expense will depend on future investment allocation and performance, changes in future discount rates and various other factors related to the population of participants in the Company's pension plans. All other assumptions are reviewed periodically by our actuaries and us and may be adjusted based on current trends and expectations as well as past experience in the plans. The following table provides the sensitivity of net annual periodic benefit costs for our pension plans, including aU.S. nonqualified retirement plan, and the retiree medical plan to a 25-basis-point decrease in both the discount rate and asset return assumption: 25 Basis Point 25 Basis Point Decrease in Decrease in Asset Return (Dollars in thousands) Discount Rate Assumption U.S. pension plans $ (500) $ 580 U.S. retiree medical plan (18) - Non-U.S. pension plans (138) 26 Total $ (656) $ 606 The following table provides the rates used in the assumptions and the changes between 2021 and 2020: 2021 2020 Change Discount rate used to measure the benefit cost: U.S. pension plans 2.55 % 3.35 % (0.80) % U.S. retiree medical plan 2.40 % 3.25 % (0.85) % Non-U.S. pension plans 1.14 % 1.76 % (0.62) % Discount rate used to measure the benefit obligation: U.S. pension plans 2.85 % 2.55 % 0.30 % U.S. retiree medical plan 2.80 % 2.40 % 0.40 % Non-U.S. pension plans 1.43 % 1.29 % 0.14 % Expected return on plan assets: U.S. pension plans 7.48 % 7.70 % (0.22) % Non-U.S. pension plans 1.55 % 2.04 % (0.49) % Our overall net periodic benefit credit for all defined benefit plans was$31.1 million in 2021 and a cost of$8.4 million in 2020. In theU.S. , the net periodic benefit credit for all defined benefit plans was$26.3 million in 2021 and a cost of$2.2 million in 2020. This is primarily caused by the increase in discount rates and higher asset returns in 2021. In non-U.S. countries, the net periodic benefit credit for all defined benefit plans was$4.9 million in 2021 and a cost of$6.3 million in 2020. This is also primarily caused by the increase in discount rates in 2021. For 2022, assuming expected returns on plan assets and no actuarial gains or losses, we expect our overall net periodic benefit income to be approximately$4.6 million , compared with income of approximately$4.9 million in 2021 on a comparable basis. 36
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Environmental Liabilities
Our manufacturing facilities are subject to a broad array of environmental laws and regulations in the countries in which they are located. The costs to comply with complex environmental laws and regulations are significant and will continue for the foreseeable future. We expense these recurring costs as they are incurred. While these costs may increase in the future, they are not expected to have a material impact on our financial position, liquidity or results of operations. We also accrue for environmental remediation costs and other obligations when it is probable that a liability has been incurred and we can reasonably estimate the amount. We determine the timing and amount of any liability based upon assumptions regarding future events. Inherent uncertainties exist in such evaluations primarily due to unknown conditions and other circumstances, changing governmental regulations and legal standards regarding liability, and evolving technologies. We adjust these liabilities periodically as remediation efforts progress or as additional technical or legal information becomes available.
Impact of Newly Issued Accounting Pronouncements
Refer to Note 2 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K for a discussion of accounting standards we recently adopted or will be required to adopt. InNovember 2020 , theSEC issued Final Rule Release No. 33-10890, Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information. This rule, which became effective onFebruary 10, 2021 , amended certainSEC disclosure requirements in order to modernize, simplify and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the amendments eliminate the requirement for Selected Financial Data, streamline the requirement to disclose Supplementary Financial Information, and amend Management's Discussion and Analysis. The final rule is applicable for fiscal years ending on or afterAugust 9, 2021 , however, early adoption on an Item-by-Item basis is permitted afterFebruary 10, 2021 . We adopted the amendments to two items resulting in the elimination of Item 301, Selected Financial Data, from Part II, Item 6 of this report and the omission of Regulation S[1]K Item 302(a), Supplementary Financial Information, from the notes to our consolidated financial statements in Part II, Item 8 of this report.
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