##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from _________ to __________.
 Commission File Number 1-584
 FERRO CORPORATION
  Ohio
(State of Corporation)
    
    34-0217820
(IRS Employer Identification No.)1000 Lakeside Avenue 
Cleveland, OH
(Address of Principal executive offices)
    
    44114
(Zip Code)
 216-641-8580
 þ o
 o o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



TABLE OF CONTENTS
 PART IItem 1 Financial Statements (Unaudited)
    
    Page   3Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    Page 26Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    Page 38Item 4 Controls and Procedures
    
    Page 40PART IIItem 1 Legal Proceedings
    
    Page 41Item 1A Risk Factors
    
    Page 41Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 41Item 3 Defaults Upon Senior Securities
    
    Page 41Item 4 Submission of Matters to a Vote of Security Holders
    
    Page 42Item 5 Other Information
    
    Page 42Item 6 Exhibits
    
    Page 42Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements (Unaudited)
 Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Statements of Operations
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands,except per share amounts)Net sales
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    757,086
    
    
    $
    1,222,814Cost of sales
    
    
    334,048
    
    
    
    513,002
    
    
    
    636,611
    
    
    
    994,575Gross profit
    
    
    65,229
    
    
    
    118,974
    
    
    
    120,475
    
    
    
    228,239Selling, general and administrative expenses
    
    
    62,480
    
    
    
    79,724
    
    
    
    130,608
    
    
    
    157,300Restructuring charges
    
    
    (309
    )
    
    
    9,031
    
    
    
    1,089
    
    
    
    13,238Other expense (income):Interest expense
    
    
    17,190
    
    
    
    12,768
    
    
    
    28,364
    
    
    
    26,323Interest earned
    
    
    (205
    )
    
    
    (142
    )
    
    
    (473
    )
    
    
    (271
    )Foreign currency losses (gains), net
    
    
    1,100
    
    
    
    650
    
    
    
    2,929
    
    
    
    (891
    )Miscellaneous expense, net
    
    
    321
    
    
    
    1,554
    
    
    
    854
    
    
    
    2,994(Loss)
income before income taxes
    
    
    (15,348
    )
    
    
    15,389
    
    
    
    (42,896
    )
    
    
    29,546Income tax (benefit) expense
    
    
    (4,276
    )
    
    
    7,188
    
    
    
    (12,095
    )
    
    
    13,414(Loss) income from continuing operations
    
    
    (11,072
    )
    
    
    8,201
    
    
    
    (30,801
    )
    
    
    16,132Income from discontinued operations, net of income taxes
    
    
    
    
    
    
    1,683
    
    
    
    
    
    
    
    3,327(Loss) gain
on disposal of discontinued operations, net of income taxes
    
    
    (116
    )
    
    
    9
    
    
    
    (358
    )
    
    
    (16
    )Net (loss) income
    
    
    (11,188
    )
    
    
    9,893
    
    
    
    (31,159
    )
    
    
    19,443Less: Net
income attributable to noncontrolling interests
    
    
    620
    
    
    
    528
    
    
    
    984
    
    
    
    938Net (loss) income attributable to Ferro Corporation
    
    
    (11,808
    )
    
    
    9,365
    
    
    
    (32,143
    )
    
    
    18,505Dividends on preferred stock
    
    
    (199
    )
    
    
    (223
    )
    
    
    (370
    )
    
    
    (450
    )Net
(loss) income attributable to Ferro Corporation
common shareholders
    
    $
    (12,007
    )
    
    $
    9,142
    
    
    $
    (32,513
    )
    
    $
    18,055Amounts attributable to Ferro Corporation:(Loss) income from continuing operations, net of tax
    
    $
    (11,692
    )
    
    $
    7,673
    
    
    $
    (31,785
    )
    
    $
    15,194(Loss) income from discontinued operations, net of tax
    
    
    (116
    )
    
    
    1,692
    
    
    
    (358
    )
    
    
    3,311$
    (11,808
    )
    
    $
    9,365
    
    
    $
    (32,143
    )
    
    $
    18,505Per common share dataBasic and diluted (loss) earnings attributable to
Ferro Corporation common shareholders:From continuing operations
    
    $
    (0.27
    )
    
    $
    0.17
    
    
    $
    (0.72
    )
    
    $
    0.34From discontinued operations
    
    
    0.00
    
    
    
    0.04
    
    
    
    (0.01
    )
    
    
    0.08$
    (0.27
    )
    
    $
    0.21
    
    
    $
    (0.73
    )
    
    $
    0.42Cash dividends declared
    
    $
    0.00
    
    
    $
    0.145
    
    
    $
    0.01
    
    
    $
    0.29
   3




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)ASSETSCurrent assetsCash and cash equivalents
    
    $
    17,492
    
    
    $
    10,191Accounts and trade notes receivable, net
    
    
    292,617
    
    
    
    296,423Inventories
    
    
    179,541
    
    
    
    256,411Deposits for precious metals
    
    
    80,426
    
    
    
    Deferred income taxes
    
    
    18,492
    
    
    
    19,167Other receivables
    
    
    47,509
    
    
    
    58,391Other current assets
    
    
    9,780
    
    
    
    8,306Total current assets
    
    
    645,857
    
    
    
    648,889Other assetsProperty, plant and equipment, net
    
    
    444,084
    
    
    
    456,549Goodwill
    
    
    230,628
    
    
    
    229,665Amortizable intangible assets, net
    
    
    11,265
    
    
    
    11,753Deferred income taxes
    
    
    132,241
    
    
    
    134,361Other non-current assets
    
    
    67,442
    
    
    
    62,900Total assets
    
    $
    1,531,517
    
    
    $
    1,544,117LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesLoans payable and current portion of long-term debt
    
    $
    37,979
    
    
    $
    8,883Accounts payable
    
    
    188,172
    
    
    
    232,113Income taxes
    
    
    9,310
    
    
    
    14,361Accrued payrolls
    
    
    17,448
    
    
    
    18,695Accrued expenses and other current liabilities
    
    
    65,813
    
    
    
    83,012Total current liabilities
    
    
    318,722
    
    
    
    357,064Other liabilitiesLong-term debt, less current portion
    
    
    612,768
    
    
    
    561,613Postretirement and pension liabilities
    
    
    226,431
    
    
    
    221,110Deferred income taxes
    
    
    7,524
    
    
    
    13,011Other non-current liabilities
    
    
    32,148
    
    
    
    34,047Total liabilities
    
    
    1,197,593
    
    
    
    1,186,845Series A convertible preferred stock (approximates redemption value)
    
    
    9,660
    
    
    
    11,548Shareholders equityFerro Corporation shareholders equity:Common stock
    
    
    52,323
    
    
    
    52,323Paid-in capital
    
    
    156,126
    
    
    
    178,420Retained earnings
    
    
    368,407
    
    
    
    401,186Accumulated other comprehensive loss
    
    
    (90,114
    )
    
    
    (98,436
    )Common shares in treasury, at cost
    
    
    (171,938
    )
    
    
    (197,524
    )Total Ferro Corporation shareholders equity
    
    
    314,804
    
    
    
    335,969Noncontrolling interests
    
    
    9,460
    
    
    
    9,755Total equity
    
    
    324,264
    
    
    
    345,724Total liabilities and shareholders equity
    
    $
    1,531,517
    
    
    $
    1,544,117
   4




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Statement of Shareholders Equity and Comprehensive Income (Loss)
 Ferro Corporation ShareholdersAccumulatedOtherCommon Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive
    
    
    Non-in Treasury
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Income
    
    
    controlling
    
    
    TotalShares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    (Loss) (a)
    
    
    Interests
    
    
    Equity(In thousands, except per share data)Balances at December 31, 2007
    
    
    8,753
    
    
    $
    (202,855
    )
    
    $
    52,323
    
    
    $
    166,391
    
    
    $
    468,190
    
    
    $
    (7,765
    )
    
    $
    9,896
    
    
    $
    486,180Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,505
    
    
    
    
    
    
    
    938
    
    
    
    19,443Other comprehensive income (loss),
net of tax:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,247
    
    
    
    284
    
    
    
    21,531Postretirement benefit
liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (414
    )
    
    
    
    
    
    
    (414
    )Raw material commodity swap
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    455
    
    
    
    
    
    
    
    455Interest rate swap adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    606
    
    
    
    
    
    
    
    606Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41,621Cash dividends:Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,586
    )
    
    
    
    
    
    
    
    
    
    
    (12,586
    )Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (450
    )
    
    
    
    
    
    
    
    
    
    
    (450
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Stock-based compensation
transactions
    
    
    (149
    )
    
    
    2,331
    
    
    
    
    
    
    
    (444
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,887Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,130
    )
    
    
    (1,130
    )Adjustment to initially apply FAS No. 158
as of January 1, 2008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (505
    )
    
    
    366
    
    
    
    
    
    
    
    (139
    )Balances at June 30, 2008
    
    
    8,604
    
    
    $
    (200,524
    )
    
    $
    52,323
    
    
    $
    165,968
    
    
    $
    473,154
    
    
    $
    14,495
    
    
    $
    9,988
    
    
    $
    515,404Balances at December 31, 2008
    
    
    8,432
    
    
    $
    (197,524
    )
    
    $
    52,323
    
    
    $
    178,420
    
    
    $
    401,186
    
    
    $
    (98,436
    )
    
    $
    9,755
    
    
    $
    345,724Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (32,143
    )
    
    
    
    
    
    
    984
    
    
    
    (31,159
    )Other comprehensive income (loss),
net of tax:Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,977
    
    
    
    (4
    )
    
    
    4,973Postretirement benefit
liability adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    
    
    
    
    661Raw material commodity swap
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    559
    
    
    
    
    
    
    
    559Interest rate swap adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,125
    
    
    
    
    
    
    
    2,125Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,841
    )Cash dividends:Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )
    
    
    
    
    
    
    
    
    
    
    (437
    )Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (199
    )
    
    
    
    
    
    
    
    
    
    
    (199
    )Income tax expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Stock-based compensation
transactions
    
    
    (1,059
    )
    
    
    25,586
    
    
    
    
    
    
    
    (22,295
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,291Distributions to noncontrolling interests
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,275
    )
    
    
    (1,275
    )Balances at June 30, 2009
    
    
    7,373
    
    
    $
    (171,938
    )
    
    $
    52,323
    
    
    $
    156,126
    
    
    $
    368,407
    
    
    $
    (90,114
    )
    
    $
    9,460
    
    
    $
    324,264
   5




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Statements of Cash Flows
 Six months endedJune 30,2009
    
    
    2008(Dollars in thousands)Cash flows from operating activitiesNet (loss) income
    
    $
    (31,159
    )
    
    $
    19,443Depreciation and amortization
    
    
    41,353
    
    
    
    36,575Precious metals deposits
    
    
    (80,426
    )
    
    
    Accounts and trade notes receivable
    
    
    3,743
    
    
    
    (19,184
    )Inventories
    
    
    75,512
    
    
    
    (41,832
    )Accounts payable
    
    
    (37,894
    )
    
    
    9,735Other changes in current assets and liabilities, net
    
    
    (15,781
    )
    
    
    15,672Other adjustments, net
    
    
    4,527
    
    
    
    (14,057
    )Net cash (used for) provided by continuing operations
    
    
    (40,125
    )
    
    
    6,352Net cash (used for) provided by discontinued operations
    
    
    (361
    )
    
    
    341Net cash (used for) provided by operating activities
    
    
    (40,486
    )
    
    
    6,693Cash flows from investing activitiesCapital expenditures for property, plant and equipment of continuing operations
    
    
    (22,969
    )
    
    
    (32,997
    )Capital expenditures for property, plant and equipment of discontinued
operations
    
    
    
    
    
    
    (1,575
    )Proceeds from sale of assets and businesses
    
    
    72
    
    
    
    646Net cash used for investing activities
    
    
    (22,897
    )
    
    
    (33,926
    )Cash flows from financing activitiesNet borrowings under short-term facilities
    
    
    28,945
    
    
    
    3,478Proceeds from revolving credit facility
    
    
    434,624
    
    
    
    430,347Principal payments on revolving credit facility
    
    
    (384,727
    )
    
    
    (380,074
    )Principal payments on term loan facility
    
    
    (1,525
    )
    
    
    (7,927
    )Debt issue costs
    
    
    (9,367
    )
    
    
    Cash dividends paid
    
    
    (636
    )
    
    
    (13,036
    )Other financing activities
    
    
    2,135
    
    
    
    (4,238
    )Net cash provided by financing activities
    
    
    69,449
    
    
    
    28,550Effect of exchange rate changes on cash and cash equivalents
    
    
    1,235
    
    
    
    48Increase in cash and cash equivalents
    
    
    7,301
    
    
    
    1,365Cash and cash equivalents at beginning of period
    
    
    10,191
    
    
    
    12,025Cash and cash equivalents at end of period
    
    $
    17,492
    
    
    $
    13,390Cash paid during the period for:Interest
    
    $
    25,792
    
    
    $
    26,493Income taxes
    
    $
    5,635
    
    
    $
    5,243
   6




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation
  2. Accounting Standards Adopted in the Six Months Ended June 30, 2009
 Business Combinations Accounting for Assets Acquired and Liabilities Assumed in a Business Combination
That Arise From Contingencies
 Accounting
for Defensive Intangible Assets Accounting for the Impairment or Disposal of Long-Lived Assets Goodwill and Other Intangible Assets
 Determination of the Useful Life of
Intangible Assets
 Noncontrolling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51
  7




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##### Table of Contents



Disclosures about Derivative
Instruments and Hedging Activities  an amendment of FASB Statement No. 133
 Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
 Determining Whether an Instrument (or an
Embedded Feature) Is Indexed to an Entitys Own Stock The Meaning of Indexed to a Companys Own Stock Accounting
for Derivative Instruments and Hedging Activitie
 Equity Method Investment Accounting
Considerations
 Employers Disclosures About
Postretirement Benefit Plan Assets
 Fair Value
Measurements Effective Date of FASB Statement No. 157
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities
  8




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##### Table of Contents



Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions That Are Not Orderly
 Interim Disclosures about
Fair Value of Financial Instruments
 Recognition and
Presentation of Other-Than-Temporary Impairments
 Subsequent Events
 3. Newly Issued Accounting Pronouncements
 Accounting for Transfers of Financial Assets
 an amendment of FASB Statement No. 140
 Amendments to FASB Interpretation No. 46(R)
 TM and the Hierarchy of Generally Accepted Accounting Principles  a
replacement of FASB Statement No. 162
  9




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##### Table of Contents



4. Inventories
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Raw materials
    
    $
    53,241
    
    
    $
    82,837Work in process
    
    
    36,692
    
    
    
    43,224Finished goods
    
    
    89,608
    
    
    
    130,350Total
    
    $
    179,541
    
    
    $
    256,411
  5. Property, Plant and Equipment
  6. Goodwill and Other Intangible Assets
  (Dollars in thousands)Balance at December 31, 2008
    
    $
    229,665Currency translation adjustments
    
    
    963Balance at June 30, 2009
    
    $
    230,628
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Patents
    
    $
    5,775
    
    
    $
    5,775Other
    
    
    14,489
    
    
    
    14,451Total gross amortizable intangible assets
    
    
    20,264
    
    
    
    20,226Accumulated amortization
    
    
    (8,999
    )
    
    
    (8,473
    )Amortizable intangible assets, net
    
    $
    11,265
    
    
    $
    11,753
   10




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##### Table of Contents



Goodwill and Other Intangible Assets
   7. Financing and Long-term Debt
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)Loans payable to banks
    
    $
    8,122
    
    
    $
    4,754Accounts receivable asset securitization program
    
    
    25,420
    
    
    
    Current portion of long-term debt
    
    
    4,437
    
    
    
    4,129Total
    
    $
    37,979
    
    
    $
    8,883
  June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands)$172.5 million 6.50% Convertible Senior Notes, net of unamortized discounts
    
    $
    155,133
    
    
    $
    153,451Revolving credit facility
    
    
    161,700
    
    
    
    111,803Term loan facility
    
    
    290,973
    
    
    
    292,498Capitalized lease obligations
    
    
    6,697
    
    
    
    6,447Other notes
    
    
    2,702
    
    
    
    1,543617,205
    
    
    
    565,742Less current portion
    
    
    (4,437
    )
    
    
    (4,129
    )Total
    
    $
    612,768
    
    
    $
    561,613
  11




---



##### Table of Contents



6.50% Convertible Senior Notes
    Revolving Credit and Term Loan Facilities
  
    
    Increase the interest rates and commitment fees payable thereunder pursuant to a grid
structure based on our leverage ratio,
 
    
    Increase the maximum permitted quarterly leverage ratio and decrease the minimum
permitted quarterly fixed charge coverage ratio,
 
    
    Add a minimum cumulative EBITDA requirement for each quarter in 2009,
 
    
    Restrict the Companys ability to engage in acquisitions and make investments,
 
    
    Limit the amount of cash and cash equivalent collateral the Company is permitted to
deliver to participants in our precious metals program to secure our obligations arising
under the precious metals consignment agreements,
 
    
    Require additional financial reporting by the Company to the lenders,
 
    
    Increase the amount of the annual excess cash flow required to be used to repay term
loans,
 
    
    Require application of the net proceeds of certain dispositions, but excluding the first
$20 million of such net proceeds, to be applied to repay debt outstanding under the
revolving credit facility and term loans and to permanently reduce availability under the
revolving loan facility on a dollar for dollar basis, provided that we are not required to
reduce the commitments under the revolving credit facility to below $150 million,
  12




---



##### Table of Contents




    
    Eliminate our ability to request an increase of $50 million in the revolving credit
facility,
 
    
    Add provisions governing the obligations of the Company and the lenders if one or more
lenders under the revolving credit facility fails to satisfy its funding obligations or
otherwise becomes a defaulting lender, and
 
    
    Restrict our ability to make payments with respect to our capital securities. The 2009
Amended Credit Facility effectively prohibits us from paying dividends on our preferred and
common stock beginning in the second quarter of 2009.
    Receivable Sales Programs
     13




---



##### Table of Contents



(Dollars in thousands)Trade accounts receivable sold to FFC
    
    $
    549,362Cash proceeds from FFC
    
    
    550,369Trade accounts receivable collected and remitted to FFC and the conduits
    
    
    529,991Servicing fees from FFC
    
    
    262
   2009
    
    
    2008(Dollars in thousands)Trade accounts receivable sold to financial institutions
    
    $
    55,714
    
    
    $
    134,069Cash proceeds from financial institutions
    
    
    65,855
    
    
    
    128,921Trade accounts receivable collected and remitted to financial institutions
for programs where we provide collection and administrative services
    
    
    19,267
    
    
    
    42,431
 8. Financial Instruments
  
    
    Cash and cash equivalents;
 
    
    Notes receivable;
 
    
    Deposits;
 
    
    Miscellaneous receivables; and
 
    
    Short-term loans payable to banks.
  14




---



##### Table of Contents



Long-term Debt
  June 30, 2009
    
    
    December 31, 2008Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(Dollars in thousands)$172.5 million 6.50% Convertible Senior Notes
    
    $
    155,133
    
    
    $
    85,574
    
    
    $
    153,451
    
    
    $
    84,725Revolving credit facility
    
    
    161,700
    
    
    
    119,249
    
    
    
    111,803
    
    
    
    88,757Term loan facility
    
    
    290,973
    
    
    
    195,791
    
    
    
    292,498
    
    
    
    225,731Other notes
    
    
    2,702
    
    
    
    1,707
    
    
    
    1,543
    
    
    
    975
  Derivative Instruments
  Interest rate swaps.
 Foreign currency forward contracts.
 Raw material commodity swaps.
 Precious metals forward contracts.
  15




---



##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008
    
    
    Balance Sheet Location(Dollars in thousands)Derivatives designated as
hedging instruments:Asset derivatives:Raw material commodity swaps
    
    $
    24
    
    
    $
    
    
    
    Other receivablesLiability derivatives:Interest rate swaps
    
    $
    (9,425
    )
    
    $
    (12,724
    )
    
    Other non-current liabilitiesRaw material commodity swaps
    
    
    
    
    
    
    (576
    )
    
    Accrued expenses and other current liabilitiesTotal fair value
    
    $
    (9,425
    )
    
    $
    (13,300
    )Derivatives not designated as
hedging instruments:Asset derivatives:Foreign
currency forward contracts
    
    $
    74
    
    
    $
    1,621
    
    
    Other receivablesForeign currency forward
contracts
    
    
    473
    
    
    
    230
    
    
    Accrued expenses and other current liabilitiesPrecious metals forward contracts
    
    
    4
    
    
    
    8
    
    
    Other receivablesTotal fair value
    
    $
    551
    
    
    $
    1,859Liability derivatives:Foreign
currency forward contracts
    
    $
    
    
    
    $
    (1,140
    )
    
    Other receivablesForeign currency forward
contracts
    
    
    (1,963
    )
    
    
    (807
    )
    
    Accrued expenses and other current liabilitiesTotal fair value
    
    $
    (1,963
    )
    
    $
    (1,947
    )
  16




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##### Table of Contents



June 30, 2009
    
    
    December 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    2008(Dollars in thousands)AssetsForeign currency forward
contracts
    
    $
    
    
    
    $
    74
    
    
    $
    
    
    
    $
    74
    
    
    
    480Raw material commodity
swaps
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    Precious metals forward
contracts
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    4
    
    
    
    8Total fair value
    
    $
    
    
    
    $
    102
    
    
    $
    
    
    
    $
    102
    
    
    $
    488LiabilitiesInterest rate swaps
    
    $
    
    
    
    $
    
    
    
    
    (9,425
    )
    
    $
    (9,425
    )
    
    $
    (12,724
    )Foreign currency forward
contracts
    
    
    
    
    
    
    (1,490
    )
    
    
    
    
    
    
    (1,490
    )
    
    
    (576
    )Raw material commodity
swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (576
    )Total fair value
    
    $
    
    
    
    $
    (1,490
    )
    
    $
    (9,425
    )
    
    $
    (10,915
    )
    
    $
    (13,876
    )
  (Dollars in thousands)Balance at March 31, 2009
    
    $
    Total gains included in other comprehensive income
    
    
    1,025Settlements
    
    
    1,644Transfers in and/or out of Level 3
    
    
    (12,094
    )Balance at June 30, 2009
    
    $
    (9,425
    )
  17




---



##### Table of Contents



Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    Reclassified from AOCI
    
    
    Location of Gain (Loss)Recognized in OCI
    
    
    into Income
    
    
    Reclassified from2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    AOCI into Income(Dollars in thousands)Derivatives in Cash Flow
Hedging Relationships:Interest rate swaps
    
    $
    119
    
    
    $
    (418
    )
    
    $
    (3,180
    )
    
    $
    (1,359
    )
    
    Interest expenseRaw material commodity swaps
    
    
    10
    
    
    
    (954
    )
    
    
    (1,114
    )
    
    
    (1,729
    )
    
    Cost of salesTotal
    
    $
    129
    
    
    $
    (1,372
    )
    
    $
    (4,294
    )
    
    $
    (3,088
    )
 Amount of Gain (Loss)Recognized in Income
    
    
    Location of Gain (Loss)2009
    
    
    2008
    
    
    in Income(Dollars in thousands)Derivatives Not Designated as
Hedging Instruments:Foreign currency forward contracts
    
    $
    (4,089
    )
    
    $
    (2,414
    )
    
    Foreign currency gains (losses)Precious metals forward contracts
    
    
    13
    
    
    
    1,592
    
    
    Cost of salesPrecious metals forward contracts
    
    
    (4
    )
    
    
    (743
    )
    
    Miscellaneous income (expense), netTotal
    
    $
    (4,080
    )
    
    $
    (1,565
    )
 9. Income Taxes
    10. Contingent Liabilities
   18




---



##### Table of Contents



11. Retirement Benefits
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    8
    
    
    $
    50
    
    
    $
    1,045
    
    
    $
    1,557
    
    
    $
    3
    
    
    $
    16Interest cost
    
    
    5,236
    
    
    
    5,177
    
    
    
    2,612
    
    
    
    3,040
    
    
    
    720
    
    
    
    731Expected return on plan assets
    
    
    (3,864
    )
    
    
    (5,663
    )
    
    
    (1,751
    )
    
    
    (2,203
    )
    
    
    
    
    
    
    Amortization
of prior service cost
    
    
    25
    
    
    
    25
    
    
    
    (101
    )
    
    
    25
    
    
    
    (437
    )
    
    
    (411
    )Net amortization and deferral
    
    
    3,845
    
    
    
    624
    
    
    
    260
    
    
    
    55
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    5,250
    
    
    $
    213
    
    
    $
    2,065
    
    
    $
    2,474
    
    
    $
    286
    
    
    $
    336
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    15
    
    
    $
    100
    
    
    $
    2,048
    
    
    $
    3,058
    
    
    $
    7
    
    
    $
    32Interest cost
    
    
    10,472
    
    
    
    10,354
    
    
    
    5,096
    
    
    
    5,979
    
    
    
    1,439
    
    
    
    1,462Expected return on plan assets
    
    
    (7,727
    )
    
    
    (11,326
    )
    
    
    (3,413
    )
    
    
    (4,336
    )
    
    
    
    
    
    
    Amortization of prior service
cost
    
    
    49
    
    
    
    50
    
    
    
    (198
    )
    
    
    49
    
    
    
    (874
    )
    
    
    (822
    )Net amortization and deferral
    
    
    7,690
    
    
    
    1,248
    
    
    
    506
    
    
    
    112
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    10,499
    
    
    $
    426
    
    
    $
    4,039
    
    
    $
    4,862
    
    
    $
    572
    
    
    $
    672
  19




---



##### Table of Contents



12. Stock-Based Compensation
  2009
    
    
    2008(Dollars in thousands)Stock options
    
    $
    1,023
    
    
    $
    1,087Performance shares
    
    
    35
    
    
    
    (178
    )Deferred stock units
    
    
    247
    
    
    
    267Restricted shares
    
    
    288
    
    
    
    172Total
    
    $
    1,593
    
    
    $
    1,348
  AggregateWeighted-
    
    
    Grant Date
    
    
    RemainingNumber of
    
    
    Average Fair
    
    
    Fair Value of
    
    
    Service orShares or
    
    
    Value per
    
    
    Shares or
    
    
    PerformanceUnits Granted
    
    
    Share or Unit
    
    
    Units Granted
    
    
    Period(Dollars inthousands)
    
    
    (In years)Stock options
    
    
    676,700
    
    
    $
    0.49
    
    
    $
    335
    
    
    
    3.7Deferred stock units
    
    
    34,200
    
    
    
    1.33
    
    
    
    45
    
    
    
    0.6Restricted shares
    
    
    142,100
    
    
    
    1.37
    
    
    
    194
    
    
    
    2.7
  Common Sharesin Treasury
    
    
    Paid-inShares
    
    
    Amount
    
    
    Capital(In thousands)Stock options
    
    
    
    
    
    $
    
    
    
    $
    1,023Performance shares, net
    
    
    167
    
    
    
    (499
    )
    
    
    344Deferred stock units
    
    
    (34
    )
    
    
    835
    
    
    
    (588
    )Directors deferred compensation
    
    
    
    
    
    
    (684
    )
    
    
    684Preferred stock conversions
    
    
    (1,057
    )
    
    
    23,063
    
    
    
    (21,175
    )Restricted shares
    
    
    (135
    )
    
    
    2,871
    
    
    
    (2,583
    )Total
    
    
    (1,059
    )
    
    $
    25,586
    
    
    $
    (22,295
    )
  20




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##### Table of Contents



13. Restructuring and Cost Reduction Programs
    Restructuring Program in Rotterdam, Netherlands
  Restructuring Program in Limoges, France
    Restructuring Program in Nules, Spain
   21




---



##### Table of Contents



Restructuring Program in Penn Yan, New York
  Other Restructuring Programs
   EmployeeTermination
    
    
    OtherBenefits
    
    
    Costs
    
    
    Total(Dollars in thousands)Balance at December 31, 2008
    
    $
    1,206
    
    
    $
    5,102
    
    
    $
    6,308Restructuring charges
    
    
    3,657
    
    
    
    (2,568
    )
    
    
    1,089Cash payments
    
    
    (4,473
    )
    
    
    (1,172
    )
    
    
    (5,645
    )Currency translation adjustment
    
    
    (73
    )
    
    
    163
    
    
    
    90Non-cash items
    
    
    5
    
    
    
    
    
    
    
    5Balance at June 30, 2009
    
    $
    322
    
    
    $
    1,525
    
    
    $
    1,847
  14. Discontinued Operations
  Three
    
    
    Sixmonths endedJune 30, 2008(Dollars in thousands)Net sales
    
    $
    18,420
    
    
    $
    34,838Cost of sales
    
    
    14,010
    
    
    
    26,374Gross profit
    
    
    4,410
    
    
    
    8,464Selling, general and administrative expenses
    
    
    1,467
    
    
    
    2,548Other expense:Interest expense
    
    
    446
    
    
    
    920Income from discontinued operations before income taxes
    
    
    2,497
    
    
    
    4,996Income tax expense
    
    
    814
    
    
    
    1,669Income from discontinued operations, net of income taxes
    
    $
    1,683
    
    
    $
    3,327
  22




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Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Loss (income) on disposal of discontinued operations
before income tax benefit (expense)
    
    $
    189
    
    
    $
    (15
    )
    
    $
    582
    
    
    $
    26Income tax benefit (expense)
    
    
    73
    
    
    
    (6
    )
    
    
    224
    
    
    
    10Loss (income) on disposal of discontinued operations,
net of income tax benefit (expense)
    
    $
    116
    
    
    $
    (9
    )
    
    $
    358
    
    
    $
    16
  15. Per Share Amounts from Continuing Operations
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(In thousands,
except per
share amounts)Basic
(loss) earnings per share computation:Net
(loss) income attributable to Ferro Corporation
common shareholders
    
    $
    (12,007
    )
    
    $
    9,142
    
    
    $
    (32,513
    )
    
    $
    18,055Adjustment for loss (income) from discontinued
operations
    
    
    116
    
    
    
    (1,692
    )
    
    
    358
    
    
    
    (3,311
    )$
    (11,891
    )
    
    $
    7,450
    
    
    $
    (32,155
    )
    
    $
    14,744Weighted-average common shares outstanding
    
    
    44,701
    
    
    
    43,622
    
    
    
    44,533
    
    
    
    43,639Basic (loss)
earnings per share from continuing operations attributable to Ferro
Corporation common shareholders
    
    $
    (0.27
    )
    
    $
    0.17
    
    
    $
    (0.72
    )
    
    $
    0.34Diluted (loss) earnings per share computation:Net (loss) income attributable to Ferro Corporation
common shareholders
    
    $
    (12,007
    )
    
    $
    9,142
    
    
    $
    (32,513
    )
    
    $
    18,055Adjustment for loss (income) from discontinued
operations
    
    
    116
    
    
    
    (1,692
    )
    
    
    358
    
    
    
    (3,311
    )Plus: Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (11,891
    )
    
    $
    7,450
    
    
    $
    (32,155
    )
    
    $
    14,744Weighted-average common shares outstanding
    
    
    44,701
    
    
    
    43,622
    
    
    
    44,533
    
    
    
    43,639Assumed exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumed satisfaction of deferred stock unit conditions
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    7Assumed conversion of convertible notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumed conversion of convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average diluted shares outstanding
    
    
    44,701
    
    
    
    43,633
    
    
    
    44,533
    
    
    
    43,646Diluted (loss) earnings per share from continuing operations attributable to Ferro
Corporation common shareholders
    
    $
    (0.27
    )
    
    $
    0.17
    
    
    $
    (0.72
    )
    
    $
    0.34
  23




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##### Table of Contents



16. Comprehensive Income (Loss)
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Net (loss) income
    
    $
    (11,188
    )
    
    $
    9,893
    
    
    $
    (31,159
    )
    
    $
    19,443Other comprehensive income (loss), net of tax:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Foreign currency translation adjustments
    
    
    22,637
    
    
    
    25
    
    
    
    4,973
    
    
    
    21,531Postretirement benefit liability adjustments
    
    
    (1,156
    )
    
    
    (38
    )
    
    
    661
    
    
    
    (414
    )Raw material commodity swap adjustments
    
    
    135
    
    
    
    (393
    )
    
    
    559
    
    
    
    455Interest rate swap adjustments
    
    
    1,719
    
    
    
    3,209
    
    
    
    2,125
    
    
    
    606Comprehensive income
    
    
    12,147
    
    
    
    12,696
    
    
    
    (22,841
    )
    
    
    41,621Less: Comprehensive income attributable to
noncontrolling interests
    
    
    592
    
    
    
    836
    
    
    
    980
    
    
    
    1,222Comprehensive income (loss) attributable to
Ferro Corporation
    
    $
    11,555
    
    
    $
    11,860
    
    
    $
    (23,821
    )
    
    $
    40,399
 17. Reporting for Segments
    Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Performance Coatings
    
    $
    117,333
    
    
    $
    178,504
    
    
    $
    225,921
    
    
    $
    339,296Electronic Materials
    
    
    100,570
    
    
    
    156,202
    
    
    
    183,059
    
    
    
    297,195Color and Glass Performance Materials
    
    
    76,350
    
    
    
    130,230
    
    
    
    143,766
    
    
    
    259,070Polymer Additives
    
    
    62,998
    
    
    
    98,715
    
    
    
    122,445
    
    
    
    191,026Specialty Plastics
    
    
    36,934
    
    
    
    63,609
    
    
    
    71,793
    
    
    
    125,402Pharmaceuticals
    
    
    5,092
    
    
    
    4,716
    
    
    
    10,102
    
    
    
    10,825Total net sales
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    757,086
    
    
    $
    1,222,814
  24




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##### Table of Contents



Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Performance Coatings
    
    $
    6,225
    
    
    $
    12,785
    
    
    $
    5,626
    
    
    $
    22,265Electronic Materials
    
    
    6,387
    
    
    
    17,683
    
    
    
    8,804
    
    
    
    26,432Color and Glass Performance Materials
    
    
    2,223
    
    
    
    15,547
    
    
    
    (232
    )
    
    
    30,983Polymer Additives
    
    
    1,588
    
    
    
    4,599
    
    
    
    3,477
    
    
    
    7,318Specialty Plastics
    
    
    2,709
    
    
    
    3,237
    
    
    
    4,171
    
    
    
    4,724Pharmaceuticals
    
    
    214
    
    
    
    (1,679
    )
    
    
    327
    
    
    
    (457
    )Total segment income
    
    
    19,346
    
    
    
    52,172
    
    
    
    22,173
    
    
    
    91,265Unallocated corporate expenses
    
    
    16,597
    
    
    
    12,922
    
    
    
    32,306
    
    
    
    20,326Restructuring charges
    
    
    (309
    )
    
    
    9,031
    
    
    
    1,089
    
    
    
    13,238Interest expense
    
    
    17,190
    
    
    
    12,768
    
    
    
    28,364
    
    
    
    26,323Other expense, net
    
    
    1,216
    
    
    
    2,062
    
    
    
    3,310
    
    
    
    1,832Income before income taxes from
continuing operations
    
    $
    (15,348
    )
    
    $
    15,389
    
    
    $
    (42,896
    )
    
    $
    29,546
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)United States
    
    $
    180,963
    
    
    $
    265,362
    
    
    $
    351,017
    
    
    $
    506,495Spain
    
    
    62,905
    
    
    
    108,295
    
    
    
    122,216
    
    
    
    199,894Other international
    
    
    155,409
    
    
    
    258,319
    
    
    
    283,853
    
    
    
    516,425Total net sales
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    757,086
    
    
    $
    1,222,814
  25




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         Outlook
     26




---



##### Table of Contents



Results of Operations
 Comparison of the three months ended June 30, 2009 and 2008
 Three months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands,except per share amounts)Net sales
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    (232,699
    )
    
    
    (36.8
    %)Cost of sales
    
    
    334,048
    
    
    
    513,002
    
    
    
    (178,954
    )
    
    
    (34.9
    %)Gross profit
    
    
    65,229
    
    
    
    118,974
    
    
    
    (53,745
    )
    
    
    (45.2
    %)Gross profit percentage
    
    
    16.3
    %
    
    
    18.8
    %Selling, general and administrative expenses
    
    
    62,480
    
    
    
    79,724
    
    
    
    (17,244
    )
    
    
    (21.6
    %)Restructuring charges
    
    
    (309
    )
    
    
    9,031
    
    
    
    (9,340
    )
    
    
    (103.4
    %)Other expense (income):Interest expense
    
    
    17,190
    
    
    
    12,768
    
    
    
    4,422
    
    
    
    34.6
    %Interest earned
    
    
    (205
    )
    
    
    (142
    )
    
    
    (63
    )
    
    
    44.4
    %Foreign currency losses, net
    
    
    1,100
    
    
    
    650
    
    
    
    450
    
    
    
    69.2
    %Miscellaneous expense, net
    
    
    321
    
    
    
    1,554
    
    
    
    (1,233
    )
    
    
    (79.3
    %)(Loss)
income before income taxes
    
    
    (15,348
    )
    
    
    15,389
    
    
    
    (30,737
    )
    
    
    (199.7
    %)Income tax (benefit) expense
    
    
    (4,276
    )
    
    
    7,188
    
    
    
    (11,464
    )
    
    
    (159.5
    %)(Loss) income from continuing operations
    
    
    (11,072
    )
    
    
    8,201
    
    
    
    (19,273
    )
    
    
    (235.0
    %)(Loss) income from discontinued operations,
net of income tax
    
    
    (116
    )
    
    
    1,692
    
    
    
    (1,808
    )
    
    
    (106.9
    %)Net (loss) income
    
    $
    (11,188
    )
    
    $
    9,893
    
    
    $
    (21,081
    )
    
    
    (213.1
    %)Diluted (loss) earnings per share
    
    $
    (0.27
    )
    
    $
    0.21
    
    
    $
    (0.48
    )
    
    
    (228.6
    %)
     27




---



##### Table of Contents



Three months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesPerformance Coatings
    
    $
    117,333
    
    
    $
    178,504
    
    
    $
    (61,171
    )
    
    
    (34.3
    %)Electronic Materials
    
    
    100,570
    
    
    
    156,202
    
    
    
    (55,632
    )
    
    
    (35.6
    %)Color & Glass Performance Materials
    
    
    76,350
    
    
    
    130,230
    
    
    
    (53,880
    )
    
    
    (41.4
    %)Polymer Additives
    
    
    62,998
    
    
    
    98,715
    
    
    
    (35,717
    )
    
    
    (36.2
    %)Specialty Plastics
    
    
    36,934
    
    
    
    63,609
    
    
    
    (26,675
    )
    
    
    (41.9
    %)Pharmaceuticals
    
    
    5,092
    
    
    
    4,716
    
    
    
    376
    
    
    
    8.0
    %Total segment sales
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    (232,699
    )
    
    
    (36.8
    %)Segment Operating Income (Loss)Performance Coatings
    
    $
    6,225
    
    
    $
    12,785
    
    
    $
    (6,560
    )
    
    
    (51.3
    %)Electronic Materials
    
    
    6,387
    
    
    
    17,683
    
    
    
    (11,296
    )
    
    
    (63.9
    %)Color & Glass Performance Materials
    
    
    2,223
    
    
    
    15,547
    
    
    
    (13,324
    )
    
    
    (85.7
    %)Polymer Additives
    
    
    1,588
    
    
    
    4,599
    
    
    
    (3,011
    )
    
    
    (65.5
    %)Specialty Plastics
    
    
    2,709
    
    
    
    3,237
    
    
    
    (528
    )
    
    
    (16.3
    %)Pharmaceuticals
    
    
    214
    
    
    
    (1,679
    )
    
    
    1,893
    
    
    
    (112.7
    %)Total segment operating income
    
    $
    19,346
    
    
    $
    52,172
    
    
    $
    (32,826
    )
    
    
    (62.9
    %)
 Performance Coatings Segment Results.
  28




---



##### Table of Contents



Electronic Materials Segment Results.
 Color and Glass Performance Materials Segment Results.
 Polymer Additives Segment Results.
 Specialty Plastics Segment Results.
 Pharmaceuticals Segment Results.
 Three months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    180,963
    
    
    $
    265,362
    
    
    $
    (84,399
    )
    
    
    (31.8
    %)International
    
    
    218,314
    
    
    
    366,614
    
    
    
    (148,300
    )
    
    
    (40.5
    %)Total
    
    $
    399,277
    
    
    $
    631,976
    
    
    $
    (232,699
    )
    
    
    (36.8
    %)
   29




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##### Table of Contents



Comparison of the six months ended June 30, 2009 and 2008
 Six months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands,except per share amounts)Net sales
    
    $
    757,086
    
    
    $
    1,222,814
    
    
    $
    (465,728
    )
    
    
    (38.1
    %)Cost of sales
    
    
    636,611
    
    
    
    994,575
    
    
    
    (357,964
    )
    
    
    (36.0
    %)Gross profit
    
    
    120,475
    
    
    
    228,239
    
    
    
    (107,764
    )
    
    
    (47.2
    %)Gross profit percentage
    
    
    15.9
    %
    
    
    18.7
    %Selling, general and administrative expenses
    
    
    130,608
    
    
    
    157,300
    
    
    
    (26,692
    )
    
    
    (17.0
    %)Restructuring charges
    
    
    1,089
    
    
    
    13,238
    
    
    
    (12,149
    )
    
    
    (91.8
    %)Other expense (income):Interest expense
    
    
    28,364
    
    
    
    26,323
    
    
    
    2,041
    
    
    
    7.8
    %Interest earned
    
    
    (473
    )
    
    
    (271
    )
    
    
    (202
    )
    
    
    74.5
    %Foreign currency losses (gains), net
    
    
    2,929
    
    
    
    (891
    )
    
    
    3,820
    
    
    
    (428.7
    %)Miscellaneous expense, net
    
    
    854
    
    
    
    2,994
    
    
    
    (2,140
    )
    
    
    (71.5
    %)(Loss)
income before income taxes
    
    
    (42,896
    )
    
    
    29,546
    
    
    
    (72,442
    )
    
    
    (245.2
    %)Income tax (benefit) expense
    
    
    (12,095
    )
    
    
    13,414
    
    
    
    (25,509
    )
    
    
    (190.2
    %)(Loss) income from continuing operations
    
    
    (30,801
    )
    
    
    16,132
    
    
    
    (46,933
    )
    
    
    (290.9
    %)(Loss) income from discontinued operations,
net of income tax
    
    
    (358
    )
    
    
    3,311
    
    
    
    (3,669
    )
    
    
    (110.8
    %)Net (loss) income
    
    $
    (31,159
    )
    
    $
    19,443
    
    
    $
    (50,602
    )
    
    
    (260.3
    %)Diluted (loss) earnings per share
    
    $
    (0.73
    )
    
    $
    0.42
    
    
    $
    (1.15
    )
    
    
    (273.8
    %)
     30




---



##### Table of Contents



Six months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesPerformance Coatings
    
    $
    225,921
    
    
    $
    339,296
    
    
    $
    (113,375
    )
    
    
    (33.4
    %)Electronic Materials
    
    
    183,059
    
    
    
    297,195
    
    
    
    (114,136
    )
    
    
    (38.4
    %)Color & Glass Performance Materials
    
    
    143,766
    
    
    
    259,070
    
    
    
    (115,304
    )
    
    
    (44.5
    %)Polymer Additives
    
    
    122,445
    
    
    
    191,026
    
    
    
    (68,581
    )
    
    
    (35.9
    %)Specialty Plastics
    
    
    71,793
    
    
    
    125,402
    
    
    
    (53,609
    )
    
    
    (42.7
    %)Pharmaceuticals
    
    
    10,102
    
    
    
    10,825
    
    
    
    (723
    )
    
    
    (6.7
    %)Total segment sales
    
    $
    757,086
    
    
    $
    1,222,814
    
    
    $
    (465,728
    )
    
    
    (38.1
    %)Segment Operating Income (Loss)Performance Coatings
    
    $
    5,626
    
    
    $
    22,265
    
    
    $
    (16,639
    )
    
    
    (74.7
    %)Electronic Materials
    
    
    8,804
    
    
    
    26,432
    
    
    
    (17,628
    )
    
    
    (66.7
    %)Color & Glass Performance Materials
    
    
    (232
    )
    
    
    30,983
    
    
    
    (31,215
    )
    
    
    (100.7
    %)Polymer Additives
    
    
    3,477
    
    
    
    7,318
    
    
    
    (3,841
    )
    
    
    (52.5
    %)Specialty Plastics
    
    
    4,171
    
    
    
    4,724
    
    
    
    (553
    )
    
    
    (11.7
    %)Pharmaceuticals
    
    
    327
    
    
    
    (457
    )
    
    
    784
    
    
    
    (171.6
    %)Total segment operating income
    
    $
    22,173
    
    
    $
    91,265
    
    
    $
    (69,092
    )
    
    
    (75.7
    %)
 Performance Coatings Segment Results.
  31




---



##### Table of Contents



Electronic Materials Segment Results.
 Color and Glass Performance Materials Segment Results.
 Polymer Additives Segment Results.
 Specialty Plastics Segment Results.
 Pharmaceuticals Segment Results.
 Six months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    351,017
    
    
    $
    506,495
    
    
    $
    (155,478
    )
    
    
    (30.7
    %)International
    
    
    406,069
    
    
    
    716,319
    
    
    
    (310,250
    )
    
    
    (43.3
    %)Total
    
    $
    757,086
    
    
    $
    1,222,814
    
    
    $
    (465,728
    )
    
    
    (38.1
    %)
   32




---



##### Table of Contents



Summary of Cash Flows for the six months ended June 30, 2009 and 2008
 Six months endedJune 30,2009
    
    
    2008
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Net cash (used for) provided by
operating activities
    
    $
    (40,486
    )
    
    $
    6,693
    
    
    $
    (47,179
    )
    
    
    (704.9
    %)Net cash used for investing activities
    
    
    (22,897
    )
    
    
    (33,926
    )
    
    
    11,029
    
    
    
    (32.5
    %)Net cash provided by (used for)
financing activities
    
    
    69,449
    
    
    
    28,550
    
    
    
    40,899
    
    
    
    143.3
    %Effect of exchange rate changes on cash
and cash equivalents
    
    
    1,235
    
    
    
    48
    
    
    
    1,187
    
    
    
    2,472.9
    %Increase (decrease) in cash and cash equivalents
    
    $
    7,301
    
    
    $
    1,365
    
    
    $
    5,936
    
    
    
    434.9
    %
    Capital Resources and Liquidity
 6.50% Convertible Senior Notes
  Revolving Credit and Term Loan Facility
  
    
    Increase the interest rates and commitment fees payable thereunder pursuant to a grid
structure based on our leverage ratio,
 
    
    Increase the maximum permitted quarterly leverage ratio and decrease the minimum
permitted quarterly fixed charge coverage ratio,
 33




---



##### Table of Contents




    
    Add a minimum cumulative EBITDA requirement for each quarter in 2009,
 
    
    Restrict the Companys ability to engage in acquisitions and make investments,
 
    
    Limit the amount of cash and cash equivalent collateral the Company is permitted to
deliver to participants in our precious metals program to secure our obligations arising
under the precious metals consignment agreements,
 
    
    Require additional financial reporting by the Company to the lenders,
 
    
    Increase the amount of the annual excess cash flow required to be used to repay term
loans,
 
    
    Require application of the net proceeds of certain dispositions, but excluding the first
$20 million of such net proceeds, to be applied to repay debt outstanding under the
revolving credit facility and term loans and to permanently reduce availability under the
revolving loan facility on a dollar for dollar basis, provided that we are not required to
reduce the commitments under the revolving credit facility to below $150 million,
 
    
    Eliminate our ability to request an increase of $50 million in the revolving credit
facility,
 
    
    Add provisions governing the obligations of the Company and the lenders if one or more
lenders under the revolving credit facility fails to satisfy its funding obligations or
otherwise becomes a defaulting lender, and
 
    
    Restrict our ability to make payments with respect to our capital securities. The 2009
Amended Credit Facility effectively prohibits us from paying dividends on our preferred and
common stock beginning in the second quarter of 2009.
     34




---



##### Table of Contents



Domestic Receivable Sales Program
    Off Balance Sheet Arrangements
 International Receivable Sales Programs.
 Consignment and Customer Arrangements for Precious Metals.
    35




---



##### Table of Contents



Bank Guarantees and Standby Letters of Credit.
 Other Financing Arrangements
  Liquidity Requirement
    Critical Accounting Policies and Their Application
  Newly Issued Accounting Pronouncements
 Accounting for Transfers of Financial Assets
 an amendment of FASB Statement No. 140
 Amendments to FASB Interpretation No. 46(R)
  36




---



##### Table of Contents



TM and the Hierarchy of Generally Accepted Accounting Principles  a
replacement of FASB Statement No. 162
 Risk Factors
   37




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
      38




---



##### Table of Contents



June 30,
    
    
    December 31,2009
    
    
    2008(Dollars in thousands,except as noted)Variable-rate debt and utilization of accounts receivable sales programs:Change in annual interest expense from 1% change in interest rates
    
    $
    3,525
    
    
    $
    2,742Fixed-rate debt:Carrying amount
    
    $
    157,836
    
    
    $
    154,995Fair value
    
    $
    87,281
    
    
    $
    85,700Change in fair value from 1% increase in interest rate
    
    $
    (2,582
    )
    
    $
    (2,877
    )Change in fair value from 1% decrease in interest rate
    
    $
    2,683
    
    
    $
    3,003Interest rate swaps:Notional amount
    
    $
    150,000
    
    
    $
    150,000Carrying amount and fair value
    
    $
    (9,425
    )
    
    $
    (12,724
    )Change in fair value from 1% increase in interest rate
    
    $
    2,379
    
    
    $
    3,322Change in fair value from 1% decrease in interest rate
    
    $
    (2,419
    )
    
    $
    (3,401
    )Foreign currency forward contracts:Notional amount
    
    $
    186,183
    
    
    $
    156,840Carrying amount and fair value
    
    $
    (1,416
    )
    
    $
    (96
    )Change in fair value from 10% appreciation of U.S. dollar
    
    $
    4,115
    
    
    $
    2,523Change in fair value from 10% depreciation of U.S. dollar
    
    $
    (5,029
    )
    
    $
    (3,084
    )Raw material commodity swaps:Notional amount (in metric tons of base metals)
    
    
    150
    
    
    
    330Carrying amount and fair value
    
    $
    24
    
    
    $
    (576
    )Change in fair value from 10% change in forward prices
    
    $
    23
    
    
    $
    71Precious metals forward contracts:Notional amount (in troy ounces)
    
    
    32
    
    
    
    129Carrying amount and fair value
    
    $
    4
    
    
    $
    8Change in fair value from 10% change in forward prices
    
    $
    3
    
    
    $
    11
  39




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   40




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
    
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
   41




---



##### Table of Contents



Item 4.
    
    Submission of Matters to a Vote of Security Holders
  For
    
    
    Withheld AuthorityJennie S. Hwang, Ph.D.
    
    
    35,058,752
    
    
    
    3,727,872James F. Kirsch
    
    
    34,773,576
    
    
    
    4,013,048William J. Sharp
    
    
    26,222,578
    
    
    
    12,564,046
   
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
   42




---



##### Table of Contents



SIGNATURES
  FERRO CORPORATION
(Registrant)Date: August 4, 2009/s/ James F. KirschJames F. KirschChairman, President and Chief Executive Officer
(Principal Executive Officer)Date: August 4, 2009/s/ Sallie B. BaileySallie B. BaileyVice President and Chief Financial Officer
(Principal Financial Officer)  43




---



##### Table of Contents



EXHIBIT INDEX
   3
    
    Articles of incorporation and by-laws
 3.1
    
    Eleventh Amended Articles of Incorporation. (Reference is made to Exhibit 4.1 to Ferro
Corporations Registration Statement on Form S-3, filed March 5, 2008, which Exhibit is
incorporated here by reference.)
 3.2
    
    Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro
Corporation filed with the Ohio Secretary of State on December 29, 1994. (Reference is made to
Exhibit 4.2 to Ferro Corporations Registration Statement on Form S-3, filed March 5, 2008,
which Exhibit is incorporated here by reference.)
 3.3
    
    Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro
Corporation filed with the Ohio Secretary of State on June 23, 1998. (Reference is made to
Exhibit 4.3 to Ferro Corporations Registration Statement on Form S-3, filed March 5, 2008,
which Exhibit is incorporated here by reference.)
 3.4
    
    Ferro Corporation Code of Regulations. (Reference is made to Exhibit 4.4 to Ferro
Corporations Registration Statement on Form S-3, filed March 5, 2008, which Exhibit is
incorporated here by reference.)
 4
    
    Instruments defining rights of security holders, including indentures
 4.1
    
    Senior Indenture, dated as of March 5, 2008, by and between Ferro Corporation and U.S. Bank
National Association. (Reference is made to Exhibit 4.5 to Ferro Corporations Registration
Statement on Form S-3, filed March 5, 2008, which Exhibit is incorporated here by reference.)
 4.2
    
    First Supplemental Indenture, dated August 19, 2008, by and between Ferro Corporation and
U.S. Bank National Association (with Form of 6.50% Convertible Senior Note due 2013).
(Reference is made to Exhibit 4.2 to Ferro Corporations Current Report on Form 8-K, filed
August 19, 2008, which Exhibit is incorporated here by reference.)The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a
copy of any instrument authorizing long-term debt that does not authorize debt in excess of
10% of the total assets of the Company and its subsidiaries on a consolidated basis.
 10
    
    Material Contracts.
 10.1
    
    Purchase Agreement, dated as of June 2, 2009, among Ferro Corporation, Ferro Color & Glass
Corporation and Ferro Pfanstiehl Laboratories, Inc. (Reference is made to Exhibit 10.1 to
Ferro Corporations Current Report on Form 8-K, filed June 3, 2009, which Exhibit is
incorporated here by reference.)
 10.2
    
    Purchase and Contribution Agreement, dated as of June 2, 2009, between Ferro Corporation and
Ferro Finance Corporation. (Reference is made to Exhibit 10.2 to Ferro Corporations Current
Report on Form 8-K, filed June 3, 2009, which Exhibit is incorporated here by reference.)
 10.3
    
    Receivables Purchase Agreement, dated as of June 2, 2009, among Ferro Finance Corporation,
Ferro Corporation, as collection agent, certain purchasers from time to time party thereto and
Wachovia Bank, National Association, as agent. (Reference is made to Exhibit 10.3 to Ferro
Corporations Current Report on Form 8-K, filed June 3, 2009, which Exhibit is incorporated
here by reference.)
 31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
 31.2
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
 32.1
    
    Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.
 32.2
    
    Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.
  44