##### 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 March 31, 2011
 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
    
    34-0217820(State of Corporation)
    
    (IRS Employer Identification No.)1000 Lakeside AvenueCleveland, OH
    
    44114(Address of Principal executive offices)
    
    (Zip Code)
 216-641-8580
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    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
 PagePART IItem 1. Financial Statements (Unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    24Item 4. Controls and Procedures
    
    
    25PART IIItem 1. Legal Proceedings
    
    
    26Item 1A. Risk Factors
    
    
    26Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. (Removed and Reserved)
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits
    
    
    26Exhibit 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 Subsidiaries
Condensed Consolidated Statements of Operations
 Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands,except per share amounts)Net sales
    
    $
    573,009
    
    
    $
    492,865Cost of sales
    
    
    452,683
    
    
    
    385,931Gross profit
    
    
    120,326
    
    
    
    106,934Selling, general and administrative expenses
    
    
    76,818
    
    
    
    70,948Restructuring and impairment charges
    
    
    1,630
    
    
    
    13,332Other expense (income):Interest expense
    
    
    6,826
    
    
    
    12,911Interest earned
    
    
    (74
    )
    
    
    (331
    )Foreign currency losses, net
    
    
    1,310
    
    
    
    3,548Miscellaneous expense (income), net
    
    
    518
    
    
    
    (1,251
    )Income before income taxes
    
    
    33,298
    
    
    
    7,777Income tax expense
    
    
    10,107
    
    
    
    8,589Net income (loss)
    
    
    23,191
    
    
    
    (812
    )Less: Net income (loss) attributable to noncontrolling interests
    
    
    301
    
    
    
    (744
    )Net income (loss) attributable to Ferro Corporation
    
    
    22,890
    
    
    
    (68
    )Dividends on preferred stock
    
    
    (165
    )
    
    
    (165
    )Net income (loss) attributable to Ferro Corporation common shareholders
    
    $
    22,725
    
    
    $
    (233
    )Earnings per share attributable to Ferro Corporation common shareholders:Basic earnings per share
    
    $
    0.26
    
    
    $
    Diluted earnings per share
    
    
    0.26
    
    
    
    Dividends per share of common stock
    
    
    
    
    
    
    
   3




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##### Table of Contents



Ferro Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)ASSETSCurrent assetsCash and cash equivalents
    
    $
    29,593
    
    
    $
    29,035Accounts receivable, net
    
    
    359,851
    
    
    
    302,448Inventories
    
    
    249,300
    
    
    
    202,067Deposits for precious metals
    
    
    
    
    
    
    28,086Deferred income taxes
    
    
    25,299
    
    
    
    24,924Other receivables
    
    
    32,258
    
    
    
    27,762Other current assets
    
    
    10,495
    
    
    
    7,432Total current assets
    
    
    706,796
    
    
    
    621,754Other assetsProperty, plant and equipment, net
    
    
    389,709
    
    
    
    391,496Goodwill
    
    
    219,852
    
    
    
    219,716Amortizable intangible assets, net
    
    
    11,795
    
    
    
    11,869Deferred income taxes
    
    
    125,559
    
    
    
    121,640Other non-current assets
    
    
    83,988
    
    
    
    67,880Total assets
    
    $
    1,537,699
    
    
    $
    1,434,355LIABILITIES AND EQUITYCurrent liabilitiesLoans payable and current portion of long-term debt
    
    $
    56,581
    
    
    $
    3,580Accounts payable
    
    
    242,425
    
    
    
    207,770Income taxes
    
    
    15,724
    
    
    
    8,823Accrued payrolls
    
    
    35,483
    
    
    
    49,590Accrued expenses and other current liabilities
    
    
    77,641
    
    
    
    75,912Total current liabilities
    
    
    427,854
    
    
    
    345,675Other liabilitiesLong-term debt, less current portion
    
    
    291,109
    
    
    
    290,971Postretirement and pension liabilities
    
    
    189,761
    
    
    
    189,058Deferred income taxes
    
    
    2,358
    
    
    
    2,211Other non-current liabilities
    
    
    21,581
    
    
    
    22,833Total liabilities
    
    
    932,663
    
    
    
    850,748Series A convertible preferred stock (approximates redemption value)
    
    
    
    
    
    
    9,427EquityFerro Corporation shareholders equity:Common stock
    
    
    93,436
    
    
    
    93,436Paid-in capital
    
    
    315,501
    
    
    
    323,015Retained earnings
    
    
    384,889
    
    
    
    362,164Accumulated other comprehensive loss
    
    
    (45,908
    )
    
    
    (50,949
    )Common shares in treasury, at cost
    
    
    (154,001
    )
    
    
    (164,257
    )Total Ferro Corporation shareholders equity
    
    
    593,917
    
    
    
    563,409Noncontrolling interests
    
    
    11,119
    
    
    
    10,771Total equity
    
    
    605,036
    
    
    
    574,180Total liabilities and equity
    
    $
    1,537,699
    
    
    $
    1,434,355
   4




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##### Table of Contents



Ferro Corporation and Subsidiaries
Condensed Consolidated Statements of Equity
 Ferro Corporation ShareholdersAccumulatedCommon Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Non-in Treasury
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    controllingShares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Interests
    
    
    Total Equity(In thousands)Balances at December 31, 2009
    
    
    7,375
    
    
    $
    (171,567
    )
    
    $
    93,436
    
    
    $
    331,376
    
    
    $
    357,128
    
    
    $
    (60,147
    )
    
    $
    10,269
    
    
    $
    560,495Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (68
    )
    
    
    
    
    
    
    (744
    )
    
    
    (812
    )Other comprehensive income (loss),
net of tax:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,011
    )
    
    
    1
    
    
    
    (11,010
    )Postretirement benefit liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    168
    
    
    
    
    
    
    
    168Raw material commodity swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (107
    )
    
    
    
    
    
    
    (107
    )Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    724
    
    
    
    
    
    
    
    724Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,037
    )Cash dividends:Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    
    
    
    
    (165
    )Stock-based compensation transactions
    
    
    (68
    )
    
    
    2,832
    
    
    
    
    
    
    
    (2,086
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    746Balances at March 31, 2010
    
    
    7,307
    
    
    $
    (168,735
    )
    
    $
    93,436
    
    
    $
    329,290
    
    
    $
    356,895
    
    
    $
    (70,373
    )
    
    $
    9,526
    
    
    $
    550,039Balances at December 31, 2010
    
    
    7,242
    
    
    $
    (164,257
    )
    
    $
    93,436
    
    
    $
    323,015
    
    
    $
    362,164
    
    
    $
    (50,949
    )
    
    $
    10,771
    
    
    $
    574,180Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    22,890
    
    
    
    
    
    
    
    301
    
    
    
    23,191Other comprehensive income (loss),
net of tax:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,532
    
    
    
    47
    
    
    
    5,579Postretirement benefit liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (491
    )
    
    
    
    
    
    
    (491
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28,279Cash dividends:Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (165
    )
    
    
    
    
    
    
    
    
    
    
    (165
    )Stock-based compensation transactions
    
    
    (362
    )
    
    
    10,256
    
    
    
    
    
    
    
    (7,514
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,742Balances at March 31, 2011
    
    
    6,880
    
    
    $
    (154,001
    )
    
    $
    93,436
    
    
    $
    315,501
    
    
    $
    384,889
    
    
    $
    (45,908
    )
    
    $
    11,119
    
    
    $
    605,036
   5




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Ferro Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
 Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands)Cash flows from operating activitiesNet cash (used for) provided by operating activities
    
    $
    (28,580
    )
    
    $
    7,604Cash flows from investing activitiesCapital expenditures for property, plant and equipment
    
    
    (16,037
    )
    
    
    (8,623
    )Proceeds from sale of assets
    
    
    1,132
    
    
    
    469Net cash used for investing activities
    
    
    (14,905
    )
    
    
    (8,154
    )Cash flows from financing activitiesNet borrowings (repayments) under loans payable
    
    
    52,944
    
    
    
    (1,181
    )Proceeds from long-term debt
    
    
    209,677
    
    
    
    146,100Principal payments on long-term debt
    
    
    (209,677
    )
    
    
    (145,200
    )Redemption
of convertible preferred stock
    
    
    (9,427
    )
    
    
    Cash dividends paid
    
    
    (165
    )
    
    
    (165
    )Other financing activities
    
    
    331
    
    
    
    252Net cash provided by (used for) financing activities
    
    
    43,683
    
    
    
    (194
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    360
    
    
    
    (69
    )Increase (decrease) in cash and cash equivalents
    
    
    558
    
    
    
    (813
    )Cash and cash equivalents at beginning of period
    
    
    29,035
    
    
    
    18,507Cash and cash equivalents at end of period
    
    $
    29,593
    
    
    $
    17,694Cash paid during the period for:Interest
    
    $
    11,540
    
    
    $
    13,279Income taxes
    
    
    6,930
    
    
    
    5,505
   6




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Ferro Corporation and Subsidiaries
Notes to Condensed Consolidated Financial Statements
 1. Basis of Presentation
  2. Accounting Standards Adopted in the Three Months Ended March 31, 2011
 Multiple Deliverable Revenue Arrangements Revenue RecognitionMilestone Method
 3. Inventories
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Raw materials
    
    $
    82,878
    
    
    $
    63,856Work in process
    
    
    45,313
    
    
    
    38,684Finished goods
    
    
    121,109
    
    
    
    99,527Total inventories
    
    $
    249,300
    
    
    $
    202,067
  4. Property, Plant and Equipment
   7




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##### Table of Contents



5. Financing and Long-term Debt
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Loans payable to banks
    
    $
    163
    
    
    $
    709Domestic accounts receivable asset securitization program
    
    
    50,000
    
    
    
    International accounts receivable sales programs
    
    
    3,480
    
    
    
    Current portion of long-term debt
    
    
    2,938
    
    
    
    2,871Total loans payable and current portion of long-term debt
    
    $
    56,581
    
    
    $
    3,580
  March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)7.875% Senior Notes
    
    $
    250,000
    
    
    $
    250,0006.50% Convertible Senior Notes, net of unamortized discounts
    
    
    33,576
    
    
    
    33,368Capitalized lease obligations
    
    
    6,027
    
    
    
    6,177Other notes
    
    
    4,444
    
    
    
    4,297Total long-term debt
    
    
    294,047
    
    
    
    293,842Less current portion
    
    
    (2,938
    )
    
    
    (2,871
    )Total long-term debt, less current portion
    
    $
    291,109
    
    
    $
    290,971
 Receivable Sales Programs
    7.875% Senior Notes
    8




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6.50% Convertible Senior Notes
  2010 Credit Facility
    6. Financial Instruments
  
    
    Cash and cash equivalents;
    
    Notes receivable;
    
    Deposits;
    
    Miscellaneous receivables; and
    
    Short-term loans payable to banks.
 Long-term Debt
  March 31, 2011
    
    
    December 31, 2010Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(Dollars in thousands)7.875% Senior Notes
    
    $
    250,000
    
    
    $
    265,000
    
    
    $
    250,000
    
    
    $
    266,5636.50% Convertible
Senior Notes, net
of unamortized
discounts
    
    
    33,576
    
    
    
    35,662
    
    
    
    33,368
    
    
    
    36,379Other notes
    
    
    4,444
    
    
    
    3,723
    
    
    
    4,297
    
    
    
    3,600
  9




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Derivative Instruments
  Interest rate swaps.
 Foreign currency forward contracts.
  March 31,
    
    
    December 31,2011
    
    
    2010
    
    
    Balance Sheet Location(Dollars in thousands)Asset derivatives:Foreign currency forward contracts
    
    $
    65
    
    
    $
    1,261
    
    
    Accrued expenses and other current liabilitiesLiability derivatives:Foreign currency forward contracts
    
    
    (6,625
    )
    
    
    (1,501
    )
    
    Accrued expenses and other current liabilities
      March 31, 2011
    
    
    December 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    2010(Dollars in thousands)Liabilities:Foreign currency forward contracts, net
    
    $
    
    
    
    $
    (6,560
    )
    
    $
    
    
    
    $
    (6,560
    )
    
    $
    (240
    )
  10




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Amount of Gain (Loss)Amount of Gain (Loss)
    
    
    Reclassified from AOCI
    
    
    Location of Gain (Loss)Recognized in OCI
    
    
    into Income
    
    
    Reclassified from AOCI2011
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    into Income(Dollars in thousands)Derivatives in Cash
Flow Hedging
Relationships:Interest rate swaps
    
    $
    
    
    
    $
    (866
    )
    
    $
    
    
    
    $
    (1,989
    )
    
    Interest expense
 Amount of Gain (Loss)Recognized in Income2011
    
    
    2010
    
    
    Location of Gain (Loss) in Income(Dollars in thousands)Derivatives Not Designated as Hedging Instruments:Foreign currency forward contracts
    
    $
    (7,560
    )
    
    $
    11,427
    
    
    Foreign currency losses, net
 7. Income Taxes
  8. Contingent Liabilities
     11




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9. Retirement Benefits
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2011
    
    
    2010
    
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    
    
    
    $
    7
    
    
    $
    539
    
    
    $
    882
    
    
    $
    
    
    
    $
    Interest cost
    
    
    5,114
    
    
    
    5,156
    
    
    
    1,432
    
    
    
    2,735
    
    
    
    482
    
    
    
    607Expected return on plan assets
    
    
    (5,136
    )
    
    
    (4,491
    )
    
    
    (810
    )
    
    
    (1,899
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    18
    
    
    
    24
    
    
    
    (33
    )
    
    
    (132
    )
    
    
    (100
    )
    
    
    (399
    )Net amortization and deferral
    
    
    3,235
    
    
    
    3,456
    
    
    
    161
    
    
    
    147
    
    
    
    (160
    )
    
    
    (43
    )Curtailment and settlement effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (726
    )
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    3,231
    
    
    $
    4,152
    
    
    $
    1,289
    
    
    $
    1,007
    
    
    $
    222
    
    
    $
    165
  10. Serial Convertible Preferred Stock
    12




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11. Stock-Based Compensation
   Common Shares in Treasury
    
    
    Paid-inShares
    
    
    Amount
    
    
    Capital(In thousands)Stock options
    
    
    (191
    )
    
    $
    4,763
    
    
    $
    (2,031
    )Deferred stock units
    
    
    (80
    )
    
    
    2,013
    
    
    
    (1,858
    )Restricted shares
    
    
    (128
    )
    
    
    3,446
    
    
    
    (3,515
    )Performance shares, net
    
    
    37
    
    
    
    (537
    )
    
    
    461Directors deferred compensation
    
    
    
    
    
    
    571
    
    
    
    (571
    )Preferred stock conversions
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    (362
    )
    
    $
    10,256
    
    
    $
    (7,514
    )
 12. Restructuring and Cost Reduction Programs
    Employee
    
    
    
    
    
    AssetSeverance
    
    
    Other Costs
    
    
    Impairment
    
    
    Total(Dollars in thousands)Balance at December 31, 2010
    
    $
    2,429
    
    
    $
    5,863
    
    
    $
    
    
    
    $
    8,292Restructuring charges
    
    
    960
    
    
    
    667
    
    
    
    3
    
    
    
    1,630Cash payments
    
    
    (1,691
    )
    
    
    (2,570
    )
    
    
    
    
    
    
    (4,261
    )Currency translation adjustment
    
    
    100
    
    
    
    317
    
    
    
    
    
    
    
    417Non-cash items
    
    
    (27
    )
    
    
    (109
    )
    
    
    (3
    )
    
    
    (139
    )Balance at March 31, 2011
    
    $
    1,771
    
    
    $
    4,168
    
    
    $
    
    
    
    $
    5,939
   13




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##### Table of Contents



13. Earnings Per Share
  Three months endedMarch 31,2011
    
    
    2010(In thousands, except per share amounts)Basic earnings per share computation:Net income (loss) attributable to Ferro Corporation common shareholders
    
    $
    22,725
    
    
    $
    (233
    )Weighted-average common shares outstanding
    
    
    85,975
    
    
    
    85,836Basic earnings per share attributable to Ferro Corporation common shareholders
    
    $
    0.26
    
    
    $
    Diluted earnings per share computation:Net income (loss) attributable to Ferro Corporation common shareholders
    
    $
    22,725
    
    
    $
    (233
    )Plus: Convertible preferred stock dividends, net of tax
    
    
    103
    
    
    
    Total
    
    $
    22,828
    
    
    $
    (233
    )Weighted-average common shares outstanding
    
    
    85,975
    
    
    
    85,836Assumed exercise of stock options
    
    
    351
    
    
    
    Assumed satisfaction of deferred stock unit conditions
    
    
    64
    
    
    
    Assumed satisfaction of restricted share conditions
    
    
    361
    
    
    
    Assumed conversion of convertible notes
    
    
    
    
    
    
    Assumed conversion of convertible preferred stock
    
    
    528
    
    
    
    Weighted-average diluted shares outstanding
    
    
    87,279
    
    
    
    85,836Diluted earnings per share attributable to Ferro Corporation common shareholders
    
    $
    0.26
    
    
    $
    
 14. Comprehensive Income (Loss)
  Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands)Net income (loss)
    
    $
    23,191
    
    
    $
    (812
    )Other comprehensive income (loss), net of tax:Foreign currency translation
    
    
    5,579
    
    
    
    (11,010
    )Postretirement benefit liabilities
    
    
    (491
    )
    
    
    168Raw material commodity swaps
    
    
    
    
    
    
    (107
    )Interest rate swaps
    
    
    
    
    
    
    724Total comprehensive income (loss)
    
    
    28,279
    
    
    
    (11,037
    )Less: Comprehensive income (loss) attributable to noncontrolling interests
    
    
    348
    
    
    
    (743
    )Comprehensive income (loss) attributable to Ferro Corporation
    
    $
    27,931
    
    
    $
    (10,294
    )
  14




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##### Table of Contents



15. Reporting for Segments
    Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands)Electronic Materials
    
    $
    202,347
    
    
    $
    147,233Performance Coatings
    
    
    136,700
    
    
    
    128,191Color and Glass Performance Materials
    
    
    99,805
    
    
    
    99,332Polymer Additives
    
    
    85,862
    
    
    
    74,476Specialty Plastics
    
    
    42,629
    
    
    
    38,373Pharmaceuticals
    
    
    5,666
    
    
    
    5,260Total net sales
    
    $
    573,009
    
    
    $
    492,865
  Three months endedMarch 31,2011
    
    
    2010(Dollars in thousands)Electronic Materials
    
    $
    32,589
    
    
    $
    28,482Performance Coatings
    
    
    7,405
    
    
    
    9,482Color and Glass Performance Materials
    
    
    9,830
    
    
    
    7,283Polymer Additives
    
    
    6,451
    
    
    
    3,991Specialty Plastics
    
    
    1,909
    
    
    
    1,819Pharmaceuticals
    
    
    1,156
    
    
    
    125Total segment income
    
    
    59,340
    
    
    
    51,182Unallocated corporate expenses
    
    
    15,832
    
    
    
    15,196Restructuring and impairment charges
    
    
    1,630
    
    
    
    13,332Other expense, net
    
    
    8,580
    
    
    
    14,877Income before income taxes
    
    $
    33,298
    
    
    $
    7,777
  15




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         Outlook
     16




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##### Table of Contents



Results of Operations
 Comparison of the three months ended March 31, 2011 and 2010
 Three months endedMarch 31,2011
    
    
    2010
    
    
    $ Change
    
    
    % Change(Dollars in thousands, except per share amounts)Net sales
    
    $
    573,009
    
    
    $
    492,865
    
    
    $
    80,144
    
    
    
    16.3
    %Cost of sales
    
    
    452,683
    
    
    
    385,931
    
    
    
    66,752
    
    
    
    17.3
    %Gross profit
    
    
    120,326
    
    
    
    106,934
    
    
    
    13,392
    
    
    
    12.5
    %Gross profit percentage
    
    
    21.0
    %
    
    
    21.7
    %Selling, general and administrative expenses
    
    
    76,818
    
    
    
    70,948
    
    
    
    5,870
    
    
    
    8.3
    %Restructuring and impairment charges
    
    
    1,630
    
    
    
    13,332
    
    
    
    (11,702
    )Other expense (income):Interest expense
    
    
    6,826
    
    
    
    12,911
    
    
    
    (6,085
    )Interest earned
    
    
    (74
    )
    
    
    (331
    )
    
    
    257Losses on extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    Foreign currency losses, net
    
    
    1,310
    
    
    
    3,548
    
    
    
    (2,238
    )Miscellaneous expense (income), net
    
    
    518
    
    
    
    (1,251
    )
    
    
    1,769Income before income taxes
    
    
    33,298
    
    
    
    7,777
    
    
    
    25,521Income tax expense
    
    
    10,107
    
    
    
    8,589
    
    
    
    1,518Net income (loss)
    
    $
    23,191
    
    
    $
    (812
    )
    
    $
    24,003Diluted earnings per share
    
    $
    0.26
    
    
    $
    
    
    
    $
    0.26
      17




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##### Table of Contents



Three months endedMarch 31,2011
    
    
    2010
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesElectronic Materials
    
    $
    202,347
    
    
    $
    147,233
    
    
    $
    55,114
    
    
    
    37.4
    %Performance Coatings
    
    
    136,700
    
    
    
    128,191
    
    
    
    8,509
    
    
    
    6.6
    %Color and Glass Performance Materials
    
    
    99,805
    
    
    
    99,332
    
    
    
    473
    
    
    
    0.5
    %Polymer Additives
    
    
    85,862
    
    
    
    74,476
    
    
    
    11,386
    
    
    
    15.3
    %Specialty Plastics
    
    
    42,629
    
    
    
    38,373
    
    
    
    4,256
    
    
    
    11.1
    %Pharmaceuticals
    
    
    5,666
    
    
    
    5,260
    
    
    
    406
    
    
    
    7.7
    %Total segment sales
    
    $
    573,009
    
    
    $
    492,865
    
    
    $
    80,144
    
    
    
    16.3
    %Segment Operating IncomeElectronic Materials
    
    $
    32,589
    
    
    $
    28,482
    
    
    $
    4,107
    
    
    
    14.4
    %Performance Coatings
    
    
    7,405
    
    
    
    9,482
    
    
    
    (2,077
    )
    
    
    (21.9
    )%Color and Glass Performance Materials
    
    
    9,830
    
    
    
    7,283
    
    
    
    2,547
    
    
    
    35.0
    %Polymer Additives
    
    
    6,451
    
    
    
    3,991
    
    
    
    2,460
    
    
    
    61.6
    %Specialty Plastics
    
    
    1,909
    
    
    
    1,819
    
    
    
    90
    
    
    
    4.9
    %Pharmaceuticals
    
    
    1,156
    
    
    
    125
    
    
    
    1,031
    
    
    NMTotal segment operating income
    
    $
    59,340
    
    
    $
    51,182
    
    
    $
    8,158
    
    
    
    15.9
    %
 
  Electronic Materials Segment Results.
  18




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##### Table of Contents



Performance Coatings Segment Results.
 Color and Glass Performance Materials Segment Results.
 Polymer Additives Segment Results.
 Specialty Plastics Segment Results.
 Pharmaceuticals Segment Results.
 Three months endedMarch 31,2011
    
    
    2010
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    288,509
    
    
    $
    240,487
    
    
    $
    48,022
    
    
    
    20.0
    %International
    
    
    284,500
    
    
    
    252,378
    
    
    
    32,122
    
    
    
    12.7
    %Total
    
    $
    573,009
    
    
    $
    492,865
    
    
    $
    80,144
    
    
    
    16.3
    %
   19




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##### Table of Contents



Summary of Cash Flows for the three months ended March 31, 2011 and 2010
 Three months endedMarch 31,2011
    
    
    2010
    
    
    $ Change(Dollars in thousands)Net cash (used for) provided by operating activities
    
    $
    (28,580
    )
    
    $
    7,604
    
    
    $
    (36,184
    )Net cash used for investing activities
    
    
    (14,905
    )
    
    
    (8,154
    )
    
    
    (6,751
    )Net cash provided by (used for) financing activities
    
    
    43,683
    
    
    
    (194
    )
    
    
    43,877Effect of exchange rate changes on cash and cash equivalents
    
    
    360
    
    
    
    (69
    )
    
    
    429Increase (decrease) in cash and cash equivalents
    
    $
    558
    
    
    $
    (813
    )
    
    $
    1,371
  Three months endedMarch 31,2011
    
    
    2010
    
    
    $ Change(Dollars in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    23,191
    
    
    $
    (812
    )
    
    $
    24,003Depreciation and amortization
    
    
    16,229
    
    
    
    20,176
    
    
    
    (3,947
    )Precious metals deposits
    
    
    28,086
    
    
    
    5,560
    
    
    
    22,526Accounts receivable
    
    
    (50,070
    )
    
    
    (39,470
    )
    
    
    (10,600
    )Inventories
    
    
    (41,891
    )
    
    
    (18,397
    )
    
    
    (23,494
    )Accounts payable
    
    
    33,768
    
    
    
    25,172
    
    
    
    8,596Other changes in current assets and liabilities, net
    
    
    (14,084
    )
    
    
    (429
    )
    
    
    (13,655
    )Other adjustments, net
    
    
    (23,809
    )
    
    
    15,804
    
    
    
    (39,613
    )Net cash (used for) provided by operating activities
    
    $
    (28,580
    )
    
    $
    7,604
    
    
    $
    (36,184
    )
     20




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##### Table of Contents



Capital Resources and Liquidity
 7.875% Senior Notes
   6.50% Convertible Senior Notes
  2010 Credit Facility
   Domestic Receivable Sales Programs
  International Receivable Sales Programs
   21




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##### Table of Contents



Off Balance Sheet Arrangements
 International Receivable Sales Programs.
 Consignment Arrangements for Precious Metals.
 Serial Convertible Preferred Stock
   Liquidity Requirements
       22




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##### Table of Contents



Critical Accounting Policies and Their Application
  Newly Issued Accounting Pronouncements
  Risk Factors
   23




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##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
     March 31,
    
    
    December 31,2011
    
    
    2010(Dollars in thousands)Variable-rate debt and utilization of accounts receivable sales programs:Change in annual interest expense from 1% change in interest rates
    
    $
    541
    
    
    $
    41Fixed-rate debt:Carrying amount
    
    
    288,020
    
    
    
    283,368Fair value
    
    
    304,385
    
    
    
    302,942Change in fair value from 1% increase in interest rate
    
    
    (15,088
    )
    
    
    (15,635
    )Change in fair value from 1% decrease in interest rate
    
    
    16,142
    
    
    
    16,759Foreign currency forward contracts:Notional amount
    
    
    232,101
    
    
    
    187,291Carrying amount and fair value
    
    
    (6,560
    )
    
    
    (240
    )Change in fair value from 10% appreciation of U.S. dollar
    
    
    12,345
    
    
    
    7,735Change in fair value from 10% depreciation of U.S. dollar
    
    
    (15,088
    )
    
    
    (9,454
    )
  24




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##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   25




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##### 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
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
   26




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##### Table of Contents



SIGNATURES
  FERRO CORPORATION
(Registrant)Date: April 27, 2011
    /s/ James F. KirschJames F. KirschChairman, President and Chief Executive Officer
(Principal Executive Officer)Date: April 27, 2011
    /s/ Thomas R. MiklichThomas R. MiklichVice President and Chief Financial Officer
(Principal Financial Officer)  27




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##### Table of Contents



EXHIBIT INDEX
  Exhibit:
 3
    
    
    Articles of incorporation and by-laws3.1
    
    
    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.)3.5
    
    
    Ferro Corporation Amended and Restated Code of Regulations. (Reference is made to
Exhibit 3.4 to Ferro Corporations Quarterly Report for the quarter ended
September 30, 2010, which Exhibit is incorporated here by reference.)4
    
    
    Instruments defining rights of security holders, including indentures4.1
    
    
    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.)4.3
    
    
    Form of Indenture, by and between Ferro Corporation and Wilmington Trust FSB
(Reference is made to Exhibit 4.1 to Ferro Corporations Registration Statement
on Form S-3ASR, filed July 27, 2010, which Exhibit is incorporated here by
reference.)4.4
    
    
    First Supplemental Indenture, dated August 24, 2010, by and between Ferro
Corporation and Wilmington Trust FSB (with Form of 7.875% Senior Notes due 2018).
(Reference is made to Exhibit 4.1 to Ferro Corporations Current Report on Form
8-K, filed August 24, 2010, 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.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.
  28