##### 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, 2010
 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
 YES o NO o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
 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 17Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    Page 23Item 4 Controls and Procedures
    
    Page 24PART IIItem 1 Legal Proceedings
    
    Page 25Item 1A Risk Factors
    
    Page 25Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 25Item 3 Defaults Upon Senior Securities
    
    Page 25Item 4 (Removed and Reserved)
    
    Page 25Item 5 Other Information
    
    Page 25Item 6 Exhibits
    
    Page 25Exhibit 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 endedMarch 31,2010
    
    
    2009(Dollars in thousands,except per share amounts)Net sales
    
    $
    492,865
    
    
    $
    357,809Cost of sales
    
    
    385,931
    
    
    
    302,563Gross profit
    
    
    106,934
    
    
    
    55,246Selling, general and administrative expenses
    
    
    70,948
    
    
    
    68,128Impairment charges
    
    
    2,202
    
    
    
    Restructuring charges
    
    
    11,130
    
    
    
    1,398Other expense (income):Interest expense
    
    
    12,911
    
    
    
    11,174Interest earned
    
    
    (331
    )
    
    
    (268
    )Foreign currency losses, net
    
    
    3,548
    
    
    
    1,829Miscellaneous (income) expense, net
    
    
    (1,251
    )
    
    
    533Income (loss) before income taxes
    
    
    7,777
    
    
    
    (27,548
    )Income tax expense (benefit)
    
    
    8,589
    
    
    
    (7,819
    )Loss from continuing operations
    
    
    (812
    )
    
    
    (19,729
    )Loss on disposal of discontinued operations, net of income taxes
    
    
    
    
    
    
    (242
    )Net loss
    
    
    (812
    )
    
    
    (19,971
    )Less: Net (loss) income attributable to
noncontrolling interests
    
    
    (744
    )
    
    
    364Net loss attributable to Ferro Corporation
    
    
    (68
    )
    
    
    (20,335
    )Dividends on preferred stock
    
    
    (165
    )
    
    
    (171
    )Net loss attributable to Ferro Corporation common shareholders
    
    $
    (233
    )
    
    $
    (20,506
    )Amounts attributable to Ferro Corporation:Loss from continuing operations, net of tax
    
    $
    (68
    )
    
    $
    (20,093
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    (242
    )$
    (68
    )
    
    $
    (20,335
    )Per common share dataBasic and diluted loss attributable to Ferro Corporation common shareholders:From continuing operations
    
    $
    
    
    
    $
    (0.46
    )From discontinued operations
    
    
    
    
    
    
    $
    
    
    
    $
    (0.46
    )Cash dividends declared
    
    $
    
    
    
    $
    0.01
   3




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)ASSETSCurrent assetsCash and cash equivalents
    
    $
    17,694
    
    
    $
    18,507Accounts and trade notes receivable, net
    
    
    316,980
    
    
    
    285,638Inventories
    
    
    194,370
    
    
    
    180,700Deposits for precious metals
    
    
    106,874
    
    
    
    112,434Deferred income taxes
    
    
    19,473
    
    
    
    19,618Other receivables
    
    
    34,849
    
    
    
    27,795Other current assets
    
    
    8,191
    
    
    
    7,180Total current assets
    
    
    698,431
    
    
    
    651,872Other assetsProperty, plant and equipment, net
    
    
    411,470
    
    
    
    432,405Goodwill
    
    
    220,318
    
    
    
    221,044Amortizable intangible assets, net
    
    
    10,297
    
    
    
    10,610Deferred income taxes
    
    
    130,283
    
    
    
    133,705Other non-current assets
    
    
    71,653
    
    
    
    76,719Total assets
    
    $
    1,542,452
    
    
    $
    1,526,355LIABILITIES AND EQUITYCurrent liabilitiesLoans payable and current portion of long-term debt
    
    $
    23,234
    
    
    $
    24,737Accounts payable
    
    
    214,815
    
    
    
    196,038Income taxes
    
    
    11,649
    
    
    
    7,241Accrued payrolls
    
    
    30,657
    
    
    
    20,894Accrued expenses and other current liabilities
    
    
    70,014
    
    
    
    72,039Total current liabilities
    
    
    350,369
    
    
    
    320,949Other liabilitiesLong-term debt, less current portion
    
    
    400,071
    
    
    
    398,720Postretirement and pension liabilities
    
    
    201,471
    
    
    
    203,743Deferred income taxes
    
    
    1,821
    
    
    
    1,124Other non-current liabilities
    
    
    29,254
    
    
    
    31,897Total liabilities
    
    
    982,986
    
    
    
    956,433Series A convertible preferred stock (approximates redemption value)
    
    
    9,427
    
    
    
    9,427EquityFerro Corporation shareholders equity:Common stock
    
    
    93,436
    
    
    
    93,436Paid-in capital
    
    
    329,290
    
    
    
    331,376Retained earnings
    
    
    356,895
    
    
    
    357,128Accumulated other comprehensive loss
    
    
    (70,373
    )
    
    
    (60,147
    )Common shares in treasury, at cost
    
    
    (168,735
    )
    
    
    (171,567
    )Total Ferro Corporation shareholders equity
    
    
    540,513
    
    
    
    550,226Noncontrolling interests
    
    
    9,526
    
    
    
    10,269Total equity
    
    
    550,039
    
    
    
    560,495Total liabilities and equity
    
    $
    1,542,452
    
    
    $
    1,526,355
   4




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Statements of 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)
    
    
    Interests
    
    
    Equity(In thousands)Balances at December 31, 2008
    
    
    8,432
    
    
    $
    (197,524
    )
    
    $
    52,323
    
    
    $
    178,420
    
    
    $
    401,186
    
    
    $
    (98,436
    )
    
    $
    9,755
    
    
    $
    345,724Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,335
    )
    
    
    
    
    
    
    364
    
    
    
    (19,971
    )Other comprehensive income (loss), net of
tax:Foreign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,668
    )
    
    
    4
    
    
    
    (17,664
    )Postretirement benefit liabilities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,797
    
    
    
    20
    
    
    
    1,817Raw material commodity swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    424Interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    406
    
    
    
    
    
    
    
    406Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,988
    )Cash dividends:Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (437
    )
    
    
    
    
    
    
    
    
    
    
    (437
    )Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    
    
    
    
    
    
    
    
    (171
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Stock-based compensation
transactions
    
    
    (1,197
    )
    
    
    25,416
    
    
    
    
    
    
    
    (22,993
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,423Balances at March 31, 2009
    
    
    7,235
    
    
    $
    (172,108
    )
    
    $
    52,323
    
    
    $
    155,428
    
    
    $
    380,243
    
    
    $
    (113,477
    )
    
    $
    10,143
    
    
    $
    312,552Balances at December 31, 2009
    
    
    7,375
    
    
    $
    (171,567
    )
    
    $
    93,436
    
    
    $
    331,376
    
    
    $
    357,128
    
    
    $
    (60,147
    )
    
    $
    10,269
    
    
    $
    560,495Net (loss) income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (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
    
    
    $
    550,039
   5




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries
 Condensed Consolidated Statements of Cash Flows
 Three months endedMarch 31,2010
    
    
    2009(Dollars in thousands)Cash flows from operating activitiesNet loss
    
    $
    (812
    )
    
    $
    (19,971
    )Depreciation and amortization
    
    
    20,176
    
    
    
    18,609Precious metals deposits
    
    
    5,560
    
    
    
    (65,472
    )Accounts and trade notes receivable
    
    
    (39,470
    )
    
    
    16,677Inventories
    
    
    (18,397
    )
    
    
    46,596Accounts payable
    
    
    25,172
    
    
    
    (67,001
    )Other changes in current assets and liabilities, net
    
    
    (429
    )
    
    
    (9,470
    )Other adjustments, net
    
    
    15,804
    
    
    
    2,738Net cash provided by (used for) continuing operations
    
    
    7,604
    
    
    
    (77,294
    )Net cash used for discontinued operations
    
    
    
    
    
    
    (245
    )Net cash provided by (used for) operating activities
    
    
    7,604
    
    
    
    (77,539
    )Cash flows from investing activitiesCapital expenditures for property, plant and equipment
    
    
    (8,623
    )
    
    
    (2,621
    )Proceeds from sale of assets and businesses
    
    
    469
    
    
    
    45Net cash used for investing activities
    
    
    (8,154
    )
    
    
    (2,576
    )Cash flows from financing activitiesNet (repayments) borrowings under loans payable
    
    
    (1,181
    )
    
    
    964Proceeds from revolving credit facility
    
    
    146,100
    
    
    
    280,249Principal payments on revolving credit facility
    
    
    (145,200
    )
    
    
    (186,654
    )Principal payments on term loan facility
    
    
    
    
    
    
    (762
    )Debt issue costs
    
    
    
    
    
    
    (8,105
    )Cash dividends paid
    
    
    (165
    )
    
    
    (608
    )Other financing activities
    
    
    252
    
    
    
    117Net cash (used for) provided by financing activities
    
    
    (194
    )
    
    
    85,201Effect of exchange rate changes on cash and cash equivalents
    
    
    (69
    )
    
    
    (206
    )(Decrease) increase in cash and cash equivalents
    
    
    (813
    )
    
    
    4,880Cash and cash equivalents at beginning of period
    
    
    18,507
    
    
    
    10,191Cash and cash equivalents at end of period
    
    $
    17,694
    
    
    $
    15,071Cash paid during the period for:Interest
    
    $
    13,279
    
    
    $
    13,555Income taxes
    
    $
    5,505
    
    
    $
    3,895
   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 Three Months Ended March 31, 2010
 Accounting for Transfers of Financial Assets FASB Accounting Standards Codification TM
 Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities
 Improving Disclosures
About Fair Value Measurements
 3. Newly Issued Accounting Pronouncements
 Multiple Deliverable Revenue Arrangements
  7




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##### Table of Contents



4. Inventories
  March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Raw materials
    
    $
    60,909
    
    
    $
    54,481Work in process
    
    
    40,294
    
    
    
    37,449Finished goods
    
    
    93,167
    
    
    
    88,770Total
    
    $
    194,370
    
    
    $
    180,700
  5. Property, Plant and Equipment
   6. Financing and Long-term Debt
  March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Loans payable to banks
    
    $
    7,157
    
    
    $
    5,891Accounts receivable asset securitization program
    
    
    15,096
    
    
    
    17,762Current portion of long-term debt
    
    
    981
    
    
    
    1,084Total
    
    $
    23,234
    
    
    $
    24,737
  8




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##### Table of Contents



March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)$172.5 million 6.50% Convertible Senior Notes, net of unamortized discounts
    
    $
    157,810
    
    
    $
    156,896Revolving credit facility
    
    
    2,600
    
    
    
    1,700Term loan facility
    
    
    231,385
    
    
    
    231,385Capitalized lease obligations
    
    
    5,867
    
    
    
    5,669Other notes
    
    
    3,390
    
    
    
    4,154401,052
    
    
    
    399,804Less current portion
    
    
    (981
    )
    
    
    (1,084
    )Total
    
    $
    400,071
    
    
    $
    398,720
  7. Financial Instruments
  
    
    Cash and cash equivalents;
 
    
    Notes receivable;
 
    
    Deposits;
 
    
    Miscellaneous receivables; and
 
    
    Short-term loans payable to banks.
 Long-term Debt
  March 31, 2010
    
    
    December 31, 2009Carrying
    
    
    Fair
    
    
    Carrying
    
    
    FairAmount
    
    
    Value
    
    
    Amount
    
    
    Value(Dollars in thousands)$172.5 million 6.50% Convertible Senior Notes
    
    $
    157,810
    
    
    $
    168,619
    
    
    $
    156,896
    
    
    $
    157,191Revolving credit facility
    
    
    2,600
    
    
    
    2,619
    
    
    
    1,700
    
    
    
    1,747Term loan facility
    
    
    231,385
    
    
    
    239,586
    
    
    
    231,385
    
    
    
    237,047Other notes
    
    
    3,390
    
    
    
    2,517
    
    
    
    4,154
    
    
    
    3,084
   9




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##### Table of Contents



Derivative Instruments
  Interest rate swaps.
 Foreign currency forward contracts.
  March 31,
    
    
    December 31,2010
    
    
    2009
    
    
    Balance Sheet Location(Dollars in thousands)Derivatives designated as
hedging instruments:Liability derivatives:Interest rate swaps
    
    $
    (8,393
    )
    
    $
    (9,516
    )
    
    Other non-current liabilitiesDerivatives not designated as
hedging instruments:Asset derivatives:Foreign currency forward
contracts
    
    $
    1,800
    
    
    $
    899
    
    
    Other receivablesLiability derivatives:Foreign currency forward
contracts
    
    $
    (390
    )
    
    $
    (176
    )
    
    Other receivables
      March 31, 2010
    
    
    December 31,Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    Total
    
    
    2009(Dollars in thousands)AssetsForeign
currency forward
contracts
    
    $
    
    
    
    
    1,410
    
    
    $
    
    
    
    $
    1,410
    
    
    $
    723LiabilitiesInterest rate swaps
    
    $
    
    
    
    $
    (8,393
    )
    
    $
    
    
    
    $
    (8,393
    )
    
    $
    (9,516
    )
  10




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##### Table of Contents



Amount of LossAmount of Loss
    
    
    Reclassified from AOCI
    
    
    Location of LossRecognized in OCI
    
    
    into Income
    
    
    Reclassified from2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    AOCI into Income(Dollars in thousands)Derivatives in Cash Flow
Hedging Relationships:Interest rate swaps
    
    $
    (866
    )
    
    $
    (906
    )
    
    $
    (1,989
    )
    
    $
    (1,536
    )
    
    Interest expense
 Amount of GainRecognized in Income
    
    
    Location of2010
    
    
    2009
    
    
    Gain in Income(Dollars in thousands)Derivatives Not Designated as
Hedging Instruments:Foreign currency forward contracts
    
    $
    11,427
    
    
    $
    567
    
    
    Foreign currency losses, net
 8. Income Taxes
  9. Contingent Liabilities
    11




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##### Table of Contents



10. Retirement Benefits
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    7
    
    
    $
    7
    
    
    $
    882
    
    
    $
    1,003
    
    
    $
    
    
    
    $
    4Interest cost
    
    
    5,156
    
    
    
    5,236
    
    
    
    2,735
    
    
    
    2,484
    
    
    
    607
    
    
    
    719Expected return on plan assets
    
    
    (4,491
    )
    
    
    (3,863
    )
    
    
    (1,899
    )
    
    
    (1,662
    )
    
    
    
    
    
    
    Amortization of prior service
cost
    
    
    24
    
    
    
    24
    
    
    
    147
    
    
    
    (97
    )
    
    
    (399
    )
    
    
    (437
    )Net amortization and deferral
    
    
    3,456
    
    
    
    3,845
    
    
    
    (132
    )
    
    
    246
    
    
    
    (43
    )
    
    
    Curtailment and settlement
effects
    
    
    
    
    
    
    
    
    
    
    (726
    )
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    4,152
    
    
    $
    5,249
    
    
    $
    1,007
    
    
    $
    1,974
    
    
    $
    165
    
    
    $
    286
  11. Stock-Based Compensation
  Common Sharesin Treasury
    
    
    Paid-inShares
    
    
    Amount
    
    
    Capital(In thousands)Stock options
    
    
    (13
    )
    
    $
    370
    
    
    $
    83Deferred stock units
    
    
    (34
    )
    
    
    832
    
    
    
    (730
    )Restricted shares
    
    
    (132
    )
    
    
    3,242
    
    
    
    (3,074
    )Performance shares, net
    
    
    111
    
    
    
    (995
    )
    
    
    1,018Directors deferred compensation
    
    
    
    
    
    
    (617
    )
    
    
    617Preferred stock conversions
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    (68
    )
    
    $
    2,832
    
    
    $
    (2,086
    )
 12. Restructuring and Cost Reduction Programs
   12




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##### Table of Contents



Restructuring Program in Limoges, France
     Restructuring Program in Castanheira do Ribatejo, Portugal
     13




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##### Table of Contents



Employee
    
    
    OtherSeverance
    
    
    Costs
    
    
    Total(Dollars in thousands)Balance at December 31, 2009
    
    $
    3,081
    
    
    $
    1,518
    
    
    $
    4,599Gross restructuring charges
    
    
    10,327
    
    
    
    990
    
    
    
    11,317Reserve adjustments
    
    
    
    
    
    
    (187
    )
    
    
    (187
    )Net restructuring charges
    
    
    10,327
    
    
    
    803
    
    
    
    11,130Cash payments
    
    
    (4,796
    )
    
    
    (796
    )
    
    
    (5,592
    )Currency translation adjustment
    
    
    32
    
    
    
    (86
    )
    
    
    (54
    )Balance at March 31, 2010
    
    $
    8,644
    
    
    $
    1,439
    
    
    $
    10,083
 13. Per Share Amounts from Continuing Operations
  Three months endedMarch 31,2010
    
    
    2009(In thousands,except per share amounts)Basic loss per share computation:Net loss attributable to Ferro Corporation common shareholders
    
    $
    (233
    )
    
    $
    (20,506
    )Adjustment for loss from discontinued operations
    
    
    
    
    
    
    242$
    (233
    )
    
    $
    (20,264
    )Weighted-average common shares outstanding
    
    
    85,836
    
    
    
    44,366Basic loss per share from continuing operations
attributable to Ferro Corporation common
shareholders
    
    $
    
    
    
    $
    (0.46
    )Diluted loss per share computation:Net loss attributable to Ferro Corporation common shareholders
    
    $
    (233
    )
    
    $
    (20,506
    )Adjustment for loss from discontinued operations
    
    
    
    
    
    
    242Plus: Convertible preferred stock
    
    
    
    
    
    
    $
    (233
    )
    
    $
    (20,264
    )Weighted-average common shares outstanding
    
    
    85,836
    
    
    
    44,366Assumed exercise of stock options
    
    
    
    
    
    
    Assumed satisfaction of deferred stock unit conditions
    
    
    
    
    
    
    Assumed satisfaction of restricted share conditions
    
    
    
    
    
    
    Assumed conversion of convertible notes
    
    
    
    
    
    
    Assumed conversion of convertible preferred stock
    
    
    
    
    
    
    Weighted-average diluted shares outstanding
    
    
    85,836
    
    
    
    44,366Diluted loss per share from continuing operations
attributable to Ferro Corporation common
shareholders
    
    $
    
    
    
    $
    (0.46
    )
  14




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##### Table of Contents



14. Comprehensive Income (Loss)
  Three months endedMarch 31,2010
    
    
    2009(Dollars in thousands)Net loss
    
    $
    (812
    )
    
    $
    (19,971
    )Other comprehensive income (loss), net of tax:Foreign currency translation
    
    
    (11,010
    )
    
    
    (17,664
    )Postretirement benefit liabilities
    
    
    168
    
    
    
    1,817Raw material commodity swaps
    
    
    (107
    )
    
    
    424Interest rate swaps
    
    
    724
    
    
    
    406Total comprehensive loss
    
    
    (11,037
    )
    
    
    (34,988
    )Less: Comprehensive (loss) income attributable to noncontrolling
interests
    
    
    (743
    )
    
    
    388Comprehensive loss attributable to Ferro Corporation
    
    $
    (10,294
    )
    
    $
    (35,376
    )
 15. Reporting for Segments
    Three months endedMarch 31,2010
    
    
    2009(Dollars in thousands)Electronic Materials
    
    $
    147,233
    
    
    $
    82,489Performance Coatings
    
    
    128,191
    
    
    
    108,588Color and Glass Performance Materials
    
    
    99,332
    
    
    
    67,416Polymer Additives
    
    
    74,476
    
    
    
    59,447Specialty Plastics
    
    
    38,373
    
    
    
    34,859Pharmaceuticals
    
    
    5,260
    
    
    
    5,010Total net sales
    
    $
    492,865
    
    
    $
    357,809
  15




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##### Table of Contents



Three months endedMarch 31,2010
    
    
    2009(Dollars in thousands)Electronic Materials
    
    $
    28,482
    
    
    $
    2,417Performance Coatings
    
    
    9,482
    
    
    
    (599
    )Color and Glass Performance Materials
    
    
    7,283
    
    
    
    (2,455
    )Polymer Additives
    
    
    3,991
    
    
    
    1,889Specialty Plastics
    
    
    1,819
    
    
    
    1,462Pharmaceuticals
    
    
    125
    
    
    
    113Total segment income
    
    
    51,182
    
    
    
    2,827Unallocated corporate expenses
    
    
    15,196
    
    
    
    15,709Impairment charges
    
    
    2,202
    
    
    
    Restructuring charges
    
    
    11,130
    
    
    
    1,398Interest expense
    
    
    12,911
    
    
    
    11,174Other expense, net
    
    
    1,966
    
    
    
    2,094Income (loss) before income taxes from continuing operations
    
    $
    7,777
    
    
    $
    (27,548
    )
 16. Subsequent Event
    16




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
         Outlook
     17




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##### Table of Contents



Results of Operations
 Comparison of the three months ended March 31, 2010 and 2009
 Three months endedMarch 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % Change(Dollars in thousands, except per share amounts)Net sales
    
    $
    492,865
    
    
    $
    357,809
    
    
    $
    135,056
    
    
    
    37.7
    %Cost of sales
    
    
    385,931
    
    
    
    302,563
    
    
    
    83,368
    
    
    
    27.6
    %Gross profit
    
    
    106,934
    
    
    
    55,246
    
    
    
    51,688
    
    
    
    93.6
    %Gross profit percentage
    
    
    21.7
    %
    
    
    15.4
    %Selling, general and administrative expenses
    
    
    70,948
    
    
    
    68,128
    
    
    
    2,820
    
    
    
    4.1
    %Impairment charges
    
    
    2,202
    
    
    
    
    
    
    
    2,202
    
    
    
    Restructuring charges
    
    
    11,130
    
    
    
    1,398
    
    
    
    9,732
    
    
    
    696.1
    %Other expense (income):Interest expense
    
    
    12,911
    
    
    
    11,174
    
    
    
    1,737
    
    
    
    15.5
    %Interest earned
    
    
    (331
    )
    
    
    (268
    )
    
    
    (63
    )
    
    
    23.5
    %Foreign currency losses, net
    
    
    3,548
    
    
    
    1,829
    
    
    
    1,719
    
    
    
    94.0
    %Miscellaneous (income) expense, net
    
    
    (1,251
    )
    
    
    533
    
    
    
    (1,784
    )
    
    
    (334.7
    %)Income (loss) before income taxes
    
    
    7,777
    
    
    
    (27,548
    )
    
    
    35,325
    
    
    
    (128.2
    %)Income tax expense (benefit)
    
    
    8,589
    
    
    
    (7,819
    )
    
    
    16,408
    
    
    
    (209.8
    %)Loss from continuing operations
    
    
    (812
    )
    
    
    (19,729
    )
    
    
    18,917
    
    
    
    (95.9
    %)Loss on disposal of discontinued operations,
net of income taxes
    
    
    
    
    
    
    (242
    )
    
    
    242
    
    
    
    (100.0
    %)Net loss
    
    $
    (812
    )
    
    $
    (19,971
    )
    
    $
    19,159
    
    
    
    (95.9
    %)Diluted loss per share
    
    $
    
    
    
    $
    (0.46
    )
    
    $
    0.46
    
    
    
    (100.0
    %)
     18




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##### Table of Contents



Three months endedMarch 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesElectronic Materials
    
    $
    147,233
    
    
    $
    82,489
    
    
    $
    64,744
    
    
    
    78.5
    %Performance Coatings
    
    
    128,191
    
    
    
    108,588
    
    
    
    19,603
    
    
    
    18.1
    %Color and Glass Performance Materials
    
    
    99,332
    
    
    
    67,416
    
    
    
    31,916
    
    
    
    47.3
    %Polymer Additives
    
    
    74,476
    
    
    
    59,447
    
    
    
    15,029
    
    
    
    25.3
    %Specialty Plastics
    
    
    38,373
    
    
    
    34,859
    
    
    
    3,514
    
    
    
    10.1
    %Pharmaceuticals
    
    
    5,260
    
    
    
    5,010
    
    
    
    250
    
    
    
    5.0
    %Total segment sales
    
    $
    492,865
    
    
    $
    357,809
    
    
    $
    135,056
    
    
    
    37.7
    %Segment Operating Income (Loss)Electronic Materials
    
    $
    28,482
    
    
    $
    2,417
    
    
    $
    26,065
    
    
    
    1,078.4
    %Performance Coatings
    
    
    9,482
    
    
    
    (599
    )
    
    
    10,081
    
    
    NMColor and Glass Performance Materials
    
    
    7,283
    
    
    
    (2,455
    )
    
    
    9,738
    
    
    NMPolymer Additives
    
    
    3,991
    
    
    
    1,889
    
    
    
    2,102
    
    
    
    111.3
    %Specialty Plastics
    
    
    1,819
    
    
    
    1,462
    
    
    
    357
    
    
    
    24.4
    %Pharmaceuticals
    
    
    125
    
    
    
    113
    
    
    
    12
    
    
    
    10.6
    %Total segment operating income
    
    $
    51,182
    
    
    $
    2,827
    
    
    $
    48,355
    
    
    
    1,710.5
    %
 
   19




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##### Table of Contents



Electronic Materials Segment Results.
 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 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    240,487
    
    
    $
    170,054
    
    
    $
    70,433
    
    
    
    41.4
    %International
    
    
    252,378
    
    
    
    187,755
    
    
    
    64,623
    
    
    
    34.4
    %Total
    
    $
    492,865
    
    
    $
    357,809
    
    
    $
    135,056
    
    
    
    37.7
    %
   20




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##### Table of Contents



Summary of Cash Flows for the three months ended March 31, 2010 and 2009
 Three months endedMarch 31,2010
    
    
    2009
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Net cash provided by (used for)
operating activities
    
    $
    7,604
    
    
    $
    (77,539
    )
    
    $
    85,143
    
    
    
    (109.8
    %)Net cash used for investing activities
    
    
    (8,154
    )
    
    
    (2,576
    )
    
    
    (5,578
    )
    
    
    216.5
    %Net cash (used for) provided by
financing activities
    
    
    (194
    )
    
    
    85,201
    
    
    
    (85,395
    )
    
    
    (100.2
    %)Effect of exchange rate changes on cash
and cash equivalents
    
    
    (69
    )
    
    
    (206
    )
    
    
    137
    
    
    
    (66.5
    %)(Decrease) increase in cash and cash
equivalents
    
    $
    (813
    )
    
    $
    4,880
    
    
    $
    (5,693
    )
    
    
    (116.7
    %)
    Capital Resources and Liquidity
 Off Balance Sheet Arrangements
 International Receivable Sales Programs.
 Liquidity
Requirements
   21




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##### Table of Contents



Critical Accounting Policies and Their Application
  Newly Issued Accounting Pronouncements
  Risk Factors
   22




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
     March 31,
    
    
    December 31,2010
    
    
    2009(Dollars in thousands)Variable-rate debt and utilization of accounts receivable sales programs:Change in annual interest expense from 1% change in interest rates
    
    $
    1,150
    
    
    $
    1,170Fixed-rate debt:Carrying amount
    
    
    161,200
    
    
    
    161,050Fair value
    
    
    171,136
    
    
    
    160,275Change in fair value from 1% increase in interest rate
    
    
    (4,922
    )
    
    
    (4,814
    )Change in fair value from 1% decrease in interest rate
    
    
    5,104
    
    
    
    5,000Interest rate swaps:Notional amount
    
    
    150,000
    
    
    
    150,000Carrying amount and fair value
    
    
    (8,393
    )
    
    
    (9,516
    )Change in fair value from 1% increase in interest rate
    
    
    1,878
    
    
    
    2,226Change in fair value from 1% decrease in interest rate
    
    
    (1,905
    )
    
    
    (2,263
    )Foreign currency forward contracts:Notional amount
    
    
    200,139
    
    
    
    178,922Carrying amount and fair value
    
    
    1,410
    
    
    
    723Change in fair value from 10% appreciation of U.S. dollar
    
    
    7,202
    
    
    
    5,571Change in fair value from 10% depreciation of U.S. dollar
    
    
    (8,802
    )
    
    
    (6,809
    )
  23




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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
   24




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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
   25




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##### Table of Contents



SIGNATURES
  FERRO CORPORATION
(Registrant)Date: April 27, 2010/s/ James F. KirschJames F. KirschChairman, President and Chief Executive Officer
(Principal Executive Officer)Date: April 27, 2010/s/ Sallie B. BaileySallie B. BaileyVice President and Chief Financial Officer
(Principal Financial Officer)  26




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##### Table of Contents



EXHIBIT INDEX
   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.)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.)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.
  27