##### 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 endedJune 30, 2008
 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 Avenue
    
    44114Cleveland, OH
    
    (Zip Code)(Address of Principal executive offices)
 216-641-8580
 þ 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 21Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    Page 32Item 4 Controls and Procedures
    
    Page 34PART IIItem 1 Legal Proceedings
    
    Page 35Item 1A Risk Factors
    
    Page 36Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    Page 42Item 3 Defaults Upon Senior Securities
    
    Page 42Item 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 Income
 Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share amounts)Net sales
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    1,257,652
    
    
    $
    1,083,363Cost of sales
    
    
    527,012
    
    
    
    446,131
    
    
    
    1,020,949
    
    
    
    869,056Gross profit
    
    
    123,384
    
    
    
    107,527
    
    
    
    236,703
    
    
    
    214,307Selling, general and administrative expenses
    
    
    81,191
    
    
    
    84,386
    
    
    
    159,848
    
    
    
    163,143Restructuring charges
    
    
    9,031
    
    
    
    332
    
    
    
    13,238
    
    
    
    1,863Other expense (income):Interest expense
    
    
    13,214
    
    
    
    14,286
    
    
    
    27,243
    
    
    
    31,732Interest earned
    
    
    (142
    )
    
    
    (189
    )
    
    
    (271
    )
    
    
    (1,154
    )Foreign currency losses (gains), net
    
    
    650
    
    
    
    423
    
    
    
    (891
    )
    
    
    934Miscellaneous expense (income), net
    
    
    2,082
    
    
    
    883
    
    
    
    3,932
    
    
    
    (386
    )Income before taxes
    
    
    17,358
    
    
    
    7,406
    
    
    
    33,604
    
    
    
    18,175Income tax expense
    
    
    8,002
    
    
    
    2,808
    
    
    
    15,083
    
    
    
    7,342Income from continuing operations
    
    
    9,356
    
    
    
    4,598
    
    
    
    18,521
    
    
    
    10,833(Gain) loss from discontinued operations,
net of tax
    
    
    (9
    )
    
    
    58
    
    
    
    16
    
    
    
    214Net income
    
    
    9,365
    
    
    
    4,540
    
    
    
    18,505
    
    
    
    10,619Dividends on preferred stock
    
    
    223
    
    
    
    259
    
    
    
    450
    
    
    
    545Net income available to common shareholders
    
    $
    9,142
    
    
    $
    4,281
    
    
    $
    18,055
    
    
    $
    10,074Per common share dataBasic earnings:From continuing operations
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24From discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00$
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24Diluted earnings:From continuing operations
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24From discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00
    
    
    
    0.00$
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24Cash dividends declared
    
    $
    0.145
    
    
    $
    0.145
    
    
    $
    0.290
    
    
    $
    0.290
   3




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries  Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)ASSETSCurrent assetsCash and cash equivalents
    
    $
    13,390
    
    
    $
    12,025Accounts and trade notes receivable, net
    
    
    281,858
    
    
    
    245,369Note receivable from Ferro Finance Corporation
    
    
    28,442
    
    
    
    29,577Inventories
    
    
    316,783
    
    
    
    262,799Deferred income taxes
    
    
    24,454
    
    
    
    15,764Other receivables
    
    
    47,516
    
    
    
    33,419Other current assets
    
    
    6,332
    
    
    
    8,239Total current assets
    
    
    718,775
    
    
    
    607,192Other assetsProperty, plant and equipment, net
    
    
    534,761
    
    
    
    519,959Goodwill
    
    
    290,340
    
    
    
    291,070Amortizable intangible assets, net
    
    
    8,864
    
    
    
    9,071Deferred income taxes
    
    
    106,415
    
    
    
    100,935Other non-current assets
    
    
    111,779
    
    
    
    110,033Total assets
    
    $
    1,770,934
    
    
    $
    1,638,260LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesLoans payable and current portion of long-term debt
    
    $
    9,163
    
    
    $
    5,444Accounts payable
    
    
    293,539
    
    
    
    269,591Income taxes
    
    
    27,827
    
    
    
    Accrued payrolls
    
    
    33,157
    
    
    
    26,415Accrued expenses and other current liabilities
    
    
    103,482
    
    
    
    108,882Total current liabilities
    
    
    467,168
    
    
    
    410,332Other liabilitiesLong-term debt, less current portion
    
    
    561,790
    
    
    
    520,645Postretirement and pension liabilities
    
    
    143,404
    
    
    
    140,988Deferred income taxes
    
    
    12,542
    
    
    
    9,848Other non-current liabilities
    
    
    57,862
    
    
    
    56,644Total liabilities
    
    
    1,242,766
    
    
    
    1,138,457Minority interests
    
    
    9,988
    
    
    
    9,896Series A convertible preferred stock (approximates redemption value)
    
    
    12,764
    
    
    
    13,623Shareholders equityCommon stock
    
    
    52,323
    
    
    
    52,323Paid-in capital
    
    
    165,968
    
    
    
    166,391Retained earnings
    
    
    473,154
    
    
    
    468,190Accumulated other comprehensive income (loss)
    
    
    14,495
    
    
    
    (7,765
    )Common shares in treasury, at cost
    
    
    (200,524
    )
    
    
    (202,855
    )Total shareholders equity
    
    
    505,416
    
    
    
    476,284Total liabilities and shareholders equity
    
    $
    1,770,934
    
    
    $
    1,638,260
   4




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries  Condensed Consolidated Statement of Shareholders Equity and Comprehensive Income
 Accumulated
    
    
    TotalCommon Shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    Share-in Treasury
    
    
    Common
    
    
    Paid-in
    
    
    Retained
    
    
    Comprehensive
    
    
    holdersShares
    
    
    Amount
    
    
    Stock
    
    
    Capital
    
    
    Earnings
    
    
    Income (Loss)
    
    
    Equity(In thousands)Balances at December 31, 2007
    
    
    8,753
    
    
    $
    (202,855
    )
    
    $
    52,323
    
    
    $
    166,391
    
    
    $
    468,190
    
    
    $
    (7,765
    )
    
    $
    476,284Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,505
    
    
    
    
    
    
    
    18,505Other comprehensive income,
net of tax:Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,247
    
    
    
    21,247Postretirement benefit liability
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (414
    )
    
    
    (414
    )Raw material commodity
swap adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    455
    
    
    
    455Interest rate swap adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    606
    
    
    
    606Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,399Cash dividends:Common
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (12,586
    )
    
    
    
    
    
    
    (12,586
    )Preferred
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (450
    )
    
    
    
    
    
    
    (450
    )Income tax benefits
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Stock-based compensation
transactions
    
    
    (149
    )
    
    
    2,331
    
    
    
    
    
    
    
    (444
    )
    
    
    
    
    
    
    
    
    
    
    1,887Adjustment 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
    
    
    $
    505,416
   5




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##### Table of Contents



Ferro Corporation and Consolidated Subsidiaries  Condensed Consolidated Statements of Cash Flows
 Six months endedJune 30,2008
    
    
    2007(Dollars in thousands)Cash flows from operating activitiesNet income
    
    $
    18,505
    
    
    $
    10,619Depreciation and amortization
    
    
    38,244
    
    
    
    43,992Precious metals deposits
    
    
    
    
    
    
    70,073Accounts and trade notes receivable, inventories, and accounts payable
    
    
    (55,550
    )
    
    
    (26,190
    )Note receivable from Ferro Finance Corporation
    
    
    1,135
    
    
    
    (14,116
    )Other changes in current assets and liabilities, net
    
    
    14,394
    
    
    
    (7,367
    )Other adjustments, net
    
    
    (10,019
    )
    
    
    (7,149
    )Net cash provided by continuing operations
    
    
    6,709
    
    
    
    69,862Net cash used for discontinued operations
    
    
    (16
    )
    
    
    (45
    )Net cash provided by operating activities
    
    
    6,693
    
    
    
    69,817Cash flows from investing activitiesCapital expenditures for property, plant and equipment
    
    
    (34,572
    )
    
    
    (30,921
    )Proceeds from sale of assets and businesses
    
    
    310
    
    
    
    1,964Dividends received from affiliates
    
    
    336
    
    
    
    859Net cash used for investing activities
    
    
    (33,926
    )
    
    
    (28,098
    )Cash flows from financing activitiesNet borrowings (repayments) under short-term facilities
    
    
    3,478
    
    
    
    10,850Proceeds from revolving credit facility
    
    
    430,347
    
    
    
    410,295Proceeds from term loan facility
    
    
    
    
    
    
    55,000Principal payments on revolving credit facility
    
    
    (380,074
    )
    
    
    (507,649
    )Principal payments on term loan facility
    
    
    (7,927
    )
    
    
    (1,525
    )Debt issue costs paid
    
    
    
    
    
    
    (2,086
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    8,233Cash dividends paid
    
    
    (13,036
    )
    
    
    (13,041
    )Other financing activities
    
    
    (4,238
    )
    
    
    (1,325
    )Net cash provided by (used for) financing activities
    
    
    28,550
    
    
    
    (41,248
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    48
    
    
    
    339Increase in cash and cash equivalents
    
    
    1,365
    
    
    
    810Cash and cash equivalents at beginning of period
    
    
    12,025
    
    
    
    16,985Cash and cash equivalents at end of period
    
    $
    13,390
    
    
    $
    17,795Cash paid during the period for:Interest
    
    $
    26,493
    
    
    $
    28,680Income taxes
    
    $
    5,243
    
    
    $
    6,774
   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, 2008
 Fair Value Measurements Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of
Lease Classification or Measurement Under Statement 13 Effective Date of FASB Statement No. 157 Accounting for
Leases
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of
FASB Statements No. 87, 88, 106, and 132(R)
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
  7




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Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards
 3. Newly Issued Accounting Pronouncements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements  an
amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 Determination of the Useful Life
of Intangible Assets Goodwill and Other Intangible Assets
 4. Inventories
  June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Raw materials
    
    $
    98,720
    
    
    $
    74,659Work in process
    
    
    56,163
    
    
    
    41,640Finished goods
    
    
    161,900
    
    
    
    146,500Total
    
    $
    316,783
    
    
    $
    262,799
  5. Property, Plant and Equipment
   8




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##### Table of Contents



6. Financing and Long-term Debt
  June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)Loans payable to banks
    
    $
    5,040
    
    
    $
    954Current portion of long-term debt
    
    
    4,123
    
    
    
    4,490Total
    
    $
    9,163
    
    
    $
    5,444
  June 30,
    
    
    December 31,2008
    
    
    2007(Dollars in thousands)$200 million Senior Notes, 9.125%, due January 1, 2009 *
    
    $
    199,818
    
    
    $
    199,636Revolving credit facility
    
    
    64,130
    
    
    
    13,857Term loan facility
    
    
    294,023
    
    
    
    301,950Capitalized lease obligations
    
    
    7,258
    
    
    
    8,924Other notes
    
    
    684
    
    
    
    768565,913
    
    
    
    525,135Less current portion
    
    
    (4,123
    )
    
    
    (4,490
    )Total
    
    $
    561,790
    
    
    $
    520,645
 
 *
 Credit Rating
  Revolving Credit and Term Loan Facilities
   9




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##### Table of Contents



Senior Notes
   Receivable Sales Programs
    2008
    
    
    2007(Dollars in thousands)Trade accounts receivable sold to FFC
    
    $
    549,362
    
    
    $
    497,358Cash proceeds from FFC
    
    
    550,369
    
    
    
    482,838Trade accounts receivable collected and remitted to FFC and the conduits
    
    
    529,991
    
    
    
    482,138
  10




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##### Table of Contents



2008
    
    
    2007(Dollars in thousands)Trade accounts receivable sold to financial institutions
    
    $
    134,069
    
    
    $
    86,985Cash proceeds from financial institutions
    
    
    128,921
    
    
    
    86,113Trade accounts receivable collected and remitted to financial institutions
for programs where we provide collection and administrative services
    
    
    42,431
    
    
    
    42,844
 7. Financial Instruments
  Senior Notes.
 Revolving credit facility.
 Term loan facility.
  11




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##### Table of Contents



Level 1:
    
    Quoted market prices in active markets for identical assets or liabilities.Level 2:
    
    Observable market-based inputs or unobservable inputs that are corroborated by
market data.Level 3:
    
    Unobservable inputs that are not corroborated by market data.
  Fair Value MeasurementsJune 30,
    
    
    at June 30, 2008
    
    
    December 31,2008
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    2007(Dollars in thousands)AssetsForeign currency forward
contracts
    
    $
    50
    
    
    $
    
    
    
    $
    50
    
    
    $
    
    
    
    $
    16Precious metals forward
contracts
    
    
    7
    
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    755Total fair value
    
    $
    57
    
    
    $
    
    
    
    $
    57
    
    
    $
    
    
    
    $
    771LiabilitiesInterest rate swaps
    
    $
    (7,168
    )
    
    $
    
    
    
    $
    (7,168
    )
    
    $
    
    
    
    $
    (8,109
    )Foreign currency forward
contracts
    
    
    (618
    )
    
    
    
    
    
    
    (618
    )
    
    
    
    
    
    
    (284
    )Raw material commodity swaps
    
    
    (1,025
    )
    
    
    
    
    
    
    (1,025
    )
    
    
    
    
    
    
    (1,499
    )Precious metals forward
contracts
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    Total fair value
    
    $
    (8,821
    )
    
    $
    
    
    
    $
    (8,821
    )
    
    $
    
    
    
    $
    (9,892
    )
 Interest rate swaps.
 Foreign currency forward contracts.
 Raw material commodity swaps.
 Precious metals forward contracts.
  12




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##### Table of Contents



8. Income Taxes
    9. Contingent Liabilities
     13




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##### Table of Contents



10. Retirement Benefits
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    50
    
    
    $
    315
    
    
    $
    1,557
    
    
    $
    1,633
    
    
    $
    16
    
    
    $
    152Interest cost
    
    
    5,177
    
    
    
    5,029
    
    
    
    3,040
    
    
    
    2,318
    
    
    
    731
    
    
    
    859Expected return on plan assets
    
    
    (5,663
    )
    
    
    (5,129
    )
    
    
    (2,203
    )
    
    
    (1,837
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    25
    
    
    
    39
    
    
    
    25
    
    
    
    28
    
    
    
    (411
    )
    
    
    (293
    )Net amortization and deferral
    
    
    624
    
    
    
    1,473
    
    
    
    55
    
    
    
    145
    
    
    
    
    
    
    
    Curtailment and settlement effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    213
    
    
    $
    1,727
    
    
    $
    2,474
    
    
    $
    2,287
    
    
    $
    336
    
    
    $
    718
  U.S. Pension Plans
    
    
    Non-U.S. Pension Plans
    
    
    Other Benefit Plans2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Components of net periodic cost:Service cost
    
    $
    100
    
    
    $
    631
    
    
    $
    3,058
    
    
    $
    3,225
    
    
    $
    32
    
    
    $
    304Interest cost
    
    
    10,354
    
    
    
    10,057
    
    
    
    5,979
    
    
    
    4,578
    
    
    
    1,462
    
    
    
    1,718Expected return on plan assets
    
    
    (11,326
    )
    
    
    (10,252
    )
    
    
    (4,336
    )
    
    
    (3,628
    )
    
    
    
    
    
    
    Amortization of prior service cost
    
    
    50
    
    
    
    79
    
    
    
    49
    
    
    
    55
    
    
    
    (822
    )
    
    
    (586
    )Net amortization and deferral
    
    
    1,248
    
    
    
    2,949
    
    
    
    112
    
    
    
    286
    
    
    
    
    
    
    
    Curtailment and settlement effects
    
    
    
    
    
    
    250
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic benefit cost
    
    $
    426
    
    
    $
    3,714
    
    
    $
    4,862
    
    
    $
    4,516
    
    
    $
    672
    
    
    $
    1,436
   14




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11. Stock-Based Compensation
  2008
    
    
    2007(Dollars in thousands)Stock options
    
    $
    1,087
    
    
    $
    1,573Performance shares
    
    
    (178
    )
    
    
    615Deferred stock units
    
    
    267
    
    
    
    308Restricted shares
    
    
    172
    
    
    
    Total
    
    $
    1,348
    
    
    $
    2,496
  Weighted-
    
    
    Aggregate Grant
    
    
    RemainingNumber of
    
    
    Average Fair
    
    
    Date Fair Value
    
    
    Service orShares or Units
    
    
    Value per Share
    
    
    of Shares or
    
    
    PerformanceGranted
    
    
    or Unit
    
    
    Units Granted
    
    
    Period(Dollars in
    
    
    (In years)thousands)Stock options
    
    
    488,100
    
    
    $
    4.18
    
    
    $
    2,040
    
    
    
    3.7Performance shares
    
    
    77,825
    
    
    
    17.26
    
    
    
    1,343
    
    
    
    2.7Deferred stock units
    
    
    34,200
    
    
    
    16.69
    
    
    
    571
    
    
    
    0.7Restricted shares
    
    
    92,400
    
    
    
    17.22
    
    
    
    1,591
    
    
    
    2.7
  Common Sharesin Treasury
    
    
    Paid-inShares
    
    
    Amount
    
    
    Capital(In thousands)Stock options
    
    
    
    
    
    $
    324
    
    
    $
    1,404Performance shares, net
    
    
    36
    
    
    
    25
    
    
    
    (804
    )Deferred stock units
    
    
    (32,900
    )
    
    
    140
    
    
    
    Directors deferred compensation
    
    
    
    
    
    
    (397
    )
    
    
    397Preferred stock conversions
    
    
    (24,070
    )
    
    
    435
    
    
    
    Restricted shares
    
    
    (92,400
    )
    
    
    1,804
    
    
    
    (1,441
    )Total
    
    
    (149,334
    )
    
    $
    2,331
    
    
    $
    (444
    )
 Restricted Share Awards
   15




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##### Table of Contents



12. Restructuring and Cost Reduction Programs
        EmployeeTermination
    
    
    Other
    
    
    AssetBenefits
    
    
    Costs
    
    
    Impairment
    
    
    Total(Dollars in thousands)Balance, December 31, 2007
    
    $
    8,381
    
    
    $
    1,560
    
    
    $
    
    
    
    $
    9,941Restructuring charges
    
    
    9,110
    
    
    
    3,689
    
    
    
    439
    
    
    
    13,238Cash payments
    
    
    (9,563
    )
    
    
    (523
    )
    
    
    
    
    
    
    (10,086
    )Currency translation adjustment
    
    
    492
    
    
    
    211
    
    
    
    
    
    
    
    703Non-cash items
    
    
    (83
    )
    
    
    
    
    
    
    (439
    )
    
    
    (522
    )Balance, June 30, 2008
    
    $
    8,337
    
    
    $
    4,937
    
    
    $
    
    
    
    $
    13,274
  16




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##### Table of Contents



13. Discontinued Operations
  Three months ended June 30,
    
    
    Six months ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Pre-tax (income) losses
    
    $
    (15
    )
    
    $
    95
    
    
    $
    26
    
    
    $
    351Tax (expense) benefits
    
    
    (6
    )
    
    
    37
    
    
    
    10
    
    
    
    137Net of tax (income) losses
    
    $
    (9
    )
    
    $
    58
    
    
    $
    16
    
    
    $
    214
   17




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##### Table of Contents



14. Earnings per Share
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(In thousands, except per share amounts)Basic earnings per share computation:Net income available to common shareholders
    
    $
    9,142
    
    
    $
    4,281
    
    
    $
    18,055
    
    
    $
    10,074(Subtract) add: (Gain) loss from discontinued
operations
    
    
    (9
    )
    
    
    58
    
    
    
    16
    
    
    
    214$
    9,133
    
    
    $
    4,339
    
    
    $
    18,071
    
    
    $
    10,288Weighted-average common shares outstanding
    
    
    43,251
    
    
    
    42,906
    
    
    
    43,206
    
    
    
    42,807Basic earnings per share from continuing operations
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24Diluted earnings per share computation:Net income available to common shareholders
    
    $
    9,142
    
    
    $
    4,281
    
    
    $
    18,055
    
    
    $
    10,074(Subtract) add: (Gain) loss from discontinued
operations
    
    
    (9
    )
    
    
    58
    
    
    
    16
    
    
    
    214Plus: Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    9,133
    
    
    $
    4,339
    
    
    $
    18,071
    
    
    $
    10,288Weighted-average common shares outstanding
    
    
    43,251
    
    
    
    42,906
    
    
    
    43,206
    
    
    
    42,807Assumed conversion of convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Assumed satisfaction of performance share conditions
    
    
    65
    
    
    
    47
    
    
    
    70
    
    
    
    51Assumed satisfaction of deferred stock unit conditions
    
    
    11
    
    
    
    14
    
    
    
    7
    
    
    
    10Assumed exercise of stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted-average diluted shares outstanding
    
    
    43,327
    
    
    
    42,967
    
    
    
    43,283
    
    
    
    42,868Diluted earnings per share from continuing operations
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.42
    
    
    $
    0.24
 15. Comprehensive Income
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Net income
    
    $
    9,365
    
    
    $
    4,540
    
    
    $
    18,505
    
    
    $
    10,619Other comprehensive income, net of tax:Foreign currency translation adjustments
    
    
    (282
    )
    
    
    5,842
    
    
    
    21,247
    
    
    
    12,742Postretirement benefit liability adjustments
    
    
    (39
    )
    
    
    (266
    )
    
    
    (414
    )
    
    
    (3
    )Raw material commodity swap adjustments
    
    
    (393
    )
    
    
    (1,121
    )
    
    
    455
    
    
    
    (1,512
    )Interest rate swap adjustments
    
    
    3,209
    
    
    
    (751
    )
    
    
    606
    
    
    
    (751
    )Comprehensive income
    
    $
    11,860
    
    
    $
    8,244
    
    
    $
    40,399
    
    
    $
    21,095
  18




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##### Table of Contents



16. Reporting for Segments
    Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Performance Coatings
    
    $
    178,504
    
    
    $
    158,501
    
    
    $
    339,296
    
    
    $
    297,316Electronic Materials
    
    
    156,202
    
    
    
    108,823
    
    
    
    297,195
    
    
    
    221,767Color and Glass Performance Materials
    
    
    130,230
    
    
    
    109,920
    
    
    
    259,070
    
    
    
    215,620Polymer Additives
    
    
    98,715
    
    
    
    85,160
    
    
    
    191,026
    
    
    
    167,673Specialty Plastics
    
    
    63,609
    
    
    
    69,797
    
    
    
    125,402
    
    
    
    136,758Other Businesses
    
    
    23,136
    
    
    
    21,457
    
    
    
    45,663
    
    
    
    44,229Total net sales
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    1,257,652
    
    
    $
    1,083,363
  Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)Performance Coatings
    
    $
    12,785
    
    
    $
    10,815
    
    
    $
    22,265
    
    
    $
    21,498Electronic Materials
    
    
    17,683
    
    
    
    4,929
    
    
    
    26,432
    
    
    
    11,012Color and Glass Performance Materials
    
    
    15,547
    
    
    
    12,668
    
    
    
    30,983
    
    
    
    27,735Polymer Additives
    
    
    4,599
    
    
    
    4,053
    
    
    
    7,318
    
    
    
    7,159Specialty Plastics
    
    
    3,237
    
    
    
    4,236
    
    
    
    4,724
    
    
    
    7,375Other Businesses
    
    
    915
    
    
    
    3,698
    
    
    
    4,760
    
    
    
    7,389Total segment income
    
    
    54,766
    
    
    
    40,399
    
    
    
    96,482
    
    
    
    82,168Unallocated corporate expenses
    
    
    12,573
    
    
    
    17,258
    
    
    
    19,627
    
    
    
    31,004Restructuring charges
    
    
    9,031
    
    
    
    332
    
    
    
    13,238
    
    
    
    1,863Other expense, net
    
    
    15,804
    
    
    
    15,403
    
    
    
    30,013
    
    
    
    31,126Income before taxes from continuing
operations
    
    $
    17,358
    
    
    $
    7,406
    
    
    $
    33,604
    
    
    $
    18,175
  19




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##### Table of Contents



Three months ended
    
    
    Six months endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)United States
    
    $
    277,902
    
    
    $
    239,612
    
    
    $
    530,176
    
    
    $
    478,018International
    
    
    372,494
    
    
    
    314,046
    
    
    
    727,476
    
    
    
    605,345Total net sales
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    1,257,652
    
    
    $
    1,083,363
  20




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 Overview
      Outlook
     21




---



##### Table of Contents



Results of Operations
 Comparison of the three months ended June 30, 2008 and 2007
 Three months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands,except per share amounts)Net sales
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    96,738
    
    
    
    17.5
    %Cost of sales
    
    
    527,012
    
    
    
    446,131
    
    
    
    80,881
    
    
    
    18.1
    %Gross profit
    
    
    123,384
    
    
    
    107,527
    
    
    
    15,857
    
    
    
    14.7
    %Gross profit percentage
    
    
    19.0
    %
    
    
    19.4
    %Selling, general and administrative expenses
    
    
    81,191
    
    
    
    84,386
    
    
    
    (3,195
    )
    
    
    (3.8
    %)Restructuring charges
    
    
    9,031
    
    
    
    332
    
    
    
    8,699
    
    
    
    2,620.2
    %Other expense (income):Interest expense
    
    
    13,214
    
    
    
    14,286
    
    
    
    (1,072
    )
    
    
    (7.5
    %)Interest earned
    
    
    (142
    )
    
    
    (189
    )
    
    
    47
    
    
    
    (24.9
    %)Foreign currency losses, net
    
    
    650
    
    
    
    423
    
    
    
    227
    
    
    
    53.7
    %Miscellaneous expense, net
    
    
    2,082
    
    
    
    883
    
    
    
    1,199
    
    
    
    135.8
    %Income before taxes
    
    
    17,358
    
    
    
    7,406
    
    
    
    9,952
    
    
    
    134.4
    %Income tax expense
    
    
    8,002
    
    
    
    2,808
    
    
    
    5,194
    
    
    
    185.0
    %Income from continuing operations
    
    
    9,356
    
    
    
    4,598
    
    
    
    4,758
    
    
    
    103.5
    %(Gain) loss on disposal of discontinued
operations, net of tax
    
    
    (9
    )
    
    
    58
    
    
    
    (67
    )
    
    
    (115.5
    %)Net income
    
    $
    9,365
    
    
    $
    4,540
    
    
    $
    4,825
    
    
    
    106.3
    %Diluted earnings per share
    
    $
    0.21
    
    
    $
    0.10
    
    
    $
    0.11
    
    
    
    110.0
    %
      22




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##### Table of Contents



Three months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesPerformance Coatings
    
    $
    178,504
    
    
    $
    158,501
    
    
    $
    20,003
    
    
    
    12.6
    %Electronic Materials
    
    
    156,202
    
    
    
    108,823
    
    
    
    47,379
    
    
    
    43.5
    %Color & Glass Performance Materials
    
    
    130,230
    
    
    
    109,920
    
    
    
    20,310
    
    
    
    18.5
    %Polymer Additives
    
    
    98,715
    
    
    
    85,160
    
    
    
    13,555
    
    
    
    15.9
    %Specialty Plastics
    
    
    63,609
    
    
    
    69,797
    
    
    
    (6,188
    )
    
    
    (8.9
    %)Other Businesses
    
    
    23,136
    
    
    
    21,457
    
    
    
    1,679
    
    
    
    7.8
    %Total segment sales
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    96,738
    
    
    
    17.5
    %Segment Operating IncomePerformance Coatings
    
    $
    12,785
    
    
    $
    10,815
    
    
    $
    1,970
    
    
    
    18.2
    %Electronic Materials
    
    
    17,683
    
    
    
    4,929
    
    
    
    12,754
    
    
    
    258.8
    %Color & Glass Performance Materials
    
    
    15,547
    
    
    
    12,668
    
    
    
    2,879
    
    
    
    22.7
    %Polymer Additives
    
    
    4,599
    
    
    
    4,053
    
    
    
    546
    
    
    
    13.5
    %Specialty Plastics
    
    
    3,237
    
    
    
    4,236
    
    
    
    (999
    )
    
    
    (23.6
    %)Other Businesses
    
    
    915
    
    
    
    3,698
    
    
    
    (2,783
    )
    
    
    (75.3
    %)Total segment operating income
    
    $
    54,766
    
    
    $
    40,399
    
    
    $
    14,367
    
    
    
    35.6
    %
 Performance Coatings Segment Results.
 Electronic Materials Segment Results.
  23




---



##### Table of Contents



Color and Glass Performance Materials Segment Results.
 Polymer Additives Segment Results.
 Specialty Plastics Segment Results.
 Other Businesses Segment Results.
 Three months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    277,902
    
    
    $
    239,612
    
    
    $
    38,290
    
    
    
    16.0
    %International
    
    
    372,494
    
    
    
    314,046
    
    
    
    58,448
    
    
    
    18.6
    %Total
    
    $
    650,396
    
    
    $
    553,658
    
    
    $
    96,738
    
    
    
    17.5
    %
   24




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##### Table of Contents



Comparison of the six months ended June 30, 2008 and 2007
 Six months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands,except per share amounts)Net sales
    
    $
    1,257,652
    
    
    $
    1,083,363
    
    
    $
    174,289
    
    
    
    16.1
    %Cost of sales
    
    
    1,020,949
    
    
    
    869,056
    
    
    
    151,893
    
    
    
    17.5
    %Gross profit
    
    
    236,703
    
    
    
    214,307
    
    
    
    22,396
    
    
    
    10.5
    %Gross profit percentage
    
    
    18.8
    %
    
    
    19.8
    %Selling, general and administrative expenses
    
    
    159,848
    
    
    
    163,143
    
    
    
    (3,295
    )
    
    
    (2.0
    %)Restructuring charges
    
    
    13,238
    
    
    
    1,863
    
    
    
    11,375
    
    
    
    610.6
    %Other expense (income):Interest expense
    
    
    27,243
    
    
    
    31,732
    
    
    
    (4,489
    )
    
    
    (14.1
    %)Interest earned
    
    
    (271
    )
    
    
    (1,154
    )
    
    
    883
    
    
    
    (76.5
    %)Foreign currency (gains) losses, net
    
    
    (891
    )
    
    
    934
    
    
    
    (1,825
    )
    
    
    (195.4
    %)Miscellaneous expense (income), net
    
    
    3,932
    
    
    
    (386
    )
    
    
    4,318
    
    
    
    (1,118.7
    %)Income before taxes
    
    
    33,604
    
    
    
    18,175
    
    
    
    15,429
    
    
    
    84.9
    %Income tax expense
    
    
    15,083
    
    
    
    7,342
    
    
    
    7,741
    
    
    
    105.4
    %Income from continuing operations
    
    
    18,521
    
    
    
    10,833
    
    
    
    7,688
    
    
    
    71.0
    %Loss on disposal of discontinued operations, net of tax
    
    
    16
    
    
    
    214
    
    
    
    (198
    )
    
    
    (92.5
    %)Net income
    
    $
    18,505
    
    
    $
    10,619
    
    
    $
    7,886
    
    
    
    74.3
    %Diluted earnings per share
    
    $
    0.42
    
    
    $
    0.24
    
    
    $
    0.18
    
    
    
    75.0
    %
      25




---



##### Table of Contents



Six months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Segment SalesPerformance Coatings
    
    $
    339,296
    
    
    $
    297,316
    
    
    $
    41,980
    
    
    
    14.1
    %Electronic Materials
    
    
    297,195
    
    
    
    221,767
    
    
    
    75,428
    
    
    
    34.0
    %Color & Glass Performance Materials
    
    
    259,070
    
    
    
    215,620
    
    
    
    43,450
    
    
    
    20.2
    %Polymer Additives
    
    
    191,026
    
    
    
    167,673
    
    
    
    23,353
    
    
    
    13.9
    %Specialty Plastics
    
    
    125,402
    
    
    
    136,758
    
    
    
    (11,356
    )
    
    
    (8.3
    %)Other Businesses
    
    
    45,663
    
    
    
    44,229
    
    
    
    1,434
    
    
    
    3.2
    %Total segment sales
    
    $
    1,257,652
    
    
    $
    1,083,363
    
    
    $
    174,289
    
    
    
    16.1
    %Segment Operating IncomePerformance Coatings
    
    $
    22,265
    
    
    $
    21,498
    
    
    $
    767
    
    
    
    3.6
    %Electronic Materials
    
    
    26,432
    
    
    
    11,012
    
    
    
    15,420
    
    
    
    140.0
    %Color & Glass Performance Materials
    
    
    30,983
    
    
    
    27,735
    
    
    
    3,248
    
    
    
    11.7
    %Polymer Additives
    
    
    7,318
    
    
    
    7,159
    
    
    
    159
    
    
    
    2.2
    %Specialty Plastics
    
    
    4,724
    
    
    
    7,375
    
    
    
    (2,651
    )
    
    
    (35.9
    %)Other Businesses
    
    
    4,760
    
    
    
    7,389
    
    
    
    (2,629
    )
    
    
    (35.6
    %)Total segment operating income
    
    $
    96,482
    
    
    $
    82,168
    
    
    $
    14,314
    
    
    
    17.4
    %
 Performance Coatings Segment Results.
 Electronic Materials Segment Results.
  26




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##### Table of Contents



Color and Glass Performance Materials Segment Results.
 Polymer Additives Segment Results.
 Specialty Plastics Segment Results.
 Other Businesses Segment Results.
 Six months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Geographic RevenuesUnited States
    
    $
    530,176
    
    
    $
    478,018
    
    
    $
    52,158
    
    
    
    10.9
    %International
    
    
    727,476
    
    
    
    605,345
    
    
    
    122,131
    
    
    
    20.2
    %Total
    
    $
    1,257,652
    
    
    $
    1,083,363
    
    
    $
    174,289
    
    
    
    16.1
    %
   27




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##### Table of Contents



Summary of Cash Flows for the six months ended June 30, 2008 and 2007
 Six months endedJune 30,2008
    
    
    2007
    
    
    $ Change
    
    
    % Change(Dollars in thousands)Net cash provided by operating activities
    
    $
    6,693
    
    
    $
    69,817
    
    
    $
    (63,124
    )
    
    
    (90.4
    %)Net cash used for investing activities
    
    
    (33,926
    )
    
    
    (28,098
    )
    
    
    (5,828
    )
    
    
    20.7
    %Net cash provided by (used for) financing activities
    
    
    28,550
    
    
    
    (41,248
    )
    
    
    69,798
    
    
    
    (169.2
    %)Effect of
exchange rate changes on cash and cash equivalents
    
    
    48
    
    
    
    339
    
    
    
    (291
    )
    
    
    (85.8
    %)Increase in cash and cash equivalents
    
    $
    1,365
    
    
    $
    810
    
    
    $
    555
    
    
    
    68.5
    %
    Capital Resources and Liquidity
 Credit Rating
  Revolving Credit and Term Loan Facility
    28




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##### Table of Contents



Senior Notes and Debentures
   Off Balance Sheet Arrangements
 Receivable Sales Programs.
   Consignment and Customer Arrangements for Precious Metals.
 Bank Guarantees and Standby Letters of Credit.
 Other Financing Arrangements
  Liquidity Requirement
   29




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##### Table of Contents



Critical Accounting Policies and Their Application
  Newly Adopted Accounting Standards
 Fair Value Measurements Application of FASB Statement No. 157 to FASB
Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for
Purposes of Lease Classification or Measurement Under Statement 13 Effective Date of FASB Statement No. 157 Accounting for Leases
 Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of
FASB Statements No. 87, 88, 106, and 132(R)
 The Fair Value Option for Financial
Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115
 Accounting for
Income Tax Benefits of Dividends on Share-Based Payment Awards
  30




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##### Table of Contents



Newly Issued Accounting Pronouncements
 Business Combinations Noncontrolling Interests in Consolidated Financial Statements -
an amendment of ARB No. 51
 Disclosures about Derivative Instruments and
Hedging Activities  an amendment of FASB Statement No. 133
 Determination of the Useful Life
of Intangible Assets Goodwill and Other Intangible Assets
 Risk Factors
   31




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Item 3. Quantitative and Qualitative Disclosures About Market Risk
      32




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##### Table of Contents



June 30,
    
    
    December 31,2008
    
    
    2007(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
    
    $
    3,294
    
    
    $
    2,636Fixed-rate debt:Carrying amount
    
    $
    200,502
    
    
    $
    200,404Fair value
    
    $
    204,129
    
    
    $
    205,705Change in fair value from 1% increase in interest rate
    
    $
    (991
    )
    
    $
    (1,929
    )Change in fair value from 1% decrease in interest rate
    
    $
    1,000
    
    
    $
    1,957Interest rate swaps:Notional amount
    
    $
    150,000
    
    
    $
    150,000Carrying amount and fair value
    
    $
    (7,168
    )
    
    $
    (8,109
    )Change in fair value from 1% increase in interest rate
    
    $
    4,080
    
    
    $
    5,000Change in fair value from 1% decrease in interest rate
    
    $
    (4,202
    )
    
    $
    (5,181
    )Foreign currency forward contracts:Notional amount
    
    $
    132,815
    
    
    $
    142,638Carrying amount and fair value
    
    $
    (568
    )
    
    $
    (268
    )Change in fair value from 10% appreciation of U.S. dollar
    
    $
    1,456
    
    
    $
    (1,402
    )Change in fair value from 10% depreciation of U.S. dollar
    
    $
    (1,779
    )
    
    $
    1,714Raw material commodity swaps:Notional amount (in metric tons of base metals)
    
    
    853
    
    
    
    1,171Carrying amount and fair value
    
    $
    (1,025
    )
    
    $
    (1,499
    )Change in fair value from 10% change in forward prices
    
    $
    329
    
    
    $
    507Precious metals forward contracts:Notional amount (in troy ounces)
    
    
    225
    
    
    
    159,648Carrying amount and fair value
    
    $
    (3
    )
    
    $
    755Change in fair value from 10% change in forward prices
    
    $
    23
    
    
    $
    612
  33




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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
   34




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
       35




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##### Table of Contents



Item 1A. Risk Factors
  We depend on reliable sources of raw materials, energy, petroleum-based products and other supplies
at a reasonable cost, but the availability of these materials and supplies could be interrupted
and/or their prices could escalate and adversely affect our sales and profitability.
  The markets for our products are highly competitive and subject to intense price competition, and
that could adversely affect our sales and earnings performance.
  We strive to improve operating margins through sales growth, price increases, productivity gains,
improved purchasing techniques and restructuring activities, but we may not achieve the desired
improvements.
  We sell our products into industries where demand has been unpredictable, cyclical or heavily
influenced by consumer spending.
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##### Table of Contents



The global scope of our operations exposes us to risks related to currency conversion rates and
changing economic, social and political conditions around the world.
  
    
    new and different legal and regulatory requirements and enforcement mechanisms in local jurisdictions;
    
    U.S. export licenses may be difficult to obtain and we may be subject to export duties or import
quotas or other trade barriers;
    
    increased costs of, and decreased availability of, transportation or shipping;
    
    credit risk and financial conditions of local customers and distributors;
    
    risk of nationalization of private enterprises by foreign governments or restrictions on investments;
    
    potentially adverse tax consequences, including imposition or increase of withholding and other taxes
on remittances and other payments by subsidiaries; and
    
    local political, economic and social conditions, including the possibility of hyperinflationary
conditions and political instability in certain countries.
  We have a growing presence in the Asia-Pacific region where it can be difficult for a U.S.-based
company, such as Ferro, to compete lawfully with local competitors.
  Regulatory authorities in the U.S., European Union and elsewhere are taking a much more aggressive
approach to regulating hazardous materials, and those regulations could affect sales of our
products.
  Our operations are subject to operating hazards and, as a result, to stringent environmental,
health and safety regulations, and compliance with those regulations could require us to make
significant investments.
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##### Table of Contents



We depend on external financial resources, and any interruption in access to capital markets or
borrowings could adversely affect our financial condition.
  Interest rates on some of our borrowings are variable, and our borrowing costs could be affected
adversely by interest rate increases.
  Many of our assets are encumbered by liens that have been granted to lenders, and those liens
affect our flexibility to dispose of property and businesses.
  We are subject to a number of restrictive covenants under our credit facilities, and those
covenants could affect our flexibility to fund strategic initiatives.
   38




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##### Table of Contents



We have significant deferred tax assets, and our ability to utilize these assets will depend on our
future performance.
  We are a defendant in several lawsuits that could have an adverse effect on our financial condition
and/or financial performance, unless they are successfully resolved.
  Our businesses depend on a continuous stream of new products, and failure to introduce new products
could affect our sales and profitability.
  We are subject to stringent labor and employment laws in certain jurisdictions in which we operate,
we are party to various collective bargaining arrangements, and our relationship with our employees
could deteriorate, which could adversely impact our operations.
   Employee benefit costs, especially postretirement costs, constitute a significant element of our
annual expenses, and funding these costs could adversely affect our financial condition.
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##### Table of Contents



Our restructuring initiatives may not provide sufficient cost savings to justify their expense.
  We are exposed to intangible asset risk.
  We have in the past identified material weaknesses in our internal controls, and the identification
of any material weaknesses in the future could affect our ability to ensure timely and reliable
financial reports.
       40




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##### Table of Contents



We are exposed to risks associated with acts of God, terrorists and others, as well as fires,
explosions, wars, riots, accidents, embargoes, natural disasters, strikes and other work stoppages,
quarantines and other governmental actions, and other events or circumstances that are beyond our
control.
    41




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##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  For
    
    
    Withheld AuthoritySandra Austin Crayton
    
    
    38,495,034
    
    
    
    3,346,269Richard J. Hipple
    
    
    39,028,226
    
    
    
    2,813,077William B. Lawrence
    
    
    37,861,693
    
    
    
    3,979,610Dennis W. Sullivan
    
    
    37,787,345
    
    
    
    4,053,958
  
 Item 5. Other Information
  
 Item 6. Exhibits
 The exhibits listed in the attached Exhibit Index are filed pursuant to Item 6 of Form 10-Q.
  42




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##### Table of Contents



SIGNATURES
  FERRO CORPORATION
(Registrant)Date: August 5, 2008/s/ James F. KirschJames F. KirschChairman, President and Chief Executive Officer
(Principal Executive Officer)Date: August 5, 2008/s/ Sallie B. BaileySallie B. BaileyVice President and Chief Financial Officer
(Principal Financial Officer)  43




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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 3(a) to Ferro
Corporations Annual Report on Form 10-K for the year ended December 31, 2003, which Exhibit
is incorporated here by reference.)3.2
    
    Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro
Corporation filed December 28, 1994. (Reference is made to Exhibit 3(b) to Ferro Corporations
Annual Report on Form 10-K for the year ended December 31, 2003, which Exhibit is incorporated
here by reference.)3.3
    
    Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro filed
June 19, 1998. (Reference is made to Exhibit 3(c) to Ferro Corporations Annual Report on Form
10-K for the year ended December 31, 2003, which Exhibit is incorporated here by reference.)3.4
    
    Ferro Corporation Code of Regulations. (Reference is made to Exhibit 3.01 to Ferro
Corporations Current Report on Form 8-K, filed November 8, 2006, which Exhibit is
incorporated here by reference.)4
    
    Instruments defining rights of security holders, including indentures4.1
    
    The rights of the holders of Ferros Debt Securities issued and to be issued pursuant to an
Indenture between Ferro and J. P. Morgan Trust Company, National Association
(successor-in-interest to Chase Manhattan Trust Company, National Association) as Trustee, are
described in the Indenture, dated March 25, 1998. (Reference is made to Exhibit 4(b) to Ferro
Corporations Annual Report on Form 10-K for the year ended December 31, 2003, which Exhibit
is incorporated here by reference.)4.2
    
    Pledge and Security Agreement, dated as of June 6, 2006, made by Ferro Corporation and each
U.S. Subsidiary, as Grantors, in favor of J. P. Morgan Trust Company, National Association, as
Trustee, for the benefit of the Trustee and the Holders under the Indentures. (Reference is
made to Exhibit 10.3 to Ferro Corporations Current Report on Form 8-K, filed June 12, 2006,
which Exhibit is incorporated here by reference.)4.3
    
    Collateral Sharing Agreement, dated as of June 6, 2006, among National City Bank, as
Collateral Agent under the Credit Agreement, J.P. Morgan Trust Company, National Association,
as Trustee under the Indentures, and Ferro Corporation and each other Person listed on the
signature pages, as Obligors. (Reference is made to Exhibit 10.4 to Ferro Corporations
Current Report on Form 8-K, filed June 12, 2006, which Exhibit is incorporated here by
reference.)4.4
    
    Officers Certificate dated December 20, 2001, pursuant to Section 301 of the Indenture dated
as of March 25, 1998, between the Company and J. P. Morgan Trust Company, National Association
(the successor-in-interest to Chase Manhattan Trust Company, National Association), as Trustee
(excluding exhibits thereto). (Reference is made to Exhibit 4.2 to Ferro Corporations Annual
Report on Form 10-K for the year ended December 31, 2006, which Exhibit is incorporated here
by reference.)4.5
    
    Form of Global Note
(91/8% Senior Notes due 2009). (Reference is made to Exhibit 4.3 to Ferro
Corporations Annual Report on Form 10-K for the year ended December 31, 2006, 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.
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##### Table of Contents



10
    
    Material Contracts10.1
    
    Purchase Agreement, dated as of April 1, 2008, among Ferro Color & Glass Corporation, Ferro
Pfanstiehl Laboratories, Inc. and Ferro Corporation. (Reference is made to Exhibit 10.1 to
Ferro Corporations Current Report on Form 8-K, filed April 7, 2008, which Exhibit is
incorporated here by reference.)10.2
    
    Amended and Restated Purchase and Contribution Agreement, dated as of April 1, 2008, 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 April 7, 2008, which Exhibit is incorporated
here by reference.)10.3
    
    Second Amended and Restated Receivables Purchase Agreement, dated as of April 1, 2008, among
Ferro Finance Corporation, as Seller, and CAFCO, LLC, as the Investor, and Citibank, N.A., as
a Bank, Citicorp North America, Inc., as the Agent, Ferro Color & Glass Corporation and Ferro
Pfanstiehl Laboratories, Inc., each as an Originator, and Ferro Corporation, as Originator and
Collection Agent and Originator. (Reference is made to Exhibit 10.3 to Ferro Corporations
Current Report on Form 8-K, filed April 7, 2008, which Exhibit is incorporated here by
reference.)10.4
    
    Amendment No. 1 to Second Amended and Restated Receivables Purchase Agreement, dated as of
June 3, 2008, among Ferro Finance Corporation, as Seller; CAFCO, LLC, as the Investor;
Citibank, N.A., as a Bank; Citicorp North America, Inc., as the Agent; Ferro Color & Glass
Corporation and Ferro Pfanstiehl Laboratories, Inc., each as an Originator; and Ferro
Corporation, as Originator and Collection Agent. (Reference is made to Exhibit 10.1 to Ferro
Corporations Current Report on Form 8-K, filed June 16, 2008, which Exhibit is incorporated
here by reference.)10.5
    
    Amendment No. 2 to Second Amended and Restated Receivables Purchase Agreement, dated as of
June 10, 2008, among Ferro Finance Corporation, as Seller; CAFCO, LLC, as the Investor;
Citibank, N.A., as a Bank; Citicorp North America, Inc., as the Agent; Ferro Color & Glass
Corporation and Ferro Pfanstiehl Laboratories, Inc., each as an Originator; and Ferro
Corporation, as Originator and Collection Agent. (Reference is made to Exhibit 10.2 to Ferro
Corporations Current Report on Form 8-K, filed June 16, 2008, which Exhibit is incorporated
here by reference.)10.6
    
    Third Amendment to Amended and Restated Credit Agreement, dated June 12, 2008, among Ferro
Corporation; Credit Suisse, Cayman Islands Branch, as term loan administrative agent; National
City Bank, as revolving loan administrative agent. (Reference is made to Exhibit 10.1 to Ferro
Corporations Current Report on Form 8-K, filed June 18, 2008, 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.
  45