PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations



	Three Months Ended				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016		2018		2017		2018		2017
	(Dollars in thousands, except per share amounts)								(Dollars in thousands, except per share amounts)
Net sales	$	350,012	$	288,527	$	1,019,199	$	863,955	$	416,239	$	348,632	$	821,771	$	669,187
Cost of sales		246,396		199,546		708,447		592,372		289,594		240,290		576,440		462,051
Gross profit		103,616		88,981		310,752		271,583		126,645		108,342		245,331		207,136
Selling, general and administrative expenses		65,485		55,588		186,957		166,105		70,124		62,981		143,216		122,427
Restructuring and impairment charges		1,471		26		7,713		1,694		3,768		3,224		7,874		6,242
Other expense (income):
Interest expense		7,248		5,304		19,921		15,579		8,200		6,449		16,162		12,673
Interest earned		(201)		(214)		(556)		(414)		(186)		(175)		(387)		(355)
Foreign currency losses, net		1,021		867		5,575		2,867		2,660		4,868		4,500		4,554
Loss on extinguishment of debt		—		—		3,905		—		3,226		—		3,226		3,905
Miscellaneous (income) expense, net		(1,726)		705		(2,264)		(2,079)		(1,372)		1,071		(597)		(1,493)
Income before income taxes		30,318		26,705		89,501		87,831		40,225		29,924		71,337		59,183
Income tax expense		7,353		6,157		23,186		22,659		10,364		8,695		17,878		15,833
Income from continuing operations		22,965		20,548		66,315		65,172
Loss from discontinued operations, net of income taxes		—		(29,222)		—		(64,464)
Net income (loss)		22,965		(8,674)		66,315		708
Net income										29,861		21,229		53,459		43,350
Less: Net income attributable to noncontrolling interests		148		210		575		589		193		204		400		427
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119
Earnings (loss) per share attributable to Ferro Corporation common shareholders:
Basic earnings (loss):
Continuing operations	$	0.27	$	0.24	$	0.79	$	0.78
Discontinued operations		—		(0.35)		—		(0.77)
	$	0.27	$	(0.11)	$	0.79	$	0.01
Diluted earnings (loss):
Continuing operations	$	0.27	$	0.24	$	0.77	$	0.77
Discontinued operations		—		(0.35)		—		(0.77)
	$	0.27	$	(0.11)	$	0.77	$	—
Net income attributable to Ferro Corporation common shareholders									$	29,668	$	21,025	$	53,059	$	42,923
Earnings per share attributable to Ferro Corporation common shareholders:
Basic earnings per share									$	0.35	$	0.25	$	0.63	$	0.51
Diluted earnings per share									$	0.35	$	0.25	$	0.62	$	0.50

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income ~~(Loss)~~

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)
Net income (loss)

$
22,965

$
(8,674)

$
66,315

$
708
Other comprehensive income (loss), net of income tax:

Foreign currency translation (loss) income

(2,996)

2,680

18,081

(2,267)
Cash flow hedging instruments, unrealized gain

104

—

104

—
Postretirement benefit liabilities (loss) gain

(33)

(2)

(21)

293
Other comprehensive (loss) income, net of income tax

(2,925)

2,678

18,164

(1,974)
Total comprehensive income (loss)

20,040

(5,996)

84,479

(1,266)
Less: Comprehensive income attributable to noncontrolling interests

294

191

837

450
Comprehensive income (loss) attributable to Ferro Corporation

$
19,746

$
(6,187)

$
83,642

$
(1,716)



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
	(Dollars in thousands)
Net income	$	29,861	$	21,229	$	53,459	$	43,350
Other comprehensive income, net of income tax:
Foreign currency translation (loss) income		(30,315)		13,866		(24,528)		21,077
Cash flow hedging instruments, unrealized (loss) gain		(1,336)		—		(22)		—
Postretirement benefit liabilities (loss) gain		10		16		17		12
Other comprehensive (loss) income, net of income tax		(31,641)		13,882		(24,533)		21,089
Total comprehensive (loss) income		(1,780)		35,111		28,926		64,439
Less: Comprehensive (loss) income attributable to noncontrolling interests		(114)		280		221		543
Comprehensive (loss) income attributable to Ferro Corporation	$	(1,666)	$	34,831	$	28,705	$	63,896

See accompanying notes to condensed consolidated financial statements.

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Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



		September 30,		December 31,			June 30,		December 31,
		2017		2016			2018		2017
		(Dollars in thousands)					(Dollars in thousands)
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents		$	52,211	$	45,582		$	44,886	$	63,551
Accounts receivable, net			337,887		259,687			395,858		354,416
Inventories			286,848		229,847			381,763		324,180
Other receivables			50,057		37,814			66,519		67,137
Other current assets			19,533		9,087			25,765		16,448
Total current assets			746,536		582,017			914,791		825,732
Other assets
Property, plant and equipment, net			288,774		262,026			334,997		321,742
Goodwill			197,819		148,296			199,172		195,369
Intangible assets, net			190,985		137,850			179,154		187,616
Deferred income taxes			106,081		106,454			109,404		108,025
Other non-current assets			45,472		47,126			36,294		43,718
Total assets		$	1,575,667	$	1,283,769		$	1,773,812	$	1,682,202
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	18,477	$	17,310		$	25,739	$	25,136
Accounts payable			155,542		127,655			201,380		211,711
Accrued payrolls			40,950		35,859			39,904		48,201
Accrued expenses and other current liabilities			85,927		65,203			75,114		70,151
Total current liabilities			300,896		246,027			342,137		355,199
Other liabilities
Long-term debt, less current portion			673,464		557,175			815,015		726,491
Postretirement and pension liabilities			170,199		162,941			161,179		166,680
Other non-current liabilities			83,995		62,594			71,769		77,152
Total liabilities			1,228,554		1,028,737			1,390,100		1,325,522
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 83.8 million and 83.4 million shares outstanding at September 30, 2017, and December 31, 2016, respectively			93,436		93,436
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 84.1 million and 84.0 million shares outstanding at June 30, 2018, and December 31, 2017, respectively								93,436		93,436
Paid-in capital			303,428		306,566			296,242		302,158
Retained earnings			180,430		114,690			228,944		171,744
Accumulated other comprehensive loss			(88,741)		(106,643)			(99,822)		(75,468)
Common shares in treasury, at cost			(151,900)		(160,936)			(144,172)		(147,056)
Total Ferro Corporation shareholders’ equity			336,653		247,113			374,628		344,814
Noncontrolling interests			10,460		7,919			9,084		11,866
Total equity			347,113		255,032			383,712		356,680
Total liabilities and equity		$	1,575,667	$	1,283,769		$	1,773,812	$	1,682,202

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity



	Ferro Corporation Shareholders															Ferro Corporation Shareholders
	Common Shares									Accumulated						Common Shares									Accumulated
	in Treasury									Other		Non-				in Treasury									Other		Non-
				Common		Paid-in		Retained		Comprehensive		controlling		Total					Common		Paid-in		Retained		Comprehensive		controlling		Total
	Shares	Amount		Stock		Capital		Earnings		(Loss)		Interests		Equity		Shares	Amount		Stock		Capital		Earnings		(Loss)		Interests		Equity
	(In thousands)															(In thousands)
Balances at December 31, 2015	9,431	$	(166,020)	$	93,436	$	314,854	$	135,507	$	(61,318)	$	7,822	$	324,281
Net income	—		—		—		—		119		—		589		708
Other comprehensive (loss)	—		—		—		—		—		(1,835)		(139)		(1,974)
Purchase of treasury stock	1,175		(11,429)		—		—		—		—		—		(11,429)
Stock-based compensation transactions	(556)		15,095		—		(10,015)		—		—		—		5,080
Distributions to noncontrolling interests	—		—		—		—		—		—		(502)		(502)
Balances at September 30, 2016	10,050		(162,354)		93,436		304,839		135,626		(63,153)		7,770		316,164

Balances at December 31, 2016	9,996		(160,936)		93,436		306,566		114,690		(106,643)		7,919		255,032	9,996	$	(160,936)	$	93,436	$	306,566	$	114,690	$	(106,643)	$	7,919	$	255,032
Net income	—		—		—		—		65,740		—		575		66,315	—		—		—		—		42,923		—		427		43,350
Other comprehensive income	—		—		—		—		—		17,902		262		18,164	—		—		—		—		—		20,973		116		21,089
Stock-based compensation transactions	(359)		9,036		—		(3,138)		—		—		—		5,898	(255)		6,656		—		(2,761)		—		—		—		3,895
Distributions to noncontrolling interests																—		—		—		—		—		—		(474)		(474)
Balances at June 30, 2017																9,741		(154,280)		93,436		303,805		157,613		(85,670)		7,988		322,892

Balances at December 31, 2017																9,386		(147,056)		93,436		302,158		171,744		(75,468)		11,866		356,680
Net income																—		—		—		—		53,059		—		400		53,459
Other comprehensive loss																—		—		—		—		—		(24,354)		(179)		(24,533)
Purchase of treasury stock																287		(6,014)		—		—		—		—		—		(6,014)
Stock-based compensation transactions																(376)		8,898		—		(6,705)		—		—		—		2,193
Change in ownership interest	—		—		—		—		—		—		2,178		2,178	—		—		—		789		—		—		(2,228)		(1,439)
Distributions to noncontrolling interests	—		—		—		—		—		—		(474)		(474)	—		—		—		—		—		—		(775)		(775)
Balances at September 30, 2017	9,637	$	(151,900)	$	93,436	$	303,428	$	180,430	$	(88,741)	$	10,460	$	347,113
Adjustment for accounting standards update 2016-16																—		—		—		—		4,141		—		—		4,141
Balances at June 30, 2018																9,297	$	(144,172)	$	93,436	$	296,242	$	228,944	$	(99,822)	$	9,084	$	383,712

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows



	Nine Months Ended				Six Months Ended
	September 30,				June 30,
	2017		2016		2018		2017
	(Dollars in thousands)				(Dollars in thousands)
Cash flows from operating activities
Net cash provided by operating activities	$	34,691	$	6,742
Net cash (used in) provided by operating activities					$	(37,675)	$	14,705
Cash flows from investing activities
Capital expenditures for property, plant and equipment and other long lived assets		(30,134)		(18,217)		(43,569)		(16,894)
Proceeds from sale of assets		—		3,598
Proceeds from sale of equity method investment		2,268		—
Business acquisitions, net of cash acquired		(71,930)		(11,417)		(4,920)		(14,752)
Other investing		551		—
Other investing activities						31		145
Net cash used in investing activities		(99,245)		(26,036)		(48,458)		(31,501)
Cash flows from financing activities
Net (repayments) borrowings under loans payable		(10,803)		2,606
Proceeds from revolving credit facility, maturing 2019		15,628		212,906
Principal payments on revolving credit facility, maturing 2019		(327,183)		(149,696)
Proceeds from term loan facility, maturing 2024		623,827		—
Principal payments on term loan facility, maturing 2024		(3,232)		—
Principal payments on term loan facility, maturing 2021		(243,250)		(52,250)
Proceeds from revolving credit facility, maturing 2022		69,787		—
Principal payments on revolving credit facility, maturing 2022		(42,400)		—
Principal payments on other long-term debt		(2,978)		—
Proceeds from other long-term debt		2,700		—
Net (repayments) under loans payable						(1,828)		(5,645)
Proceeds from revolving credit facility - 2014 Credit Facility						—		15,628
Principal payments on revolving credit facility - 2014 Credit Facility						—		(327,183)
Proceeds from term loan facility - Credit Facility						—		623,827
Principal payments on term loan facility - 2014 Credit Facility						—		(243,250)
Principal payments on term loan facility - Credit Facility						(304,060)		(1,596)
Principal payments on term loan facility - Amended Credit Facility						(2,050)		—
Proceeds from revolving credit facility - Credit Facility						134,950		—
Principal payments on revolving credit facility - Credit Facility						(212,950)		—
Proceeds from revolving credit facility - Amended Credit Facility						580		—
Proceeds from term loan facility - Amended Credit Facility						466,075		—
Payment of debt issuance costs		(12,927)		(661)		(3,466)		(12,927)
Acquisition related contingent consideration payment		(1,315)		—		(348)		—
Purchase of treasury stock		—		(11,429)		(6,014)		—
Other financing activities		182		416		(2,387)		(930)
Net cash provided by financing activities		68,036		1,892		68,502		47,924
Effect of exchange rate changes on cash and cash equivalents		3,147		(422)		(1,034)		2,156
Increase (decrease) in cash and cash equivalents		6,629		(17,824)
(Decrease) increase in cash and cash equivalents						(18,665)		33,284
Cash and cash equivalents at beginning of period		45,582		58,380		63,551		45,582
Cash and cash equivalents at end of period	$	52,211	$	40,556	$	44,886	$	78,866
Cash paid during the period for:
Interest	$	20,594	$	15,032	$	16,450	$	14,714
Income taxes	$	16,619	$	12,929	$	14,378	$	9,513

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Ferro Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Ferro Corporation (“Ferro,” “we,” “us” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. These statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

~~As discussed in Note 3,~~We produce our products primarily in the ~~third quarter of 2016, we completed~~Europe-Middle East (“EMEA”) region, the ~~disposition of~~United States, the ~~Europe-based Polymer Additives business~~Asia Pacific region, and have classified the related operating results, net of income tax, as discontinued operations in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

~~During the first quarter of 2017, the Company renamed the Pigments, Powders and Oxides segment “Color Solutions.”~~Latin America.

Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, ~~2017.~~

2018.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

~~In March 2016, the~~On April 1, 2018, we adopted Financial Accounting Standards Board (“FASB”) ~~issued~~ Accounting Standards Update (“ASU”) ~~2016-09,~~ ~~Compensation – Stock Compensation: (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~ ASU 2016-09 is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This new guidance requires all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled. Cash flow related to excess tax benefits will no longer be classified as a financing activity on the statement of cash flows but will be presented with all other income tax cash flows as an operating activity. The new guidance also provides an accounting policy election to account for award forfeitures as they occur. Finally, the updated standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and clarifies that all cash tax payments made on an employee’s behalf for withheld shares should be presented as financing activities on the statement of cash flows.

The Company adopted ASU 2016-09, in the first quarter of 2017. As a result of the adoption, tax benefits of $0.3 million were recorded in income tax expense. The Company has elected to account for award forfeitures as they occur. In addition, the Company elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively. The presentation requirements for cash flows related to employee taxes paid for withheld shares had no impact on the statements of cash flows since the Company has historically presented such payments as financing activities.

~~NewAccounting Standards~~

~~In August 2017, the FASB issued ASU~~ 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 provides guidance to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.��~~This pronouncement is effective for fiscal years beginning after December 15, 2018, including interim~~

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~~periods within those fiscal years.~~ The ~~Company is in the process of assessing the impact that the~~ adoption of this ASU did not have an impact to the opening balance of Retained earnings. We will apply the guidance of this ASU to applicable transactions after the adoption date.

On April 1, 2018, we adopted FASB ASU 2018-03, Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. ASU 2018-03 provides targeted improvements to address certain aspects of recognition, measurement presentation, and disclosure of financial instruments. The adoption of ASU 2018-03 did not have a material impact on ~~our~~the Company’s condensed consolidated financial statements.

~~In May 2017, the~~On January 1, 2018, we adopted FASB ~~issued~~ ASU 2017-09, Compensation – Stock Compensation: (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. This ~~pronouncement is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is~~new guidance would only impact our consolidated financial statements if, in the ~~process~~future, we modified the terms of ~~assessing~~any of our share-based awards. We will apply the ~~impact that the adoption~~guidance of this ASU ~~will~~to applicable transactions after the adoption date. The adoption of ASU 2017-09 did not have a material impact on ~~our~~the Company’s condensed consolidated financial statements.

~~In March 2017, the~~On January 1, 2018, we adopted FASB ~~issued~~ ASU 2017-07, Compensation – Retirement Benefits: (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs. ASU 2017-07 requires that an employer report the service cost component in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit costs are to be presented in the income statement separately from the service ~~costs~~cost component and outside a subtotal of income from operations. ~~Employers will have~~This ASU also allows only the service cost component of net benefit costs to ~~disclose~~be eligible for capitalization. We adopted this new standard using the ~~line(s) used to present~~retrospective approach for the presentation of the service cost component and the other components of the net periodic pension (credit) cost and net periodic postretirement benefit cost ~~if the components are not presented separately~~ in the income statement. This resulted in the reclassification of income of $0.5 million and $1.0 million from Selling, general and administrative expenses to Other income, expense, net in our condensed consolidated statement of operations for the three and six months ended June 30, 2017, respectively. The Company used a practical expedient where the amount disclosed in our Retirement Benefits footnote for the prior

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year comparative period was the basis for the estimation for applying the retrospective presentation requirements. Other than this reclassification, the adoption of ASU 2017-07 did not have an impact on the Company’s condensed consolidated financial statements.

On January 1, 2018, we adopted FASB ASU 2017-01, Business Combinations: (Topic 805): Clarifying the Definition of a Business. ASU 2017-01 is intended to clarify the definition of a business with the objective of adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses. We will apply the guidance of this ASU to applicable transactions after the adoption date. The adoption of ASU 2017-01 did not have a material impact on the Company’s condensed consolidated financial statements.

On January 1, 2018, we adopted FASB ASU 2016-16, Income Taxes: (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory and requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. We adopted this new standard using the modified retrospective method. The impact of adopting this guidance on the Company’s condensed consolidated financial statements resulted in an increase to Retained earnings of $4.1 million and Deferred income taxes of $4.7 million and a decrease to Other receivables of $0.6 million for the year ended June 30, 2018.

On January 1, 2018, we adopted FASB ASU 2016-15, Statement of Cash Flow: (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 is intended to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. Adoption of ASU 2016-15 did not have a material effect on our condensed consolidated financial statements.

On January 1, 2018, we adopted FASB ASU 2014-09, Revenue from Contracts with Customers: (Topic 606) (“ASC 606”). This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which require significant judgment. We have completed our assessment and review of specific contracts and have adopted this new standard using the modified retrospective method with no impact to the opening Retained earnings balance. We expect the impact of the adoption of this new standard will not have a material effect on our consolidated financial statements on an ongoing basis.

NewAccounting Standards

In February 2018, the FASB issued ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220):Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows a reclassification from Accumulated Other Comprehensive (Loss) Income to Retained Earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. This pronouncement is effective for ~~annual periods~~fiscal years beginning after December 15, ~~2017,~~2018, including interim periods within those ~~annual periods.~~fiscal years. Early adoption is permitted, including adoption in any interim period. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: (Topic 350): Simplifying the Test for Goodwill Impairment. ASU 2017-04 is intended to simplify the subsequent measurement of goodwill by eliminating Step 2 from the current goodwill impairment test. This pronouncement is effective for the annual or any interim goodwill impairment tests conducted in fiscal years beginning after December 15, 2019. The Company is in the process of assessing the impact that ~~the adoption of this ASU will have on our consolidated financial statements.~~

~~In January 2017, the FASB issued ASU 2017-01,~~ ~~Business Combinations: (Topic 805): Clarifying the Definition of a Business.~~ ASU 2017-01 is intended to clarify the definition of a business with the objective of adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses. This pronouncement is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

~~In October 2016, the FASB issued ASU 2016-16,~~ ~~Income Taxes: (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory.~~ ASU 2016-16 is intended to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory and requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This pronouncement is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

~~In August 2016, the FASB issued ASU 2016-15,~~ ~~Statement of Cash Flow: (Topic 230): Classification of Certain Cash Receipts and Cash Payments.~~ ASU 2016-15 is intended to address eight specific cash flow issues with the objective of reducing the existing diversity in practice. This pronouncement is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The Company is in the process of assessing the impact the adoption of this ASU will have on our consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases: (Topic 842). ASU 2016-02 requires companies to recognize a lease liability and asset on the balance sheet for operating leases with a term greater than one year. This pronouncement is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company is in the process of assessing the impact the adoption of this ASU will have on our consolidated financial statements.

~~In May 2014, the FASB issued ASU 2014-09,~~ ~~Revenue from Contracts with Customers: (Topic 606)~~. This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition. The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We will adopt the new standard effective January 1, 2018, using the modified

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retrospective method. We are nearing completion of our assessment and review of specific contracts and we do not currently believe ASU 2014-09 will have a material effect on our consolidated financial statements.

No other new accounting pronouncements issued had, or are expected to have, a material impact ofon the Company’s consolidated financial statements.

3. ~~Discontinued Operations~~Revenue

~~During 2014, we commenced a process to market for sale our Europe-based Polymer Additives business. We determined that the criteria to classify these assets as held-for-sale under~~

Revenue Recognition

Under ASC ~~Topic 360, Property, Plant and Equipment, were met at that time. On August 22, 2016, we completed the disposition~~606, revenues are recognized when control of the ~~Europe-based Polymer Additives business~~promised goods is transferred to ~~Plahoma Two AG,~~our customers, in an ~~affiliate~~amount that reflects the consideration we expect to be entitled to in exchange for those goods. In order to achieve that core principle, the Company applies the following five-step approach: 1) identify the contract with a customer, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when a performance obligation is satisfied.

The Company considers confirmed customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts, from an accounting perspective, with customers. Under our standard contracts, the only performance obligation is the delivery of manufactured goods and the performance obligation is satisfied at a point in time, when the Company transfers control of the ~~LIVIA Group.~~ manufactured goods. The Company ~~made~~may receive orders for products to be delivered over multiple dates that may extend across several reporting periods. The Company invoices for each order and recognizes revenue for each distinct product upon shipment, once transfer of control has occurred. Payment terms are standard for the industry and jurisdiction in which we operate. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment, to determine the net consideration to which the Company expects to be entitled. Discounts or rebates are specifically stated in customer contracts or invoices, and are recorded as a ~~capital contribution~~reduction of ~~€12 million (approximately $13.6 million)~~revenue in the period the related revenue is recognized. The product price as specified on the customer confirmed orders is considered the standalone selling price. The Company allocates the transaction price to each distinct product based on its ~~subsidiaries that owned~~relative standalone selling price. Revenue is recognized when control of the ~~assets prior~~product is transferred to the ~~close~~customer (i.e., when the Company’s performance obligation is satisfied), which generally occurs at shipment. We review all material contracts to determine transfer of control based upon the ~~sale. In August 2016, prior to the sale, an impairment charge of $26.8 million was recorded under ASC Topic 360 Property, Plant~~business practices and Equipment. The charge was calculated as the difference of the executed transaction price and the carrying value of the assets. The impairment charge included $1.1 million associated with the reclassification of foreign currency translation loss from Accumulated other comprehensive loss (Note 17). We have classified the Europe-based Polymer Additives operating results, net of income tax, as discontinued operations in the accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

The table below summarizes results for the Europe-based Polymer Additives assets, for the three and nine months ended September 30, 2016, which are reflected in our condensed consolidated statements of operations as discontinued operations. Interest expense has been allocated to the discontinued operations based on the ratio of net assetslegal requirements of each ~~business to consolidated net assets excluding debt.~~country.

The amount of shipping and handling fees invoiced to our customers at the time our product is shipped is included in net sales as we are the principle in those activities. Sales, valued-added and other taxes collected from our customers and remitted to governmental authorities are excluded from net sales.

There were no changes in amounts previously reported in the Company’s condensed consolidated financial statements due to adopting ASC 606.

Three Months Ended

Nine Months Ended

September 30, 2016

September 30, 2016

(Dollars in thousands)
Net sales
$
3,831

$
18,481
Cost of sales

5,654

28,473
Gross loss

(1,823)

(9,992)
Selling, general and administrative expenses

588

3,094
Restructuring and impairment charges

26,843

50,902
Interest expense

49

325
Miscellaneous income

(4)

(392)
Loss from discontinued operations before income taxes

(29,299)

(63,921)
Income tax (benefit) expense

(77)

543
Loss from discontinued operations, net of income taxes
$
(29,222)

$
(64,464)

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Revenues disaggregated by geography and reportable segment for the three months ended June 30, 2018, follow:


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	126,133	$	11,715	$	29,129	$	26,472	$	193,449
Performance Colors and Glass		63,675		38,504		18,063		5,785		126,027
Color Solutions		36,227		41,272		10,532		8,732		96,763
Total net sales	$	226,035	$	91,491	$	57,724	$	40,989	$	416,239

Revenues disaggregated by geography and reportable segment for the three months ended June 30, 2017, follow:


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	88,814	$	11,604	$	23,089	$	28,239	$	151,746
Performance Colors and Glass		47,592		37,832		15,796		5,417		106,637
Color Solutions		34,961		39,179		8,775		7,334		90,249
Total net sales	$	171,367	$	88,615	$	47,660	$	40,990	$	348,632

Revenues disaggregated by geography and reportable segment for the six months ended June 30, 2018, follow:


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	245,249	$	24,534	$	55,076	$	53,238	$	378,097
Performance Colors and Glass		125,019		75,595		34,578		11,340		246,532
Color Solutions		76,710		82,898		20,470		17,064		197,142
Total net sales	$	446,978	$	183,027	$	110,124	$	81,642	$	821,771

Revenues disaggregated by geography and reportable segment for the six months ended June 30, 2017, follow:


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	157,973	$	22,362	$	44,406	$	53,570	$	278,311
Performance Colors and Glass		92,178		76,936		30,429		10,612		210,155
Color Solutions		70,138		77,696		17,034		15,853		180,721
Total net sales	$	320,289	$	176,994	$	91,869	$	80,035	$	669,187

Practical Expedients and Exemptions

All material contracts have an original duration of one year or less and, as such, the Company uses the practical expedient applicable to such contracts, and has not disclosed the transaction price for the remaining performance obligations as of the end of each reporting period, or when the Company expects to recognize this revenue.

When the period of time between the transfer of control of the goods and the time the customer pays for the goods is one year or less, the Company uses the practical expedient allowed by ASC 606 that provides relief from adjusting the amount of promised consideration for the effects of a financing component.

We generally expense sales commissions when incurred because the amortization period is one year or less. These costs are recorded within Selling, general and administrative expenses.

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4. Acquisitions

~~Dip Tech Ltd.~~PT Ferro Materials Utama

On ~~August 2,~~June 29, 2018, the Company acquired 66% of the equity interests in PT Ferro Materials Utama (“FMU”) for $2.7 million in cash, in addition to the forgiveness of debt of $9.2 million, bringing our total ownership to 100%. The Company previously recorded its investment in FMU as an equity method investment, and following this transaction, the Company fully consolidates FMU. Due to the change of control that occurred, the Company recorded a gain on purchase of $2.6 million, which is recorded in Miscellaneous (income), expense net, related to the difference between the Company’s carrying value and fair value of the previously held equity method investment during the second quarter of 2018.

Endeka Group

On November 1, 2017, the Company acquired 100% of the equity interests of ~~Dip Tech Ltd.~~ Endeka Group (“~~Dip-Tech”~~Endeka”), a ~~leading provider~~global producer of ~~digital printing solutions~~high-value coatings and key raw materials for ~~glass coatings,~~the ceramic tile market, for €72.~~$77.3~~8 million ~~excluding customary adjustments. Dip-Tech is headquartered in Kfar Saba, Israel. The fair value~~(approximately $84.8 million), including the assumption of ~~the consideration transferred was cash paid at closing~~debt of ~~$60.4~~€13.1 million ~~and contingent consideration of $16.9 million.~~(approximately $15.3 million). The Company incurred acquisition costs for the ~~three and nine~~six months ended ~~September~~June 30, ~~2017,~~2018, of ~~$2.1~~$0.5 million, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations. The acquired business contributed net sales of ~~$6.4~~$30.5 million and $61.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, and net ~~loss~~income attributable to Ferro Corporation of ~~$1.1~~$4.8 million and $8.8 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017. The net loss attributable to Ferro Corporation was driven by the amortization of inventory step up costs of $0.8 million and acquired intangible asset amortization~~2018, respectively.

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costs of $0.6 million for the three and nine months ended September 30, 2017. Dip-Tech incurred research and development costs of $1.1 million for the three and nine months ended September 30, 2017.

The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. During the first half of 2018, the Company adjusted the net working capital on the opening balance sheet and as such, the carrying amount of the personal and real property decreased $4.1 million. As of ~~September~~June 30, ~~2017,~~2018, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded ~~$46.3~~$44.1 million of ~~amortizable intangible assets, $38.2~~net working capital, $24.1 million of ~~goodwill, $11.5 million of a~~ deferred tax ~~liability, $3.2~~assets, $17.7 million of personal and real property and $1.1 million of ~~net working capital~~noncontrolling interest on the condensed consolidated balance sheet.

Gardenia Quimica S.A.

On August 3, 2017, the Company acquired ~~the~~a majority interest in Gardenia Quimica S.A. (“Gardenia”) for $3.0 million. The Company previously owned 46% of Gardenia and recorded it as an equity method investment. ~~In connection with~~Following this transaction, the Company ~~now owns~~owned 83.5% and fully consolidates Gardenia. Due to athe change of control that occurred, the Company recorded a gain on purchase of $2.6 million related to the difference between the Company’s carrying value and fair value of the previously held equity method ~~investment.~~ investment during the third quarter of 2017. On March 1, 2018, the Company acquired the remaining equity interest in Gardenia for $1.4 million.

Dip Tech Ltd.

On August 2, 2017, the Company acquired 100% of the equity interests of Dip Tech Ltd. (“Dip-Tech”), a leading provider of digital printing solutions for glass coatings, for $77.0 million. Dip-Tech is headquartered in Kfar Saba, Israel. The purchase price consideration consisted of cash paid at closing of $60.1 million, net of the net working capital adjustment, and contingent consideration of $16.9 million. The Company incurred acquisition costs for the six months ended June 30, 2018, of $0.1 million, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations. The acquired business contributed net sales of $7.0 million and $10.9 million for the three and six months ended June 30, 2018, respectively, and net loss attributable to Ferro Corporation of $1.6 million and $4.0 million for the three and six months ended June 30, 2018, respectively. The net loss attributable to Ferro Corporation was driven by the amortization of acquired intangible asset amortization costs of $1.0 million and $2.0 million for the three and six months ended June 30, 2018, respectively. Dip-Tech incurred research and development costs of $1.8 million and $3.3 million for the three and six months ended June 30, 2018, respectively.

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who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. As of June 30, 2018, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $41.2 million of amortizable intangible assets, $33.5 million of goodwill, $7.2 million of a deferred tax liability, $5.1 million of indefinite-lived intangible assets, $3.2 million of personal and real property and $1.2 million of net working capital on the condensed consolidated balance sheet.

Smalti per Ceramiche, s.r.l

On April 24, 2017, the Company acquired 100% of the equity interests of S.P.C. Group s.r.l., and 100% of the equity interests of Smalti per Ceramiche, s.r.l. (“SPC”), for €~~17.~~18.97 million (approximately ~~$19.~~$20.43 million), including the assumption of debt of €5.7 million (approximately $6.2 million). SPC is a high-end tile coatings manufacturer based in Italy focused on fast-growing specialty products. SPC’s products, strong technology, design capabilities, and customer-centric business model are complementary to our Performance Coatings segment, and position us for continued growth in the high-end tile markets. The Company incurred acquisition costs for the three and nine months ended September 30, 2017, of $0.1 million and $1.3 million, respectively, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations.

The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. As of September 30, 2017, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $6.7 million of personal and real property, $5.9 million of amortizable intangible assets, $5.7 million of net working capital, $3.3 million of goodwill and $2.2 million of a deferred tax liability on the condensed consolidated balance sheet.

~~Cappelle Pigments NV~~

On December 9, 2016, the Company acquired 100% of the equity interests of Belgium-based Cappelle Pigments NV (“Cappelle”), a leader in specialty, high-performance inorganic and organic pigments used in coatings, inks and plastics, for €49.8 million (approximately $52.7 million)~~, including the assumption of debt of~~ €9.8 ~~million.~~ The acquired business contributed net sales of $17.8 million and $55.8 million for the three and nine months ended September 30, 2017, respectively, and net income attributable to Ferro Corporation of $1.2 million and $2.3 million for the three and nine months ended September 30, 2017, respectively.

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~~Electro-Science Laboratories, Inc.~~

On October 31, 2016, the Company acquired 100% of the equity interests of Electro-Science Laboratories, Inc. (“ESL”), a leader in electronic packaging materials, for $78.5 million. ESL is headquartered in King of Prussia, Pennsylvania. The acquisition of ESL enhances the Company’s position in the electronic packaging materials space with complementary products, and provides a platform for growth in our Performance Colors and Glass segment. ESL produces thick-film pastes and ceramics tape systems that enable important functionality in a wide variety of industrial and consumer applications. The acquired business contributed net sales of $10.5 million and $31.8 million for the three and nine months ended September 30, 2017, respectively, and net income attributable to Ferro Corporation of $1.2 million and $3.9 million for the three and nine months ended September 30, 2017, respectively. The Company incurred acquisition costs for the nine months ended September 30, 2017, of $0.3 million, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations.

The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. As of September 30, 2017, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $39.7 million of intangible assets, $19.0 million of goodwill, $18.9 million of net working capital, $2.9 million of personal and real property and $2.0 million of a deferred tax liability on the condensed consolidated balance sheet.

~~Delta Performance Products, LLC~~

~~On August 1, 2016, the Company acquired certain assets of Delta Performance Products, LLC, for a cash purchase price of $4.4 million.~~ The information included herein has been prepared based on the allocation of the purchase price using the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. The Company recorded ~~$3.2 million of amortizable intangible assets, $0.6 million of net working capital, $0.4 million of goodwill and $0.2 million of a deferred tax asset on the condensed consolidated balance sheet.~~

~~Pinturas Benicarló, S.L.~~

On June 1, 2016, the Company acquired 100% of the equity interests of privately held Pinturas Benicarló, S.L. (“Pinturas”) for €16.5 million in cash (approximately $18.4 million). The information included herein has been prepared based on the allocation of the purchase price using the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. The Company recorded $8.8 million of amortizable intangible assets, $7.7 million of net working capital, $3.9 million of goodwill, $2.7 million of a deferred tax liability, and $0.7$6.1 million of personal and real property, ~~on the condensed consolidated balance sheet.~~

~~Ferer Dis Ticaret Ve Kimyasallar Anonim Sirketi A.S.~~

On January 5, 2016, the Company completed the purchase of 100% of the equity interests of privately held Istanbul-based Ferer Dis Ticaret Ve Kimyasallar Anonim Sirketi A.S. (“Ferer”) for approximately $9.4 million. The information included herein has been prepared based on the allocation of the purchase price using the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. The Company recorded $4.5 million of goodwill, $3.3$6.0 million of amortizable intangible assets, ~~$1.7~~$5.2 million of goodwill, $5.0 million of net working capital ~~$0.7~~and $2.0 million of a deferred tax liability ~~and $0.6 million of personal and real property~~ on the condensed consolidated balance sheet.

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5. Inventories



	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
	(Dollars in thousands)				(Dollars in thousands)
Raw materials	$	92,387	$	72,943	$	135,595	$	112,300
Work in process		48,131		38,859		58,591		39,454
Finished goods		146,330		118,045		187,577		172,426
Total inventories	$	286,848	$	229,847	$	381,763	$	324,180

In the production of some of our products, we use precious metals, which we obtain from financial institutions under consignment agreements with terms of one year or less. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign. These fees were ~~$0.3~~$0.4 million and ~~$0.2~~$0.3 million for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, and were $0.8 million and ~~$0.6~~$0.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively. We had on-hand precious metals owned by participants in our precious metals consignment program of ~~$36.3~~$44.1 million at ~~September~~June 30, ~~2017,~~2018, and ~~$28.7~~$37.7 million at December 31, ~~2016,~~2017, measured at fair value based on market prices for identical ~~assets and net of credits.~~assets.

Property, plant and equipment is reported net of accumulated depreciation of ~~$493.6~~$515.1 million at ~~September~~June 30, ~~2017,~~2018, and ~~$439.4~~$502.9 million at December 31, ~~2016.~~2017. Unpaid capital expenditure liabilities, which are non-cash investing activities, were ~~$3.2~~$3.8 million at ~~September~~June 30, ~~2017,~~2018, and ~~$2.4~~$3.8 million at ~~September~~June 30, ~~2016.~~

We recorded a $3.9 million gain on sale of a closed site in Australia which was recorded in Miscellaneous (income) expense, net in our condensed consolidated statements of operations for the nine months ended September 30, 2016.

As discussed in Note 3, our Europe-based Polymer Additives assets had been classified as held-for-sale under ASC Topic 360, Property, Plant and Equipment from 2014 until the ultimate sale of the business in August 2016. As such, at each historical reporting date, these assets were tested for impairment comparing the fair value of the assets, less costs to sell, to the carrying value. The fair value was determined using both the market approach and income approach, utilizing Level 3 measurements within the fair value hierarchy, which indicated the fair value, less costs to sell, was less than the carrying value during the first quarter of 2016, resulting in an impairment charge of $24.1 million, representing the remaining carrying value of long-lived assets at that reporting date. During the third quarter of 2016, prior to the sale, an impairment charge of $26.8 million, representing net working capital, was recorded under ASC Topic 360 Property, Plant and Equipment. The impairment charges of $26.8 million and $50.9 million are included in Loss from discontinued operations, net of income taxes in our condensed consolidated statements of operations for the three and nine months ended September 30, 2016, respectively.

Goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. As of ~~September~~June 30, ~~2017,~~2018, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment test.

(1) ~~The carrying value of the term loan facility, maturing 2021, was net of unamortized debt issuance costs of $3.7 million.~~

~~(2)~~ The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of ~~$7.7 million.~~$5.3 million at June 30, 2018, and $7.5 million at December 31, 2017.

~~In 2014,~~On April 25, 2018 the Company entered into aan amendment (the “Amended Credit Facility”) to its existing credit facility ~~that was amended~~(the “Credit Facility”) which Amended Credit Facility (a) provided a new revolving facility (the “2018 Revolving Facility”), which replaced the Company’s existing revolving facility, (b) repriced the (“Tranche B-1 Loans”), (c) provided new tranches of term loans (“Tranche B-2 Loans” and “Tranche B-3 Loans”) denominated in U.S. dollars borrowed by the Company’s existing credit facility and will be used for ongoing working capital requirements and general corporate purposes. The (“Tranche B-2 Loans”) are borrowed by the Company and the (“Tranche B-3 Loans”) are borrowed on ~~January 25, 2016,~~a joint and ~~August 29, 2016, resulting in~~several basis by Ferro GmbH and Ferro Europe Holdings LLC.

The Amended Credit Facility consists of a ~~$400~~$500 million secured revolving line of credit with a ~~term~~maturity of ~~five years and~~February 2023, a ~~$300~~$355 million secured term loan facility with a ~~term~~maturity of ~~seven years from the original issuance date (the “Previous Credit Facility”) with~~February 2024, a group of lenders that was replaced on February 14, 2017, by the Credit Facility (as defined below). For discussion of the Company’s Previous Credit Facility, refer to Note 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

In conjunction with the refinancing of the Previous Credit Facility, we recorded a charge of $3.9 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our condensed consolidated statement of operations for the nine months ended September 30, 2017.

On February 14, 2017, the Company entered into a new credit facility (the “Credit Facility”) with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes.

~~The Credit Facility consists of a $400 million secured revolving line of credit with a term of five years, a $357.5~~$235 million secured term loan facility with a ~~term~~maturity of ~~seven years~~February 2024 and a ~~€250~~$230 million secured ~~euro~~ term loan facility with a ~~term~~maturity of ~~seven years.~~February 2024. The term loans are payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company is required, on an annual basis, to make a prepayment ~~of term loans until they are fully paid and then to the revolving loans~~ in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit ~~Facility.~~Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans.

Subject to the satisfaction of certain conditions, the Company can request additional commitments under the revolving line of credit or term loans in the aggregate principal amount of up to $250 million to the extent that existing or new lenders agree to provide such additional commitments and/or term ~~loans and,~~loans. The Company can also raise certain additional debt or credit facilities subject to satisfaction of certain covenant levels.

Certain of the Company’s U.S. subsidiaries have guaranteed the Company’s obligations under the Amended Credit Facility and such obligations are secured by (a) substantially all of the personal property of the Company and the U.S. subsidiary guarantors and (b) a pledge of 100% of the stock of certain of the Company’s U.S. subsidiaries and 65% of the stock of certain of the Company’s direct foreign subsidiaries. The Tranche B-3 Loans are guaranteed by the Company, the U.S. subsidiary guarantors and a cross-guaranty by the borrowers of the Tranche B-3 Loans, and are secured by the collateral securing the revolving loans and the other term loans, in addition to a pledge of the equity interests of Ferro GmbH.

Interest Rate – Term Loans: The interest rates applicable to the ~~U.S.~~ term loans will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable margin. ~~The interest rates applicable to the Euro term loans will be a Euro Interbank Offered Rate (“EURIBOR”) rate plus an applicable margin.~~

At ~~September~~June 30, ~~2017,~~2018, the Company had borrowed ~~$355.7~~$354.1 million under the ~~secured term loan facility~~Tranche B-1 Loans at an interest rate of ~~3.73% and €248.8~~4.58%, $234.4 million under the ~~secured euro term loan facility~~Tranche B-2 Loans at an interest rate of ~~2.75%~~4.58%, and $229.4 million under the Tranche B-3 Loans at an interest rate of 4.58%. At ~~September~~June 30, ~~2017,~~2018, there were no additional borrowings available under the ~~term loan facilities.~~ ~~We entered into interest rate swap agreements in the second quarter of 2017. These~~

~~swaps converted $150 million~~Tranche B-1 Loans, Tranche B-2 Loans and €90 million of our term loans from variable interest rates to fixed interest rates. At September 30, 2017, the effective interest rate for the term loan facilities after adjusting for the interest rate swap was 4.27% for the secured term loan facility and 3.00% for the euro term loan facility. Tranche B-3 Loans.

Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the revolving credit line will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable variable margin. The variable margin will be based on the ratio of (a) the Company’s total consolidated net debt outstanding at such time to (b) the Company’s consolidated EBITDA computed for the period of four consecutive fiscal quarters most recently ended.

At ~~September~~June 30, ~~2017,~~2018, there were ~~$27.4~~$0.6 million borrowings under the revolving credit line at an interest rate of ~~3.48%~~4.09%. After reductions for outstanding letters of credit secured by these facilities, we had ~~$367.9~~$494.8 million of additional borrowings available under the revolving credit facilities at ~~September~~June 30, ~~2017.~~2018.

The Amended Credit Facility contains customary restrictive covenants including, but not limited to, limitations on use of loan proceeds, limitations on the Company’s ability to pay dividends and repurchase stock, limitations on acquisitions and dispositions, and limitations on certain types of investments. The Amended Credit Facility also contains standard provisions relating to conditions of borrowing and customary events of default, including the non-payment of obligations by the Company and the bankruptcy of the Company.

Specific to the ~~revolving credit facility,~~2018 Revolving Facility, the Company is subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Amended Credit Facility agreement may be accelerated and become immediately due and payable. At ~~September~~June 30, ~~2017,~~2018, we were in compliance with the covenants of the Amended Credit Facility.

On February 14, 2017, the Company entered into a credit facility (the “Credit Facility”) with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes. The Credit Facility consisted of a $400 million secured revolving line of credit with a term of five years, a $357.5 million secured term loan facility with a term of seven years and a €250 million secured Euro term loan facility with a term of seven years. For discussion of the Company’s Credit Facility, refer to Note 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

In conjunction with the refinancing of the Credit Facility, we recorded a charge of $3.2 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our condensed consolidated statement of operations for the three and six months ended June 30, 2018.

In 2014, the Company entered into a credit facility that was amended on January 25, 2016, and August 29, 2016, resulting in a $400 million secured revolving line of credit with a term of five years and a $300 million secured term loan facility with a term of seven years from the original issuance date (the “2014 Credit Facility”) with a group of lenders that was replaced on February 14, 2017, by the Credit Facility (as defined above). For discussion of the Company’s Previous Credit Facility, refer to Note 8 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

We maintain other lines of credit to provide global flexibility for our short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled ~~$61.8~~$43.3 million and ~~$7.3~~$64.5 million at ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, respectively. The unused portions of these lines provided additional liquidity of ~~$43.5~~$21.1 million at ~~September~~June 30, ~~2017,~~2018, and ~~$6.7~~$39.4 million at December 31, ~~2016.~~2017.

The following financial instrument assets (liabilities) are presented at their respective carrying amount, fair value and classification within the fair value hierarchy:

(1) The carrying values of the term loan ~~facilities~~facility are net of unamortized debt issuance costs of ~~$7.7~~$5.3 million and ~~$3.7~~$7.5 million for the period ended ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, respectively.

The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair values of loans payable are based on the present value of expected future cash flows and approximate their carrying amounts due to the short periods to maturity. ~~At September 30, 2017, the~~The fair value of the term loan facility is based on market price information and is measured using the last available bid price of the instrument on a secondary market and at December 31, 2016, is based on the present value of expected future cash flows and interest rates that would be currently available to the Company for issuance of similar types of debt instruments with similar terms and remaining maturities adjusted for the Company's performance risk.market. The revolving credit facility and other long-term notes payable are based on the present value of expected future cash flows and interest rates that would be currently available to the Company for issuance of similar types of debt instruments with similar terms and remaining maturities adjusted for the Company's performance risk. The fair values of our interest rate swaps and cross currency swaps are determined based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets. The fair values of the foreign currency forward contracts are based on market prices for comparable contracts.

The Company may use derivative instruments to partially offset its business exposure to foreign currency and interest rate risk on expected future cash flows, on net investment in certain foreign subsidiaries and on certain existing assets and liabilities. However,

the Company may choose not to hedge in countries where it is not economically feasible to enter into hedging arrangements or where hedging inefficiencies exist, such as timing of transactions.

~~Interest~~Cash Flow Hedges. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative is recorded in Accumulated other comprehensive loss (“AOCL”) and reclassified into earnings in the same period during which the hedged transaction affects earnings.

The Company utilizes interest rate ~~swaps.~~ ~~To reduce our~~swaps to limit exposure to ~~interest rate changes~~market fluctuations on ~~our variable-rate debt, we~~floating-rate debt. During the second quarter of 2017, the Company entered into interest rate swap agreements ~~in the second quarter of 2017. These swaps~~that converted $150 million and €90 million of our term loans from variable interest rates to fixed interest rates. These swaps qualified for, and were designated as, cash flow hedges. This interest rate swap agreement was terminated in the second quarter of 2018 in connection with the refinancing of the Credit Facility.

During the second quarter of 2018, the Company entered into variable to fixed interest rate swaps for an initial aggregate notional amount of $319.2 million with a maturity date of February 28, 2024. These swaps are hedging risk associated with the Tranche B-1 Loans. These interest rate swaps are designated as cash flow hedges.As of June 30, 2018, the Company expects it will reclassify net losses of approximately $1.2 million, currently recorded in AOCL, into earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

The Company has converted a US dollar denominated, variable rate debt obligation into a euro fixed rate obligation using a receive-float, pay fixed cross currency swaps in the second quarter of 2018. These swaps are hedging risk associated with the Tranche B-3 Loans. These cross currency swaps are designated as cash flow hedges.The initial aggregate notional amount is $230 million with a maturity date of February 28, 2024. As of June 30, 2018, the Company expects it will reclassify net gains of approximately $5.5 million, currently recorded in AOCL, into earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

The amount of (loss) gain recognized in AOCL and the amount of (loss) gain reclassified into earnings for the three months ended June 30, 2018 and 2017, follow:

The amount of gain recognized in AOCL and the amount of (loss) gain reclassified into earnings for the six months ended June 30, 2018 and 2017, follow:


					Amount of (Loss) Gain
	Amount of Gain				Reclassified from				Location of (Loss) Gain
	Recognized in AOCL				AOCL into Income				Reclassified from
	2018			2017	2018		2017		AOCL into Income
	(Dollars in thousands)
Interest rate swaps	$	(374)	$	—	$	(11)	$	—	Interest expense
Cross currency swaps		9,429		—		888		—	Interest expense
					$	877	$	—	Total Interest expense
Cross currency swap		—		—		10,315		—	Foreign currency losses, net

1819

Table of Contents

rates to fixed interest rates. These swaps qualify and were designated as cash flow hedges. The effective portions of cash flow hedges are recorded in accumulated other comprehensive income (“AOCI”) and are reclassified into earnings in the same period the underlying hedged items impact earnings. The ineffective portions of cash flow hedges is recognized immediately into earnings. ~~The Company did not have any ineffectiveness related to the interest rate swaps during the three and nine months ended September 30, 2017.~~

~~The amount of gain recognized in AOCI and the amount of gain reclassified into earnings for the three months ended September 30, 2017 and 2016, respectively, follow:~~

Amount of Gain Recognized

Amount of Gain Reclassified

in AOCI - Effective Portion

from AOCI into Income - Effective Portion

2017

2016

2017

2016

(Dollars in thousands)
Interest rate swap

$
166

$
—

$
—

$
—

~~The amount of gain recognized in AOCI and the amount of gain reclassified into earnings for the nine months ended September 30, 2017 and 2016, respectively, follow:~~

10,315

—

Total Foreign currency losses, net

Net investment hedge. To help protect the value of the Company’s net investment in European operations against adverse changes in exchange rates, the Company uses non-derivative financial instruments, such as its foreign currency denominated debt, as economic hedges of its net investments in certain foreign subsidiaries. Net investment hedges that use foreign currency denominated debt to hedge net investments are not impacted by ASC Topic 820, Fair Value Measurements, as the debt used as a hedging instrument is marked to a value with respect to changes in spot foreign currency exchange rates and not with respect to other factors that may impact fair value.

In the second quarter of 2017, the Company designated a portion of its Euro denominated debt as a net investment hedge for accounting purposes. This net investment hedge was terminated in the second quarter of 2018.

In the second quarter of 2018, the Company entered into cross currency swap agreements to convert a notional amount of $117.5 million, where we pay variable rate interest in Euros and receive variable rate interest in US dollars. These swaps are hedging risk associated with the Tranche B-2 Loans. These cross currency swaps are designated as net investment hedges with the spot method of accounting applied. The effective portions of net investment hedges are recorded in ~~AOCI~~AOCL as a part of the cumulative translation adjustment. ~~The ineffective portions of net investment hedges are recognized immediately into earnings.~~

~~Effective May 1, 2017, the Company designated a portion of its euro denominated debt as a net investment hedge for accounting purposes. The fair value of the net investment hedge is~~ ~~€79.4~~ ~~million at September 30, 2017. The Company did not have any ineffectiveness related to net investment hedges during the three and nine months ended September 30, 2017.~~

The amount of ~~loss~~gain recognized in ~~AOCI~~AOCL, the amount reclassified into earnings and the amount of ~~loss reclassified into earnings~~gain recognized in income on derivative (amount excluded from effectiveness testing) for the three months ended ~~September~~June 30, 2018 and 2017, ~~and 2016, respectively, follow:~~follow

The amount of ~~loss~~gain (loss) recognized in ~~AOCI~~AOCL, the amount reclassified into earnings and the amount of ~~loss reclassified into earnings~~gain recognized in income on derivative (amount excluded from effectiveness testing) for the ~~nine~~six months ended ~~September~~June 30, 2018 and 2017, ~~and 2016, respectively, follow:~~follow

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not formally designated as hedges. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as Foreign currency losses, net in the condensed consolidated statements of operations. We recognized net ~~losses~~gains of ~~$1.4~~$1.0 million and ~~$4.1~~$1.4 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, and net losses of ~~$1.2~~$3.0 million and ~~$5.8~~$2.7 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively, arising from the change in fair value of our financial

instruments, which partially offset the related net gains and losses on international trade transactions. The notional amount of foreign currency forward contracts was ~~$212.1~~$345.3 million at ~~September~~June 30, ~~2017,~~2018, and ~~$338.2~~$238.5 million at December 31, ~~2016.~~2017.

The following table presents the effect on our condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, of our foreign currency forward contracts:

The following table presents the fair values of our derivative instruments on our condensed consolidated balance ~~sheets of derivative instruments:~~sheets. All derivatives are reported on a gross basis.

~~Income~~During the first half of 2018, income tax expense ~~for the nine months ended September 30, 2017,~~ was ~~$23.2~~$17.9 million, or ~~25.9%~~25.1% of pre-tax ~~income, compared with $22.7~~income. In the first half of 2017, we recorded tax expense of $15.8 million, or ~~25.8%~~26.8% of pre-tax ~~income in the prior-year same period.~~income. The tax expense in the first ~~nine months~~half of ~~2017 and 2016,~~2018, as a percentage of pre-tax income, iswas higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for the first half of 2017, as a percentage of pre-tax income, was lower than the U.S. federal statutory income tax rate of 35% primarily as a result of foreign statutory rate differences.

We have recognized the provisional tax impacts related to the 2017 Tax Cut and Jobs Act (the “Tax Act”) under the guidance of the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). The ultimate impact may differ from these provisional amounts due to additional analysis, changes in interpretations and assumptions, additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Act. The Company’s preliminary

determinations related to the estimable impacts of the Tax Act that are effective for the year-ended December 31, 2017 have not changed in the current quarter.

The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and the foreign-derived intangible income (“FDII”) on the Company for 2018. For the current quarter, the Company has made reasonable estimates of GILTI and FDII, as well as the impact of changes to valuation allowances related to certain positions. The combined provisional net impact of these items are not anticipated to be material to the tax rate in 2018. The Company has not recorded any potential deferred tax effects related to GILTI in the financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI or use the period cost method.

We have recorded environmental liabilities of ~~$6.6~~$5.7 million at ~~September~~June 30, ~~2017,~~2018, and ~~$7.2~~$6.7 million at December 31, ~~2016,~~2017, for costs associated with the remediation of certain of our properties that have been contaminated. The liability at ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, was primarily comprised of liabilities related to a non-operating facility in Brazil, and for retained environmental obligations related to a site in the United States that was part of the sale of our North American and Asian metal powders product lines in 2013. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring and the ultimate cost of required remediation.

In November 2017, Suffolk County Water Authority filed a complaint, Suffolk County Water Authority v. The Dow Chemical Company et al., against the Company and a number of other companies in the U.S. Federal Court for the Eastern District of New York with regard to the product 1,4 dioxane. The plaintiff alleges, among other things, that the Suffolk County water supply is contaminated with 1,4 dioxane and that the defendants are ~~various lawsuits~~liable for unspecified costs of cleanup and remediation of the water supply, among other damages. The Company has not manufactured 1,4 dioxane since 2008, denies the allegations related to liability for the plaintiff’s claims, ~~pending against~~and is vigorously defending this proceeding. In March 2018, the defendants, including the Company, filed a motion to dismiss the complaint, which was heard by the court in June 2018. The Company currently does not expect the outcome of this proceeding to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of this proceeding due to the unpredictable nature of litigation.

In addition to the proceeding described above, the Company and its consolidated ~~subsidiaries.~~subsidiaries are subject from time to time to various claims, lawsuits, investigations, and proceedings related to products, services, contracts, environmental, health and safety, employment, intellectual property, and other matters, including with respect to divested businesses. The outcome of such matters is unpredictable, our assessment of them may change, and resolution of them could have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. We do not currently expect the resolution of ~~these lawsuits and claims~~such matters to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

Net periodic benefit (credit) cost of our U.S. pension plans (including our unfunded nonqualified plans), non-U.S. pension plans, and postretirement health care and life insurance benefit plans for the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, follow:

Net periodic benefit (credit) cost for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016,~~2017, respectively, follow:



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans				U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans

	Nine Months Ended September 30,												Six Months Ended June 30,

	2017		2016		2017		2016		2017		2016		2018		2017		2018		2017		2018		2017

	(Dollars in thousands)												(Dollars in thousands)
Service cost	$	13	$	13	$	1,259	$	1,081	$	—	$	—	$	6	$	9	$	908	$	827	$	1	$	—
Interest cost		10,997		11,812		1,801		2,808		632		708		5,576		7,331		1,356		1,179		366		422
Expected return on plan assets		(14,218)		(14,805)		(659)		(1,538)		—		—		(7,989)		(9,479)		(459)		(432)		—		—
Amortization of prior service cost		5		8		33		34		—		—		—		3		22		21		—		—
Net periodic benefit (credit) cost	$	(3,203)	$	(2,972)	$	2,434	$	2,385	$	632	$	708	$	(2,407)	$	(2,136)	$	1,827	$	1,595	$	367	$	422

Interest cost, expected return on plan assets and amortization of prior service cost are recorded in Miscellaneous (income) expense, net on the condensed consolidated statement of operations.

On May ~~22, 2013,~~3, 2018, our shareholders approved the ~~2013~~2018 Omnibus Incentive Plan (the “Plan”), which was adopted by the Board of Directors on February 22, ~~2013,~~2018, subject to shareholder approval. The Plan’s purpose is to promote the Company’s long-term financial interests and growth by attracting, retaining and motivating high quality key employees and directors, motivating such employees and directors to achieve the Company’s short- and long-range performance goals and objectives, and thereby align their interests with those of the Company’s shareholders. The Plan reserves ~~4,400,000~~4,500,000 shares of common stock to be issued for grants of several different types of long-term incentives including stock options, stock appreciation rights, restricted ~~shares,~~awards, performance ~~shares,~~awards, other common stock-based awards, and dividend equivalent rights.

The 2013 Omnibus Incentive Plan (the “Previous Plan”), was replaced by the Plan, and no future grants may be made under the Previous Plan. However, any outstanding awards or grants made under the Previous Plan will continue until the end of their specified terms.

In the first ~~nine months~~half of ~~2017,~~2018, our Board of Directors granted 0.2 million stock options, ~~0.2~~0.1 million performance share units and ~~0.2~~0.1 million restricted stock ~~units under the Plan.~~units.

We estimate the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock option grants made during the ~~nine~~six months ended ~~September~~June 30, ~~2017:~~2018:

The weighted average grant date fair value of our performance share units granted in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, was ~~$14.89.~~$22.92. We measure the fair value of performance share units based on the closing market price of our common stock on the date of the grant. These shares are evaluated each reporting period for respective attainment rates against the performance criteria.

The weighted-average grant date fair value per unit for grants made during the six months ended June 30, 2018, was $22.27. We measure the fair value of restricted share units based on the closing market price of our common stock on the date of the grant. The restricted share units vest over three years. ~~The weighted-average grant date fair value per unit for grants made during the nine months ended September 30, 2017, was $14.73.~~

We recognized stock-based compensation expense of ~~$6.9~~$1.4 million and $3.8 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017,~~2018, and ~~$5.3~~$2.7 million and $5.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2017. At ~~September~~June 30, ~~2017,~~2018, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately ~~$9.6~~$9.7 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of ~~2020.~~2021.

Total restructuring and impairment charges were ~~$1.5~~$3.8 million and ~~$7.7~~$7.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, and ~~$0.0~~$3.2 million and ~~$1.7~~$6.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2017, respectively. Included in the charges for the ~~nine~~three and six months ended ~~September~~June 30, 2017, was an impairment charge of $1.5 million related to an equity method investment. The remainder of the charges ~~relate to our restructuring and cost reduction programs, which are~~ primarily ~~related~~relate to costs associated with integration of our recent acquisitions and optimization programs, and are further summarized below.

We expect to make cash payments to settle the remaining liability for employee severance benefits and other costs ~~primarily~~ over the next twelve months, ~~where applicable,~~ except where legal or contractual obligations would require it to extend beyond that period.

Details of the calculation of basic and diluted earnings per share are shown below:

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands, except per share amounts)
Basic earnings per share computation:

Net income (loss) attributable to Ferro Corporation common shareholders

$
22,817

$
(8,884)

$
65,740

$
119
Adjustment for loss from discontinued operations

—

29,222

—

64,464
Total

$
22,817

$
20,338

$
65,740

$
64,583
Weighted-average common shares outstanding

83,735

83,268

83,646

83,263
Basic earnings per share from continuing operations attributable to Ferro Corporation common shareholders

$
0.27

$
0.24

$
0.79

$
0.78
Diluted earnings per share computation:

Net income (loss) attributable to Ferro Corporation common shareholders

$
22,817

$
(8,884)

$
65,740

$
119
Adjustment for loss from discontinued operations

—

29,222

—

64,464
Total

$
22,817

$
20,338

$
65,740

$
64,583
Weighted-average common shares outstanding

83,735

83,268

83,646

83,263
Assumed exercise of stock options

808

544

671

499
Assumed exercise of deferred stock unit conditions

—

80

—

—
Assumed satisfaction of restricted stock unit conditions

424

473

383

419
Assumed satisfaction of performance stock unit conditions

483

111

474

58
Weighted-average diluted shares outstanding

85,450

84,476

85,174

84,239
Diluted earnings per share from continuing operations attributable to Ferro Corporation common shareholders

$
0.27

$
0.24

$
0.77

$
0.77



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
	(Dollars in thousands, except per share amounts)
Basic earnings per share computation:
Net income attributable to Ferro Corporation common shareholders	$	29,668	$	21,025	$	53,059	$	42,923
Weighted-average common shares outstanding		84,341		83,673		84,284		83,602
Basic earnings per share attributable to Ferro Corporation common shareholders	$	0.35	$	0.25	$	0.63	$	0.51
Diluted earnings per share computation:
Net income attributable to Ferro Corporation common shareholders	$	29,668	$	21,025	$	53,059	$	42,923
Weighted-average common shares outstanding		84,341		83,673		84,284		83,602
Assumed exercise of stock options		791		677		818		599
Assumed satisfaction of restricted stock unit conditions		281		425		271		376
Assumed satisfaction of performance stock unit conditions		176		502		172		503
Weighted-average diluted shares outstanding		85,589		85,277		85,545		85,080
Diluted earnings per share attributable to Ferro Corporation common shareholders	$	0.35	$	0.25	$	0.62	$	0.50

The number of anti-dilutive or unearned shares was ~~1.6~~1.7 million and ~~1.8~~1.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2018, respectively, and ~~2.3~~1.8 million and ~~2.5~~1.9 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively.~~2017. These shares were excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.

The Company’s Board of Directors has approved $50 million of a share repurchase ~~programs,~~program, under which the Company is authorized to repurchase ~~up to $100 million of~~ the Company’s outstanding shares of Common Stock on the open market, including through a Rule 10b5-1 plan, or in privately negotiated transactions.

The timing and amount of shares to be repurchased will be determined by the Company, based on evaluation of market and business conditions, share price, and other factors. The share repurchase ~~programs do~~program does not obligate the Company to repurchase any dollar amount or number of common shares, and may be suspended or discontinued at any time.

For the ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2018, the Company repurchased ~~1,175,437~~287,257 shares of common stock at an average price of ~~$9.~~$20.7294 per share for a total cost of ~~$11.4~~$6.0 million. As of ~~September~~June 30, ~~2017, Company shares having an aggregate value of up to $50.0~~2018, $44.0 million may still be purchased under the ~~programs.~~program.

Changes in accumulated other comprehensive income (loss) by component, net of tax, were as follows:



	Three Months Ended September 30,											Three Months Ended June 30,
		Postretirement					Net Gain						Postretirement					Net Gain
		Benefit Liability		Translation			on Cash	Other					Benefit Liability		Translation			on Cash
		Adjustments		Adjustments			Flow Hedges	Adjustments		Total			Adjustments		Adjustments			Flow Hedges	Total
		(Dollars in thousands)											(Dollars in thousands)
Balances at June 30, 2016		$	1,106	$	(66,886)	$	—	$	(70)	$	(65,850)
Other comprehensive income (loss) before reclassifications, before tax			—		1,584		—		—		1,584
Balances at March 31, 2017													$	1,137	$	(100,613)	$	—	$	(99,476)
Other comprehensive income before reclassifications, before tax														—		13,790		—		13,790
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax			(2)		—		—		—		(2)			18		—		—		18
Foreign currency translation adjustment, before tax(1)			—		1,115		—		—		1,115
Current period other comprehensive (loss) income, before tax														18		13,790		—		13,808
Tax effect														2		—		—		2
Current period other comprehensive income (loss), net of tax														16		13,790		—		13,806
Balances at June 30, 2017													$	1,153	$	(86,823)	$	—	$	(85,670)

Balances at March 31, 2018													$	1,172	$	(71,919)	$	2,259	$	(68,488)
Other comprehensive (loss) income before reclassifications, before tax														—		(29,482)		10,256		(19,226)
Reclassification to earnings:
Postretirement benefit liabilities income, before tax														6		—		—		6
Cash flow hedge income, before tax														—		—		(11,823)		(11,823)
Current period other comprehensive income (loss), before tax			(2)		2,699		—		—		2,697			6		(29,482)		(1,567)		(31,043)
Tax effect			—		—		—		—		—			(4)		526		(231)		291
Current period other comprehensive income (loss), net of tax			(2)		2,699		—		—		2,697
Balances at September 30, 2016		$	1,104	$	(64,187)	$	—	$	(70)	$	(63,153)

Balances at June 30, 2017		$	1,153	$	(86,753)	$	—	$	(70)	$	(85,670)
Other comprehensive income (loss) before reclassifications, before tax			—		(141)		166		—		25
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			(39)		—		—		—		(39)
Current period other comprehensive income (loss), before tax			(39)		(141)		166		—		(14)
Tax effect			(6)		3,001		62		—		3,057
Current period other comprehensive income (loss), net of tax			(33)		(3,142)		104		—		(3,071)
Balances at September 30, 2017		$	1,120	$	(89,895)	$	104	$	(70)	$	(88,741)
Current period other comprehensive (loss) income, net of tax														10		(30,008)		(1,336)		(31,334)
Balances at June 30, 2018													$	1,182	$	(101,927)	$	923	$	(99,822)



	Nine Months Ended September 30,											Six Months Ended June 30,
		Postretirement					Net Gain						Postretirement					Net Gain
		Benefit Liability		Translation			on Cash	Other					Benefit Liability		Translation			on Cash
		Adjustments		Adjustments			Flow Hedges	Adjustments		Total			Adjustments		Adjustments			Flow Hedges	Total

		(Dollars in thousands)											(Dollars in thousands)
Balances at December 31, 2015		$	811	$	(62,059)	$	—	$	(70)	$	(61,318)
Other comprehensive income (loss) before reclassifications, before tax			—		(3,243)		—		—		(3,243)
Balances at December 31, 2016													$	1,141	$	(107,784)	$	—	$	(106,643)
Other comprehensive income before reclassifications, before tax														—		20,961		—		20,961
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax														9		—		—		9
Current period other comprehensive (loss) income, before tax														9		20,961		—		20,970
Tax effect														(3)		—		—		(3)
Current period other comprehensive income, net of tax														12		20,961		—		20,973
Balances at June 30, 2017													$	1,153	$	(86,823)	$	—	$	(85,670)

Balances at December 31, 2017													$	1,165	$	(77,578)	$	945	$	(75,468)
Other comprehensive (loss) income before reclassifications, before tax														—		(24,021)		11,829		(12,192)
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			320		—		—		—		320			22		—		—		22
Foreign currency translation adjustment, before tax(1)			—		1,115		—		—		1,115
Cash flow hedge income, before tax														—		—		(11,687)		(11,687)
Current period other comprehensive income (loss), before tax			320		(2,128)		—		—		(1,808)			22		(24,021)		142		(23,857)
Tax effect			27		—		—		—		27			5		328		164		497
Current period other comprehensive income (loss), net of tax			293		(2,128)		—		—		(1,835)			17		(24,349)		(22)		(24,354)
Balances at September 30, 2016		$	1,104	$	(64,187)	$	—	$	(70)	$	(63,153)

Balances at December 31, 2016		$	1,141	$	(107,714)	$	—	$	(70)	$	(106,643)
Other comprehensive income (loss) before reclassifications, before tax			—		20,820		166		—		20,986
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			(30)		—		—		—		(30)
Current period other comprehensive income (loss), before tax			(30)		20,820		166		—		20,956
Tax effect			(9)		3,001		62		—		3,054
Current period other comprehensive income (loss), net of tax			(21)		17,819		104		—		17,902
Balances at September 30, 2017		$	1,120	$	(89,895)	$	104	$	(70)	$	(88,741)
Balances at June 30, 2018													$	1,182	$	(101,927)	$	923	$	(99,822)

(1) Includes a release of accumulated foreign currency translation of $1.1 million related to the Company’s sale of the Europe-based Polymer Additives business (Note 3), which is included in Loss from discontinued operations, net of income taxes in our condensed consolidated statements of operations for the three and nine months ended September 30, 2016.

~~In the first quarter of 2017, the Company’s Pigments, Powders and Oxides segment was renamed Color Solutions.~~

Net sales to external customers by segment are presented in the table below. Sales between segments were not material.

Each segment’s gross profit and reconciliations to income before income taxes are presented in the table below:

On November 1, 2017, the Company acquired 100% of the equity interests of Endeka Group, a global producer of high-value coatings and key raw materials for €63.8 million (approximately $74.3 million), excludingWe have signed definitive acquisition agreements (subject to customary ~~adjustments and fees.~~

~~The operating results related to the Endeka Group acquisition will be included~~closing conditions) in July 2018 with purchase prices in the ~~Company’s condensed consolidated financial statements commencing on the date~~aggregate amount of ~~the acquisition.~~ approximately $70 million.

Due to the timing of the ~~acquisition,~~acquisitions, the Company’s initial purchase price accounting was incomplete at the time these financial statements were issued. As such, the Company cannot disclose the allocation of the acquisition ~~price~~prices to acquired assets and liabilities and the related disclosures at this time.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Net sales for the three months ended ~~September~~June 30, ~~2017,~~2018, increased by ~~$61.5~~$67.6 million, or ~~21.3%~~19.4%, compared with the prior-year same period. The increase in net sales was driven by higher sales in ~~Color Solutions,~~Performance Coatings, Performance Colors and Glass and ~~Performance Coatings~~Color Solutions of ~~$27.9~~$41.7 million, ~~$17.8~~$19.4 million and ~~$15.8~~$6.5 million, respectively. During the three months ended ~~September~~June 30, ~~2017,~~2018, gross profit increased ~~$14.6~~$18.3 million, or ~~16.4%~~16.9%, compared with the prior-year same period; as a percentage of net sales, it decreased approximately ~~120~~70 basis points to ~~29.6%~~30.4%. Our total gross profit for the second quarter of 2018 was $126.6 million, compared with $108.3 million for the three months ended June 30, 2017. The increase in gross profit was attributable to higher gross profit across all of our segments, with increases in ~~Color Solutions,~~Performance Coatings, Performance Colors and Glass and ~~Performance Coatings~~Color Solutions of ~~$7.9~~$10.1 million, ~~$5.6~~$5.3 million and ~~$1.8~~$3.1 million, respectively.

For the three months ended ~~September~~June 30, ~~2017,~~2018, selling, general and administrative (“SG&A”) expenses increased ~~$9.9~~$7.1 million, or ~~17.8%~~11.3%, compared with the prior-year same period. As a percentage of net sales, it decreased approximately 130 basis points to 16.8%. The ~~increase was~~higher SG&A expenses compared to the prior-year same period are primarily driven by ~~$6.7 million of~~ expenses ~~related to acquisitions completed~~associated with businesses acquired within the last year.

For the three months ended ~~September~~June 30, ~~2017,~~2018, net income was ~~$23.0~~$29.9 million, compared with net ~~loss~~income of ~~$8.7~~$21.2 million for the prior-year same period, and net income attributable to common shareholders was ~~$22.8~~$29.7 million, compared with net ~~loss~~income attributable to common shareholders of ~~$8.9~~$21.0 million for the prior-year same period. Income from continuing operations was $23.0 million for the three months ended September 30, 2017, compared with $20.5 million for the three months ended September 30, 2016. Our total gross profit for the third quarter of 2017 was $103.6 million, compared with $89.0 million for the three months ended September 30, 2016.

~~For~~In the ~~remainder~~second half of ~~2017,~~2018, we expect to continue to ~~benefit from strong~~execute the dynamic innovation and optimization phase of our corporate strategy, which includes organic and inorganic growth, and optimization efforts throughout the organization. We expect organic growth from sales of new products and repositioning of our portfolio to address the higher end of our target markets. Inorganically, we expect to invest at levels of approximately $100 million to $150 million per year in strategic acquisitions. We are implementing optimization programs to improve efficiency and upgrade operations throughout our business.

We expect continued raw material headwinds through the near term. Over the long term, we are confident in our ~~businesses,~~ability to mitigate raw material inflation due to our pricing initiatives, technological advances in ~~addition to contributions from recent acquisitions. With respect to gross margins, we could~~reformulating compounds, and optimization initiatives. Foreign currency rates may continue to be impacted by the raw material headwinds that have been experienced throughout the year thus far, which we would expect to cover through pricing actions, product reformations and other optimization actions, with some lag. We expect Selling, general and administrative costs to continue to leverage favorably as a percentage of Net sales, compared with the prior year. Further, as we movevolatile through the ~~balance~~second half of ~~the year, we will continue to monitor current~~2018 and ~~near-term increasing customer demand levels, and align our production and inventories accordingly.~~ changes in interest rates could adversely impact reported results.

We remain focused on the integration of ~~our~~ recent acquisitions and continue to work toward achieving the identified synergies. We ~~will~~are concurrently focusing on opportunities to optimize our cost structure and on making our business processes and systems more efficient. We continue to ~~drive innovation and optimization throughout our business.~~expect cash flow from operating activities to be positive for 2018, providing additional liquidity.

Factors that could adversely affect our future performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Comparison of the three months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

For the three months ended ~~September~~June 30, ~~2017, income from continuing operations was $23.0 million, compared with $20.5 million income from continuing operations for the three months ended September 30, 2016. Net~~2018, net income was ~~$23.0~~$29.9 million, compared with net ~~loss~~income of ~~$8.7~~$21.2 million for the three months ended ~~September~~June 30, ~~2016.~~2017. For the three months ended ~~September~~June 30, ~~2017,~~2018, net income attributable to common shareholders was ~~$22.8~~$29.7 million, or earnings per share of ~~$0.27,~~$0.35, compared with net ~~loss~~income attributable to common shareholders of ~~$8.9~~$21.0 million, or ~~loss~~earnings per share of ~~$0.11,~~$0.25, for the three months ended ~~September~~June 30, ~~2016.~~2017.

Net sales increased by ~~$61.5~~$67.6 million, or ~~21.3%~~19.4%, infor the three months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior-year same period, driven by higher sales in ~~Color Solutions,~~Performance Coatings, Performance Colors and Glass and ~~Performance Coatings~~Color Solutions of ~~$27.9~~$41.7 million, ~~$17.8~~$19.4 million and ~~$15.8~~$6.5 million, respectively. The increase in net sales was driven in part by acquisitions, including ~~Cappelle,~~Endeka, which contributed sales of ~~$17.8~~$30.5 million, ~~ESL,~~and Dip-Tech, which contributed sales of ~~$10.5 million, and SPC, which contributed sales of $7.8~~$7.0 million, each of which was acquired after the ~~third~~second quarter of ~~2016.~~2017. The increase in net sales was also driven by organic growth, with Performance Coatings growing $11.2 million, Performance Colors and Glass growing $10.4 million and Color Solutions growing ~~$10.1 million and Performance Coatings growing $7.2~~$6.5 million.

Gross profit increased ~~$14.6~~$18.3 million, or ~~16.4%~~16.9%, infor the three months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior-year same period, and as a percentage of net sales, it decreased ~~120~~70 basis points to ~~29.6%~~30.4%. The increase in gross profit was attributable to increases across all ~~of our~~ segments, with increases in ~~Color Solutions,~~Performance Coatings, Performance Colors and Glass and ~~Performance Coatings~~Color Solutions of ~~$7.9~~$10.1 million, ~~$5.6~~$5.3 million and ~~$1.8~~$3.1 million, respectively. The increase in gross profit was driven by ~~acquisitions of $11.9 million,~~ favorable product pricing of ~~$6.0~~$12.9 million, ~~lower manufacturing costs~~gross profit from acquisitions of ~~$4.7~~$10.6 million, higher sales volumes and mix of $6.4 million, favorable foreign currency impacts of ~~$1.6~~$3.4 million and lower manufacturing costs of $0.7 million, partially offset by higher raw material costs of ~~$8.6 million and lower sales volumes and mix of $0.3~~$15.5 million.

The increase in net sales of ~~$61.5~~$67.6 million, compared with the prior-year same period, was driven by an increase in sales from EMEA, Asia Pacific and the United States. The increase in sales from EMEA was attributable to higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $37.3 million, $16.1 million and $1.3 million, respectively. The increase in sales from Asia Pacific was attributable to higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $6.0

million, $2.3 million and $1.8 million, respectively. The increase in sales from the United States was attributable to higher sales in Color Solutions and Performance Colors and Glass of $2.1 million and $0.7 million, respectively. Sales from Latin America were flat.

The following table presents our sales on the basis of where sold products were shipped.

The following table includes SG&A components with significant changes between 2018 and 2017.

SG&A expenses were $7.1 million higher in the three months ended June 30, 2018, compared with the prior-year same period. The higher SG&A expenses compared with the prior-year same period are primarily driven by businesses acquired within the last year, primarily related to personnel expenses and research and development expenses. This increase was mitigated by a decrease in stock-based compensation and in business development expenses.

The following table presents SG&A expenses attributable to sales, research and development and operations costs as strategic services and other SG&A costs as functional services.

Restructuring and impairment charges increased in the second quarter of 2018 compared with the prior-year same period. The increase primarily relates to costs associated with integration of our recent acquisitions and optimization programs.

Interest expense increased in the second quarter of 2018 compared with the prior-year same period. The increase in interest expense was due to an increase in the average long-term debt balance during the three months ended June 30, 2018, compared with the prior-year same period. Also, interest expense increased due to the increase in LIBOR, offset by the decrease in the applicable margin rate from borrowings from the Amended Credit Facility.

During the second quarter of 2018, income tax expense was $10.4 million, or 25.8% of pre-tax income. In the second quarter of 2017, we recorded tax expense of $8.7 million, or 29.1% of pre-tax income. The tax expense in the second quarter of 2018, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for the second quarter of 2017, as a percentage of pre-tax income, was lower than the U.S. federal statutory income tax rate of 35% primarily as a result of foreign statutory rate differences.

The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and the foreign-derived intangible income (“FDII”) on the Company for 2018. For the current quarter the Company has made reasonable estimates of GILTI and FDII, as well as the impact of changes to valuation allowances related to certain positions. The combined provisional net impact of these items are not anticipated to be material to the tax rate in 2018. The Company has not recorded any potential deferred tax effects related to GILTI in the financial statements and has not made a policy decision regarding whether to record deferred taxes on GILTI or use the period cost method.

Net sales increased in Performance Coatings compared with the prior-year same period, primarily driven by sales from Endeka of $29.1 million and Gardenia of $1.5 million, each of which was acquired after the second quarter of 2017, and increases in sales of frits and glazes, digital inks and porcelain enamel of $7.7 million, $3.4 million and $1.0 million, respectively, partially offset by a decrease in sales of colors. The increase in net sales was driven by sales from acquisitions of $30.6 million, higher product pricing of $8.5 million and favorable foreign currency impacts of $2.7 million, partially offset by unfavorable volume and mix of $0.1 million. Gross profit increased $10.1 million from the prior-year same period, primarily driven by favorable product pricing impacts of $8.5 million, gross profit from acquisitions of $8.1 million, lower manufacturing costs of $1.7 million, favorable foreign currency impacts of $1.4 million and higher sales volumes and mix of $0.1 million, partially offset by higher raw material costs of $9.8 million.

The net sales increase of $41.7 million was driven by increases in sales in EMEA, Asia Pacific, and the United States, partially offset by a decrease in sales in Latin America. The increase in sales from EMEA was primarily attributable to sales from Endeka and Gardenia, each of which was acquired after the second quarter of 2017, which contributed $28.4 million and $1.5 million, respectively, and higher sales of frits and glazes, porcelain enamel and digital inks of $6.4 million, $1.5 million and $1.1 million, partially offset by a decrease in sales of colors of $1.6 million. The increase in sales from Asia Pacific was driven by higher sales of frits and glazes, digital inks and porcelain enamel of $3.2 million, $1.8 million and $0.4 million, respectively, and sales from Endeka, which contributed $0.6 million. The increase in sales from the United States was fully attributable to higher sales of porcelain enamel. The decrease in sales from Latin America was driven by lower sales of frits and glazes and porcelain enamel of $1.9 million and $1.0 million, respectively, partially offset by higher sales of digital inks.

Net sales increased compared with the prior-year same period, primarily driven by organic sales of $10.4 million and $7.0 million in sales from Dip-Tech, which was acquired in the third quarter of 2017, and $1.4 million in sales from Endeka, which was acquired in the fourth quarter of 2017. The increase in net sales was driven by sales from acquisitions of $8.9 million, favorable volume and mix of $5.4 million, favorable foreign currency impacts of $3.6 million, and higher product pricing of $1.4 million. Gross profit increased from the prior-year same period, primarily due to gross profit from acquisitions of $2.4 million, higher product pricing of $1.4 million, favorable foreign currency impacts of $1.2 million, favorable manufacturing costs of $1.0 million and higher sales volumes and mix of $0.8 million, partially offset by higher raw material costs of $1.6 million.

The net sales increase of $19.4 million was driven by higher sales from all regions. The increase in sales from EMEA was primarily attributable to $6.5 million in sales from acquisitions and higher sales of decoration products and electronic products of $3.7 million and $3.1 million, respectively. The increase from Asia Pacific was primarily due to an increase in sales of automobile products of $1.3 million and decoration products of $0.8 million. The increase in sales from the United States was primarily attributable to an increase in sales from Dip-Tech of $1.4 million, partially offset by lower sales of automobile products. Sales from Latin America remained relatively flat.

Net sales increased compared with the prior-year same period, primarily due to higher sales of pigments and surface technology products of $3.5 million and $3.2 million, respectively. The increase in net sales was driven by higher product pricing of $3.0 million, favorable foreign currency impacts of $2.6 million and higher volumes and mix of $0.9 million. Gross profit increased from the prior-year same period, primarily due to favorable sales volumes and mix of $5.5 million, higher product pricing of $3.0 million and

favorable foreign currency impacts of $0.7 million, partially offset by higher raw material costs of $4.1 million and higher manufacturing costs of $2.0 million.

The net sales increase of $6.5 million was driven by higher sales from all regions. The higher sales from EMEA, Asia Pacific and Latin America were driven by sales of pigment products. The increase in sales from the United States was primarily driven by sales of $3.2 million of surface technology products, partially offset by lower sales of pigment products of $0.9 million.

For the six months ended June 30, 2018, net income was $53.5 million, compared with net income of $43.4 million for the six months ended June 30, 2017. For the six months ended June 30, 2018, net income attributable to common shareholders was $53.1 million, or earnings per share of $0.63, compared with net income attributable to common shareholders of $42.9 million, or earnings per share of $0.51, for the six months ended June 30, 2017.

Net sales increased by $152.6 million, or 22.8%, in the six months ended June 30, 2018, compared with the prior-year same period, driven by higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $99.8 million, $36.4 million and $16.4 million, respectively. The increase in net sales was driven by Endeka, which contributed sales of $61.2 million, and Dip-Tech, which contributed sales of $10.9 million, each of which was acquired after the second quarter of 2017. The increase in net sales was also driven by organic growth, with Performance Coatings growing $29.2 million, Performance Colors and Glass growing $21.2 million and Color Solutions growing $16.4 million.

Gross profit increased $38.2 million, or 18.4%, in the six months ended June 30, 2018, compared with the prior-year same period, and as a percentage of net sales, it decreased 110 basis points to 29.9%. The increase in gross profit was attributable to increases across all segments, with increases in Performance Coatings, Performance Colors and Glass and Color Solutions of $20.3 million, $11.2 million and $7.1 million, respectively. The increase in gross profit was driven by favorable product pricing of $24.1 million, gross profit from acquisitions of $23.2 million, favorable foreign currency impacts of $10.7 million, higher sales volumes and mix of $10.3 million, and lower manufacturing costs of $2.6 million, partially offset by higher raw material costs of $32.3 million.

The increase in net sales of $152.6 million, compared with the prior-year same period, was driven by an increase in sales from all regions. The increase in sales from Europe was primarily attributable to higher sales in ~~Color Solutions,~~ Performance Coatings, ~~and~~ Performance Colors and Glass and Color Solutions of ~~$17.9~~$87.3 million, ~~$14.7~~$32.8 million and ~~$12.3~~$6.6 million, respectively. The increase in sales from Asia Pacific was primarily attributable to higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $10.7 million, $4.1 million and $3.4 million, respectively. The increase in sales from the United

~~States~~$5.2 million and $2.2 million, respectively, partially offset by a decrease in sales in Performance Colors and Glass of $1.3 million. The increase in sales from Latin America was attributable to higher sales in Color Solutions and Performance Colors and Glass of ~~$7.9~~$1.2 million and ~~$3.9~~$0.7 million, ~~respectively. The increase~~respectively, partially offset by a decrease in sales ~~from Latin America and Asia Pacific was attributable to higher sales across all segments.~~in Performance Coatings of $0.3 million.

The following table presents our sales on the basis of where sold products were shipped.

The following table includes SG&A components with significant changes between ~~2017~~2018 and ~~2016.~~2017.

SG&A expenses were ~~$9.9~~$20.8 million higher in the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior-year same period. The higher SG&A expenses compared with the prior-year same period are primarily driven by ~~expenses associated with~~ businesses acquired within the last year, ~~of approximately $6.7 million. The acquisitions were the primary driver of the increase in~~primarily related to personnel expenses and accounted for the entire increase in intangible asset amortization. The increase in incentive compensation of $1.5 million was driven by the Company’s performance relative to targets established for certain awards compared with the prior-year same period.research and development expenses.

The following table presents SG&A expenses attributable to sales, research and development and operations costs as strategic services and other SG&A costs as functional services.

Restructuring and impairment charges increased in the ~~third quarter of 2017~~six months ended June 30, 2018 compared with the prior-year same period. The increase ~~was~~ primarily ~~due~~relates to ~~actions taken in connection~~costs associated with integration of our recent acquisitions ~~designed to achieve our targeted synergies.~~and optimization programs.

Interest expense increased in the ~~third quarter of 2017~~six months ended June 30, 2018 compared with the prior-year same period. The increase in interest expense was due to an increase in the average long-term debt balance during the ~~three~~six months ended ~~September~~June 30, ~~2017,~~2018, compared with the prior-year same ~~period and an~~period. Also, interest expense increased due to the increase ~~of the amortization of debt issuance costs associated with the 2017 Credit Facility, partially~~in LIBOR, offset by ~~a favorable average borrowing rate as a result of~~ the ~~refinancing completed~~decrease in the ~~first quarter of 2017.~~applicable margin rate from borrowings from the Amended Credit Facility.

During the ~~third quarter~~first half of ~~2017,~~2018, income tax expense was ~~$7.4~~$17.9 million, or ~~24.3%~~25.1% of pre-tax income. In the ~~third quarter~~first half of ~~2016,~~2017, we recorded tax expense of ~~$6.2~~$15.8 million, or ~~23.1%~~26.8% of pre-tax income. The tax expense in the ~~third quarter~~first half of ~~2017 and 2016,~~2018, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for the first half of 2017, as a percentage of pre-tax income, was lower than the U.S. federal statutory income tax rate of 35%, primarily as a result of foreign statutory rate differences.

~~Comparison~~We have recognized the provisional tax impacts related to the 2017 Tax Cut and Jobs Act (the “Tax Act”) under the guidance of the ~~three months ended September 30, 2017~~SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and ~~2016~~

~~Net sales increased in Performance Coatings compared with the prior-year same period, primarily driven by sales~~Jobs Act (“SAB 118”). The ultimate impact may differ from SPC of $7.8 million, and increases in sales of colors, frits and glazes, and porcelain enamel of $2.9 million $2.4 million and $1.1 million, respectively. The increase in net sales was driven by sales from acquisitions of $8.6 million, higher sales volume and mix of $3.4 million, higher product pricing of $2.7 million, and favorable foreign currency impacts of $1.0 million. Gross profit increased $1.8 million from the prior-year same period, primarily driven by gross profit from acquisitions of $2.7 million, favorable product pricing impacts of $2.7 million, higher sales volumes and mix of $1.0 million, and favorable foreign currency impacts of $0.7 million, partially offset by higher raw material costs of $4.8 million and higher manufacturing costs of $0.4 million.

The net sales increase of $15.8 million was driven by increases in sales from Europe, Asia Pacific and Latin America, partially offset by lower sales in the United States. The increase in sales from Europe was primarily attributable to SPC, which was acquired in second quarter of 2017, which contributed $7.8 million, and higher sales of colors, frits and glazes, and porcelain enamel of $3.0 million, $1.3 million and $1.0 million, respectively. The increase in sales from Asia Pacific was driven by higher sales of digital inks and porcelain enamel of $1.1 million and $0.4 million. Latin America sales remained relatively flat and the decrease in sales in the United States is fully attributable to lower sales of porcelain enamel.

Net sales increased compared with the prior-year same period, primarily driven by $10.5 million of sales from ESL, which was acquired in the fourth quarter of 2016, and $6.4 million in sales from Dip-Tech, which was acquired in the third quarter of 2017. The increase in net sales was driven by acquisitions of $16.8 million, favorable foreign currency impacts of $2.0 million, and higher product pricing of $0.5 million, partially offset by unfavorable volume and mix of $1.5 million. Gross profit increased from the prior-year same period, primarilythese provisional amounts due to ~~acquisitions, which contributed $5.4 million, favorable manufacturing costs of $1.5 million, favorable foreign currency impacts of $0.6 million,~~additional analysis, changes in interpretations and ~~higher product pricing of $0.5 million, partially offset by lower sales volumes~~assumptions, additional regulatory guidance that may be issued, and ~~mix of $1.5 million and unfavorable raw material costs of $0.9 million.~~

The net sales increase of $17.8 million was driven by higher sales from all regions. The increase in sales from Europe was primarily attributable to $8.9 million in sales from acquisitions and higher sales in decoration products of $2.4 million. The increase in sales from the United States was primarily attributable to sales from acquisitions of $7.9 million, partially offset by a decrease in sales of automobile and industrial products of $2.1 million and $1.7 million, respectively. The increase from Asia Pacific was due to an increase in sales of decoration and automobile products of $0.9 million and $0.7 million, respectively. Sales from Latin America remained relatively flat.

Net sales increased compared with the prior-year same period, primarily due to sales from Cappelle of $17.8 million, and higher sales of pigments and surface technology products of $6.6 million and $3.7 million, respectively. The increase in net sales was driven by acquisitions of $17.8 million, higher volumes and mix of $6.5 million, higher product pricing of $2.8 million, and favorable foreign currency impacts of $0.9 million. Gross profit increased from the prior-year same period, primarily due to acquisitions, which contributed $3.8 million, lower manufacturing costs of $3.6 million, higher product pricing of $2.8 million, favorable sales volumes

~~and mix of $0.3 million, and favorable foreign currency impacts of $0.2 million, partially offset by higher raw material costs of $2.9 million.~~

The net sales increase of $27.9 million was driven by higher sales from all regions. The higher sales from Europe was driven by sales from Cappelle of $14.8 million and pigment products of $3.1 million. The increase in sales from the United States was primarily driven by sales in surface technology products of $3.7 million, sales from Cappelle of $3.0 million and sales in pigment products of $1.4 million. The increases in sales from Asia Pacific and Latin America of $1.1 million and $0.9 million, respectively, were fully attributable to higher sales for pigment products.

For the nine months ended September 30, 2017, income from continuing operations was $66.3 million, compared with $65.2 million income from continuing operations for the nine months ended September 30, 2016. Net income was $66.3 million, compared with net income of $0.7 million for the nine months ended September 30, 2016. For the nine months ended September 30, 2017, net income attributable to common shareholders was $65.7 million, or earnings per share of $0.79, compared with net income attributable to common shareholders of $0.1 million, or earnings per share of $0.01, for the nine months ended September 30, 2016.

Net sales increased by $155.2 million, or 18.0%, in the nine months ended September 30, 2017, compared with the prior-year same period, driven by higher sales in Color Solutions, Performance Colors and Glass and Performance Coatings of $86.0 million, $43.8 million and $25.4 million, respectively. The increase in net sales was driven largely by acquisitions, including Cappelle, which contributed sales of $55.8 million, ESL, which contributed sales of $31.8 million, and SPC, which contributed sales of $13.5 million, each of which was acquired after the third quarter of 2016. The increase in net sales was also driven by organic growth with Color Solutions growing $28.1 million, Performance Coatings growing $11.1 million and Performance Colors and Glass growing $1.8 million.

Gross profit increased $39.2 million, or 14.4%, in the nine months ended September 30, 2017, compared with the prior-year same period, and as a percentage of net sales, it decreased 90 basis points to 30.5%. The increase in gross profit was attributable to increases across all of our segments, with increases in Color Solutions, Performance Colors and Glass and Performance Coatings of

$21.8 million, $14.6 million and $4.2 million, respectively. The increase in gross profit was primarily driven by acquisitions of $31.2 million, lower manufacturing costs of $20.2 million, higher sales volumes and mix of $7.0 million, and favorable product pricing of $5.5 million, partially offset by higher raw material costs of $20.7 million and unfavorable foreign currency impacts of $2.6 million.

~~The following table presents our sales on the basis of where sales originated.~~

The increase in net sales of $155.2 million, compared with the prior-year same period, was driven by higher sales from all regions. The increase in sales from Europe was attributable to higher sales in Color Solutions, Performance Colors and Glass and Performance Coatings of $53.8 million, $23.4 million and $20.5 million, respectively. The increase in sales from the United States was primarily attributable to higher sales in Color Solutions and Performance Colors and Glass of $26.5 million and $15.9 million. The increase in sales from Latin America and Asia Pacific was attributable to higher sales across all segments.

~~The following table presents our sales on the basis of where sold products were shipped.~~

~~The following table includes SG&A components with significant changes between 2017 and 2016.~~

SG&A expenses were $20.9 million higher in the nine months ended September 30, 2017, compared with the prior-year same period. The higher SG&A expenses compared with the prior-year same period are primarily driven by businesses acquired within the last year of approximately $17.2 million. The acquisitions were the primary driver of the increase in personnel expenses, and accounted for the entire increase in intangible asset amortization. The increase in business development expenses is due to higher professional fees. The increase in stock-based compensation expense of $1.6 million is driven by the Company’s performance relative to targets for certain awards compared with the prior-year same period, as well as increases in the Company’s stock price.

~~The following table presents SG&A expenses attributable to sales, research and development and operations costs as strategic services and other SG&A costs as functional services.~~

Restructuring and impairment charges increased in the first nine months of 2017 compared with the prior-year same period. The increase was primarily due to an “other than temporary impairment” charge on an equity method investment of $1.5 million and costs associated with a restructuring plan in Italy, which includes $1.2 million of asset impairment associated with assets that have been taken out of service, as well as actions ~~taken in connection with recent acquisitions designed to achieve our targeted synergies.~~

Interest expense increased in the first nine months of 2017 compared with the prior-year same period. The increase in interest expense was due to an increase in the average long-term debt balance during the nine months ended September 30, 2017, compared with the prior-year same period and an increase of the amortization of debt issuance costs associated with the 2017 Credit Facility, partially offset by a favorable average borrowing ratewe may take as a result of the ~~refinancing completed~~Tax Act. The Company’s preliminary determinations related to the estimable impacts of the Tax Act that are effective for the year-ended December 31, 2017 have not changed in the ~~first quarter of 2017.~~current quarter.

~~During~~The Company continues to review the ~~first nine months~~anticipated impacts of ~~2017,~~the global intangible low taxed income (“GILTI”) and the foreign-derived intangible income (“FDII”) on the Company for 2018. For the current quarter the Company has made reasonable estimates of GILTI and FDII, as well as the impact of changes to valuation allowances related to certain positions. The combined provisional net impact of these items are not anticipated to be material to the tax ~~expense was $23.2 million, or 25.9% of pre-tax income. In the first nine months of 2016, we~~rate in 2018. The Company has not recorded any potential deferred tax ~~expense of $22.7 million, or 25.8% of pre-tax income. The tax expense~~effects related to GILTI in the ~~first nine months of 2017~~financial statements and ~~2016, as~~has not made a ~~percentage of pre-tax income, is lower than~~policy decision regarding whether to record deferred taxes on GILTI or use the ~~U.S. federal statutory income tax rate of 35%, primarily as a result of foreign statutory rate differences.~~ period cost method.

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 and ~~2016~~2017

Nine Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions
Other

(Dollars in thousands)

Segment net sales

$
424,549

$
399,166

$
25,383

6.4
%

$
(427)

$
20,333

$
(8,851)

$
14,328

$
—
Segment gross profit

109,205

104,985

4,220

4.0
%

(427)

6,174

(2,006)

3,961

(3,482)
Gross profit as a % of segment net sales

25.7
%

26.3
%

Six Months Ended

Change due to

June 30,

Volume /

2018

2017

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

Table of Contents

	(Dollars in thousands)
Segment net sales	$	378,097		$	278,311		$	99,786	35.9	%	$	15,631	$	1,111	$	12,449	$	70,595	$	—
Segment gross profit		94,062			73,735			20,327	27.6	%		15,631		887		4,478		19,787		(20,456)
Gross profit as a % of segment net sales		24.9	%		26.5	%

Net sales increased in Performance Coatings compared with the prior-year same period, primarily driven by sales from Endeka of $57.6 million and Gardenia of $3.0 million, each of which was acquired after the second quarter of 2017, sales from SPC of ~~$13.5~~$10.1, which was acquired in the second quarter of 2017, and increases in sales of frits and glazes, porcelain enamel and digital inks of $13.1 million $7.8 million and ~~an increase in organic growth across all product lines.~~$6.9 million, respectively. The increase in net sales was driven by sales from acquisitions of $70.6 million, higher ~~sales~~product pricing of $15.6 million, favorable foreign currency impacts of $12.4 million, and favorable volume and mix of ~~$20.3 million and sales from acquisitions of $14.3 million, partially offset by unfavorable foreign currency impacts of $8.9 million and lower product pricing of $0.4~~$1.1 million. Gross profit increased ~~$4.2~~$20.3 million from the prior-year same period, primarily driven by ~~lower manufacturing costs~~gross profit from acquisitions of ~~$7.7~~$19.8 million, favorable product pricing impacts of $15.6 million, favorable foreign currency impacts of $4.5 million, higher sales volumes and mix of ~~$6.2~~$0.9 million and ~~gross profit from acquisitions~~lower manufacturing costs of ~~$4.0~~$0.7 million, partially offset by higher raw material costs of ~~$11.2 million, unfavorable foreign currency impacts of $2.0 million and unfavorable product pricing impacts of $0.4~~$21.2 million.

The net sales increase of ~~$25.4~~$99.8 million was primarily driven by increases in sales from ~~Europe, Latin America~~EMEA and Asia ~~Pacific, partially offset by a decrease in sales from the United States.~~Pacific. The increase in sales from ~~Europe~~EMEA was primarily ~~driven by~~attributable to sales from ~~SPC of $13.5~~acquisitions which contributed $67.5 million and anhigher sales of all product lines. The increase in sales ~~of colors and porcelain enamel of $3.2 million and $2.6 million, respectively. The sales increase~~ from ~~Latin America~~Asia Pacific was ~~primarily~~ driven by higher sales of frits and glazes, ~~and porcelain enamel of $3.8 million and $0.8 million, respectively. The sales increase from Asia Pacific was primarily driven by higher sales of~~ digital inks and porcelain enamel of ~~$2.5~~$5.2 million, $2.1 million and ~~$0.9~~$1.6 million, respectively, ~~partially offset by lower~~and sales ~~of frits and glazes of $1.7~~from Endeka, which contributed $1.6 million. The ~~decrease~~increase in sales from the United States was fully attributable to higher sales of porcelain enamel. The decrease in sales from Latin America was driven by lower sales of porcelain ~~enamel.~~enamel and frits and glazes, partially offset by higher sales of digital inks.



	Nine Months Ended											Change due to									Six Months Ended											Change due to
	September 30,												Volume /								June 30,												Volume /
	2017			2016			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other		2018			2017			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)																				(Dollars in thousands)
Segment net sales	$	320,733		$	276,896		$	43,837	15.8	%	$	1,672	$	1,263	$	(1,105)	$	42,007	$	—	$	246,532		$	210,155		$	36,377	17.3	%	$	2,231	$	7,770	$	11,206	$	15,170	$	—
Segment gross profit		115,385			100,825			14,560	14.4	%		1,672		(1,881)		(488)		14,925		332		88,690			77,505			11,185	14.4	%		2,231		2,165		3,948		3,458		(618)
Gross profit as a % of segment net sales		36.0	%		36.4	%																36.0	%		36.9	%

Net sales ~~increase of $43.8 million was~~increased compared with the prior-year same period, primarily driven by $10.9 million in sales from ~~ESL~~Dip-Tech, which was acquired in the third quarter of ~~$31.8~~2017, and $3.6 million ~~Dip-Tech~~in sales from Endeka, which was acquired in the fourth quarter of ~~$6.4 million and organic growth in electronic products of $4.3 million.~~2017. The increase in net sales was driven by sales from acquisitions of ~~$42.0~~$15.2 million, ~~higher product pricing~~favorable foreign currency impacts of ~~$1.7~~$11.2 million, ~~and~~ favorable volume and mix of ~~$1.3~~$7.8 million ~~partially offset by unfavorable foreign currency impacts~~and higher product pricing of ~~$1.1~~$2.2 million. Gross profit increased from the prior-year same period, primarily due to favorable foreign currency impacts of $3.9 million, gross profit from acquisitions of ~~$14.9~~$3.5 million, favorable manufacturing costs of $2.8 million, ~~and~~ higher product pricing of ~~$1.7~~$2.2 million ~~partially offset by unfavorable raw material costs of $2.5 million, lower~~and higher sales volumes and mix of ~~$1.9~~$2.2 million, ~~and unfavorable foreign currency impacts~~partially offset by higher raw material costs of ~~$0.5~~$3.4 million.

The net sales increase of ~~$43.8~~$36.4 million was driven by higher sales from ~~all regions. The increase in sales from Europe was primarily driven by higher sales from acquisitions. The increase in sales from the United States was driven by sales from ESL of $20.2 million,~~EMEA, Asia Pacific and Latin America, partially offset by a decrease in sales ~~of industrial products.~~from the United States. The increase in sales from EMEA was primarily attributable to $11.5 million in sales from acquisitions and higher sales from all product groups. The increase from Asia Pacific was primarily due to ~~higher~~an increase in sales of automobile ~~and decoration products of $1.6 million and $0.8 million, respectively. The increase~~products. Sales from Latin America remained relatively flat. The decrease in sales from the United States was primarily ~~driven~~attributable to lower sales of automobile products and industrial products, partially mitigated by an increase in sales from Dip-Tech of ~~decoration products of $1.8 million, partially offset by a decrease in sales of automobile and industrial products.~~ $2.2 million.



	Nine Months Ended											Change due to									Six Months Ended											Change due to
	September 30,												Volume /								June 30,												Volume /
	2017			2016			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other		2018			2017			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)																				(Dollars in thousands)
Segment net sales	$	273,917		$	187,893		$	86,024	45.8	%	$	4,211	$	24,208	$	(317)	$	57,922	$	—	$	197,142		$	180,721		$	16,421	9.1	%	$	6,204	$	1,999	$	8,219	$	—	$	—
Segment gross profit		87,642			65,868			21,774	33.1	%		4,211		2,664		(145)		12,308		2,736		63,690			56,598			7,092	12.5	%		6,204		7,214		2,289		—		(8,616)
Gross profit as a % of segment net sales		32.0	%		35.1	%																32.3	%		31.3	%

Net sales increased compared with the prior-year same period, primarily due to ~~sales from Cappelle of $55.8 million, and~~ higher sales of pigments and surface technology products of ~~$17.8~~$10.5 million and ~~$10.5~~$6.3 million, respectively. The increase in net sales was driven by ~~sales from acquisitions~~favorable foreign currency impacts

of $8.2 million, higher product pricing of $6.2 million and higher volumes and mix of ~~$24.2 million, and higher product pricing of $4.2 million, partially offset by unfavorable foreign currency impacts of $0.3~~$2.0 million. Gross profit increased from the prior-year same period, primarily due to ~~gross profit from acquisitions of $12.3 million, lower manufacturing costs of $9.7 million,~~ higher product pricing of ~~$4.2~~$6.2 million, ~~and higher~~favorable sales volumes and mix of ~~$2.7~~$7.2 million and favorable foreign currency impacts of $2.3 million, partially offset by ~~unfavorable~~higher raw material costs of ~~$7.0~~$7.7 million and ~~unfavorable foreign currency impacts~~higher manufacturing costs of ~~$0.1~~$0.9 million.

The net sales increase of ~~$86.0~~$16.4 million was driven by higher sales from all regions. The ~~increase in~~higher sales from ~~Europe was primarily~~EMEA, Asia Pacific and Latin America were driven by sales ~~from Cappelle~~ of ~~$46.7 million and higher sales of pigments of $7.1 million.~~pigment products. The increase in sales from the United States was primarily driven by sales ~~from Cappelle~~ of ~~$9.1 million,~~ surface technology products of $10.4 million and pigments of $5.0 million. The increases in sales from Asia Pacific and Latin America of $3.3 million and $2.4 million, respectively, were driven by an increase in pigment products.

Summary of Cash Flows for the ~~nine~~six months ended ~~September~~June 2018 and 2017 ~~and 2016~~

The following table includes details of net cash (used in) provided by operating activities.

~~The following table includes details of net cash provided by operating activities.~~

Cash flows from operating activities. Cash flows provided by operating activities ~~increased $27.9~~decreased $52.4 million in the first ~~nine~~six months of ~~2017~~2018 compared with the prior-year same period. The ~~increase~~decrease was primarily due to ~~higher earnings after consideration of non-cash items, partially offset by~~ higher cash outflows for net working capital of ~~$7.7~~$54.9 million and other current assets and liabilities of ~~$6.3~~$13.7 million, partially offset by an increase in net income of $10.1 million.

Cash flows from investing activities. Cash flows used in investing activities increased ~~$73.2~~$17.0 million in the first ~~nine~~six months of ~~2017~~2018 compared with the prior-year same period. The increase was primarily due to higher cash outflows for ~~acquisitions of $60.5 million, higher~~ capital expenditures of ~~$11.9~~$26.7 million, ~~and lower proceeds from a closed site in Australia of $3.6 million which occurred during the nine months ended September 30, 2016. The cash outflow was partially~~ offset by ~~proceeds from the sale~~lower cash outflows for business acquisitions, net of ~~an equity method investment~~cash acquired of ~~$2.3~~$9.8 million.

Cash flows from financing activities. Cash flows provided by financing activities increased ~~$66.1~~$20.6 million in the first ~~nine~~six months of ~~2017~~2018 compared with the prior-year same period. As further discussed in Note 8, during the ~~nine~~three months ended ~~September~~June 30, ~~2017,~~2018, we paid off our ~~Previous~~ Credit Facility and entered into our Amended Credit Facility, consisting of a ~~$400~~$500 million secured revolving line of credit ~~a $357.5~~and $820 million secured term loan facility and a €250 million secured euro term loan facility. This transaction resulted in additional borrowings in the first nine months of 2017 of $82.2 million compared to the prior-year same period.facilities. Further, compared to the prior-year same period, ~~net repayments under loans payable was $13.4 million higher. Additionally, during the first nine months~~payment of ~~2017, we paid~~ debt issuance costs ~~related to the Credit Facility entered into during the period, partially~~decreased $9.5 million, offset by ~~no repurchases~~the purchase of treasury stock ~~being made during~~in the ~~first nine~~six months ended of ~~2017.~~ $6.0 million.

On ~~February 14, 2017,~~April 25, 2018 the Company entered into ~~a new~~an amendment (the “Amended Credit Facility”) to its existing credit facility (the “Credit Facility”) ~~with~~which Amended Credit Facility (a) provided a ~~group~~new revolving facility (the “2018 Revolving Facility”), which replaced the Company’s existing revolving facility, (b) repriced the (“Tranche B-1 Loans”), (c) provided new tranches of ~~lenders to refinance its then outstanding~~term loans (“Tranche B-2 Loans” and “Tranche B-3 Loans”) denominated in U.S. dollars borrowed by the Company’s existing credit facility ~~debt~~ and ~~to provide liquidity~~will be used for ongoing working capital requirements and general corporate purposes. The (“Tranche B-2 Loans”) are borrowed by the Company and the (“Tranche B-3 Loans”) are borrowed on a joint and several basis by Ferro GmbH and Ferro Europe Holdings LLC.

The Amended Credit Facility consists of a ~~$400~~$500 million secured revolving line of credit with a ~~term~~maturity of ~~five years,~~February 2023, a ~~$357.5~~$355 million secured term loan facility with a ~~term~~maturity of ~~seven years and~~February 2024, a ~~€250~~$235 million secured ~~euro~~ term loan facility with a maturity of February 2024 and a $230 million secured term loan facility with a maturity of ~~seven years.~~February 2024. The term loans are payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company is required, on an annual basis, to make a prepayment ~~of term loans until they are fully paid and then to the revolving loans~~ in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit ~~Facility.~~Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans.

At ~~September~~June 30, ~~2017,~~2018, the Company had borrowed ~~$355.7~~$354.1 million under the ~~secured term loan facility~~Tranche B-1 Loans at an interest rate of ~~3.73% and €248.8~~4.58%, $234.4 million under the ~~secured euro term loan facility~~Tranche B-2 Loans at an interest rate of ~~2.75%~~4.58%, and $229.4 million under the Tranche B-3 Loans at an interest rate of 4.58%. At ~~September~~June 30, ~~2017,~~2018, there were no additional borrowings available under the ~~term loan facilities.~~Tranche B-1 Loans, Tranche B-2 Loans and Tranche B-3 Loans.

Specific to the ~~revolving credit facility,~~2018 Revolving Facility, the Company is subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Amended Credit ~~Agreement~~Facility agreement may be accelerated and become immediately due and payable. At ~~September~~June 30, ~~2017,~~2018, we were in compliance with the covenants of the Amended Credit Facility.

Consignment and Customer Arrangements for Precious Metals. We use precious metals, primarily silver, in the production of some of our products. We obtain precious metals from financial institutions under consignment agreements. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment. These fees were ~~$0.3~~$0.4 million and ~~$0.2~~$0.3 million for the three months ended ~~September~~June 30, 2018 and 2017 ~~and 2016.~~ respectively. We had on hand precious metals owned by participants in our precious metals program of ~~$36.3~~$44.1 million at ~~September~~June 30, ~~2017,~~2018, and ~~$28.7~~$37.7 million at December 31, ~~2016,~~2017, measured at fair value based on market prices for identical ~~assets and net of credits.~~assets.

The consignment agreements under our precious metals program involve short-term commitments that typically mature within 30 to 90 days of each transaction and are typically renewed on an ongoing basis. As a result, the Company relies on the continued willingness of financial institutions to participate in these arrangements to maintain this source of liquidity. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding at ~~September~~June 30, ~~2017,~~2018, or December 31, ~~2016,~~2017, we may be required to furnish cash collateral in the future based on the quantity and market value of the precious metals under consignment and the amount of collateral-free lines provided by the financial institutions. The amount of cash collateral required is subject to review by the financial institutions and can be changed at any time at their discretion, based in part on their assessment of our creditworthiness.

At ~~September~~June 30, ~~2017,~~2018, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that totaled $~~7.1~~8.1 million. These agreements primarily relate to Ferro’s insurance programs, foreign energy purchase contracts and foreign tax payments.

We maintain other lines of credit to provide global flexibility for Ferro’s short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled ~~$61.8~~$43.3 million and ~~$7.3~~$64.5 million at ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, respectively. We had ~~$43.5~~$21.1 million and ~~$6.7~~$39.4 million of additional borrowings available under these lines at ~~September~~June 30, ~~2017,~~2018, and December 31, ~~2016,~~2017, respectively.

Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under the revolving credit facility, and cash flows from operating activities. As of ~~September~~June 30, ~~2017,~~2018, we had ~~$52.2~~$44.9 million of cash and cash equivalents. Cash generated in the U.S. is generally used to pay down amounts outstanding under our revolving credit facility and for general corporate purposes, including acquisitions. If needed, we could repatriate the majority of cash held by foreign subsidiaries without the need to accrue and pay U.S. income taxes. We do not anticipate a liquidity need requiring such repatriation of these funds to the U.S.

Our liquidity requirements and uses primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, acquisition costs, capital investments, precious metals cash collateral requirements, and postretirement obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows ~~from~~(used in) provided by operating activities are primarily driven by earnings before non-cash charges and changes in working capital needs. We had additional borrowing capacity of ~~$411.4~~$515.9 million at ~~September~~June 30, ~~2017,~~2018, and ~~$112.0~~$356.7 million at December 31, ~~2016,~~2017, available under our various credit facilities, primarily our revolving credit facility.

We have signed definitive acquisition agreements (subject to customary closing conditions) in July 2018 with purchase prices in the aggregate amount of approximately $70 million.

Our revolving credit facility subjects us to a customary financial covenant regarding the Company’s maximum leverage ratio. This covenant under our Credit Facility restricts the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic initiatives.

As of ~~September~~June 30, ~~2017,~~2018, we were in compliance with our maximum leverage ratio covenant of 4.25x as our actual ratio was ~~2.79x,~~2.86x, providing ~~$80.3~~$92.1 million of EBITDA cushion on the leverage ratio, as defined within the Amended Credit Facility. To the extent that economic conditions in key markets deteriorate or we are unable to meet our business projections and EBITDA falls below approximately ~~$130~~$189 million for rolling four quarters, based on reasonably consistent net debt levels with those as of ~~March 31, 2017,~~

June 30, 2018, we could become unable to maintain compliance with our leverage ratio covenant. In such case, our lenders could demand immediate payment of outstanding amounts and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all.

Difficulties experienced in global capital markets could affect the ability or willingness of counterparties to perform under our various lines of credit, forward contracts, and precious metals program. These counterparties are major, reputable, multinational institutions, all having investment-grade credit ratings. Accordingly, we do not anticipate counterparty default. However, an interruption in access to external financing could adversely affect our business prospects and financial condition.

We assess on an ongoing basis our portfolio of businesses, as well as our financial and capital structure, to ensure that we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate the possible divestiture of businesses that are not critical to our core strategic objectives and, where appropriate, pursue the sale of such businesses and assets. We also evaluate and pursue acquisition opportunities that we believe will enhance our strategic position. Generally, we publicly announce divestiture and acquisition transactions only when we have entered into a material definitive agreement or closed on those transactions.

There were no material changes to our critical accounting policies described in “Critical Accounting Policies” within Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Refer to Note 2 to the condensed consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for a discussion of accounting standards we recently adopted or will be required to adopt.

Certain statements contained here and in future filings with the SEC reflect the Company’s expectations with respect to future performance and constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment, which are difficult to predict and are beyond the control of the Company. Factors that could adversely affect our future financial performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

4344

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our exposure to instruments that are sensitive to fluctuations in interest rates and foreign currency exchange rates.

Our exposure to interest rate risk arises from our debt portfolio. We manage this risk by controlling the mix of fixed versus variable-rate debt after considering the interest rate environment and expected future cash flows. To reduce our exposure to interest rate changes on variable rate debt, we entered into interest rate swap agreements. These swaps effectively convert a portion of our variable rate debt to a fixed rate. Our objective is to limit variability in earnings, cash flows and overall borrowing costs caused by changes in interest rates, while preserving operating flexibility.

We operate internationally and enter into transactions denominated in foreign currencies. These transactions expose us to gains and losses arising from exchange rate movements between the dates foreign currencies are recorded and the dates they are settled. We manage this risk by entering into forward currency contracts that substantially offset these gains and losses.

The notional amounts, carrying amounts of assets (liabilities), and fair values associated with our exposure to these market risks and sensitivity analysis about potential gains (losses) resulting from hypothetical changes in market rates are presented in the table below.



	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
	(Dollars in thousands)				(Dollars in thousands)
Variable-rate debt:
Carrying amount	$	679,638	$	562,537	$	829,739	$	739,602
Fair value		683,160		581,893		824,535		742,634
Increase in annual interest expense from 1% increase in interest rates		4,311		5,611		2,864		4,890
Decrease in annual interest expense from 1% decrease in interest rates		(2,420)		(5,611)		(2,864)		(2,992)
Fixed-rate debt:
Carrying amount		7,011		8,228		6,590		7,112
Fair value		3,781		7,315		4,073		3,973
Change in fair value from 1% increase in interest rates		NM		NM		NM		NM
Change in fair value from 1% decrease in interest rates		NM		NM		NM		NM
Interest rate swaps:
Notional amount		256,326		—		319,200		258,045
Carrying amount and fair value		166		—		(1,610)		1,492
Change in fair value from 1% increase in interest rates		7,995		—		14,104		9,157
Change in fair value from 1% decrease in interest rates		(5,270)		—		(16,303)		(3,678)
Cross currency swaps:
Notional amount						346,631		—
Carrying amount and fair value						10,820		—
Change in fair value from 1% increase in interest rates						24,404		—
Change in fair value from 1% decrease in interest rates						(53,873)		—
Foreign currency forward contracts:
Notional amount		212,100		338,186		345,262		238,457
Carrying amount and fair value		52		350		2,860		(469)
Change in fair value from 10% appreciation of U.S. dollar		4,406		15,589		13,366		3,541
Change in fair value from 10% depreciation of U.S. dollar		(5,385)		(19,054)		(16,340)		(4,328)

4546

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

~~There~~In November 2017, Suffolk County Water Authority filed a complaint, Suffolk County Water Authority v. The Dow Chemical Company et al., against the Company and a number of other companies in the U.S. Federal Court for the Eastern District of New York with regard to the product 1,4 dioxane. The plaintiff alleges, among other things, that the Suffolk County water supply is contaminated with 1,4 dioxane and that the defendants are ~~various lawsuits~~liable for unspecified costs of cleanup and remediation of the water supply, among other damages. The Company has not manufactured 1,4 dioxane since 2008, denies the allegations related to liability for the plaintiff’s claims, ~~pending against~~and is vigorously defending this proceeding. In March 2018, the defendants, including the Company, filed a motion to dismiss the complaint, which was heard by the court in June 2018. The Company currently does not expect the outcome of this proceeding to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of this proceeding due to the unpredictable nature of litigation.

In addition to the proceeding described above, the Company and its consolidated ~~subsidiaries.~~subsidiaries are subject from time to time to various claims, lawsuits, investigations, and proceedings related to products, services, contracts, environmental, health and safety, employment, intellectual property, and other matters, including with respect to divested businesses. The outcome of such matters is unpredictable, our assessment of them may change, and resolution of them could have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows. We do not currently expect the resolution of such matters to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

Item 1A. Risk Factors

There were no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2017.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Our ability to pay common stock dividends is limited by certain covenants in our Amended Credit Facility other than dividends payable solely in Capital Securities, as defined in the agreement.

The following table summarizes purchases of our common stock by the Company and affiliated purchasers during the three months ended ~~September~~June 30, ~~2017:~~2018:



				~~Total Number of~~		~~Maximum Dollar~~
				~~Shares Purchased~~		~~Amount that May~~
	~~Total Number~~			~~as Part of Publicly~~		~~Yet Be Purchased~~
	~~of Shares~~	~~Average Price~~		~~Announced Plans~~		~~Under the Plans~~
	~~Purchased~~	~~Paid per Share~~		~~or Programs~~		~~or Programs~~
	~~(Dollars in thousands, except for per share amounts)~~
~~July 1, 2017 to July 31, 2017~~	—	$	—	—	$	~~50,000,000~~
~~August 1, 2017 to August 31, 2017~~	—	$	—	—	$	~~50,000,000~~
~~September 1, 2017 to September 30, 2017~~	—	$	—	—	$	~~50,000,000~~
~~Total~~	—			—



				Total Number of		Maximum Dollar
				Shares Purchased		Amount that May
	Total Number			as Part of Publicly		Yet Be Purchased
	of Shares	Average Price		Announced Plans		Under the Plans
	Purchased	Paid per Share		or Programs		or Programs
	(Dollars in thousands, except for per share amounts)
April 1, 2018 to April 30, 2018	—	$	—	—	$	50,000,000
May 1, 2018 to May 31, 2018	—	$	—	—	$	50,000,000
June 1, 2018 to June 30, 2018	287,257	$	20.94	6,013,799	$	43,986,201
Total	—			—

__________________________

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

Item 5. Other Information

Not applicable.

Item 6. Exhibits

The exhibits listed in the attached Exhibit Index are the exhibits required by Item 601 of Regulation S-K.

4648

Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		FERRO CORPORATION (Registrant)

Date:	~~November 1, 2017~~July 25, 2018
		/s/ Peter T. Thomas
		Peter T. Thomas
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 1, 2017~~July 25, 2018
		/s/ Benjamin J. Schlater
		Benjamin J. Schlater
		Vice President and Chief Financial Officer (Principal Financial Officer)


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~September~~June 30, ~~2017~~2018


	Ohio (State or other jurisdiction of incorporation or organization)		34-0217820 (I.R.S. Employer Identification No.)

	6060 Parkland Boulevard Suite 250 Mayfield Heights, OH (Address of principal executive offices)		44124 (Zip Code)

	216-875-5600 (Registrant’s telephone number, including area code)


Large accelerated filer	☒		Accelerated filer	☐
Non-accelerated filer	☐	(Do not check if a smaller reporting company)	Smaller reporting company	☐
			Emerging growth company	☐


						Performance										Performance
	Performance			Color		Colors and					Performance			Color		Colors and
	Coatings			Solutions		Glass			Total		Coatings			Solutions		Glass			Total
	(Dollars in thousands)										(Dollars in thousands)
Goodwill, net at December 31, 2016	$	28,090		$	40,421	$	79,785		$	148,296
Goodwill, net at December 31, 2017											$	38,236		$	42,535	$	114,598		$	195,369
Acquisitions		4,145	2,4		—		37,371	1,3		41,516		5,140	(2)		—		1,291	(1)		6,431
Foreign currency adjustments		3,062			1,582		3,363			8,007		(1,348)			(445)		(835)			(2,628)
Goodwill, net at September 30, 2017	$	35,297		$	42,003	$	120,519		$	197,819
Goodwill, net at June 30, 2018											$	42,028		$	42,090	$	115,054		$	199,172


	September 30,		December 31,		June 30,		December 31,
	2017		2016		2018		2017
	(Dollars in thousands)				(Dollars in thousands)
Gross amortizable intangible assets:
Patents	$	5,334	$	5,147	$	5,210	$	5,279
Land rights		4,876		4,746		4,893		4,947
Technology/know-how and other		129,003		84,837		127,765		131,070
Customer relationships		92,678		80,153		92,493		93,500
Total gross amortizable intangible assets		231,891		174,883		230,361		234,796
Accumulated amortization:
Patents		(5,228)		(4,981)		(5,149)		(5,226)
Land rights		(2,825)		(2,698)		(2,912)		(2,883)
Technology/know-how and other		(40,723)		(34,775)		(46,580)		(45,214)
Customer relationships		(9,204)		(5,311)		(13,447)		(11,114)
Total accumulated amortization		(57,980)		(47,765)		(68,088)		(64,437)
Amortizable intangible assets, net	$	173,911	$	127,118	$	162,273	$	170,359


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________


		Page
PART I
Item 1. Financial Statements (Unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2728
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4445
Item 4. Controls and Procedures	4546
PART II
Item 1. Legal Proceedings	4647
Item 1A. Risk Factors	4647
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4647
Item 3. Defaults Upon Senior Securities	4647
Item 4. Mine Safety Disclosures	4647
Item 5. Other Information	4648
Item 6. Exhibits	4648

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2



	Three Months Ended		Nine Months Ended
	September 30, 2016		September 30, 2016
	(Dollars in thousands)
Net sales	$	3,831	$	18,481
Cost of sales		5,654		28,473
Gross loss		(1,823)		(9,992)
Selling, general and administrative expenses		588		3,094
Restructuring and impairment charges		26,843		50,902
Interest expense		49		325
Miscellaneous income		(4)		(392)
Loss from discontinued operations before income taxes		(29,299)		(63,921)
Income tax (benefit) expense		(77)		543
Loss from discontinued operations, net of income taxes	$	(29,222)	$	(64,464)



	September 30, 2017										June 30, 2018
	Carrying		Fair Value								Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)										(Dollars in thousands)
Cash and cash equivalents	$	52,211	$	52,211	$	52,211	$	—	$	—	$	44,886	$	44,886	$	44,886	$	—	$	—
Loans payable		(10,409)		(10,409)		—		(10,409)		—		(16,494)		(16,494)		—		(16,494)		—
Term loan facility, maturing 2024(1)		(641,842)		(644,916)		—		(644,916)		—		(812,665)		(807,468)		—		(807,468)		—
Revolving credit facility, maturing 2022		(27,387)		(27,835)		—		(27,835)		—
Revolving credit facility, maturing 2023												(580)		(573)		—		(573)		—
Other long-term notes payable		(7,011)		(3,781)		—		(3,781)		—		(6,590)		(4,073)		—		(4,073)		—
Interest rate swaps - asset		298		298		—		298		—
Interest rate swaps - liability		(132)		(132)		—		(132)		—
Cross currency swaps												10,820		10,820		—		10,820		—
Interest rate swaps												(1,610)		(1,610)		—		(1,610)		—
Foreign currency forward contracts, net		52		52		—		52		—		2,860		2,860		—		2,860		—



	December 31, 2016										December 31, 2017
	Carrying		Fair Value								Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)										(Dollars in thousands)
Cash and cash equivalents	$	45,582	$	45,582	$	45,582	$	—	$	—	$	63,551	$	63,551	$	63,551	$	—	$	—
Loans payable		(11,452)		(11,452)		—		(11,452)		—		(16,360)		(16,360)		—		(16,360)		—
Term loan facility, maturing 2021(1)		(239,530)		(252,052)		—		(252,052)		—
Revolving credit facility, maturing 2019		(311,555)		(318,389)		—		(318,389)		—
Term loan facility, maturing 2024(1)												(645,242)		(646,979)		—		(646,979)		—
Revolving credit facility, maturing 2022												(78,000)		(79,295)		—		(79,295)		—
Other long-term notes payable		(8,228)		(7,315)		—		(7,315)		—		(7,112)		(3,973)		—		(3,973)		—
Interest rate swaps												1,616		1,616		—		1,616		—
Interest rate swaps												(124)		(124)		—		(124)		—
Foreign currency forward contracts, net		350		350		—		350		—		(469)		(469)		—		(469)		—


	Amount of Gain Recognized				Amount of Gain Reclassified
	in AOCI - Effective Portion				from AOCI into Income - Effective Portion
	2017		2016		2017		2016
	(Dollars in thousands)
Interest rate swap	$	166	$	—	$	—	$	—


	Amount of (Loss) Recognized				Amount of Loss Reclassified from
	in AOCI - Effective Portion				AOCI into Income - Effective Portion
	2017		2016		2017		2016
	(Dollars in thousands)
Net investment hedge	$	(8,020)	$	—	$	—	$	—


					Amount of Gain				Amount of Gain Recognized in
	Amount of Gain				Reclassified from				Income on Derivative (Amount
	Recognized in AOCL				AOCL into Income				Excluded from Effectiveness Testing)				Location of Gain
	2018		2017		2018			2017	2018			2017	in Earnings
	(Dollars in thousands)
Cross currency swaps	$	2,774	$	—	$	—	$	—	$	495	$	—	Interest expense
Net investment hedge		—		(6,828)		—		—		—		—


					Amount of Gain				Amount of Gain Recognized in
	Amount of Gain (Loss)				Reclassified from				Income on Derivative (Amount
	Recognized in AOCL				AOCL into Income				Excluded from Effectiveness Testing)				Location of Gain
	2018		2017		2018			2017	2018			2017	in Earnings
	(Dollars in thousands)
Cross currency swaps	$	2,774	$	—	$	—	$	—	$	495	$	—	Interest expense
Net investment hedge		(860)		(6,828)		—		—		—		—



	Amount of (Loss)
	Recognized in Earnings
	Three Months Ended
	September 30,
	2017		2016		Location of (Loss) in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	(1,438)	$	(1,163)	Foreign currency losses, net



	Stock Options
Weighted-average grant-date fair value	$	~~7.29~~8.91
Expected life, in years		~~6.0~~5.4
Risk-free interest rate		~~1.9% - 2.3~~ 2.7	%
Expected volatility		~~48.0% -51.5~~ 39.7	%



	Employee		Other		Asset				Employee		Other
	Severance		Costs		Impairment		Total		Severance		Costs		Total
	(Dollars in thousands)								(Dollars in thousands)
Balances at December 31, 2016	$	239	$	1,489	$	—	$	1,728
Balances at December 31, 2017									$	2,286	$	1,234	$	3,520
Restructuring charges		2,455		2,583		1,176		6,214		3,432		4,442		7,874
Cash payments		(2,555)		(1,529)		—		(4,084)		(3,237)		(283)		(3,520)
Non-cash items		64		(1,282)		(1,176)		(2,394)		(91)		(3,534)		(3,625)
Balances at September 30, 2017	$	203	$	1,261	$	—	$	1,464
Balances at June 30, 2018									$	2,390	$	1,859	$	4,249


3	Articles of incorporation and by-laws:
3.1	Eleventh Amended Articles of Incorporation of Ferro Corporation (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.2	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed December 29, 1994 (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.3	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on June 23, 1998 (incorporated by reference to Exhibit 4.3 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.4	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on October 17, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).
3.5	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on April 25, 2014 (incorporated by reference to Exhibit 3.5 to Ferro’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2014).
3.6	Ferro Corporation Amended and Restated Code of Regulations (incorporated by reference to Exhibit 3.1 to Ferro Corporation's current Report on Form 8-K filed December 12, 2016.)
	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10.1	~~Credit Agreement,~~First Amendment, dated as of ~~February 14, 2017,~~April 25, 2018, to Credit Agreement among Ferro Corporation, ~~the lenders party thereto,~~Ferro GmbH and Ferro Europe Holding LLC, certain other subsidiaries of Ferro Corporation, PNC Bank, National Association, as the ~~administrative agent, collateral agent~~Administrative Agent, Collateral Agent and ~~a letter of credit issuer,~~an Issuer, Deutsche Bank AG New York Branch, as the ~~syndication agent~~Syndication Agent and ~~as a letter of credit issuer,~~an Issuer, and ~~the~~ various financial institutions ~~and other persons from time to time party thereto~~as lenders (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s current Report on Form 8-K, filed ~~February 17, 2017)~~April 27, 2018).
10.2	~~Second Incremental Assumption Agreement, dated August 29, 2016, by and among~~ Ferro Corporation ~~PNC Bank, National Association, as the administrative agent, the collateral agent and as an issuer, JPMorgan Chase Bank, N.A., as an issuer, and various financial institutions as lenders.~~2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s ~~current~~Current Report on Form ~~8K,~~8-K, filed ~~August 30, 2016).~~
~~10.3~~	Retention Agreement, dated September 1, 2016, by and between Jeffrey L. Rutherford and Ferro Corporation (incorporated by reference to Exhibit 10.2 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016).*
~~10.4~~	Separation Agreement and Release, dated January 3, 2017, by and between Jeffrey L. Rutherford and Ferro Corporation. (incorporated by reference to Exhibit 10.4 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*
~~10.5~~	Change in Control Agreement, dated September 1, 2016, by and between Benjamin Schlater and Ferro Corporation. (incorporated by reference to Exhibit 10.5 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*May 7, 2018.


31	Certifications:
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.
101	XBRL Documents:
101.INS	XBRL Instance Document
101.SCH	XBRL Schema Document
101.CAL	XBRL Calculation Linkbase Document
101.LAB	XBRL Labels Linkbase Document
101.PRE	XBRL Presentation Linkbase Document
101.DEF	XBRL Definition Linkbase Document