(Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FERRO CORPORATION(Mark One)xFor the quarterly period ended March 31, 2021oFor the transition period from _________ to __________NumberNumber: 1-584
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YESYes x NONo o
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Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
Common Stock, par value $1.00 | FOE | NYSE | ||||||
TABLE OF CONTENTS PART I — FINANCIAL INFORMATION Three Months Ended March 31, (Dollars in thousands, except per share amounts) 2021 2020 Net sales $ 288,358 $ 252,326 Cost of sales 193,255 171,588 Gross profit 95,103 80,738 Selling, general and administrative expenses 53,838 56,046 Restructuring and impairment charges 5,184 1,165 Other expense (income): Interest expense 9,437 5,530 Interest earned (597) (254) Foreign currency losses (gains), net 1,158 (1,315) Loss on extinguishment of debt 1,981 — Miscellaneous income, net (2,100) (1,463) Income before income taxes 26,202 21,029 Income tax expense 7,644 5,117 Income from continuing operations 18,558 15,912 Income from discontinued operations, net of income taxes 89,842 221 Net income 108,400 16,133 Less: Net income attributable to noncontrolling interests 437 10 Net income attributable to Ferro Corporation common shareholders $ 107,963 $ 16,123 Earnings per share attributable to Ferro Corporation common shareholders: Basic earnings: Continuing operations $ 0.22 $ 0.19 Discontinued operations 1.09 — $ 1.31 $ 0.19 Diluted earnings: Continuing operations $ 0.22 $ 0.19 Discontinued operations 1.08 — $ 1.30 $ 0.19 Ferro Corporation and Subsidiaries Three Months Ended March 31, (Dollars in thousands) 2021 2020 Net income $ 108,400 $ 16,133 Other comprehensive income (loss), net of income tax: Foreign currency translation loss (61,101) (18,366) Cash flow hedging instruments, unrealized income (loss) 6,786 (9,040) Postretirement benefit liabilities income 130 — Other comprehensive loss, net of income tax (54,185) (27,406) Total comprehensive income (loss) 54,215 (11,273) Less: Comprehensive income (loss) attributable to noncontrolling interests 363 (84) Comprehensive income (loss) attributable to Ferro Corporation $ 53,852 $ (11,189) Ferro Corporation and Subsidiaries March 31, December 31, (Dollars in thousands) 2021 2020 ASSETS ASSETS Current assets Cash and cash equivalents $ 128,428 $ 174,077 Accounts receivable, net 158,991 137,008 Inventories 251,366 260,332 Other receivables 56,733 72,272 Other current assets 22,127 18,261 Current assets held-for-sale — 307,854 Total current assets 617,645 969,804 Other assets Property, plant and equipment, net 328,403 330,045 Goodwill 173,493 175,351 Intangible assets, net 115,052 119,500 Deferred income taxes 112,771 115,962 Operating leased assets 14,694 15,446 Other non-current assets 26,921 80,618 Non-current assets held-for-sale — 154,207 Total assets $ 1,388,979 $ 1,960,933 LIABILITIES AND EQUITY LIABILITIES AND EQUITY Current liabilities Loans payable and current portion of long-term debt $ 13,393 $ 8,839 Accounts payable 125,163 135,296 Accrued payrolls 24,670 27,166 Accrued expenses and other current liabilities 146,285 124,770 Current liabilities held-for-sale — 107,545 Total current liabilities 309,511 403,616 Other liabilities Long-term debt, less current portion 356,547 791,509 Postretirement and pension liabilities 167,783 181,610 Operating leased non-current liabilities 9,131 10,064 Other non-current liabilities 53,735 62,050 Non-current liabilities held-for-sale — 71,149 Total liabilities 896,707 1,519,998 Equity Ferro Corporation shareholders’ equity: Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 82.6 million and 82.4 million shares outstanding at March 31, 2021, and December 31, 2020, respectively 93,436 93,436 Paid-in capital 288,538 293,682 Retained earnings 412,778 304,815 Accumulated other comprehensive loss (143,821) (89,710) Common shares in treasury, at cost (167,102) (172,256) Total Ferro Corporation shareholders’ equity 483,829 429,967 Noncontrolling interests 8,443 10,968 Total equity 492,272 440,935 Total liabilities and equity $ 1,388,979 $ 1,960,933March 31,September 30, 2021, there were 82,624,46382,742,307 shares of Ferro Common Stock, par value $1.00, outstanding.Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands, except per share amounts) 2021 2020 2021 2020 Net sales $ 277,228 $ 241,877 $ 859,917 $ 699,004 Cost of sales 193,850 171,711 586,601 484,356 Gross profit 83,378 70,166 273,316 214,648 Selling, general and administrative expenses 54,520 47,820 167,384 154,407 Restructuring and impairment charges 602 2,447 7,756 12,231 Other expense (income): Interest expense 5,436 4,767 19,879 16,474 Interest earned (88) (474) (737) (1,035) Foreign currency losses, net Foreign currency losses, net 426 1,450 4,793 1,278 Loss on extinguishment of debt — — 1,981 — Miscellaneous income, net (2,997) (438) (5,350) (2,604) Income before income taxes 25,479 14,594 77,610 33,897 Income tax expense 13,800 5,047 29,946 10,364 Income from continuing operations 11,679 9,547 47,664 23,533 Income (loss) from discontinued operations, net of income taxes Income (loss) from discontinued operations, net of income taxes (822) 5,367 87,484 2,350 Net income 10,857 14,914 135,148 25,883 Less: Net income attributable to noncontrolling interests 482 440 1,301 826 Net income attributable to Ferro Corporation $ 10,375 $ 14,474 $ 133,847 $ 25,057 Earnings (loss) per share attributable to Ferro Corporation common shareholders: Earnings (loss) per share attributable to Ferro Corporation common shareholders: Basic earnings (loss): Basic earnings (loss): Continuing operations $ 0.14 $ 0.11 $ 0.56 $ 0.28 Discontinued operations (0.01) 0.07 1.06 0.03 $ 0.13 $ 0.18 $ 1.62 $ 0.31 Diluted earnings (loss): Diluted earnings (loss): Continuing operations $ 0.13 $ 0.11 $ 0.56 $ 0.27 Discontinued operations (0.01) 0.06 1.05 0.03 $ 0.12 $ 0.17 $ 1.61 $ 0.30 (Loss)Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Net income $ 10,857 $ 14,914 $ 135,148 $ 25,883 Other comprehensive income (loss), net of income tax: Foreign currency translation gain (loss) Foreign currency translation gain (loss) (3,997) 13,831 (64,411) (678) Cash flow hedging instruments, unrealized income (loss) 1,553 269 9,622 (10,331) Postretirement benefit liabilities income 2 — 131 — Other comprehensive income (loss), net of income tax Other comprehensive income (loss), net of income tax (2,442) 14,100 (54,658) (11,009) Total comprehensive income Total comprehensive income 8,415 29,014 80,490 14,874 Less: Comprehensive income attributable to Less: Comprehensive income attributable to 935 197 1,141 453 Comprehensive income attributable to Ferro Corporation Comprehensive income attributable to Ferro Corporation $ 7,480 $ 28,817 $ 79,349 $ 14,421 (Dollars in thousands) September 30,
2021December 31,
2020ASSETS Current assets Cash and cash equivalents $ 148,754 $ 174,077 Accounts receivable, net 157,610 137,008 Inventories 267,994 260,332 Other receivables 65,654 72,272 Other current assets 20,835 18,261 Current assets held-for-sale — 307,854 Total current assets 660,847 969,804 Other assets Property, plant and equipment, net 326,982 330,045 Goodwill 172,968 175,351 Intangible assets, net 110,049 119,500 Deferred income taxes 108,426 115,962 Operating leased assets 13,387 15,446 Other non-current assets 26,604 80,618 Non-current assets held-for-sale — 154,207 Total assets $ 1,419,263 $ 1,960,933 LIABILITIES AND EQUITY Current liabilities Loans payable and current portion of long-term debt $ 8,888 $ 8,839 Accounts payable 127,526 135,296 Accrued payrolls 38,642 27,166 Accrued expenses and other current liabilities 147,456 124,770 Current liabilities held-for-sale — 107,545 Total current liabilities 322,512 403,616 Other liabilities Long-term debt, less current portion 352,695 791,509 Postretirement and pension liabilities 161,548 181,610 Operating leased non-current liabilities 8,624 10,064 Other non-current liabilities 51,882 62,050 Non-current liabilities held-for-sale — 71,149 Total liabilities 897,261 1,519,998 Equity Ferro Corporation shareholders’ equity: 93,436 93,436 Paid-in capital 289,899 293,682 Retained earnings 438,662 304,815 Accumulated other comprehensive loss (144,208) (89,710) Common shares in treasury, at cost (165,008) (172,256) Total Ferro Corporation shareholders’ equity 512,781 429,967 Noncontrolling interests 9,221 10,968 Total equity 522,002 440,935 Total liabilities and equity $ 1,419,263 $ 1,960,933
Ferro Corporation and Subsidiaries Ferro Corporation Shareholders Common Shares Accumulated in Treasury Other Non- Common Paid-in Retained Comprehensive controlling Total (In thousands) Shares Amount Stock Capital Earnings Loss Interests Equity Balances at December 31, 2020 11,065 $ (172,256) $ 93,436 $ 293,682 $ 304,815 $ (89,710) $ 10,968 $ 440,935 Net income — — — — 107,963 — 437 108,400 Other comprehensive loss — — — — — (54,111) (74) (54,185) Change in ownership interest — — — (2,530) — — (2,888) (5,418) Stock-based compensation transactions (255) 5,154 — (2,614) — — — 2,540 Balances at March 31, 2021 10,810 $ (167,102) $ 93,436 $ 288,538 $ 412,778 $ (143,821) $ 8,443 $ 492,272 Ferro Corporation Shareholders Common Shares Accumulated in Treasury Other Non- Common Paid-in Retained Comprehensive controlling Total (In thousands) Shares Amount Stock Capital Earnings Loss Interests Equity Balances at December 31, 2019 11,431 $ (180,243) $ 93,436 $ 294,543 $ 262,016 $ (109,376) $ 9,826 $ 370,202 Net income — — — — 16,123 — 10 16,133 Other comprehensive income — — — — — (27,312) (94) (27,406) Stock-based compensation transactions (238) 5,332 — (2,723) — — — 2,609 Balances at March 31, 2020 11,193 $ (174,911) $ 93,436 $ 291,820 $ 278,139 $ (136,688) $ 9,742 $ 361,538 Ferro Corporation and Subsidiaries Three Months Ended March 31, (Dollars in thousands) 2021 2020 Cash flows from operating activities Net cash used in operating activities $ (45,463) $ (71,535) Cash flows from investing activities Capital expenditures for property, plant and equipment and other long-lived assets (10,877) (8,316) Collections of financing receivables 27,776 28,827 Proceeds from sale of businesses, net 415,230 — Business acquisitions, net of cash acquired (2,200) — Other investing activities 2 745 Net cash provided by investing activities 429,931 21,256 Cash flows from financing activities Net borrowings under loans payable 4,533 137 Principal payments on term loan facility - Amended Credit Facility (437,050) (2,050) Proceeds from revolving credit facility - Amended Credit Facility — 180,000 Principal payments on revolving credit facility - Amended Credit Facility — (180,000) Other financing activities (4,100) 216 Net cash used in financing activities (436,617) (1,697) Effect of exchange rate changes on cash and cash equivalents (1,700) (1,208) Decrease in cash and cash equivalents (53,849) (53,184) Cash and cash equivalents at beginning of period 182,277 104,402 Cash and cash equivalents at end of period 128,428 51,218 Less: Cash and cash equivalents of discontinued operations at end of period — 8,200 Cash and cash equivalents of continuing operations at end of period $ 128,428 $ 43,018 Cash paid during the period for: Interest $ 10,918 $ 7,853 Income taxes $ 4,018 $ 4,431 Ferro Corporation and Subsidiaries New Accounting Standards Not Yet Adopted ASU: Standard Description Provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities through December 31, 2022. (Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 87,372 $ 67,918 $ 29,532 $ 184,822 Color Solutions 39,042 53,854 10,640 103,536 Total net sales $ 126,414 $ 121,772 $ 40,172 $ 288,358 Revenues disaggregated by geography and reportable segment for the three months ended (Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 75,857 $ 57,822 $ 21,756 $ 155,435 Color Solutions 37,889 49,706 9,296 96,891 Total net sales $ 113,746 $ 107,528 $ 31,052 $ 252,326 The table below summarizes results for the Tile Coatings business for the three and nine months ended Three Months Ended March 31, (Dollars in thousands) 2021 2020 Net sales $ 83,579 $ 114,750 Cost of sales 60,634 86,902 Gross profit 22,945 27,848 Selling, general and administrative expenses 20,327 18,808 Restructuring and impairment charges 303 279 Interest expense 1,682 2,231 Interest earned (189) (24) Foreign currency losses, net 363 5,765 Gain on sale of business, net (100,057) — Miscellaneous expense (income), net 251 542 Income from discontinued operations before income taxes 100,265 247 Income tax expense 10,423 26 Income from discontinued operations, net of income taxes 89,842 221 Less: Net income (loss) attributable to noncontrolling interests 64 (23) Net income attributable to Tile Coatings business $ 89,778 $ 244 The following table summarizes the assets and liabilities which are classified as held-for-sale at December 31, 2020: The following table summarizes cash flow data relating to discontinued operations for the Three Months Ended March 31, (Dollars in thousands) 2021 2020 Capital expenditures $ (1,074) $ (1,106) Gain on sale of discontinued operations (100,057) — Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end — 589 March 31, December 31, (Dollars in thousands) 2021 2020 Raw materials $ 72,101 $ 81,344 Work in process 45,618 48,770 Finished goods 133,647 130,218 Total inventories $ 251,366 $ 260,332 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 Functional Color (Dollars in thousands) Coatings Solutions Total Goodwill, net at December 31, 2020 $ 123,570 $ 51,781 $ 175,351 Foreign currency adjustments (1,269) (589) (1,858) Goodwill, net at March 31, 2021 $ 122,301 $ 51,192 $ 173,493 March 31, December 31, (Dollars in thousands) 2021 2020 Goodwill, gross $ 231,960 $ 233,818 Accumulated impairment (58,467) (58,467) Goodwill, net $ 173,493 $ 175,351 Amortizable intangible assets consisted of the following: March 31, December 31, (Dollars in thousands) 2021 2020 Gross amortizable intangible assets: Patents $ 5,520 $ 5,589 Land rights 3,161 3,173 Technology/know-how and other 115,584 116,015 Customer relationships 66,814 68,142 Total gross amortizable intangible assets 191,079 192,919 Accumulated amortization: Patents (5,498) (5,566) Land rights (1,646) (1,630) Technology/know-how and other (63,036) (61,104) Customer relationships (18,795) (18,317) Total accumulated amortization (88,975) (86,617) Amortizable intangible assets, net $ 102,104 $ 106,302 March 31, December 31, (Dollars in thousands) 2021 2020 Indefinite-lived intangibles assets: Trade names and trademarks $ 12,948 $ 13,198 March 31, December 31, (Dollars in thousands) 2021 2020 Current portion of long-term debt $ 13,393 $ 8,839 Current portion of long-term debt $ 13,393 $ 8,839 March 31, December 31, (Dollars in thousands) 2021 2020 Term loan facility, net of unamortized issuance costs, maturing 2024(1) $ 358,897 $ 793,731 Finance lease obligations 2,835 2,911 Other notes 8,208 3,706 Total long-term debt 369,940 800,348 Current portion of long-term debt (13,393) (8,839) Long-term debt, less current portion $ 356,547 $ 791,509 The Amended Credit Facility consists of a $500 million secured revolving line of credit with a maturity of February 14, 2023, a $355 million secured term loan facility with a maturity of February 14, 2024, a $235 million secured term loan facility with a maturity of February 14, 2024 and a $230 million secured term loan facility with a maturity of February 14, 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 in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans. 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. Three Months Ended March 31, (Dollars in thousands) 2021 2020 Trade accounts receivable sold to financial institutions $ 144,949 $ 50,537 Cash proceeds from financial institutions (1) 115,099 35,390 9. Financial Instruments March 31, 2021 Carrying Fair Value (Dollars in thousands) Amount Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 128,428 $ 128,428 $ 128,428 $ — $ — Term loan facility - Amended Credit Facility (1) (358,897) (356,090) — (356,090) — Other long-term notes payable (8,208) (6,749) — (6,749) — Cross currency swaps 786 786 — 786 — Interest rate swaps (21,158) (21,158) — (21,158) — Foreign currency forward contracts, net (5,095) (5,095) — (5,095) — December 31, 2020 Carrying Fair Value (Dollars in thousands) Amount Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 174,077 $ 174,077 $ 174,077 $ — $ — Term loan facility - Amended Credit Facility (1) (793,731) (783,143) — (783,143) — Other long-term notes payable (3,706) (1,887) — (1,887) — Cross currency swaps (5,162) (5,162) — (5,162) — Interest rate swaps (24,694) (24,694) — (24,694) — Foreign currency forward contracts, net 2,019 2,019 — 2,019 — The Company has converted a U.S. dollar denominated, variable rate debt obligation into a Euro fixed rate obligation using receive-float, pay-fixed cross currency swaps in the second quarter of 2018. These swaps are hedging currency and interest rate risk associated with the Tranche B-3 Loan. These cross-currency swaps are designated as cash flow hedges. In conjunction with the pay-down of debt discussed in Note 8, we terminated all cross-currency swaps, except for one, which we de-designated and re-designated to hedge the remaining Tranche B-3 Loan after the interest rate swaps. Due to the original designation layering, the other comprehensive loss from the cross-currency swap at re-designation and the other comprehensive loss from the terminated cross-currency swaps were written-off as the interest payments were deemed remote. The Company paid counterparties $3.5 million to settle the terminated derivatives, resulting in a net $4.5 million being reclassified from AOCL to Interest expense as a result of this remote transaction. The remaining notional amount is Amount of Loss (Gain) Amount of Gain (Loss) Reclassified from Location of Gain (Loss) Recognized in AOCL AOCL into Income Reclassified from (Dollars in thousands) 2021 2020 2021 2020 AOCL into Income Interest rate swaps $ 1,438 $ (12,874) $ (1,772) $ (498) Interest expense Cross currency swaps 2,696 5,258 (10) 1,168 Interest expense $ (1,782) $ 670 Total Interest expense Cross currency swap 2,927 3,622 Foreign currency losses, net $ 2,927 $ 3,622 Total Foreign currency losses, net Three Months Ended March 31, (Dollars in thousands) 2021 2020 Interest expense $ 9,437 $ 5,530 Foreign currency losses (gains), net 1,158 (1,315) The amount of gain (loss) on net investment hedges recognized in AOCL Amount of Gain Recognized in Income on Amount of Gain Derivative (Amount Excluded Location of Gain Recognized in AOCL from Effectiveness Testing) in Earnings (Dollars in thousands) 2021 2020 2021 2020 Cross currency swaps $ — $ 2,659 $ — $ 780 Interest expense Derivatives Not Designated as Hedging Instruments Amount of Gain Recognized in Earnings Three Months Ended March 31, Location of Gain (Loss) in Earnings (Dollars in thousands) 2021 2020 Foreign currency forward contracts $ (6,266) $ 268 Foreign currency losses, net March 31, December 31, (Dollars in thousands) 2021 2020 Balance Sheet Location Asset derivatives: Cross currency swaps $ 36 $ 9 Other current assets Cross currency swaps 750 — Other non-current assets Foreign currency forward contracts 862 2,649 Other current assets Liability derivatives: Interest rate swaps $ (8,331) $ (8,436) Accrued expenses and other current liabilities Interest rate swaps (12,827) (16,258) Other non-current liabilities Cross currency swaps — (67) Accrued expenses and other current liabilities Cross currency swaps — (5,104) Other non-current liabilities Foreign currency forward contracts (5,957) (630) Accrued expenses and other current liabilities U.S. Pension Plans Non-U.S. Pension Plans Other Benefit Plans Three Months Ended March 31, (Dollars in thousands) 2021 2020 2021 2020 2021 2020 Service cost $ — $ 3 $ 339 $ 285 $ — $ 1 Interest cost 1,880 2,387 335 330 68 132 Expected return on plan assets (3,824) (3,708) (114) (112) — — Amortization of prior service cost — — (20) (5) — — Net periodic benefit (credit) cost $ (1,944) $ (1,318) $ 540 $ 498 $ 68 $ 133 13. Stock-Based Compensation Americas Manufacturing Optimization Plan September 30, 2020, respectively. Employee Other (Dollars in thousands) Severance Costs Total Balances at December 31, 2020 $ 5,510 $ 4,460 $ 9,970 Restructuring charges 3,849 1,335 5,184 Cash payments (4,743) (464) (5,207) Non-cash items — — — Balances at March 31, 2021 $ 4,616 $ 5,331 $ 9,947 15. Earnings Per Share Three Months Ended March 31, (Dollars in thousands, except per share amounts) 2021 2020 Basic earnings per share computation: Income from continuing operations $ 18,558 $ 15,912 Less: Net income attributable to noncontrolling interests from continuing operations 373 33 Net income attributable to Ferro Corporation from continuing operations 18,185 15,879 Income from discontinued operations, net of income taxes 89,842 221 Less: Net income (loss) attributable to noncontrolling interests from discontinued operations 64 (23) Net income attributable to Ferro Corporation from discontinued operations 89,778 244 Total $ 107,963 $ 16,123 Weighted-average common shares outstanding 82,497 82,096 Basic earnings per share from continuing operations attributable to Ferro Corporation common shareholders $ 0.22 $ 0.19 Diluted earnings per share computation: Net income attributable to Ferro Corporation from continuing operations $ 18,185 $ 15,879 Net income attributable to Ferro Corporation from discontinued operations 89,778 244 Total $ 107,963 $ 16,123 Weighted-average common shares outstanding 82,497 82,096 Assumed exercise of stock options 395 297 Assumed satisfaction of restricted stock unit conditions 159 85 Assumed satisfaction of performance share unit conditions 109 44 Weighted-average diluted shares outstanding 83,160 82,522 Diluted earnings per share from continuing operations attributable to Ferro Corporation common shareholders $ 0.22 $ 0.19 17. Accumulated Other Comprehensive Loss Three Months Ended March 31, Postretirement Foreign Net Loss Benefit Liability Currency on Cash (Dollars in thousands) Adjustments Items Flow Hedges Total Balances at December 31, 2019 $ 1,206 $ (97,575) $ (13,007) $ (109,376) Other comprehensive income (loss) before reclassifications, before tax — (17,837) (7,616) (25,453) Reclassification to earnings: Cash flow hedge loss, before tax — — (4,292) (4,292) Current period other comprehensive income (loss), before tax — (17,837) (11,908) (29,745) Tax effect — 435 (2,868) (2,433) Current period other comprehensive income (loss), net of tax — (18,272) (9,040) (27,312) Balances at March 31, 2020 $ 1,206 $ (115,847) $ (22,047) $ (136,688) Balances at December 31, 2020 $ 3,199 $ (70,482) $ (22,427) $ (89,710) Other comprehensive income (loss) before reclassifications, before tax — (78,030) 4,134 (73,896) Reclassification to earnings: Postretirement benefit liabilities income, before tax 130 — — 130 Currency translation reclassification to income on divestiture — 17,305 — 17,305 Amount reclassification to income (remote transaction) — — 4,509 4,509 Cash flow hedge income loss, before tax — — (1,145) (1,145) Current period other comprehensive income (loss), before tax 130 (60,725) 7,498 (53,097) Tax effect — 302 712 1,014 Current period other comprehensive income (loss), net of tax 130 (61,027) 6,786 (54,111) Balances at March 31, 2021 $ 3,329 $ (131,509) $ (15,641) $ (143,821) 18. Reporting for Segments Three Months Ended March 31, (Dollars in thousands) 2021 2020 Functional Coatings $ 184,822 $ 155,435 Color Solutions 103,536 96,891 Total net sales $ 288,358 $ 252,326 Each segment’s gross profit and reconciliation to income before income taxes are presented in the table below: Three Months Ended March 31, (Dollars in thousands) 2021 2020 Functional Coatings $ 61,876 $ 47,817 Color Solutions 33,668 33,787 Other cost of sales (441) (866) Total gross profit 95,103 80,738 Selling, general and administrative expenses 53,838 56,046 Restructuring and impairment charges 5,184 1,165 Other expense, net 9,879 2,498 Income before income taxes $ 26,202 $ 21,029 for the prior-year same period. markets. personal technology, smart appliances, construction, and sustainable product packaging. supply chain logistics. Foreign currency rates may continue to be volatile through 2021 and changes in interest rates could adversely impact reported results. We continue to expect cash flow from operating activities to Results of Operations - Consolidated Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Net sales $ 288,358 $ 252,326 $ 36,032 14.3 % Cost of sales 193,255 171,588 21,667 12.6 % Gross profit $ 95,103 $ 80,738 $ 14,365 17.8 % Gross profit as a % of net sales 33.0 % 32.0 % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Geographic Revenues on a sales origination basis EMEA $ 126,414 $ 113,746 $ 12,668 11.1 % Americas 121,772 107,528 14,244 13.2 % Asia Pacific 40,172 31,052 9,120 29.4 % Net sales $ 288,358 $ 252,326 $ 36,032 14.3 % Selling, General and Administrative (“SG&A”) Expenses Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Personnel expenses (excluding R&D personnel expenses) $ 22,346 $ 22,749 $ (403) (1.8) % Research and development expenses 9,183 10,087 (904) (9.0) % Business development 3,648 535 3,113 581.9 % Incentive compensation 2,117 2,120 (3) (0.1) % Stock-based compensation 2,630 2,759 (129) (4.7) % Intangible asset amortization 1,350 1,678 (328) (19.5) % Pension and other postretirement benefits 339 158 181 114.6 % Bad debt 29 136 (107) (78.7) % All other expenses 12,196 15,824 (3,628) (22.9) % Selling, general and administrative expenses $ 53,838 $ 56,046 $ (2,208) (3.9) % other expenses, primarily associated with consulting and professional fees. Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Strategic services $ 24,454 $ 25,616 $ (1,162) (4.5) % Functional services 24,637 25,551 (914) (3.6) % Incentive compensation 2,117 2,120 (3) (0.1) % Stock-based compensation 2,630 2,759 (129) (4.7) % Selling, general and administrative expenses $ 53,838 $ 56,046 $ (2,208) (3.9) % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Employee severance $ 3,849 $ 658 $ 3,191 485.0 % Other restructuring costs 1,335 507 828 163.3 % Restructuring and impairment charges $ 5,184 $ 1,165 $ 4,019 345.0 % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Interest expense $ 9,725 $ 5,846 $ 3,879 66.4 % Amortization of bank fees 604 929 (325) (35.0) % Interest swap amortization (316) (316) — — % Interest capitalization (576) (929) 353 (38.0) % Interest expense $ 9,437 $ 5,530 $ 3,907 70.7 % Interest Expense The tax expense during the three months ended September 30, 2020, as a percentage of pre-tax loss, is higher than the U.S. federal statutory income tax rate of 21.0% primarily as a result of foreign statutory rate differences and U.S. taxation of foreign earnings. Three Months Ended Change due to March 31, Volume / (Dollars in thousands) 2021 2020 $ Change % Change Price Mix Currency Other Segment net sales $ 184,822 $ 155,435 $ 29,387 18.9 % $ 2,577 $ 21,017 $ 5,793 $ — Segment gross profit 61,876 47,817 14,059 29.4 % 2,577 10,563 1,930 (1,011) Gross profit as a % of segment net sales 33.5 % 30.8 % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 87,372 $ 75,857 $ 11,515 15.2 % Americas 67,918 57,822 10,096 17.5 % Asia Pacific 29,532 21,756 7,776 35.7 % Total $ 184,822 $ 155,435 $ 29,387 18.9 % Color Solutions Three Months Ended Change due to March 31, Volume / (Dollars in thousands) 2021 2020 $ Change % Change Price Mix Currency Other Segment net sales $ 103,536 $ 96,891 $ 6,645 6.9 % $ (397) $ 3,558 $ 3,484 $ — Segment gross profit 33,668 33,787 (119) (0.4) % (397) (910) 989 199 Gross profit as a % of segment net sales 32.5 % 34.9 % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 39,042 $ 37,889 $ 1,153 3.0 % Americas 53,854 49,706 4,148 8.3 % Asia Pacific 10,640 9,296 1,344 14.5 % Total $ 103,536 $ 96,891 $ 6,645 6.9 % Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change Net cash used in operating activities $ (45,463) $ (71,535) $ 26,072 Net cash provided by investing activities 429,931 21,256 408,675 Net cash used in financing activities (436,617) (1,697) (434,920) Effect of exchange rate changes on cash and cash equivalents (1,700) (1,208) (492) Decrease in cash and cash equivalents $ (53,849) $ (53,184) $ (665) The following table includes details of net cash provided by operating activities. Three Months Ended March 31, (Dollars in thousands) 2021 2020 $ Change Cash flows from operating activities: Net income $ 108,400 $ 16,133 $ 92,267 Loss (gain) on sale of assets (100,014) 487 (100,501) Depreciation and amortization 11,093 10,451 642 Interest amortization 604 929 (325) Restructuring and impairment (23) 307 (330) Loss on extinguishment of debt 1,981 — 1,981 Accounts receivable (63,487) (50,541) (12,946) Inventories (2,495) (11,297) 8,802 Accounts payable (2,732) (39,651) 36,919 Other current asset, liabilities and adjustments, net 1,210 1,647 (437) Net cash used in operating activities $ (45,463) $ (71,535) $ 26,072 Credit Liquidity Requirements Impact of Newly Issued Accounting Pronouncements March 31, December 31, (Dollars in thousands) 2021 2020 Variable-rate debt: Carrying amount(1) $ 358,897 $ 793,731 Fair value 356,090 783,143 Increase in annual interest expense from 1% increase in interest rates 157 2,626 Decrease in annual interest expense from 1% decrease in interest rates (157) (2,626) Fixed-rate debt: Carrying amount 8,208 3,706 Fair value 6,749 1,887 Change in fair value from 1% increase in interest rates NM NM Change in fair value from 1% decrease in interest rates NM NM Interest rate swaps: Notional amount 310,422 311,220 Carrying amount and fair value (21,158) (24,694) Change in fair value from 1% increase in interest rates 7,736 8,407 Change in fair value from 1% decrease in interest rates (4,541) (3,131) Cross currency swaps: Notional amount 38,800 223,675 Carrying amount and fair value 786 (5,162) Change in fair value from 10% appreciation of U.S. dollar (4,051) (24,475) Change in fair value from 10% depreciation of U.S. dollar 4,051 24,475 Foreign currency forward contracts: Notional amount 529,820 494,187 Carrying amount and fair value (5,095) 2,019 Change in fair value from 10% appreciation of U.S. dollar (856) (2,810) Change in fair value from 10% depreciation of U.S. dollar 1,046 3,435 PART II — OTHER INFORMATION Total Amount 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 (Dollars in thousands, except for per share amounts) Purchased Paid per Share or Programs or Programs January 1, 2021 to January 31, 2021 — $ — $ — $ 46,192,535 February 1, 2021 to February 28, 2021 — $ — $ — $ 46,192,535 March 1, 2021 to March 31, 2021 — $ — $ — $ 46,192,535 Total — $ — SIGNATURES Date: November 3, 2021 Peter T. Thomas Date: /s/ Benjamin J. Schlater Benjamin J. Schlater EXHIBIT INDEX 2 Articles of incorporation and by-laws: 3.1 3.2 3.3 3.4 3.5 3.6 31 Certifications: 31.1 31.2 32.1 32.2 101 Inline XBRL Documents: 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Schema Document 101.CAL Inline XBRL Calculation Linkbase Document 101.LAB Inline XBRL Labels Linkbase Document 101.PRE Inline XBRL Presentation Linkbase Document 101.DEF Inline XBRL Definition Linkbase Document 104 The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended Ferro Corporation Shareholders Non-
controlling
InterestsTotal
EquityCommon Shares
in TreasuryCommon
StockPaid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
Loss(In thousands) Shares Amount Non-
controlling
InterestsBalances at December 31, 2020 11,065 $ (172,256) $ 93,436 $ 293,682 $ 304,815 $ (89,710) $ 10,968 $ 440,935 Net income (loss) Net income (loss) — — — — 107,963 — 437 108,400 Other comprehensive income (loss) Other comprehensive income (loss) — — — — — (54,111) (74) (54,185) Change in ownership interest — — — (2,530) — — (2,888) (5,418) Stock-based compensation transactions (255) 5,154 — (2,614) — — — 2,540 Balances at March 31, 2021 10,810 (167,102) 93,436 288,538 412,778 (143,821) 8,443 492,272 Net income (loss) Net income (loss) — — — — 15,509 — 382 15,891 Other comprehensive income (loss) Other comprehensive income (loss) — — — — — 2,508 (539) 1,969 Stock-based compensation transactions Stock-based compensation transactions (79) 1,413 — 747 — — — 2,160 Balances at June 30, 2021 Balances at June 30, 2021 10,731 (165,689) 93,436 289,285 428,287 (141,313) 8,286 512,292 Net income (loss) Net income (loss) — — — — 10,375 — 482 10,857 Other comprehensive income (loss) Other comprehensive income (loss) — — — — — (2,895) 453 (2,442) Stock-based compensation transactions Stock-based compensation transactions (38) 681 — 614 — — — 1,295 Balances at September 30, 2021 Balances at September 30, 2021 10,693 $ (165,008) $ 93,436 $ 289,899 $ 438,662 $ (144,208) $ 9,221 $ 522,002 Ferro Corporation Shareholders Non-
controlling
InterestsTotal
EquityCommon Shares
in TreasuryCommon
StockPaid-in
CapitalRetained
EarningsAccumulated
Other
Comprehensive
Loss(In thousands) Shares Amount Balances at December 31, 2019 11,431 $ (180,243) $ 93,436 $ 294,543 $ 262,016 $ (109,376) $ 9,826 $ 370,202 Net income (loss) — — — — 16,123 — 10 16,133 Other comprehensive income (loss) — — — — — (27,312) (94) (27,406) Stock-based compensation transactions (238) 5,332 — (2,723) — — — 2,609 Balances at March 31, 2020 11,193 (174,911) 93,436 291,820 278,139 (136,688) 9,742 361,538 Net income (loss) — — — — (5,540) — 376 (5,164) Other comprehensive income (loss) — — — — — 2,333 (36) 2,297 Stock-based compensation transactions (8) 159 — 1,825 — — — 1,984 Balances at June 30, 2020 11,185 (174,752) 93,436 293,645 272,599 (134,355) 10,082 360,655 Net income (loss) — — — — 14,474 — 440 14,914 Other comprehensive income (loss) — — — — — 14,343 (243) 14,100 Stock-based compensation transactions (40) 807 — 432 — — — 1,239 Balances at September 30, 2020 11,145 $ (173,945) $ 93,436 $ 294,077 $ 287,073 $ (120,012) $ 10,279 $ 390,908 Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 Cash flows from operating activities Net cash used in operating activities $ (64,949) $ (106,481) Cash flows from investing activities Capital expenditures for property, plant and equipment and other long-lived assets (25,684) (21,681) Collections of financing receivables 90,662 97,299 Proceeds from sale of businesses, net 415,230 — Business acquisitions, net of cash acquired (2,200) — Other investing activities 436 803 Net cash provided by investing activities 478,444 76,421 Cash flows from financing activities Net payments under loans payable Net payments under loans payable (31) (683) Principal payments on term loan facility - Amended Credit Facility (441,150) (6,150) Proceeds from revolving credit facility - Amended Credit Facility 50,000 398,336 Principal payments on revolving credit facility - Amended Credit Facility (50,000) (392,596) Other financing activities (4,022) (728) Net cash used in financing activities (445,203) (1,821) Effect of exchange rate changes on cash and cash equivalents (1,815) 174 Decrease in cash and cash equivalents (33,523) (31,707) Cash and cash equivalents at beginning of period 182,277 104,402 Cash and cash equivalents at end of period 148,754 72,695 Less: Cash and cash equivalents of discontinued operations at end of period — 8,200 Cash and cash equivalents of continuing operations at end of period $ 148,754 $ 64,495 Cash paid during the period for: Interest $ 21,943 $ 20,176 Income taxes 16,637 13,005 March 31,September 30, 2021, are not necessarily indicative of the results expected in the subsequent quartersquarter or for the full year ending December 31, 2021.The following ASUs were adopted as of January 1, 2021 and did not have a material impact on the consolidated financial statements:StandardDescriptionASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, issued August, 2018Modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans.ASUs:StandardDescriptionMarch 31,September 30, 2021, follow:(Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 81,508 $ 66,005 $ 32,055 $ 179,568 Color Solutions 34,186 52,692 10,782 97,660 Total net sales $ 115,694 $ 118,697 $ 42,837 $ 277,228 March 31,September 30, 2020, follow:(Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 65,081 $ 62,358 $ 26,779 $ 154,218 Color Solutions 30,472 46,421 10,766 87,659 Total net sales $ 95,553 $ 108,779 $ 37,545 $ 241,877 (Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 261,449 $ 205,969 $ 91,881 $ 559,299 Color Solutions 111,186 156,560 32,872 300,618 Total net sales $ 372,635 $ 362,529 $ 124,753 $ 859,917 (Dollars in thousands) EMEA Americas Asia Pacific Total Functional Coatings $ 192,009 $ 179,048 $ 70,268 $ 441,325 Color Solutions 96,235 132,272 29,172 257,679 Total net sales $ 288,244 $ 311,320 $ 99,440 $ 699,004 March 31,September 30, 2021 and 2020, which are reflected in our consolidated statements of operations as Income (loss) from discontinued operations.operations, net of income taxes. Interest expense has been allocated to the discontinued operations based on the ratio of net assets of the Tile Coatings business to consolidated net assets excluding debt.Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Net sales $ — $ 120,163 $ 83,579 $ 310,167 Cost of sales — 89,120 60,634 235,095 Gross profit — 31,043 22,945 75,072 Selling, general and administrative expenses — 18,549 20,327 52,899 Restructuring and impairment charges — 269 303 2,306 Interest expense — 2,950 1,682 7,698 Interest earned — (21) (189) (174) Foreign currency losses, net — 113 363 5,074 Gain on sale of business, net — — (100,057) — Miscellaneous expense, net — 173 251 1,420 Income from discontinued operations before income taxes — 9,010 100,265 5,849 Income tax expense 822 3,643 12,781 3,499 Income (loss) from discontinued operations, net of (822) 5,367 87,484 2,350 Less: Net (loss) income attributable to
noncontrolling interests— (11) 64 33 Net income attributable to Tile Coatings business $ (822) $ 5,378 $ 87,420 $ 2,317 December 31,(Dollars in thousands)2020Cash and cash equivalents$8,200Accounts receivable, net211,548Inventories84,239Other receivables1,630Other current assets2,237Current assets held-for-sale307,854Property, plant and equipment, net93,430Intangible assets, net42,126Deferred income taxes12,267Other non-current assets6,384Non-current assets held-for-sale154,207Total assets held-for-sale$462,061Loans payable and current portion of long-term debt$3,927Accounts payable85,308Accrued payrolls5,946Accrued expenses and other current liabilities12,364Current liabilities held-for-sale107,545Long-term debt, less current portion56,359Postretirement and pension liabilities8,119Other non-current liabilities6,671Non-current liabilities held-for-sale71,149Total liabilities held-for-sale$178,694(Dollars in thousands) December 31, 2020 Cash and cash equivalents $ 8,200 Accounts receivable, net 211,548 Inventories 84,239 Other receivables 1,630 Other current assets 2,237 Current assets held-for-sale 307,854 Property, plant and equipment, net 93,430 Intangible assets, net 42,126 Deferred income taxes 12,267 Other non-current assets 6,384 Non-current assets held-for-sale 154,207 Total assets held-for-sale $ 462,061 Loans payable and current portion of long-term debt $ 3,927 Accounts payable 85,308 Accrued payrolls 5,946 Accrued expenses and other current liabilities 12,364 Current liabilities held-for-sale 107,545 Long-term debt, less current portion 56,359 Postretirement and pension liabilities 8,119 Other non-current liabilities 6,671 Non-current liabilities held-for-sale 71,149 Total liabilities held-for-sale $ 178,694 threenine months ended March 31,September 30, 2021 and 2020:Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 Capital expenditures $ (1,074) $ (3,048) Gain on sale of discontinued operations (100,057) — Non-cash operating activities - restructuring and impairment charges Non-cash operating activities - restructuring and impairment charges — 1,091 Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end — 683 (Dollars in thousands) September 30,
2021December 31,
2020Raw materials $ 80,430 $ 81,344 Work in process 47,064 48,770 Finished goods 140,500 130,218 Total inventories $ 267,994 $ 260,332 $0.6$0.7 million and $1.1$0.6 million for the three months ended March 31,September 30, 2021 and 2020.2020, respectively, and $2.1 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively. We had on-hand precious metals owned by participants in our precious metals consignment program of $96.7$80.7 million at March 31,September 30, 2021, and $87.2 million at December 31, 2020, measured at fair value based on market prices for identical assets.$443.8$453.1 million at March 31,September 30, 2021 and $456.3 million at December 31, 2020. As discussed in Note 4, the assets of our Tile Coatings business were classified as held-for-sale under ASC Topic 360; Property, Plant, and Equipment. As such, additional accumulated depreciation of $135.3 million at December 31, 2020 was classified as Non-current assets held for sale.$2.7$2.5 million at March 31,September 30, 2021 and $1.9$2.9 million at March 31,September 30, 2020.(Dollars in thousands) Functional
CoatingsColor
SolutionsTotal Goodwill, net at December 31, 2020 $ 123,570 $ 51,781 $ 175,351 Foreign currency adjustments (1,816) (567) (2,383) Goodwill, net at September 30, 2021 Goodwill, net at September 30, 2021 $ 121,754 $ 51,214 $ 172,968 (Dollars in thousands) September 30,
2021December 31,
2020Goodwill, gross $ 231,435 $ 233,818 Accumulated impairment (58,467) (58,467) Goodwill, net $ 172,968 $ 175,351 March 31,September 30, 2021, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment test.(Dollars in thousands) September 30,
2021December 31,
2020Gross amortizable intangible assets: Patents $ 5,494 $ 5,589 Land rights 3,215 3,173 Technology/know-how and other 116,121 116,015 Customer relationships 66,276 68,142 Total gross amortizable intangible assets 191,106 192,919 Accumulated amortization: Patents (5,472) (5,566) Land rights (1,718) (1,630) Technology/know-how and other (67,541) (61,104) Customer relationships (19,197) (18,317) Total accumulated amortization (93,928) (86,617) Amortizable intangible assets, net $ 97,178 $ 106,302 (Dollars in thousands) September 30,
2021December 31,
2020Indefinite-lived intangibles assets: Trade names and trademarks $ 12,871 $ 13,198 (Dollars in thousands) September 30,
2021December 31,
2020Current portion of long-term debt $ 8,888 $ 8,839 Loans payable and current portion of long-term debt $ 8,888 $ 8,839 (Dollars in thousands) September 30,
2021December 31,
2020$ 355,058 $ 793,731 Finance lease obligations 2,663 2,911 Other notes 3,862 3,706 Total long-term debt 361,583 800,348 Current portion of long-term debt (8,888) (8,839) Long-term debt, less current portion $ 352,695 $ 791,509 $1.5$1.2 million at March 31,September 30, 2021 and $3.7 million at December 31, 2020.•The base rate for term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans is 1.25%.•The LIBOR rate for term loans shall not be less than 0.0% and the applicable margin for LIBOR rate term loans is 2.25%.•For LIBOR rate term loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.March 31,September 30, 2021, the Company had borrowed $156.0$154.3 million under the Tranche B-1 Loans at an interest rate of 2.45%2.38%, $103.3$102.1 million under the Tranche B-2 Loans at an interest rate of 2.45%,2.38% and $101.1$99.9 million under the Tranche B-3 Loans at an interest rate of 2.45%2.38%. At March 31,September 30, 2021, there were 0no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans, or Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At March 31,September 30, 2021, the effective interest rate for all tranches of the term loan facility, inclusive of hedging activities, was 4.83%4.84%.•The base rate for revolving loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans will vary between 0.50% to 1.50%.•The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.50% and 2.50%.•For LIBOR rate revolving loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.March 31,September 30, 2021, there were 0no borrowings under the 2018 Revolving Credit Facility. After reductions for outstanding letters of credit secured by these facilities, we had $495.8$496.1 million of additional borrowings available under the revolving credit facilities at March 31,September 30, 2021.March 31,September 30, 2021, we were in compliance with the covenants of the Amended Credit Facility.quarternine months ended March 31,September 30, 2021.March 31,September 30, 2021, waswere immaterial. The program, whose maximum capacity is €85€85 million, is scheduled to expire on December 31, 2023. Generally, at the transfer date, the Company receives cash equal to approximately 80% of the value of the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in operating activities in our consolidated statement of cash flows. The proceeds from the deferred purchase price are reflected in investing activities.$40.0$38.5 million at March 31,September 30, 2021 and $24.5 million at December 31, 2020. The carrying amount of deferred purchase price was $11.2$7.7 million at March 31,September 30, 2021 and $9.8 million at December 31, 2020 and is recorded in Other receivables. Trade accounts receivable collected from customers to be remitted to financial institutions were $45.1$39.3 million at March 31,September 30, 2021 and $36.0 million at December 31, 2020 recorded in Accrued expenses and other current liabilities.threenine months ended March 31,September 30, 2021 and 2020 is detailed below:Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 Trade accounts receivable sold to financial institutions $ 467,245 $ 206,104 375,196 139,549 threenine months ended March 31,September 30, 2020, our Tile Coatings business received cash proceeds from financial institutions of $29.7$47.3 million. Refer to Note 4 for additional discussion of the Tile Coatings business and its classification as discontinued operations.at March 31, 2021 and $28.1 million at September 30, 2021 and December 31, 2020.2020, respectively. The unused portions of these lines provided additional liquidity of $20.5 million and $25.0 million at March 31,September 30, 2021 and December 31, 2020.September 30, 2021 Carrying
AmountFair Value (Dollars in thousands) Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 148,754 $ 148,754 $ 148,754 $ — $ — (355,058) (354,382) — (354,382) — Other long-term notes payable (3,862) (2,324) — (2,324) — Cross currency swaps 1,456 1,456 — 1,456 — Interest rate swaps (17,595) (17,595) — (17,595) — Foreign currency forward contracts, net (3,255) (3,255) — (3,255) — December 31, 2020 Carrying
AmountFair Value (Dollars in thousands) Total Level 1 Level 2 Level 3 Cash and cash equivalents $ 174,077 $ 174,077 $ 174,077 $ — $ — (793,731) (783,143) — (783,143) — Other long-term notes payable (3,706) (1,887) — (1,887) — Cross currency swaps (5,162) (5,162) — (5,162) — Interest rate swaps (24,694) (24,694) — (24,694) — Foreign currency forward contracts, net 2,019 2,019 — 2,019 — $1.5$1.2 million and $3.7 million for the period ended March 31,September 30, 2021, and December 31, 2020, respectively.$310.4$308.8 million at March 31,September 30, 2021. These swaps are hedging risk associated with the Tranche B-1, B-2 and B-3 Loans. These interest rate swaps are designated as cash flow hedges.As of March 31,September 30, 2021, the Company expects it will reclassify net losses of approximately $8.4$8.5 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.$38.8$38.6 million at March 31,September 30, 2021, with a maturity date of February 14, 2024. As of March 31,September 30, 2021, the Company expects it will reclassify net losses of approximately $0.1 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However,, the actual amount reclassified could vary due to future changes in the fair value of this derivative.March 31,September 30, 2021 and 2020, follow:Amount of Gain (Loss)
Recognized in AOCLAmount of Loss (Gain)
Reclassified from
AOCL into IncomeLocation of Gain (Loss)
Reclassified from
AOCL into Income(Dollars in thousands) 2021 2020 2021 2020 Interest rate swaps $ (428) $ (975) $ (2,422) $ (1,648) Interest expense Cross currency swaps 907 (10,286) (111) 116 Interest expense $ (2,533) $ (1,532) Total Interest expense Cross currency swaps 916 (9,825) Foreign currency losses (gains), net $ 916 $ (9,825) Total Foreign currency losses (gains), net Amount of Gain (Loss)
Recognized in AOCLAmount of Loss (Gain)
Reclassified from
AOCL into IncomeLocation of Gain (Loss)
Reclassified from
AOCL into Income(Dollars in thousands) 2021 2020 2021 2020 Interest rate swaps $ 625 $ (15,783) $ (6,035) $ (2,970) Interest expense Cross currency swaps 3,215 (8,930) (234) 2,135 Interest expense $ (6,269) $ (835) Total Interest expense Cross currency swaps 3,410 (10,407) Foreign currency losses (gains), net $ 3,410 $ (10,407) Total Foreign currency losses (gains), net March 31,September 30, 2021 and 2020, are as follows:Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Interest expense $ 5,436 $ 4,767 $ 19,879 $ 16,474 Foreign currency losses, net Foreign currency losses, net 426 1,450 4,793 1,278 the amount reclassified into earnings and the amount of gain recognized in income on derivative (amount excluded from effectiveness testing) for the three months ended March 31,September 30, 2021 and 2020, follow:Amount of Gain (Loss)
Recognized in AOCLAmount of Gain
Recognized in Income on
Derivative (Amount Excluded
from Effectiveness Testing)Location of Gain
in Earnings(Dollars in thousands) 2021 2020 2021 2020 Cross currency swaps $ — $ (4,285) $ — $ 259 Interest expense Amount of Gain (Loss)
Recognized in AOCLAmount of Gain
Recognized in Income on
Derivative (Amount Excluded
from Effectiveness Testing)Location of Gain
in Earnings(Dollars in thousands) 2021 2020 2021 2020 Cross currency swaps $ — $ (3,195) $ — $ 1,651 Interest expense $6.3$2.6 million and $10.1 million in the three and nine months ended March 31,September 30, 2021, respectively, and net gains of $0.3$3.6 million and $4.0 million in the three and nine months ended March 31,September 30, 2020, 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 $529.8$705.7 million at March 31,September 30, 2021 and $625.9$494.2 million at December 31, 2020.March 31,September 30, 2021 and 2020, respectively, of our foreign currency forward contracts:Amount of Gain (Loss)
Recognized in EarningsAmount of Gain (Loss) Recognized in Earnings Location of Gain (Loss) in Earnings Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Foreign currency forward contracts $ (2,555) $ 3,586 $ (10,101) $ 3,996 Foreign currency losses (gains), net (Dollars in thousands) September 30,
2021December 31,
2020Balance Sheet Location Asset derivatives: Cross currency swaps $ 32 $ 9 Other current assets Cross currency swaps 1,424 — Other non-current assets Foreign currency forward contracts 1,133 2,649 Other current assets Liability derivatives: Interest rate swaps $ (8,450) $ (8,436) Accrued expenses and other current liabilities Interest rate swaps (9,145) (16,258) Other non-current liabilities Cross currency swaps — (67) Accrued expenses and other current liabilities Cross currency swaps — (5,104) Other non-current liabilities Foreign currency forward contracts (4,388) (630) Accrued expenses and other current liabilities threenine months ended March 31,September 30, 2021 was $7.6$29.9 million, or 29.2%38.6% of pre-tax income. Income tax expense for the threenine months ended March 31,September 30, 2020 was $5.1$10.4 million, or 24.3%30.6% of pre-tax income. The tax expense during the threenine months ended March 31,September 30, 2021, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21.0% primarily as a result of foreign statutory rate differences and March 31,an extraordinary distribution from a foreign affiliate subject to local country withholding taxes that were not fully creditable by the U.S. shareholder. The tax expense during the nine months ended September 30, 2020, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21%21.0% primarily as a result of foreign statutory rate differences.differences and U.S. taxation of foreign earnings.at March 31, 2021 and $5.7 million at September 30, 2021 and December 31, 2020, respectively, for costs associated with the remediation of certain of our current or former properties that have been contaminated. The balance at March 31,September 30, 2021 and December 31, 2020, were 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 line in 2013. These costs include, but are not limited to, 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, the ultimate cost of required remediation, and other circumstances.March 31,September 30, 2021 and 2020, respectively, follow:U.S. Pension Plans Non-U.S. Pension Plans Other Benefit Plans Three Months Ended September 30, (Dollars in thousands) 2021 2020 2021 2020 2021 2020 Service cost $ — $ 3 $ 315 $ 325 $ — $ 1 Interest cost 1,880 2,387 316 379 68 132 Expected return on plan assets (3,824) (3,708) (107) (128) — — Amortization of prior service cost — — (19) (5) — — Net periodic benefit (credit) cost $ (1,944) $ (1,318) $ 505 $ 571 $ 68 $ 133 U.S. Pension Plans Non-U.S. Pension Plans Other Benefit Plans Nine Months Ended September 30, (Dollars in thousands) 2021 2020 2021 2020 2021 2020 Service cost $ — $ 9 $ 987 $ 904 $ — $ 2 Interest cost 5,641 7,162 994 1,052 204 397 Expected return on plan assets (11,472) (11,124) (337) (356) — — Amortization of prior service cost — — (60) (14) — — Net periodic benefit (credit) cost $ (5,831) $ (3,953) $ 1,584 $ 1,586 $ 204 $ 399 expense (income),income, net on the condensed consolidated statement of operations.InThrough the first quarter ofnine months ended September 30, 2021, our Board of Directors granted 0.3 million stock options, 0.2 million performance share units, and 0.2 million restricted stockshare units under the Plan.threenine months ended March 31,September 30, 2021:Stock OptionsWeighted-average grant-date fair value$5.94Expected life, in years6.0Risk-free interest rate0.76%Expected volatility40.39%Stock Options Weighted-average grant-date fair value $ 5.94 Expected life, in years 6 Risk-free interest rate 0.76% Expected volatility 40.39% weighted averageweighted-average grant date fair value of our performance share units granted in the threenine months ended March 31,September 30, 2021, was $16.00. 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.threenine months ended March 31,September 30, 2021, was $15.07. 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.$2.4$1.4 million and $6.5 million for the three and nine months ended March 31,September 30, 2021, respectively, and $2.8$1.6 million and $7.1 million for the three and nine months ended March 31, 2020.September 30, 2020, respectively. At March 31,September 30, 2021, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately $13.1$9.8 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2023.2024.$5.2$0.6 million and $7.8 million for the three and nine months ended March 31,September 30, 2021, respectively, and $1.2$2.4 million and $12.2 million for the three and nine months ended March 31, 2020.September 30, 2020, respectively. As discussed in Note 4, our Tile Coatings business was classified as held-for-sale during the fourth quarter of 2019. As such, there were additional restructuring charges of $0.3 million for the threenine months ended March 31,September 30, 2021 and $0.3 million and $2.3 million for the three and nine months ended March 31,September 30, 2020, respectively, classified as Net income from discontinued operations, net of income taxes. pending sale of the Tile Coatings business, discussed in Note 4, we developed our Organizational Optimization Plan and initiated a program across the organization with the objective of realigning the business and lowering our cost structure in anticipation of the pending sale.structure. As a result of these actions, the Company expects to incur total charges of approximately $5.7 million, substantially all of which will be for anticipated severance costs. The remaining activities of the program are expected to be recognized throughout the remainder of 2021. Charges associated with the program were$2.1 $0.2 million and $3.2 million for the three and nine months ended March 31, 2021.September 30, 2021, respectively, and $1.2 million for the three and nine months ended September 30, 2020.two2 plants located in the United States and two2 sites in Latin America into the expanded Villagran location. As a result of these actions, the Company expects to incur total charges of approximately $9.5 million, substantially all of which will be for anticipated severance costs. The remaining activities of the program are expected to be recognized within the next 12 months. Charges associated with the program were $1.7$0.1 million and $2.5 million for the three and nine months ended March 31,September 30, 2021, respectively, and $0.2$1.1 million for the threenine months ended March 31,September 30, 2020.wereare substantially completed, and as such, we do not anticipate material charges related to this plan for the remainder of 2021. Charges associated with the program were $1.4$0.3 million and $2.1 million for the three and nine months ended March 31,September 30, 2021, respectively, and $1.0$1.2 million and $9.9 million for the three and nine months ended March 31, 2020.(Dollars in thousands) Employee
SeveranceOther
CostsTotal Balances at December 31, 2020 $ 5,510 $ 4,460 $ 9,970 Restructuring charges 5,697 2,059 7,756 Cash payments (6,178) (1,454) (7,632) Balances at September 30, 2021 $ 5,029 $ 5,065 $ 10,094 Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands, except per share amounts) 2021 2020 2021 2020 Basic earnings per share computation: Income from continuing operations $ 11,679 $ 9,547 $ 47,664 $ 23,533 Less: Net income attributable to noncontrolling interests from continuing operations 482 451 1,237 793 Net income attributable to Ferro Corporation from continuing operations 11,197 9,096 46,427 22,740 Income (loss) from discontinued operations, net of income taxes Income (loss) from discontinued operations, net of income taxes (822) 5,367 87,484 2,350 Less: Net income (loss) attributable to noncontrolling interests from discontinued operations — (11) 64 33 Net income (loss) attributable to Ferro Corporation from discontinued operations Net income (loss) attributable to Ferro Corporation from discontinued operations (822) 5,378 87,420 2,317 Total $ 10,375 $ 14,474 $ 133,847 $ 25,057 Weighted-average common shares outstanding 82,719 82,261 82,627 82,201 Basic earnings per share from continuing operations attributable to Ferro Corporation common shareholders $ 0.14 $ 0.11 $ 0.56 $ 0.28 Diluted earnings per share computation: Net income attributable to Ferro Corporation from continuing operations $ 11,197 9,096 46,427 22,740 Net income (loss) attributable to Ferro Corporation from discontinued operations Net income (loss) attributable to Ferro Corporation from discontinued operations (822) 5,378 87,420 2,317 Total $ 10,375 $ 14,474 $ 133,847 $ 25,057 Weighted-average common shares outstanding 82,719 82,261 82,627 82,201 Assumed exercise of stock options 629 272 531 260 Assumed satisfaction of restricted stock unit conditions 155 157 200 300 Assumed satisfaction of performance share unit conditions 184 81 162 130 Weighted-average diluted shares outstanding 83,687 82,771 83,520 82,891 Diluted earnings per share from continuing operations attributable to Ferro Corporation common shareholders $ 0.13 $ 0.11 $ 0.56 $ 0.27 2.42.0 million for the three and nine months ended March 31,September 30, 2021, respectively, and 3.02.8 million and 2.7 million for the three and nine months ended March 31, 2020.September 30, 2020, respectively. These shares are excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.factors.factors, including limitations contained in the Merger Agreement with Prince. The share repurchase programs do not obligate the Company to repurchase any dollar amount or number of common shares, and may be suspended or discontinued at any time.March 31,September 30, 2021, $46.2 million remainsremains authorized under the programs for the repurchase of common stock.Three Months Ended September 30, (Dollars in thousands) Postretirement
Benefit Liability
AdjustmentsForeign
Currency
ItemsNet Gain (Loss)
on Cash Flow
HedgesTotal Balances at June 30, 2020 $ 1,206 $ (111,954) $ (23,607) $ (134,355) Other comprehensive income (loss) before reclassifications, before tax — 13,022 (11,261) 1,761 Reclassification to earnings: Cash flow hedge income (loss), before tax — — 11,357 11,357 Current period other comprehensive income (loss), before tax — 13,022 96 13,118 Tax effect — (1,052) (173) (1,225) Current period other comprehensive income (loss), net of tax — 14,074 269 14,343 Balances at September 30, 2020 $ 1,206 $ (97,880) $ (23,338) $ (120,012) Balances at June 30, 2021 $ 3,328 $ (130,283) $ (14,358) $ (141,313) Other comprehensive income (loss) before reclassifications, before tax — (5,391) 479 (4,912) Reclassification to earnings: Postretirement benefit liabilities income (loss), before tax 2 — — 2 Cash flow hedge income (loss), before tax — — 1,617 1,617 Current period other comprehensive income (loss), before tax 2 (5,391) 2,096 (3,293) Tax effect — (941) 543 (398) Current period other comprehensive income (loss), net of tax 2 (4,450) 1,553 (2,895) Balances at September 30, 2021 $ 3,330 $ (134,733) $ (12,805) $ (144,208) Nine Months Ended September 30, (Dollars in thousands) Postretirement
Benefit Liability
AdjustmentsForeign
Currency
ItemsNet Gain (Loss)
on Cash Flow
HedgesTotal Balances at December 31, 2019 $ 1,206 $ (97,575) $ (13,007) $ (109,376) Other comprehensive income (loss) before reclassifications, before tax — (1,427) (24,713) (26,140) Reclassification to earnings: Cash flow hedge income (loss), before tax — — 11,242 11,242 Current period other comprehensive income (loss), before tax — (1,427) (13,471) (14,898) Tax effect — (1,122) (3,140) (4,262) Current period other comprehensive income (loss), net of tax — (305) (10,331) (10,636) Balances at September 30, 2020 $ 1,206 $ (97,880) $ (23,338) $ (120,012) Balances at December 31, 2020 $ 3,199 $ (70,482) $ (22,427) $ (89,710) Other comprehensive income (loss) before reclassifications, before tax — (81,857) 3,840 (78,017) Reclassification to earnings: Postretirement benefit liabilities income (loss), before tax 131 — — 131 Currency translation reclassification to income on divestiture — 17,305 — 17,305 Amount reclassification to income (remote transaction) — — 4,509 4,509 Cash flow hedge income (loss), before tax — — 2,859 2,859 Current period other comprehensive income (loss), before tax 131 (64,552) 11,208 (53,213) Tax effect — (301) 1,586 1,285 Current period other comprehensive income (loss), net of tax 131 (64,251) 9,622 (54,498) Balances at September 30, 2021 $ 3,330 $ (134,733) $ (12,805) $ (144,208) Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Functional Coatings $ 179,568 $ 154,218 $ 559,299 $ 441,325 Color Solutions 97,660 87,659 300,618 257,679 Total net sales $ 277,228 $ 241,877 $ 859,917 $ 699,004 Three Months Ended
September 30,Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 2021 2020 Functional Coatings $ 51,094 $ 41,906 $ 172,491 $ 125,842 Color Solutions 32,790 28,450 103,150 89,222 Other cost of sales (506) (190) (2,325) (416) Total gross profit 83,378 70,166 273,316 214,648 Selling, general and administrative expenses 54,520 47,820 167,384 154,407 Restructuring and impairment charges 602 2,447 7,756 12,231 Other expense, net 2,777 5,305 20,566 14,113 Income (loss) before income taxes $ 25,479 $ 14,594 $ 77,610 $ 33,897 March 31,September 30, 2021, increased by $36.0$35.4 million, or 14.3%14.6%, compared with the prior-year same period. Net sales increased by $29.4$25.4 million in Functional Coatings and $6.6$10.0 million in Color Solutions. During the three months ended March 31,September 30, 2021, gross profit increased $14.4$13.2 million, or 17.8%18.8%, compared with the prior-year same period; as a percentage of net sales, it increased approximately 100110 basis points to 33.0%30.1%. Our total gross profit for the firstthird quarter of 2021 was $95.1$83.4 million, compared with $80.7$70.2 million for the three months ended March 31,September 30, 2020. The increase in gross profit was attributable to higher gross profit in Functional Coatings of $14.1$9.2 million partially offset by lower gross profitand in Color Solutions of $0.1$4.3 million.March 31,September 30, 2021, selling, general and administrative (“SG&A”) expenses decreased $2.2increased $6.7 million, or 3.9%14.0%, compared with the prior-year same period. As a percentage of net sales, it decreased approximately 35010 basis points to 18.7%19.7%.March 31,September 30, 2021, net income was $108.4$10.9 million, compared with $16.1$14.9 million for the prior-year same period, and net income attributable to common shareholders was $108.0$10.4 million, compared with $16.1$14.5 million for the prior-year same period. Income from continuing operations was $18.6$11.7 million for the three months ended March 31,September 30, 2021, compared with $15.9$9.5 million in 2020.With global economic conditions strengthening, has continued to experience the positive trends establishedexperienced higher demand across all business segments in the second half of 2020third quarter, continuing the trend established throughout 2021 as customer markets recover.have improved from 2020. The impact of the COVID pandemic through the remainder of 2021 is unknown, even with the rolloutglobal availability of vaccines. Meanwhile, Ferro has benefittedexpects to continue to benefit from strategic actions taken prior to and during the pandemic to optimize our business, invest in technology platforms, align with macrotrends, and focus on higher margin,higher-margin, higher-growth markets which has contributed to gross margin expansion in the first quarter of 2021.is a technology-led, innovation-driven business with a profile for attractive, sustainable profitability and value creation. We provideprovides products and services that are essential to our customers as they innovate to address trends in their markets and develop next-generationnext generation products. We sell our products and services in multiple markets and geographies around the world, which limits exposure to any one industry or region. In addition, we serve a diverse set of industries, including automotive, construction, appliances, healthcare, food and beverage, information technology, energy and defense. Many of ourCOVID-related behavior changes have accelerated demand for certain products, especially those in industries supporting mobility, entertainment and services support critical industries, which governments around the world generally have allowed to operate during the pandemic. of the outbreak of COVID-19 on our business, including how it may impact our customers, employees, supply chain and distribution network and to take action, as appropriate, to address these circumstances. In some areas around the world, government mandates have been liftedchanged and economic conditions have improved in certain sectors of the economy relative to 2020. Meanwhile,Recently, some regions have experienced increasing numbers of COVID-19 cases, and if this continues and if public authorities intensify efforts to contain the spread of COVID-19, normal business activity may be further disrupted, and economic conditions could weaken. In addition, COVID-related behavior changes are accelerating demand for certain products, especially those in industries supporting mobility, entertainment and personal technology, smart appliances, construction and sustainable product packaging.We will continue On May 11, 2021, Ferro announced that it has entered into a definitive agreement to refine our manufacturing footprint, optimize logisticsbe acquired by an affiliate of Prince International Corporation, a portfolio company of American Securities LLC. The transaction is anticipated to close in the first quarter of 2022.streamline sourcinginto 2022 may be affected by the rise of inflation, which could impact raw material and procurement in our operations around the world.continue to be positive for 2021.
March 31,September 30, 2021 and 2020March 31,September 30, 2021, net income from continuing operations was $18.6$11.7 million, compared with $15.9$9.5 million for the three months ended March 31,September 30, 2020. For the three months ended March 31,September 30, 2021, net income attributable to common shareholders was $108.0$10.4 million, or earnings per share of $1.31,$0.13, compared with net income attributable to common shareholders of $16.1$14.5 million, or earnings per share of $0.19,$0.18, for the three months ended March 31,September 30, 2020.Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Net sales $ 277,228 $ 241,877 $ 35,351 14.6 % Cost of sales 193,850 171,711 22,139 12.9 % Gross profit $ 83,378 $ 70,166 $ 13,212 18.8 % Gross profit as a % of net sales 30.1 % 29.0 % $36.0$35.4 million, or 14.3%14.6%, for the three months ended March 31,September 30, 2021, compared with the prior-year same period, driven by higher sales in Functional Coatings and Color Solutions of $29.4$25.4 million and $6.6$10.0 million, respectively. The increase in net sales was driven by favorable volume and mix of $24.5$28.5 million, higher product pricing of $4.1 million and favorable foreign currency impacts of $9.3 million and higher product pricing of $2.2$2.7 million.$14.4$13.2 million, or 17.8%18.8%, for the three months ended March 31,September 30, 2021, compared with the prior-year same period. As a percentage of net sales, gross profit increased approximately 100110 basis points to 33.0%30.1%. The increase in gross profit was primarily attributable to an increase in gross profit in Functional Coatings of $14.1 million, partially offset by a decrease inand Color Solutions of $0.1 million.$9.2 million and $4.3 million, respectively. The increase in gross profit was primarily driven by favorable sales volume and mix of $9.7$14.0 million, higher product pricing of $4.1 million, favorable foreign currency impacts of $2.9 million, higher product pricing of $2.2$0.6 million, and lower raw materialfavorable manufacturing costs of $2.1$0.1 million, partially offset by higher manufacturingraw material costs of $2.5$5.6 million.Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Geographic Revenues on a sales origination basis EMEA $ 115,694 $ 95,553 $ 20,141 21.1 % Americas 118,697 108,779 9,918 9.1 % Asia Pacific 42,837 37,545 5,292 14.1 % Net sales $ 277,228 $ 241,877 $ 35,351 14.6 % $36.0$35.4 million, compared with the prior-year same period, was driven by increases in sales from all regions. The increase in sales from EMEA was attributable to higher sales in Functional Coatings and Color Solutions of $11.5$16.4 million and $1.2$3.7 million, respectively. The increase in sales from the Americas was attributable to higher sales in Color Solutions and Functional Coatings and Color Solutions of $10.1$6.3 million and $4.1$3.6 million, respectively. The increase in sales from Asia Pacific was attributable to higher sales in Functional Coatings and Color Solutions of $7.8 million and $1.3 million, respectively.$5.3 million.components with significantcomponent changes between 2021 and 2020.Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Personnel expenses (excluding R&D personnel expenses) $ 20,263 $ 19,827 436 2.2 % Research and development expenses 7,892 8,488 (596) (7.0) % Business development 5,235 3,113 2,122 68.2 % Incentive compensation 8,404 2,018 6,386 316.5 % Stock-based compensation 1,419 1,608 (189) (11.8) % Intangible asset amortization 1,521 1,504 17 1.1 % Pension and other postretirement benefits 315 213 102 47.9 % Bad debt 59 62 (3) (4.8) % All other expenses 9,412 10,987 (1,575) (14.3) % Selling, general and administrative expenses $ 54,520 $ 47,820 $ 6,700 14.0 % $2.2$6.7 million lowerhigher in the three months ended March 31,September 30, 2021, compared with the prior-year same period. The lowerhigher SG&A expenses compared to the prior-year same period are primarily driven by lower other miscellaneous expenses, primarily related to travelhigher incentive compensation and entertainment expenses,business development costs, partially offset by higher business development costs.Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Strategic services $ 23,488 $ 22,363 $ 1,125 5.0 % Functional services 21,209 21,831 (622) (2.8) % Incentive compensation 8,404 2,018 6,386 316.5 % Stock-based compensation 1,419 1,608 (189) (11.8) % Selling, general and administrative expenses $ 54,520 $ 47,820 $ 6,700 14.0 % Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Employee severance $ 258 $ 1,960 $ (1,702) (86.8) % Other restructuring costs 344 487 (143) (29.4) % Restructuring and impairment charges $ 602 $ 2,447 $ (1,845) (75.4) % increaseddecreased in the three months ended March 31,September 30, 2021, compared with the prior-year same period. The increasedecrease primarily relates to previously disclosed plans being substantially completed with any remaining costs associated with our Organizational Optimization and American Manufacturing Optimization Plans compared withexpected to be recognized within the prior-year same period.next 12 months. Refer to Note 14 to the consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for a discussion of our optimization plans and related costs.Interest ExpenseThree Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Interest expense $ 5,452 $ 4,810 $ 642 13.3 % Amortization of bank fees 499 1,071 (572) (53.4) % Interest swap amortization (315) (315) — — % Interest capitalization (200) (799) 599 (75.0) % Interest expense $ 5,436 $ 4,767 $ 669 14.0 % March 31,September 30, 2021, compared with the prior-year same period. The increase in interest expense was primarily due to incrementalhigher interest expense recognizedallocated to our Tile Coatings business in the three months ended September 30, 2020, and lower capitalized interest associated with the termination of certain cross-currency swap instruments and higher average interest rate,our North American Manufacturing Optimization project, partially offset by lower amortization of bank fees due to a decrease in the average long-term debt balanceand average deferred fee balances during the three months ended March 31,September 30, 2021, compared with the prior-year same period.March 31,September 30, 2021, was $7.6$13.8 million, or 29.2%54.2% of pre-tax income. Income tax expense for the three months ended March 31,September 30, 2020 was $5.1$5.0 million, or 24.3%34.6% of pre-tax income. The tax expense for the three months ended March 31,September 30, 2021, and March 31, 2020, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21%21.0% primarily as a result of foreign statutory rate differences.differences, an extraordinary distribution from a foreign affiliate subject to local country withholding taxes that were not fully creditable by the U.S. shareholder and the impact from an enactment of a tax rate change in a foreign jurisdiction. March 31,September 30, 2021 and 2020Three Months Ended
September 30,Change due to (Dollars in thousands) 2021 2020 $ Change % Change Price Volume /
MixCurrency Other Segment net sales $ 179,568 $ 154,218 $ 25,350 16.4 % $ 1,642 $ 21,820 $ 1,888 $ — Segment gross profit 51,094 41,906 9,188 21.9 % 1,642 11,010 122 (3,586) Gross profit as a % of segment net sales 28.5 % 27.2 % electronics, automotive and industrial products of $10.1$8.6 million, $7.6$7.0 million, $6.7$5.4 million, $2.5 million and $5.2$1.9 million, respectively, partially offset by lower sales in decoration products.respectively. The increase in net sales was driven by favorable volume and mix of $21.0$21.8 million, foreign currency impacts of $5.8$1.9 million and increased product pricing of $2.6$1.6 million. Gross profit increased from the prior-year same period primarily due to favorable volume and mix of $10.6$11.0 million, increased product pricing of $2.6$1.6 million and favorable foreign currency impacts of $1.9 million and favorable raw material costs of $0.7$0.1 million, partially offset by unfavorable raw material costs of $2.8 million and unfavorable manufacturing costs of $1.7$0.8 million.Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 81,508 $ 65,081 $ 16,427 25.2 % Americas 66,005 62,358 3,647 5.8 % Asia Pacific 32,055 26,779 5,276 19.7 % Total $ 179,568 $ 154,218 $ 25,350 16.4 % $29.4$25.4 million was primarily driven by higher sales from all regions. The increase in sales from EMEA was primarily attributable to higher sales of decoration, electronics, porcelain enamel electronics, automotive and industrial products of $5.6 million, $4.7 million, $4.1 million $2.8 million, $2.7 million and $2.3$2.5 million, respectively, partially offset by lower sales of decoration products.in automotive products by $0.3 million. The increase in sales from the Americas was primarily attributable to higher sales of electronics, automotive, porcelain enamel and decoration products of $1.8 million, $1.6 million, $1.1 million and 0.5 million, respectively, partially offset by lower sales of industrial products of $1.4 million. The increase in sales from Asia Pacific was primarily attributable to higher sales of decoration, automotive, industrial, electronics and porcelain enamel of $2.5 million, $1.2 million, $0.8 million, $0.5 million and $0.1 million, respectively.Three Months Ended
September 30,Change due to (Dollars in thousands) 2021 2020 $ Change % Change Price Volume /
MixCurrency Other Segment net sales $ 97,660 $ 87,659 $ 10,001 11.4 % $ 2,449 $ 6,714 $ 838 $ — Segment gross profit 32,790 28,450 4,340 15.3 % 2,449 3,013 476 (1,598) Gross profit as a % of segment net sales 33.6 % 32.5 % Three Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 34,186 $ 30,472 $ 3,714 12.2 % Americas 52,692 46,421 6,271 13.5 % Asia Pacific 10,782 10,766 16 0.1 % Total $ 97,660 $ 87,659 $ 10,001 11.4 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Net sales $ 859,917 $ 699,004 $ 160,913 23.0 % Cost of sales 586,601 484,356 102,245 21.1 % Gross profit $ 273,316 $ 214,648 $ 58,668 27.3 % Gross profit as a % of net sales 31.8 % 30.7 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Geographic Revenues on a sales origination basis EMEA $ 372,635 $ 288,244 $ 84,391 29.3 % Americas 362,529 311,320 51,209 16.4 % Asia Pacific 124,753 99,440 25,313 25.5 % Net sales $ 859,917 $ 699,004 $ 160,913 23.0 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Personnel expenses (excluding R&D personnel expenses) $ 64,875 $ 62,355 $ 2,520 4.0 % Research and development expenses 25,007 26,906 (1,899) (7.1) % Business development 16,482 8,951 7,531 84.1 % Incentive compensation 12,404 6,109 6,295 103.0 % Stock-based compensation 6,134 6,550 (416) (6.4) % Intangible asset amortization 4,583 4,593 (10) (0.2) % Pension and other postretirement benefits 987 554 433 78.2 % Bad debt 101 158 (57) (36.1) % All other expenses 36,811 38,231 (1,420) (3.7) % Selling, general and administrative expenses $ 167,384 $ 154,407 12,977 8.4 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Strategic services $ 71,616 $ 69,474 $ 2,142 3.1 % Functional services 77,230 72,274 4,956 6.9 % Incentive compensation 12,404 6,109 6,295 103.0 % Stock-based compensation 6,134 6,550 (416) (6.4) % Selling, general and administrative expenses $ 167,384 $ 154,407 $ 12,977 8.4 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Employee severance $ 5,697 $ 9,792 $ (4,095) (41.8) % Other restructuring costs 2,059 2,439 (380) (15.6) % Restructuring and impairment charges $ 7,756 $ 12,231 $ (4,475) (36.6) % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Interest expense $ 20,574 $ 17,039 $ 3,535 20.7 % Amortization of bank fees 1,601 2,866 (1,265) (44.1) % Interest swap amortization (947) (947) — — % Interest capitalization (1,349) (2,484) 1,135 (45.7) % Interest expense $ 19,879 $ 16,474 $ 3,405 20.7 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Price Volume /
MixCurrency Other Segment net sales $ 559,299 $ 441,325 $ 117,974 26.7 % $ 5,622 $ 98,576 $ 13,776 $ — Segment gross profit 172,491 125,842 46,649 37.1 % 5,622 33,734 4,073 3,220 Gross profit as a % of segment net sales 30.8 % 28.5 % Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 261,449 $ 192,009 $ 69,440 36.2 % Americas 205,969 179,048 26,921 15.0 % Asia Pacific 91,881 70,268 21,613 30.8 % Total $ 559,299 $ 441,325 $ 117,974 26.7 % $4.4$16.7 million, $4.0$16.4 million, $14.4 million, $12.8 million and $2.0$9.2 million, respectively. The increase in sales from the Americas was primarily attributable to higher sales of porcelain enamel, electronics, automotive and decoration products of $11.9 million, $7.5 million, $7.1 million and $2.1 million, respectively, partially offset by lower sales of industrial products of $1.6 million. The increase in sales from Asia Pacific was primarily attributable to increased sales of industrial,decoration, automotive, porcelain enamel, industrial and electronics products of $3.1$6.4 million, $2.0$6.1 million, $2.0$4.0 million, $3.6 million and $0.5$1.6 million, respectively.Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Price Volume /
MixCurrency Other Segment net sales $ 300,618 $ 257,679 $ 42,939 16.7 % $ 2,641 $ 32,553 $ 7,745 $ — Segment gross profit 103,150 89,222 13,928 15.6 % 2,641 9,995 3,067 (1,775) Gross profit as a % of segment net sales 34.3 % 34.6 % $4.0$33.2 million, $2.0$5.8 million and of $0.6$3.9 million, respectively. The increase in net sales was driven by favorable volume and mix of $3.5$32.6 million, and favorable foreign currency impacts of $3.5$7.7 million partially offset by lowerand increased product pricing of $0.4$2.6 million. Gross profit decreasedincreased from the prior-year same period, primarily due to unfavorable manufacturing costs of $1.2 million, unfavorablefavorable sales volume and mix of $0.9$10.0 million, and lower pricing of $0.4, partially mitigated by favorable raw material costs of $1.4 million and favorable foreign currency impacts of $1.0$3.1 million, increased product pricing of $2.6 million and favorable manufacturing costs of $0.2 million, partially offset by unfavorable raw material costs of $2.0 million.Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change % Change Segment net sales by Region EMEA $ 111,186 $ 96,235 $ 14,951 15.5 % Americas 156,560 132,272 24,288 18.4 % Asia Pacific 32,872 29,172 3,700 12.7 % Total $ 300,618 $ 257,679 $ 42,939 16.7 % $6.6$42.9 million was driven by higher sales from all regions. The increase in sales from the Americas was primarily driven by increased sales of pigment, surface technology and dispersions and colorants products of $13.8 million, $8.2 million and $2.4 million, respectively. The increase in sales from EMEA was primarily attributable to higher sales of pigment and dispersions and colorants products of $2.8 million, $0.8$13.4 million and $0.5$1.6 million, respectively. The increase in sales from Asia Pacific was attributable to increased sales of pigment products of $2.1$6.1 million, partially offset by lower sales of surface technology of $0.8 million, respectively. The increase in sales from EMEA was primarily attributable to higher sales$2.4 million.threenine months ended March 31,September 30, 2021 and 2020Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change Net cash used in operating activities $ (64,949) $ (106,481) $ 41,532 Net cash provided by investing activities 478,444 76,421 402,023 Net cash used in financing activities (445,203) (1,821) (443,382) Effect of exchange rate changes on cash and cash equivalents (1,815) 174 (1,989) Decrease in cash and cash equivalents $ (33,523) $ (31,707) $ (1,816) Nine Months Ended
September 30,(Dollars in thousands) 2021 2020 $ Change Cash flows from operating activities: Net income $ 135,148 $ 25,883 $ 109,265 Loss (gain) on sale of assets (98,746) 78 (98,824) Depreciation and amortization 30,098 30,653 (555) Interest amortization 1,601 2,866 (1,265) Restructuring and impairment 124 6,944 (6,820) Loss on extinguishment of debt 1,981 — 1,981 Accounts receivable (122,547) (107,551) (14,996) Inventories (21,057) 10,022 (31,079) Accounts payable 775 (78,576) 79,351 Other current asset, liabilities and adjustments, net 7,674 3,200 4,474 Net cash used in operating activities $ (64,949) $ (106,481) $ 41,532 $26.1$41.5 million during the threenine months ended March 31,September 30, 2021 compared with the prior-year same period. The increase in cash from operating activities was primarily due to lower cash outflows for net working capital of $32.8 $33.3 million partially offset by a decreaseand an increase in net income, net of the gain on the sale of the Tile Coatings business.$408.7$402.0 million during the threenine months ended March 31,September 30, 2021 compared with the prior-year same period. The increase in cash from investing activities was primarily due to the proceeds from the sale of the Tile Coatings business of $415.2 million, partially offset by lower collection of financing receivables of $6.6 million and higher cash outflows for capital expenditures of $2.6$4.0 million in the threenine months ended March 31,September 30, 2021, compared to the prior-year same period.$434.9$443.4 million during the threenine months ended March 31,September 30, 2021 compared with the prior-year same period. The decrease in cash from financing activities was primarily due to increased principal payments on the Amended Credit Facility of $435.0 million, decreased net proceeds from the revolving credit facilities of $5.8 million, increased other financing activities of $3.3 million and decreased net proceeds from loans payable of $0.7 million compared to the prior-year same period.$0.6$0.7 million and $1.1$0.6 million for the three months ended March 31,September 30, 2021 and 2020.2020, respectively, and $2.1 million and $2.3 million for the nine months ended September 30, 2021 and 2020, respectively. We had on hand precious metals owned by participants in our precious metals program of $96.7$80.7 million at March 31,September 30, 2021, and $87.2 million at December 31, 2020, measured at fair value based on market prices for identical assets.March 31,September 30, 2021,, or December 31, 2020, 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.Credit.March 31,September 30, 2021, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that totaled $4.9totaled $4.3 million. These agreements primarily relate to Ferro’s insurance programs, foreign energy purchase contracts and foreign tax payments.March 31,September 30, 2021, we had $128.4$148.8 million of cash and cash equivalents. The majority of our cash and cash equivalents were held by foreign subsidiaries. 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.quarternine months ended March 31,September 30, 2021.March 31,September 30, 2021, we had liquidity of approximately $644.7$669.8 million, consisting of cash and availability under our various credit facilities, primarily our revolving credit facility.March 31,September 30, 2021, we were in compliance with our maximum leverage ratio covenant of 4.00x as our actual ratio was 1.45,1.29, providing $138.7$159.1 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, as defined within the Amended Credit Facility, falls below approximately $79$636.4 million for the most recently ended trailing four quarters, based on reasonably consistent net debt levels with those as of March 31,September 30, 2021, 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.(Dollars in thousands) September 30,
2021December 31,
2020Variable-rate debt: $ 355,058 $ 793,731 Fair value 354,382 783,143 Increase in annual interest expense from 1% increase in interest rates 89 2,626 Decrease in annual interest expense from 1% decrease in interest rates (89) (2,626) Fixed-rate debt: Carrying amount 3,862 3,706 Fair value 2,324 1,887 Change in fair value from 1% increase in interest rates NM NM Change in fair value from 1% decrease in interest rates NM NM Interest rate swaps: Notional amount 308,826 311,220 Carrying amount and fair value (17,595) (24,694) Change in fair value from 1% increase in interest rates 6,424 8,407 Change in fair value from 1% decrease in interest rates (3,604) (3,131) Cross currency swaps: Notional amount 38,600 223,675 Carrying amount and fair value 1,456 (5,162) Change in fair value from 10% appreciation of U.S. dollar (3,920) (24,475) Change in fair value from 10% depreciation of U.S. dollar 3,920 24,475 Foreign currency forward contracts: Notional amount 705,719 494,187 Carrying amount and fair value (3,255) 2,019 Change in fair value from 10% appreciation of U.S. dollar (5,897) (2,810) Change in fair value from 10% depreciation of U.S. dollar 7,208 3,435 $1.5$1.2 million and $3.7 million for the period ended March 31,September 30, 2021 and December 31, 2020, respectively.March 31,September 30, 2021, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the disclosure controls and procedures were effective as of March 31,September 30, 2021.firstthird quarter of 2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not observed any material impact to our internal controls over financial reporting despite the fact that many of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.March 31,September 30, 2021:(Dollars in thousands, except for per share amounts) Total Number
of Shares
PurchasedAverage Price
Paid per ShareTotal Amount of
Shares Purchased
as Part of Publicly
Announced Plans
or ProgramsMaximum Dollar
Amount that May
Yet Be Purchased
Under the Plans
or ProgramsJuly 1, 2021 to July 31, 2021 — $ — $ — $ 46,192,535 August 1, 2021 to August 31, 2021 — $ — $ — $ 46,192,535 September 1, 2021 to September 30, 2021 — $ — $ — $ 46,192,535 Total — $ — FERRO CORPORATION(Registrant)Date:May 10, 2021/s/ Peter T. Thomas May 10,November 3, 2021Plan of acquisition, reorganization, arrangement or successor: 2.1 3 March 31,September 30, 2021, formatted in Inline XBRL and contained in Exhibit 101.