UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2012~~2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period fromto

Commission File Number 1-584

FERRO CORPORATION

(Exact name of registrant as specified in its charter)


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

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

216-875-5600

(Registrant’s telephone number, including area code)

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. YES x NO ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES x NO ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x

At September 30, ~~2012,~~2013, there were ~~86,538,312~~86,601,495 shares of Ferro Common Stock, par value $1.00, outstanding.

TABLE OF CONTENTS


	Page
PART I

Item 1. Financial Statements (Unaudited)		3

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		2119

Item 3. Quantitative and Qualitative Disclosures about Market Risk		33

~~Item 4. Controls and Procedures~~		34

~~PART II~~

Item ~~1. Legal Proceedings~~4. Controls and Procedures		35

PART II

Item ~~1A. Risk Factors~~1. Legal Proceedings		3536

Item 1A. Risk Factors		36

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		3536

Item 3. Defaults Upon Senior Securities		3536

Item 4. Mine Safety Disclosures		3536

Item 5. Other Information		3536

Item 6. Exhibits		3536

Exhibit 1810.1
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 Instance Document
EX-101 Schema Document
EX-101 Calculation Linkbase Document
EX-101 Labels Linkbase Document
EX-101 Presentation Linkbase Document
EX-101 Definition Linkbase Document

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
	2012			As adjusted 2011			2012			As adjusted 2011			2013			As adjusted 2012			2013			As adjusted 2012
	(Dollars in thousands, except per share amounts)												(Dollars in thousands, except per share amounts)
Net sales	$	414,840		$	546,114		$	1,362,735		$	1,713,097		$	408,104		$	408,865		$	1,261,083		$	1,344,836
Cost of sales		352,501			442,304			1,124,228			1,374,614			323,857			348,155			1,009,945			1,112,587

Gross profit		62,339			103,810			238,507			338,483			84,247			60,710			251,138			232,249
Selling, general and administrative expenses		65,109			65,766			206,306			210,153			59,078			63,863			184,986			202,675
Restructuring and impairment charges		198,790			869			203,829			4,044			3,834			198,695			26,738			203,734
Other expense (income):
Interest expense		7,101			7,030			20,689			21,208			6,766			6,716			21,034			19,566
Interest earned		(57	)		(50	)		(192	)		(193	)		(48	)		(57	)		(171	)		(192	)
Foreign currency losses, net		869			1,726			792			4,049			1,308			869			4,016			792
Miscellaneous expense, net		792			64			3,027			458
Miscellaneous (income) expense, net														(209	)		797			(9,493	)		3,038

(Loss) income before income taxes		(210,265	)		28,405			(195,944	)		98,764
Income (loss) before income taxes														13,518			(210,173	)		24,028			(197,364	)
Income tax expense		105,473			9,057			113,618			32,825			474			105,447			4,025			113,115

Net (loss) income		(315,738	)		19,348			(309,562	)		65,939
Income (loss) from continuing operations														13,044			(315,620	)		20,003			(310,479	)
(Loss) income from discontinued operations, net of income taxes														—			(118	)		(8,421	)		917

Net income (loss)														13,044			(315,738	)		11,582			(309,562	)
Less: Net income attributable to noncontrolling interests		376			40			830			573			392			376			177			830

Net (loss) income attributable to Ferro Corporation		(316,114	)		19,308			(310,392	)		65,366
Dividends on preferred stock		—			—			—			(165	)
Net income (loss) attributable to Ferro Corporation common shareholders													$	12,652		$	(316,114	)	$	11,405		$	(310,392	)

Net (loss) income attributable to Ferro Corporation common shareholders	$	(316,114	)	$	19,308		$	(310,392	)	$	65,201
Earnings (loss) per share attributable to Ferro Corporation common shareholders:
Basic earnings (loss):
From continuing operations													$	0.15		$	(3.66	)	$	0.23		$	(3.61	)
From discontinued operations													$	—			—			(0.10	)		0.01

(Loss) earnings per share attributable to Ferro Corporation common shareholders:
Basic (loss) earnings	$	(3.66	)	$	0.22		$	(3.60	)	$	0.76
Diluted (loss) earnings		(3.66	)		0.22			(3.60	)		0.75
													$	0.15		$	(3.66	)	$	0.13		$	(3.60	)

Diluted earnings (loss):
From continuing operations													$	0.15		$	(3.66	)	$	0.23		$	(3.61	)
From discontinued operations													$	—			—			(0.10	)		0.01

													$	0.15		$	(3.66	)	$	0.13		$	(3.60	)

See accompanying notes to condensed consolidated financial statements.

Ferro Corporation and Subsidiaries

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


	Three months ended September 30,						Nine months ended September 30,						Three months ended September 30,						Nine months ended September 30,
	2012			2011			2012			2011			2013			2012			2013			2012
	(Dollars in thousands)												(Dollars in thousands)
Net (loss) income	$	(315,738	)	$	19,348		$	(309,562	)	$	65,939
Net income (loss)													$	13,044		$	(315,738	)	$	11,582		$	(309,562	)
Other comprehensive income (loss), net of tax:
Foreign currency translation		3,321			(11,013	)		(2,940	)		(562	)		4,226			3,321			(3,820	)		(2,940	)
Postretirement benefit liabilities		1,044			582			(311	)		(229	)		(34	)		1,044			(171	)		(311	)

Total comprehensive (loss) income		(311,373	)		8,917			(312,813	)		65,148
Total comprehensive income (loss)														17,236			(311,373	)		7,591			(312,813	)
Less: Comprehensive income attributable to noncontrolling interests		442			113			845			762			415			442			323			845

Comprehensive (loss) income attributable to Ferro Corporation	$	(311,815	)	$	8,804		$	(313,658	)	$	64,386
Comprehensive income (loss) attributable to Ferro Corporation													$	16,821		$	(311,815	)	$	7,268		$	(313,658	)

See accompanying notes to condensed consolidated financial statements.

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets


		September 30, 2012			As adjusted December 31, 2011				September 30, 2013			December 31, 2012
		(Dollars in thousands)							(Dollars in thousands)
ASSETS	ASSETS							ASSETS
Current assets
Cash and cash equivalents		$	24,817		$	22,991			$	35,853		$	29,576
Accounts receivable, net			322,620			306,775				331,847			306,463
Inventories			212,014			228,813				195,617			200,824
Deferred income taxes			6,419			17,395				8,011			7,995
Other receivables			37,338			37,839				32,371			31,554
Other current assets			12,746			17,086				14,571			10,802
Current assets of discontinued operations										—			6,289

Total current assets			615,954			630,899				618,270			593,503
Other assets
Property, plant and equipment, net			331,894			379,336				299,619			309,374
Goodwill			68,952			215,601				63,234			62,975
Amortizable intangible assets, net			14,086			11,056				12,268			14,410
Deferred income taxes			16,835			117,658				20,527			21,554
Other non-current assets			71,913			86,101				55,444			61,941
Other assets of discontinued operations										—			15,346

Total assets		$	1,119,634		$	1,440,651			$	1,069,362		$	1,079,103

LIABILITIES AND EQUITY	LIABILITIES AND EQUITY							LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	67,180		$	11,241			$	59,665		$	85,152
Accounts payable			196,977			214,460				183,044			182,024
Accrued payrolls			31,564			31,055				44,081			31,643
Accrued expenses and other current liabilities			69,508			67,878				67,514			76,384
Current liabilities of discontinued operations										—			1,300

Total current liabilities			365,229			324,634				354,304			376,503
Other liabilities
Long-term debt, less current portion			270,132			298,082				278,119			261,624
Postretirement and pension liabilities			190,283			215,732				199,922			216,167
Other non-current liabilities			19,846			19,709				20,316			18,135

Total liabilities			845,490			858,157				852,661			872,429
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 86.6 million shares outstanding in 2012 and 2011			93,436			93,436
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 86.6 and 86.5 million shares outstanding in 2013 and 2012, respectively										93,436			93,436
Paid-in capital			325,137			320,882				320,216			321,652
Retained (deficit) earnings			(22,730	)		287,662
Retained deficit										(75,201	)		(86,606	)
Accumulated other comprehensive income			20,633			23,899				12,513			16,650
Common shares in treasury, at cost			(153,029	)		(153,617	)			(147,608	)		(151,605	)

Total Ferro Corporation shareholders’ equity			263,447			572,262				203,356			193,527
Noncontrolling interests			10,697			10,232				13,345			13,147

Total equity			274,144			582,494				216,701			206,674

Total liabilities and equity		$	1,119,634		$	1,440,651			$	1,069,362		$	1,079,103

See accompanying notes to condensed consolidated financial statements.

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity


	Ferro Corporation Shareholders																							Ferro Corporation Shareholders
	Common Shares in Treasury						Common		Paid-in			Retained Earnings			Accumulated Other Comprehensive			Non-controlling						Common Shares in Treasury						Common		Paid-in			Retained Earnings			Accumulated Other Comprehensive			Non-controlling			Total
	Shares			Amount			Stock		Capital			(Deficit)			(Loss) Income			Interests			Total Equity			Shares			Amount			Stock		Capital			(Deficit)			Income (Loss)			Interests			Equity
	(In thousands)																							(In thousands)
Balances at December 31, 2010, as originally reported		7,242		$	(164,257	)	$	93,436	$	323,015		$	362,164		$	(50,949	)	$	10,771		$	574,180
Cumulative effect of change in accounting principle (Refer to Note 2)													(78,741	)		78,741

Balances at December 31, 2010, as adjusted		7,242			(164,257	)		93,436		323,015			283,423			27,792			10,771			574,180
Net income													65,366						573			65,939
Other comprehensive (loss) income																(980	)		189			(791	)
Cash dividends on preferred stock													(165	)								(165	)
Stock-based compensation transactions		(377	)		10,683					(4,409	)											6,274
Distributions to noncontrolling interests																			(938	)		(938	)

Balances at September 30, 2011		6,865		$	(153,574	)	$	93,436	$	318,606		$	348,624		$	26,812		$	10,595		$	644,499

Balances at December 31, 2011, as originally reported		6,865		$	(153,617	)	$	93,436	$	320,882		$	393,636		$	(82,075	)	$	10,232		$	582,494
Cumulative effect of change in accounting principle (Refer to Note 2)													(105,974	)		105,974

Balances at December 31, 2011, as adjusted		6,865			(153,617	)		93,436		320,882			287,662			23,899			10,232			582,494
Balances at December 31, 2011																									6,865		$	(153,617	)	$	93,436	$	320,882		$	287,662		$	23,899		$	10,232		$	582,494
Net (loss) income													(310,392	)					830			(309,562	)													(310,392	)					830			(309,562	)
Other comprehensive (loss) income																(3,266	)		15			(3,251	)																(3,266	)		15			(3,251	)
Stock-based compensation transactions		32			588					4,255												4,843			32			588					4,255												4,843
Distributions to noncontrolling interests																			(380	)		(380	)																			(380	)		(380	)

Balances at September 30, 2012		6,897		$	(153,029	)	$	93,436	$	325,137		$	(22,730	)	$	20,633		$	10,697		$	274,144			6,897		$	(153,029	)	$	93,436	$	325,137		$	(22,730	)	$	20,633		$	10,697		$	274,144

Balances at December 31, 2012																									6,962		$	(151,605	)	$	93,436	$	321,652		$	(86,606	)	$	16,650		$	13,147		$	206,674
Net income																																				11,405						177			11,582
Other comprehensive (loss) income																																							(4,137	)		146			(3,991	)
Stock-based compensation transactions																									(129	)		3,997					(1,436	)											2,561
Distributions to noncontrolling interests																																										(125	)		(125	)

Balances at September 30, 2013																									6,833		$	(147,608	)	$	93,436	$	320,216		$	(75,201	)	$	12,513		$	13,345		$	216,701

See accompanying notes to condensed consolidated financial statements.

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows


	Nine months ended September 30,						Nine months ended September 30,
	2012			2011			2013			2012
	(Dollars in thousands)						(Dollars in thousands)
Cash flows from operating activities
Net cash provided by (used for) operating activities	$	19,536		$	(17,370	)
Net cash provided by operating activities							$	3,003		$	19,536
Cash flows from investing activities
Capital expenditures for property, plant and equipment		(46,245	)		(51,923	)		(21,187	)		(46,245	)
Proceeds from sale of assets		2,386			2,374			16,034			2,386
Other investing activities		96			193
Proceeds from sale of stock of Ferro Pfanstiehl Laboratories, Inc.								16,912			—
Dividends received from affiliates								1,119			96

Net cash used for investing activities		(43,763	)		(49,356	)
Net cash provided by (used for) investing activities								12,878			(43,763	)
Cash flows from financing activities
Net borrowings under loans payable		22,087			55,496
Proceeds from long-term debt		323,151			530,174
Principal payments on long-term debt		(319,926	)		(517,065	)
Redemption of convertible preferred stock		—			(9,427	)
Cash dividends paid		—			(165	)
Net borrowings under loans payable⁽¹⁾								9,223			22,087
Proceeds from revolving credit facility								368,317			323,151
Principal payments on revolving credit facility								(351,404	)		(319,926	)
Extinguishment of convertible senior notes								(35,066	)		—
Other financing activities		760			(180	)		(734	)		760

Net cash provided by financing activities		26,072			58,833
Net cash (used for) provided by financing activities								(9,664	)		26,072
Effect of exchange rate changes on cash and cash equivalents		(19	)		758			60			(19	)

Increase (decrease) in cash and cash equivalents		1,826			(7,135	)
Increase in cash and cash equivalents								6,277			1,826
Cash and cash equivalents at beginning of period		22,991			29,035			29,576			22,991

Cash and cash equivalents at end of period	$	24,817		$	21,900		$	35,853		$	24,817

Cash paid during the period for:
Interest	$	25,343		$	24,620		$	25,484		$	25,343
Income taxes		3,130			20,646			2,905			3,130

⁽¹⁾	Includes cash flows related to our domestic accounts receivable program, international accounts receivable sales programs as well as loans payable to banks.

See accompanying notes to condensed consolidated financial statements.

Ferro Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Ferro Corporation (“Ferro,” “we,” “us” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. These statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012. Prior periods have been adjusted for the presentation of discontinued operations.

Operating results for the three and nine months ended September 30, ~~2012,~~2013, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, ~~2012.~~2013.

2. Recent Accounting Pronouncements ~~and Change in Accounting Principle~~

Accounting Standards Adopted in the Nine Months Ended September 30, ~~2012~~2013

On January 1, ~~2012,~~2013, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) ~~2011-04,~~~~Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs~~, (“ASU 2011-04”), which is codified in ASC Topic 820, Fair Value Measurement. This pronouncement changes certain fair value measurement guidance and expands certain disclosure requirements. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

~~On January 1, 2012, we adopted ASU 2011-05,~~~~Presentation of Comprehensive Income~~~~, (“ASU 2011-05”) and ASU 2011-12,~~~~Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05~~, (“ASU 2011-12”), which are codified in ASC Topic 220, Comprehensive Income. ASU 2011-05 requires companies to present items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or two separate but consecutive statements. ASU 2011-12 indefinitely defers certain provisions of ASU 2011-05 that required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. Adoption of these pronouncements did not have a material effect on our consolidated financial statements.

~~On January 1, 2012, we adopted ASU 2011-08,~~~~Testing Goodwill for Impairment~~, (“ASU 2011-08”), which is codified in ASC Topic 350, Intangibles—Goodwill and Other. This pronouncement permits companies testing goodwill for impairment to first assess qualitative factors to determine whether the two-step impairment test is required. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

~~Change in Accounting Principle~~

During the third quarter of 2012, we elected to change our method of recognizing defined benefit pension and other postretirement benefit expense. Historically, we recognized actuarial gains and losses in accumulated other comprehensive loss within shareholders’ equity on our consolidated balance sheets annually, and these gains and losses were amortized into our operating results over the average remaining service period of plan participants, to the extent such gains and losses were in excess of a corridor.

Under our new method, we will recognize actuarial gains and losses in our operating results in the year in which the gains or losses occur. These gains and losses are generally measured annually as of December 31 and recorded during the fourth quarter, unless an interim remeasurement is required. The remaining components of benefit expense, primarily service and interest costs and the expected return on plan assets, will be recorded quarterly as ongoing benefit expense. While the historical method of recognizing expense was acceptable, we believe the new method is preferable because it results in more timely recognition in our operating results of actuarial gains and losses as they arise. In accordance with ASC Topic 250, Accounting Changes and Error Corrections, all prior periods have been adjusted to apply the new method retrospectively. The effect of the change on retained earnings as of January 1, 2012 and 2011, was a reduction of $106.0 million and $78.7 million, respectively, with a corresponding offset to accumulated other comprehensive loss.

We have presented the effects of the change in accounting principle on our condensed consolidated financial statements for 2012 and 2011 below. The following table presents the significant effects of the change on our historical condensed consolidated statements of operations, statements of comprehensive (loss) income and balance sheets. There was no effect on our condensed consolidated statements of cash flows.

~~Condensed Consolidated Statements of Operations Information~~

   Three months ended
September 30, 2012 Nine months ended
September 30, 2012
   Prior
accounting
method Effect of
accounting
change As reported Prior
accounting
method Effect of
accounting
change As reported
   (Dollars in thousands, except per share amounts)
Net sales
   $ 414,840    $ —      $ 414,840    $ 1,362,735    $ —      $ 1,362,735
Cost of sales
   352,501    —      352,501    1,124,228    —      1,124,228


Gross profit
   62,339    —      62,339    238,507    —      238,507
Selling, general and administrative expenses
   69,397    (4,288 ) 65,109    221,727    (15,421 ) 206,306
Restructuring and impairment charges
   198,790    —      198,790    203,829    —      203,829
Other expense (income):

Interest expense
   7,101    —      7,101    20,689    —      20,689
Interest earned
   (57 ) —      (57 ) (192 ) —      (192 )
Foreign currency losses, net
   869    —      869    792    —      792
Miscellaneous expense, net
   792    —      792    3,027    —      3,027


(Loss) income before income taxes
   (214,553 ) 4,288    (210,265 ) (211,365 ) 15,421    (195,944 )
Income tax expense
   103,934    1,539    105,473    108,226    5,392    113,618


Net (loss) income
   (318,487 ) 2,749    (315,738 ) (319,591 ) 10,029    (309,562 )
Less: Net income attributable to noncontrolling interests
   376    —      376    830    —      830


Net (loss) income attributable to Ferro Corporation common shareholders
   $ (318,863 ) $ 2,749    $ (316,114 ) $ (320,421 ) $ 10,029    $ (310,392 )


(Loss) earnings per share attributable to Ferro Corporation common shareholders:

Basic (loss) earnings
   $ (3.69 ) $ 0.03    $ (3.66 ) $ (3.71 ) $ 0.11    $ (3.60 )
Diluted (loss) earnings
   (3.69 ) 0.03    (3.66 ) (3.71 ) 0.11    (3.60 )

   Three months ended
September 30, 2011 Nine months ended
September 30, 2011
   As originally
reported Effect of
accounting
change As adjusted As originally
reported Effect of
accounting
change As adjusted
   (Dollars in thousands, except per share amounts)
Net sales
   $ 546,114    $ —      $ 546,114    $ 1,713,097    $ —      $ 1,713,097
Cost of sales
   442,304    —      442,304    1,374,614    —      1,374,614


Gross profit
   103,810    —      103,810    338,483    —      338,483
Selling, general and administrative expenses
   67,530    (1,764 ) 65,766    217,896    (7,743 ) 210,153
Restructuring and impairment charges
   869    —      869    4,044    —      4,044
Other expense (income):

Interest expense
   7,030    —      7,030    21,208    —      21,208
Interest earned
   (50 ) —      (50 ) (193 ) —      (193 )
Foreign currency losses, net
   1,726    —      1,726    4,049    —      4,049
Miscellaneous expense, net
   64    —      64    458    —      458


Income before income taxes
   26,641    1,764    28,405    91,021    7,743    98,764
Income tax expense
   8,419    638    9,057    29,987    2,838    32,825


Net income
   18,222    1,126    19,348    61,034    4,905    65,939
Less: Net income attributable to noncontrolling interests
   40    —      40    573    —      573


Net income attributable to Ferro Corporation
   18,182    1,126    19,308    60,461    4,905    65,366
Dividends on preferred stock
   —      —      —      (165 ) —      (165 )


Net income attributable to Ferro Corporation common shareholders
   $ 18,182    $ 1,126    $ 19,308    $ 60,296    $ 4,905    $ 65,201


Earnings per share attributable to Ferro Corporation common shareholders:

Basic (loss) earnings
   $ 0.21    $ 0.01    $ 0.22    $ 0.70    $ 0.06    $ 0.76
Diluted (loss) earnings
   0.21    0.01    0.22    0.69    0.06    0.75

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

   Three months ended
September 30, 2012 Nine months ended
September 30, 2012
   Prior
accounting
method Effect of
accounting
change As reported Prior
accounting
method Effect of
accounting
change As reported
   (Dollars in thousands)
Net (loss) income
   $ (318,487 ) $ 2,749    $ (315,738 ) $ (319,591 ) $ 10,029    $ (309,562 )
Other comprehensive income (loss), net of tax:

Foreign currency translation
   3,321    —      3,321    (2,940 ) —      (2,940 )
Postretirement benefit liabilities
   3,793    (2,749 ) 1,044    9,718    (10,029 ) (311 )


Total comprehensive loss
   (311,373 ) —      (311,373 ) (312,813 ) —      (312,813 )
Less: Comprehensive income attributable to noncontrolling interests
   442    —      442    845    —      845


Comprehensive loss attributable to Ferro Corporation
   $ (311,815 ) $ —      $ (311,815 ) $ (313,658 ) $ —      $ (313,658 )

   Three months ended
September 30, 2011 Nine months ended
September 30, 2011
   Prior
accounting
method Effect of
accounting
change As reported Prior
accounting
method Effect of
accounting
change As reported
   (Dollars in thousands)
Net income
   $ 18,222    $ 1,126    $ 19,348    $ 61,034    $ 4,905    $ 65,939
Other comprehensive (loss) income, net of tax:

Foreign currency translation
   (11,013 ) —      (11,013 ) (562 ) —      (562 )
Postretirement benefit liabilities
   1,708    (1,126 ) 582    4,676    (4,905 ) (229 )


Total comprehensive income
   8,917    —      8,917    65,148    —      65,148
Less: Comprehensive income attributable to noncontrolling interests
   113    —      113    762    —      762


Comprehensive income attributable to Ferro Corporation
   $ 8,804    $ —      $ 8,804    $ 64,386    $ —      $ 64,386

~~Condensed Consolidated Balance Sheets Information~~

   September 30, 2012 December 31, 2011
   Prior accounting
method Effect of
accounting
change As reported As originally
reported Effect of
accounting
change As adjusted
   (Dollars in thousands)
Assets

Total assets
   $ 1,119,634    $ —      $ 1,119,634    $ 1,440,651    $ —      $ 1,440,651


Liabilities and Equity

Total liabilities
   $ 845,490    $ —      $ 845,490    $ 858,157    $ —      $ 858,157
Equity

Retained earnings
   73,215    (95,945 ) (22,730 ) 393,636    (105,974 ) 287,662
Accumulated other comprehensive (loss) income
   (75,312 ) 95,945    20,633    (82,075 ) 105,974    23,899
Other equity accounts
   276,241    —      276,241    270,933    —      270,933


Total equity
   274,144    —      274,144    582,494    —      582,494


Total liabilities and equity
   $ 1,119,634    $ —      $ 1,119,634    $ 1,440,651    $ —      $ 1,440,651

~~New Accounting Pronouncements Not Yet Adopted~~

~~In December 2011, the FASB issued ASU~~ 2011-11,Disclosures about Offsetting Assets and Liabilities, (“ASU 2011-11”) and ASU 2013-01,Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities, ~~which is~~(“ASU 2013-01”). These pronouncements are codified in ~~ASC~~Accounting Standards Codification (“ASC”) Topic 210, Balance ~~Sheet. This pronouncement contains~~Sheet, and contain new disclosure requirements about a company’s right of setoff and related arrangements associated with its financial and derivative instruments. ~~ASU 2011-11 will be effective for our fiscal year that begins January 1, 2013, and is to be applied retrospectively. We do not expect that adoption~~Adoption of this pronouncement ~~will~~did not have a material effect on our consolidated financial statements.

On January 1, 2013, we adopted FASB ASU 2013-02,Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, (“ASU 2013-02”), which is codified in ASC Topic 220, Comprehensive Income. This pronouncement adds new disclosure requirements for items reclassified out of accumulated other comprehensive income. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

3. Inventories


	September 30, 2012		December 31, 2011		September 30, 2013		December 31, 2012
	(Dollars in thousands)				(Dollars in thousands)
Raw materials	$	67,672	$	78,199	$	59,272	$	64,923
Work in process		42,273		42,111		35,716		35,028
Finished goods		102,069		108,503		100,629		100,873

Total inventories	$	212,014	$	228,813	$	195,617	$	200,824

In the production of some of our products, we use precious metals, some of 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 ~~$1.4~~$0.7 million and ~~$2.6~~$1.4 million for the three months ended September 30, ~~2012~~2013 and ~~2011,~~2012, respectively, and were ~~$5.0~~$2.5 million and ~~$7.3~~$5.0 million for the nine months ended September 30, ~~2012~~2013 and ~~2011,~~2012, respectively. We had on hand precious metals owned by participants in our precious metals consignment program of ~~$188.6~~$89.5 million at September 30, ~~2012,~~2013, and ~~$187.9~~$112.2 million at December 31, ~~2011,~~2012, measured at fair value based on market prices for identical ~~assets.~~assets and net of credits.

In the third quarter of 2012, we recorded inventory write-downs of $5.4 million to reflect inventories related to our solar pastes business at the lower of cost or market in accordance with ASC 330, Inventory. The inventory write-downs are classified as cost of sales in our statements of operations and charged to our Electronic Materials segment.

4. Property, Plant and Equipment

Property, plant and equipment is reported net of accumulated depreciation of ~~$659.2~~$686.5 million at September 30, ~~2012,~~2013, and ~~$599.1~~$658.1 million at December 31, ~~2011.~~2012. Unpaid capital expenditure liabilities, which are noncash investing activities, were $6.6 million at September 30, 2013, and $7.3 million at September 30, ~~2012, and $9.4 million at September 30, 2011.~~2012.

In the third quarter of 2012, we tested for impairment under ASC 360, Property, Plant, and Equipment, certain property, plant, and equipment held for use, primarily related to deterioration in our forecast for our solar pastes business. As a result, assets held for use with a carrying value of $42.5 million were written down to their fair value of $2.0 million, and the impairment charge of $40.5 million is included in restructuring and impairment charges in our statements of operations. We estimated the fair value of these assets using discounted cash flow models.

Further, we reevaluated in accordance with ASC 360, Property, Plant, and Equipment, certain property, plant, and equipment that was already classified as assets held for sale. As a result, assets held for sale with a carrying value of $14.4 million were written down to their fair value of $3.4 million, and the impairment charge of $11.0 million is included in restructuring and impairment charges in our statements of operations. We estimated the fair value of these assets using discounted cash flow models. At September 30, 2012, total assets held for sale of $3.5 million were classified as other non-current assets due to the nature of the underlying assets, although we expect to sell these assets within the next twelve months. These assets include land and buildings at our Toccoa, Georgia, facility; the Porcelain Enamel facility in Rotterdam, Netherlands; the remaining portion of our Uden, Netherlands, facility; and the Casiglie, Italy facility.

Description
   September 30,    Fair Value Measurements Using    Total Gains
   2012    Level 1    Level 2    Level 3    (Losses)
   (Dollars in thousands)
Assets held for use
   $ 2,000       $ —         $ —         $ 2,000       $ (40,526 )
Assets held for sale
   3,400       —         —         3,400       (10,973 )

~~The inputs to the valuation techniques used to measure fair value are classified into the following categories:~~

~~Level 1: Quoted market prices in active markets for identical assets or liabilities.~~

~~Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.~~

~~Level 3: Unobservable inputs that are not corroborated by market data.~~

5. ~~Goodwill~~

Also in the third quarter of 2012, deterioration in our forecast for our Electronic Materials reporting unit indicated that an interim assessment of the goodwill recorded in the Electronic Materials segment was necessary. We performed the analysis required under ASC 350, Intangibles—Goodwill and Other, and concluded under Step 1 that the carrying value of the Electronic Materials reporting unit exceeded its fair value. We estimated its fair value using the average of both the income approach and the market approach. Further analysis under Step 2 resulted in the goodwill with a carrying amount of $153.6 million being written down to a preliminary estimate of its implied fair value of $6.2 million, with the impairment charge of $147.3 million being included in restructuring and impairment charges in our statements of operations. We will finalize our determination of its implied fair value during the fourth quarter.

   September 30,    Fair Value Measurements Using    Total Gains
Description
   2012    Level 1    Level 2    Level 3    (Losses)
   (Dollars in thousands)
Goodwill
   $ 6,240       $ —         $ —         $ 6,240       $ (147,313 )

6. Debt

Loans payable and current portion of long-term debt consisted of the following:


	September 30, 2012		December 31, 2011		September 30, 2013		December 31, 2012
	(Dollars in thousands)				(Dollars in thousands)
Loans payable to banks	$	4,232	$	404	$	3,247	$	2,477
Domestic accounts receivable asset securitization program		20,000		—		48,000		40,000
International accounts receivable sales programs		6,571		8,150		5,554		6,122
Current portion of long-term debt		36,377		2,687		2,864		36,553

Loans payable and current portion of long-term debt	$	67,180	$	11,241	$	59,665	$	85,152

Long-term debt consisted of the following:

Long-term debt consisted of the following:


	September 30, 2012			December 31, 2011			September 30, 2013			December 31, 2012
	(Dollars in thousands)						(Dollars in thousands)
7.875% Senior Notes	$	250,000		$	250,000		$	250,000		$	250,000
6.50% Convertible Senior Notes, net of unamortized discounts		34,177			33,537			—			34,417
Revolving credit facility		10,931			7,706			19,509			2,596
Capital lease obligations		6,603			4,459			6,053			6,433
Other notes		4,798			5,067			5,421			4,731

Total long-term debt		306,509			300,769			280,983			298,177
Current portion of long-term debt		(36,377	)		(2,687	)		(2,864	)		(36,553	)

Long-term debt, less current portion	$	270,132		$	298,082		$	278,119		$	261,624

Receivable Sales Programs

available and qualifying receivables, ~~$30.0~~$2.0 million of additional borrowings were available under the program. During the third quarter of 2013 we amended the agreement. The interest rate under ~~this program~~the amended agreement is the sum of (A) either (1) ~~commercial paper rates, (2)~~ LIBOR rates or ~~(3)~~(2) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At September 30, ~~2012,~~2013, the interest rate was 0.6%.

We also have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At September 30, ~~2012,~~2013, the commitments supporting these programs totaled ~~$18.0~~$18.9 million, the advances received of ~~$6.6~~$5.6 million were secured by ~~$8.9~~$8.7 million of accounts receivable, and based on available and qualifying receivables, ~~$0.3~~$0.2 million of additional borrowings were available under the programs. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At ~~September��~~September 30, ~~2012,~~2013, the weighted-average interest rate was 1.9%.

7.875% Senior Notes

The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. ~~Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings.~~ We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.

The Senior Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The Senior Notes contain certain affirmative and negative covenants customary for high-yield debt securities, including, but not limited to, restrictions on our ability to incur additional debt, create liens, pay dividends or make other distributions or repurchase our common stock and sell assets outside the ordinary course of business. At September 30, ~~2012,~~2013, we were in compliance with the covenants under the Senior Notes’ indenture.

6.50% Convertible Senior Notes

The 6.50% Convertible Senior Notes (the “Convertible Notes”) were ~~issued in 2008, bear interest~~repaid at ~~a rate of 6.5% per year, payable semi-annually in arrears on February 15th and August 15th, and mature~~maturity on August 15, 2013. We separately account for the liability and equity components of the Convertible Notes in a manner that, when interest cost is recognized in subsequent periods, will reflect our nonconvertible debt borrowing rate at the time the Convertible Notes were issued. The effective interest rate on the liability component is 9.5%. Under certain circumstances, holders of the Convertible Notes may convert their notes prior to maturity. The Convertible Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The principal amount outstanding at maturity was $35.1 ~~million at September 30, 2012, and $35.1 million at December 31, 2011. At September 30, 2012, we were in compliance with the covenants under the Convertible Notes’ indenture.~~million.

Revolving Credit Facility

In 2010, we entered into the Third Amended and Restated Credit Agreement with a group of lenders for a five-year, $350 million multi-currency senior revolving credit facility (the “2010 Credit Facility”). In ~~June 2012,~~March 2013, we amended the 2010 Credit Facility (the ~~“2012~~“2013 Amended Credit Facility”) ~~primarily~~ to provide additional operating flexibility. The primary effects of the ~~2012~~2013 Amended Credit Facility were to:

Decrease the Revolving Loan Commitment Amount from $350.0 million to $250.0 million;

Amend the calculation of EBITDA to provide for a restructuring expense add-back attributable to the Company’s restructuring programs of $30.0 million in 2013, $20.0 million in 2014 and $10.0 million in 2015, with no aggregate limit on restructuring expense;

Increase the maximum permitted leverage ratio ~~(as discussed in Note 6 within Item 8~~such that for (i) the first, second and third quarters of ~~the Company’s Annual Report on Form 10-K for the year ended December 31, 2011)~~2013, it shall increase from 3.50 to ~~4.25 for~~4.25; (ii) the ~~third~~fourth quarter of 2013 and ~~fourth quarters~~first quarter of ~~2012;~~

~~Eliminate the fixed charge coverage covenant;~~

~~Include a quarterly interest coverage covenant (defined as the ratio of EBITDA~~2014, it shall increase from 3.50 to ~~cash paid for interest expense and certain other financing expenses), which requires the Company to maintain an interest coverage ratio of not less than (i) 2.50 for~~4.00; (iii) the second and third quarters of ~~2012, (ii) 2.75 for~~2014, it shall increase from 3.50 to 3.75; and (iv) the fourth quarter of ~~2012,~~2014 and ~~(iii) 3.00 thereafter;~~

thereafter, it will be 3.50; and

~~ended March 31, 2013,~~ and ~~(v) $65.0 million for the 2013 fiscal year and each fiscal year thereafter. Certain unused capital expenditures will be permitted to be carried forward to the following fiscal year; and~~

~~Maintain limitations on our ability to make restricted payments, including common stock dividends (as discussed under the 2010 Credit Facility in Note 6 within Item 8 of~~ the Company’s ~~Annual Report on Form 10-K for the year ended December 31, 2011).~~

Secured Leverage Ratio must be less than 1.50.

The ~~2012~~2013 Amended Credit Facility matures on August 24, 2015, and is secured by substantially all of Ferro’s assets. After reductions for outstanding letters of credit, we had ~~$334.9~~$225.0 million of additional borrowings available at September 30, ~~2012.~~2013. The interest rate under the ~~2012~~2013 Amended Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage. At September 30, ~~2012,~~2013, the interest rate was ~~3.5%~~3.4%.

Under the 2013 Amended Credit Facility, we are subject to a number of financial covenants, including limitations on the payment of common stock dividends. At September 30, ~~2012,~~2013, we were in compliance with the covenants of the ~~2012~~2013 Amended Credit Facility.

7.6. Financial Instruments

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


	September 30, 2012													December 31, 2011						September 30, 2013
	Carrying			Fair Value										Carrying						Carrying			Fair Value
	Amount			Total			Level 1		Level 2			Level 3		Amount			Fair Value			Amount			Total			Level 1		Level 2			Level 3
	(Dollars in thousands)																			(Dollars in thousands)
Cash and cash equivalents	$	24,817		$	24,817		$	24,817	$	—		$	—	$	22,991		$	22,991		$	35,853		$	35,853		$	35,853	$	—		$	—
Other receivables		37,338			37,338			—		37,338			—		37,839			37,839
Short-term loans payable		(30,803	)		(30,803	)		—		(30,803	)		—		(8,554	)		(8,554	)
Loans payable																					(56,801	)		(56,801	)		—		(56,801	)		—
7.875% Senior Notes		(250,000	)		(243,875	)		—		(243,875	)		—		(250,000	)		(253,750	)		(250,000	)		(262,500	)		—		(262,500	)		—
6.50% Convertible Senior Notes, net of unamortized discounts		(34,177	)		(34,893	)		—		(34,893	)		—		(33,537	)		(34,589	)
Revolving credit facility		(10,931	)		(10,673	)		—		(10,673	)		—		(7,706	)		(7,973	)
Revolving Credit Facility																					(19,509	)		(19,936	)		—		(19,936	)		—
Other long-term notes payable		(4,798	)		(3,962	)		—		(3,962	)		—		(5,067	)		(4,184	)		(5,421	)		(4,511	)		—		(4,511	)		—
Foreign currency forward contracts, net		(4,811	)		(4,811	)		—		(4,811	)		—		6,225			6,225			(2,467	)		(2,467	)		—		(2,467	)		—

   December 31, 2012
   Carrying Fair Value
   Amount Total Level 1    Level 2 Level 3
   (Dollars in thousands)
Cash and cash equivalents
   $ 29,576    $ 29,576    $ 29,576       $ —      $ —
Loans payable
   (48,599 ) (48,599 ) —         (48,599 ) —
7.875% Senior Notes
   (250,000 ) (231,500 ) —         (231,500 ) —
6.50% Convertible Senior Notes, net of unamortized discounts
   (34,417 ) (34,803 ) —         (34,803 ) —
Revolving credit facility
   (2,596 ) (2,634 ) —         (2,634 ) —
Other long-term notes payable
   (4,731 ) (3,937 ) —         (3,937 ) —
Foreign currency forward contracts, net
   (4,758 ) (4,758 ) —         (4,758 ) —

The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair ~~value~~values of ~~other receivables and~~ short-term loans payable are based on the present value of expected future cash flows and approximate their carrying amounts due to the short periods to maturity. The fair values of the Senior Notes and the Convertible Notes are based on third-party estimated bid prices. The fair values of the ~~revolving credit facility~~Revolving Credit Facility and the other long-term notes payable are based on the present value of expected future cash flows, ~~and~~ assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the debt.

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on ~~transactions.~~transactions, the majority of which are intercompany. These forward contracts are not designated as hedging instruments. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as foreign currency ~~(gains)~~ losses, net in the condensed consolidated statements of operations. ~~The~~For the three and nine months ended September 30, 2013, net foreign currency loss was approximately $1.3 million and $4.0 million, respectively, which is primarily comprised of the foreign exchange impact on transactions in countries where it is not economically feasible for us to enter into hedging arrangements and hedging inefficiencies, including timing of transactions, etc. Net losses arising from the change in fair value of our financial instruments of $2.7 million and $6.7 million, for the three and nine months ended September 30, 2013, respectively, offset related net gains on the underlying intercompany transactions of approximately the same amounts. The fair values of these contracts isare based on market prices for comparable contracts. We had foreign currency forward contracts with notional amounts of ~~$287.3~~$231.3 million at September 30, ~~2012,~~2013, and ~~$249.3~~$250.7 million at December 31, ~~2011.~~2012.

The following table presents the effect on our consolidated statements of operations for the three months ended September 30, 2013 and 2012, respectively, of our foreign currency forward contracts:


	Amount of Loss Recognized in Earnings
	2013			2012			Location of Loss in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	(2,652	)	$	(4,148	)	Foreign currency losses, net

The following table presents the effect on our consolidated statements of operations for the nine months ended September ~~30th~~30, 2013 and 2012, respectively, of our foreign currency forward contracts:

   Amount of Gain (Loss)
Recognized in Earnings
   2012    2011 Location of Gain (Loss) in Earnings
   (Dollars in thousands)
Foreign currency forward contracts
   $ 5,385       $ (5,162 ) Foreign currency losses, net


	Amount of (Loss) Gain Recognized in Earnings
	2013			2012		Location of (Loss) Gain in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	(6,652	)	$	5,385	Foreign currency losses, net

The following table presents the fair ~~value~~values on our consolidated balance sheets of ~~these~~ foreign currency forward contracts:


	September 30, 2012			December 31, 2011			Balance Sheet Location	September 30, 2013			December 31, 2012			Balance Sheet Location
	(Dollars in thousands)							(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts	$	—		$	6,491		Other current assets		211			213		Accrued expenses and other current liabilities
Foreign currency forward contracts		897			—		Accrued expenses and other current liabilities

Total	$	897		$	6,491

Liability derivatives:
Foreign currency forward contracts	$	—		$	(266	)	Other current assets		(2,678	)		(4,971	)	Accrued expenses and other current liabilities
Foreign currency forward contracts		(5,708	)		—		Accrued expenses and other current liabilities

Total	$	(5,708	)	$	(266	)

8.7. Income Taxes

Income tax expense for the nine months ended September 30, ~~2012,~~2013, was ~~$113.6~~$4.0 million, or ~~(58.0)%~~16.8% of pre-tax income. In the first nine months of ~~2011,~~2012, we recorded income tax expense of ~~$32.8~~$113.1 million, or ~~33.2%~~(57.3)% of pre-tax income. The change in the effective tax rate ~~during the first three quarters of 2012~~ was primarily due to ~~recording a charge of $112.3 million to~~the reserve for a significant portion of ~~our deferred tax assets. The reserve for~~ the Company’s deferred tax assets, that was ~~primarily driven by the significant impairment charges that were incurred during~~recorded in the third ~~quarter. Additionally,~~quarter of 2012 compared to the expected usage of tax ~~benefits of $70.1 million have not been recognized by the Company related to pre-tax losses incurred~~assets in ~~jurisdictions with full valuation allowances.~~2013.

9.8. Contingent Liabilities

We have recorded environmental liabilities of ~~$9.7~~$8.2 million at September 30, ~~2012,~~2013, and ~~$11.6~~$9.6 million at December 31, ~~2011,~~2012, for costs associated with the remediation of certain of our properties that have been contaminated, primarily a non-operating facility in Brazil. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring and the ultimate cost of required remediation.

There are various lawsuits and claims pending against the Company and its subsidiaries. We do not currently expect the ultimate liabilities, if any, and expenses related to such lawsuits and claims to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

~~10.~~9. Retirement Benefits

Net periodic benefit ~~costs (credits)~~(credit) cost of our U.S. pension plans (including our unfunded nonqualified plans), non-U.S. pension plans, and postretirement health care and life insurance benefit plans ~~have been adjusted for our change in accounting principle as described in Note 2, Recent Accounting Pronouncements and Change in Accounting Principle. Net periodic benefit costs (credits)~~ for the three months ended September ~~30th~~30, 2013 and 2012, respectively, follow:

   U.S. Pension Plans Non-U.S. Pension Plans Other Benefit Plans
   2012 As adjusted
2011 2012 As adjusted
2011 2012 As adjusted
2011
   (Dollars in thousands)
Service cost
   $ 4    $ 4    $ 493    $ 556    $ —      $ —
Interest cost
   4,867    5,117    1,313    1,466    396    482
Expected return on plan assets
   (5,158 ) (5,150 ) (748 ) (823 ) —      —
Amortization of prior service cost (credit)
   12    18    —      (36 ) (33 ) (100 )


Net periodic benefit (credit) cost
   $ (275 ) $ (11 ) $ 1,058    $ 1,163    $ 363    $ 382

   U.S. Pension Plans Non-U.S. Pension Plans Other Benefit Plans
   2013 2012 2013 2012 2013 2012
   (Dollars in thousands)
Service cost
   $ 4    $ 4    $ 519    $ 493    $ —      $ —
Interest cost
   4,485    4,867    1,224    1,313    285    396
Expected return on plan assets
   (6,181 ) (5,158 ) (742 ) (748 ) —      —
Amortization of prior service cost (credit)
   3    12    7    —      (29 ) (33 )


Net periodic benefit (credit) cost
   $ (1,689 ) $ (275 ) $ 1,008    $ 1,058    $ 256    $ 363

Net periodic benefit ~~costs (credits)~~(credit) cost for the nine months ended September ~~30th~~30, 2013 and 2012, respectively, follow:


	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans						U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			As adjusted 2011			2012			As adjusted 2011			2012			As adjusted 2011			2013			2012			2013			2012			2013			2012
	(Dollars in thousands)																		(Dollars in thousands)
Service cost	$	12		$	12		$	1,496		$	1,657		$	—		$	—		$	12		$	12		$	1,577		$	1,496		$	—		$	—
Interest cost		14,602			15,351			3,990			4,390			1,189			1,447			13,455			14,602			3,672			3,990			855			1,189
Expected return on plan assets		(15,473	)		(15,451	)		(2,253	)		(2,470	)		—			—			(18,543	)		(15,473	)		(2,229	)		(2,253	)		—			—
Amortization of prior service cost (credit)		36			55			1			(103	)		(98	)		(301	)		9			36			21			1			(87	)		(98	)
Curtailment and settlement effects		—			—			(2,394	)		—			—			—			—			—			—			(2,394	)		—			—

Net periodic benefit (credit) cost	$	(823	)	$	(33	)	$	840		$	3,474		$	1,091		$	1,146		$	(5,067	)	$	(823	)	$	3,041		$	840		$	768		$	1,091

Net periodic benefit credit for our U.S. pension plans for the nine months ended September 30, 2013 increased from the effects of a lower discount ~~rate.~~rate and larger plan asset balances resulting in increased expected returns. Net periodic benefit cost for our non-U.S. pension plans ~~for the nine months ended September 30, 2012, decreased~~increased due to the non-recurring credit recognized in the second quarter of 2012, resulting from curtailment of retirement benefit accumulations in the Netherlands. The affected employees in the Netherlands now receive benefits through a defined contribution plan.

~~11.~~10. Stock-Based Compensation

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

The 2010 Long Term Incentive Plan (the “Previous Plan”) was replaced by the Plan, and no future grants may be made under the Previous Plan. However, any outstanding awards or grants made under the Previous Plan will continue until the end of their specified terms.

In 2013, our Board of Directors granted ~~0.7~~0.6 million stock options, ~~0.6~~0.5 million performance share units and 0.4 million deferred stock units ~~during the first nine months of 2012~~ under ~~our 2010 Long Term Incentive~~The Previous Plan and The Plan. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock ~~options and performance share units for~~option grants made during the nine months ended September 30, ~~2012:~~2013:


	Stock Options		Performance Share Units		Stock Options
Weighted-average grant-date fair value	$	4.68	$	10.22	$	4.01
Expected life, in years		6.0		3.0		6.0
Risk-free interest rate		1.2% - 1.6%		0.4%		1.2% - 1.4	%
Expected volatility		81.1% - 83.9%		78.0%		83.9% - 86.4	%

The weighted average grant date fair value of our performance share units was $5.69. These shares are currently expensed at target and are evaluated each reporting period for likelihood of achieving the performance criteria.

We measure the fair value of deferred stock units based on the closing market price of our common stock on the date of the grant. The weighted-average fair value per unit for grants made during the nine months ended September 30, ~~2012,~~2013, was ~~$6.79.~~$5.70.

We recognized stock-based compensation expense of $4.4 million for the nine months ended September 30, 2013, and $5.7 million for the nine months ended September 30, ~~2012, and $5.6 million for the nine months ended September 30, 2011.~~2012. At September 30, ~~2012,~~2013, unearned compensation cost related to the unvested portion of all stock-based awards was approximately ~~$12.8~~$8.4 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of ~~2015.~~2016.

~~12.~~

11. Restructuring and Cost Reduction Programs

In the ~~second~~first quarter of ~~2012,~~2013, we developed and initiated various restructuring programs ~~related~~across the organization with the objectives of realigning the business and lowering our cost structure. Specifically, the programs relate to our ~~Performance Coatings business in Europe.~~European operations, certain corporate functions, improvement of operational efficiencies, and the exit of the solar pastes product line. As a result of ~~these programs,~~the restructuring actions, the Company expects to ~~eliminate positions within~~incur charges of approximately $40 million, the ~~Performance Coatings sales, technical service, product development, manufacturing, supply chain~~majority of which will be for severance costs and ~~general administration organizations throughout Europe.~~require future cash expenditures. The programs are subject to required consultations with employee representatives at the affected sites and other local legal requirements. ~~The Company expects to record pre-tax charges of approximately $6 million, primarily related to employee severance.~~ Charges associated with these programs were ~~$4.6~~$3.8 million and $26.7 million for the three and the nine months ended September 30, ~~2012.~~2013, respectively. The cumulative charges incurred to date associated with these programs are $37.0 million.

The activities and accruals related to our restructuring and cost reduction programs are summarized below:


	Employee Severance			Other Costs			Asset Impairment			Total			Employee Severance			Other Costs			Asset Impairment			Total
	(Dollars in thousands)												(Dollars in thousands)
Balance at December 31, 2011	$	218		$	3,419		$	—		$	3,637
Balance at December 31, 2012													$	4,093		$	6,139					$	10,232
Restructuring charges		4,953			—			64			5,017			19,647			7,094			(3	)		26,738
Cash payments		(1,663	)		(611	)		—			(2,274	)		(14,715	)		(7,671	)					(22,386	)
Non-cash items		(60	)		143			(64	)		19			92			(820	)		3			(725	)

Balance at September 30, 2012	$	3,448		$	2,951		$	—		$	6,399
Balance at September 30, 2013													$	9,117		$	4,742		$	—		$	13,859

We expect to make cash payments to settle the remaining liability for employee termination benefits and other costs over the next twelve months, except where legal or contractual restrictions prevent us from doing so.

12. Discontinued Operations

During the first quarter of 2013, we completed the sale of the stock of our pharmaceuticals business, Ferro Pfanstiehl Laboratories, Inc. (“FPL”), which was previously reported within the Pharmaceuticals reportable segment. Consideration was comprised of a $16.9 million cash payment, and the transaction also included an earn-out incentive of up to $8.0 million based on achieving certain earnings targets over a two-year period. In March 2013, prior to the sale, an impairment loss of $8.7 million associated with the long lived assets of FPL was recorded under ASC Topic 360 Property, Plant and Equipment. The write down was determined by estimating the fair value of the assets less cost to sell of $14.8 million using the market approach considering a bona fide purchase offer, a level three measurement within the fair value hierarchy.

The operations of FPL have been segregated from continuing operations and are included in discontinued operations in our condensed consolidated statements of operations. Interest expense has been allocated to the discontinued operation based on the ratio of net assets of FPL to consolidated net assets excluding debt.


	Three months ended September 30,
	2012
Net sales	$	5,975
Cost of sales		4,346

Gross profit		1,629
Selling, general and administrative expenses		1,246
Restructuring charges		95
Interest expense		385
Miscellaneous income, net		(5	)

Loss from discontinued operations before income taxes		(92	)
Income tax expense		26

Loss from discontinued operations, net of income taxes	$	(118	)

   Nine months ended
September 30,
   2013 2012
   (Dollars in thousands)
Net sales
   $ 4,791    $ 17,899
Cost of sales
   2,762    11,641


Gross profit
   2,029    6,258
Selling, general and administrative expenses
   1,181    3,631
Restructuring and impairment charges
   8,682    95
Interest expense
   589    1,123
Miscellaneous income, net
   (2 ) (11 )


(Loss) income from discontinued operations before income taxes
   (8,421 ) 1,420
Income tax expense
   —      503


(Loss) income from discontinued operations, net of income taxes
   $ (8,421 ) $ 917

The following is a summary of the assets and liabilities of FPL at December 31, 2012, which are presented separately on the condensed consolidated balance sheet:


	(Dollars in thousands)
Inventories	$	6,267
Other current assets		22

Current assets of discontinued operations		6,289

Property, plant and equipment, net		15,346

Other assets of discontinued operations		15,346

Accounts payable		880
Accrued payrolls		47
Accrued expenses and other current liabilities		373

Current liabilities of discontinued operations	$	1,300

13. Earnings (Loss) ~~Earnings~~ Per Share

Net (loss) income attributable to Ferro Corporation common shareholders has been adjusted for our change in accounting principle as described in Note 2, Recent Accounting Pronouncements and Change in Accounting Principle. Details of the calculation of basic and diluted earnings (loss) ~~earnings~~ per share are shown below:

   Three months ended
September 30,    Nine months ended
September 30,
   2012 As adjusted
2011    2012 As adjusted
2011
   (In thousands, except per share amounts)
Basic (loss) earnings per share computation:

Net (loss) income attributable to Ferro Corporation common shareholders
   $ (316,114 ) $ 19,308       $ (310,392 ) $ 65,201
Weighted-average common shares outstanding
   86,296    86,169       86,274    86,101
Basic (loss) earnings per share attributable to Ferro Corporation common shareholders
   $ (3.66 ) $ 0.22       $ (3.60 ) $ 0.76
Diluted (loss) earnings per share computation:

Net (loss) income attributable to Ferro Corporation common shareholders
   $ (316,114 ) $ 19,308       $ (310,392 ) $ 65,201
Plus: Convertible preferred stock dividends, net of tax
   —      —         —      103




Total
   $ (316,114 ) $ 19,308       $ (310,392 ) $ 65,304




Weighted-average common shares outstanding
   86,296    86,169       86,274    86,101
Assumed exercise of stock options
   —      188       —      255
Assumed satisfaction of stock unit award conditions
   —      38       —      46
Assumed satisfaction of restricted share conditions
   —      402       —      389
Assumed conversion of convertible preferred stock
   —      —         —      176




Weighted-average diluted shares outstanding
   86,296    86,797       86,274    86,967




Diluted (loss) earnings per share attributable to Ferro Corporation common shareholders
   $ (3.66 ) $ 0.22       $ (3.60 ) $ 0.75


	Three months ended September 30,					Nine months ended September 30,
	2013		As adjusted 2012			2013		As adjusted 2012
	(In thousands, except per share amounts)
Basic earnings (loss) per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	12,652	$	(316,114	)	$	11,405	$	(310,392	)
Adjustment for loss (income) from discontinued operations		—		118			8,421		(917	)

Total	$	12,652	$	(315,996	)	$	19,826	$	(311,309	)

Weighted-average common shares outstanding		86,426		86,296			86,464		86,274
Basic earnings (loss) per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.15	$	(3.66	)	$	0.23	$	(3.61	)
Diluted earnings (loss) per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	12,652	$	(316,114	)	$	11,405	$	(310,392	)
Adjustment for loss (income) from discontinued operations		—		118			8,421		(917	)

Total	$	12,652	$	(315,996	)	$	19,826	$	(311,309	)

Weighted-average common shares outstanding		86,426		86,296			86,464		86,274
Assumed exercise of stock options		200		—			112		—
Assumed satisfaction of deferred stock unit conditions		77		—			63		—
Assumed satisfaction of restricted stock unit conditions		120		—			84		—
Assumed satisfaction of performance stock unit conditions		375		—			247		—
Assumed satisfaction of restricted share conditions		52		—			63		—

Weighted-average diluted shares outstanding		87,250		86,296			87,033		86,274

Diluted earnings (loss) per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.15	$	(3.66	)	$	0.23	$	(3.61	)

The number of anti-dilutive or unearned shares, including shares related to contingently convertible debt, was 2.0 million and 2.4 million for the three and nine months ended September 30, 2013, respectively, and 7.5 million for the three and nine months ended September 30, ~~2012, and 5.3 million~~2012.

14. Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the three ~~and~~months ended September 30, 2013, were as follows:


	Postretirement Benefit Liability Adjustments			Translation Adjustments		Other Adjustments			Total
	(Dollars in thousands)
Beginning accumulated other comprehensive income (loss)	$	2,510		$	5,911	$	(77	)	$	8,344
Other comprehensive income before reclassifications		—			4,203		—			4,203
Amounts reclassified from accumulated other comprehensive income (loss)		(34	)		—		—			(34	)

Net current period other comprehensive (loss) income		(34	)		4,203		—			4,169

Ending accumulated other comprehensive income (loss)	$	2,476		$	10,114	$	(77	)	$	12,513

Changes in accumulated other comprehensive income (loss) by component, net of tax, for the nine months ended September 30, ~~2011.~~

2013, were as follows:


	Postretirement Benefit Liability Adjustments			Translation Adjustments			Other Adjustments			Total
	(Dollars in thousands)
Beginning accumulated other comprehensive income (loss)	$	2,647		$	14,080		$	(77	)	$	16,650
Other comprehensive loss before reclassifications		—			(3,966	)		—			(3,966	)
Amounts reclassified from accumulated other comprehensive income (loss)		(171	)		—			—			(171	)

Net current period other comprehensive loss		(171	)		(3,966	)		—			(4,137	)

Ending accumulated other comprehensive income (loss)	$	2,476		$	10,114		$	(77	)	$	12,513

~~14.~~15. Reporting for Segments

During the first quarter of 2013, the Company reorganized its operating segments to reflect the current structure under which performance is evaluated, strategic decisions are made and resources are allocated. The ~~Company has six reportable segments:~~new structure aligns the continuing product lines of our former Electronic Materials segment with our continuing operating segments. Under the new structure, we will continue to report Specialty Plastics, Polymer Additives and Performance Coatings, ~~Electronic Materials, Color and Glass Performance Materials, Polymer Additives, Specialty Plastics, and Pharmaceuticals. We have aggregated~~which aggregates our Tile Coating Systems and Porcelain Enamel operating segments, ~~into one reportable segment, Performance Coatings, and aggregated our~~consistent with the manner in which they have historically been reported. The Glass Systems and Performance Pigments and Colors operating segments that aggregated into ~~one reportable segment,~~the historically reported Color and Glass Performance Materials ~~based on their similar economic~~segment, now include our continuing product lines that were historically reported within the Electronic Materials segment, and as a result of such inclusion, fail to meet the aggregation criteria for continuing to report as one segment. These operating ~~characteristics.~~segments will now be reported as the Pigments, Powders and Oxides, and Performance Colors and Glass segments. As discussed in Note 12, our pharmaceuticals business that comprised the Pharmaceuticals segment was sold in the first quarter, and is reported as a discontinued operation.

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


	Three months ended September 30,				Nine months ended September 30,				Three months ended September 30,				Nine months ended September 30,
	2012		2011		2012		2011		2013		As adjusted 2012		2013		As adjusted 2012
	(Dollars in thousands)								(Dollars in thousands)				(Dollars in thousands)
Electronic Materials	$	66,188	$	156,081	$	228,625	$	538,790
Pigments, Powders and Oxides									$	47,647	$	64,053	$	155,948	$	219,398
Performance Colors and Glass										94,059		86,398		298,633		294,806
Performance Coatings		137,229		153,365		447,058		453,546		151,873		137,228		445,969		447,065
Color and Glass Performance Materials		84,262		100,525		285,586		306,806
Polymer Additives		79,881		85,634		251,055		262,767		71,599		79,881		229,266		251,055
Specialty Plastics		41,305		43,606		132,512		132,745		42,926		41,305		131,267		132,512
Pharmaceuticals		5,975		6,903		17,899		18,443

Total net sales	$	414,840	$	546,114	$	1,362,735	$	1,713,097	$	408,104	$	408,865	$	1,261,083	$	1,344,836

In the first quarter, in conjunction with the changes to operating segments, we changed the profitability metric utilized by management to evaluate segment performance. The metric that was utilized historically was segment income, and segment gross profit is the metric that is now utilized. We measure segment ~~income~~gross profit for internal reporting purposes by excluding ~~unallocated corporate expenses, restructuring and impairment charges,~~certain other ~~expenses (income) and income taxes. During the first quarter~~cost of ~~2012, we refined the allocation of certain corporate expenses to the Company’s reportable segments,~~sales, which aligns segment reporting to the current manner in which performance is evaluated, strategic decisions are made and resources are allocated. Unallocated corporate expenses consist primarily of executive employment costs, legacy pension and other benefit costs, certain professional fees, andincludes costs associated with ~~our global headquarters facility.~~

facilities that have been idled or closed. Each segment’s gross profit and a reconciliation to income (loss) ~~and reconciliations to income~~ before income taxes follow. For the three and nine months ended September 30, 2011, each segment’s income (loss) has been adjusted for the effects of applying retrospectively the refined allocations, with the offset in unallocated corporate expenses. For these periods, unallocated corporate expenses also have been adjusted for the effects of applying retrospectively the change in accounting principle as described in Note 2, Recent Accounting Pronouncements and Change in Accounting Principle.from continuing operations follows:

   Three months ended
September 30,
   2011
   2012 As adjusted    Adjustments As originally
reported
   (Dollars in thousands)
Electronic Materials
   $ (6,311 ) $ 16,463       $ (1,291 ) $ 17,754
Performance Coatings
   3,210    11,069       (659 ) 11,728
Color and Glass Performance Materials
   5,636    8,365       (393 ) 8,758
Polymer Additives
   5,398    4,252       227    4,025
Specialty Plastics
   3,728    2,717       55    2,662
Pharmaceuticals
   85    1,254       192    1,062




Total segment income
   11,746    44,120       (1,869 ) 45,989
Unallocated corporate expenses
   14,516    6,076       (3,633 ) 9,709
Restructuring and impairment charges
   198,790    869       —      869
Other expense, net
   8,705    8,770       —      8,770




(Loss) income before income taxes
   $ (210,265 ) $ 28,405       $ 1,764    $ 26,641


	Three months ended September 30,						Nine months ended September 30,
	2013			As adjusted 2012			2013			As adjusted 2012
	(Dollars in thousands)						(Dollars in thousands)
Pigments, Powders and Oxides	$	8,390		$	7,231		$	25,882		$	28,363
Performance Colors and Glass		28,713			21,086			87,203			77,220
Performance Coatings		36,410			23,858			100,237			85,328
Polymer Additives		6,251			8,907			20,616			26,871
Specialty Plastics		6,881			6,984			22,116			23,207
Other cost of sales		(2,398	)		(7,356	)		(4,916	)		(8,740	)

Total gross profit		84,247			60,710			251,138			232,249
Selling, general and administrative expenses		59,078			63,863			184,986			202,675
Restructuring and impairment charges		3,834			198,695			26,738			203,734
Other expense, net		7,817			8,325			15,386			23,204

Income (loss) before income taxes	$	13,518		$	(210,173	)	$	24,028		$	(197,364	)

   Nine months ended
September 30,
   2011
   2012 As adjusted    Adjustments As originally
reported
   (Dollars in thousands)
Electronic Materials
   $ (10,968 ) $ 69,617       $ (4,640 ) $ 74,257
Performance Coatings
   20,968    27,913       (2,549 ) 30,462
Color and Glass Performance Materials
   24,102    28,133       (1,656 ) 29,789
Polymer Additives
   13,903    15,347       540    14,807
Specialty Plastics
   12,182    7,416       35    7,381
Pharmaceuticals
   1,892    3,525       548    2,977




Total segment income
   62,079    151,951       (7,722 ) 159,673
Unallocated corporate expenses
   29,878    23,621       (15,465 ) 39,086
Restructuring and impairment charges
   203,829    4,044       —      4,044
Other expense, net
   24,316    25,522       —      25,522




(Loss) income before income taxes
   $ (195,944 ) $ 98,764       $ 7,743    $ 91,021

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

Overview

~~Market conditions~~During the three months ended September 30, 2013, sales were ~~generally weaker~~flat compared to the prior-year same period. Increases in sales excluding precious metals in Performance Colors and Glass and Performance Coatings were partially offset by lower sales in Polymer Additives due to the accelerated deselection of certain plasticizer products, and in Pigments, Powders and Oxides due to the exit of solar pastes in the first quarter of 2013. The decrease in sales of precious metals was primarily in Pigments, Powders and Oxides and driven by the exit of solar pastes. Gross profit increased approximately $24 million in the third quarter of 2013 compared to the prior-year same period, or 550 basis points as a percentage of net sales excluding precious metals, to 21.8%. The favorability was driven by our ~~key markets~~cost reduction initiatives, increased net sales excluding precious metals and improved business mix, partially offset by lower sales in Polymer Additives and the impact of the exit of solar pastes.

We continue to execute against our cost savings plans, which has resulted in additional savings in the third quarter of 2013 compared with the prior-year same period. Further, we have announced that we now expect to achieve cost savings of greater than $100 million by the end of 2015.

For the three months ended September 30, 2013, Ferro net income was $13.0 million, compared with net loss of $315.7 million in 2012, and net income attributable to common shareholders was $12.7 million, compared with net loss attributable to common shareholders of $316.1 million in 2012. Income from continuing operations was $13.0 million in the three months ended September 30, 2013, compared with net loss from continuing operations of $315.6 million in 2012. Our total segment gross profit for the third quarter of 2013 was $84.2 million, compared with $60.7 million in 2012. We incurred restructuring charges of $3.8 million in the third quarter.

For the nine months ended September 30, 2013, Ferro net income was $11.6 million, compared with net loss of $309.6 million in 2012, and net income attributable to common shareholders was $11.4 million, compared with net loss attributable to common shareholders of $310.4 million in 2012. Income from continuing operations was $20.0 million in the nine months ended September 30, 2013, compared with net loss from continuing operations of $310.5 million in 2012. Our total segment gross profit for the nine months ended September 30, 2013 was $251.1 million, compared with $232.2 million in 2012. We incurred restructuring and impairment charges of $26.7 million in the nine months ended September 30, 2013.

Outlook

We have continued to make progress against our strategic objectives during the third quarter of ~~2012. Demand~~2013. We have executed against our cost reduction plans, which are expected to drive cost savings of approximately $45 million for ~~our conductive~~full year 2013. These actions, in addition to the cost savings from exiting solar pastes ~~used in solar cells and metal powders used in a variety of electronic products declined from~~during the ~~second~~first quarter of ~~2012 and remains~~2013 have significantly ~~lower than prior-year periods. A reduced forecast for~~improved the Company’s cost structure.

In the fourth quarter, we expect to realize the continued benefits from our ~~solar pastes sales and a diminished outlook for~~cost reduction plans, however, we also expect our ~~future opportunities in the solar market led to our decision to examine strategic options for the solar pastes business.~~

Demand from customers in Europe was also weaker during the 2012 third quarter as a result of deteriorating macroeconomic conditions in the region. Demand from customers in the United States was generally stronger than in Europe, but the level of customer demand variednormal seasonal business pattern, which is characterized by ~~application market.~~

Net sales declined by 24% compared with the third quarter of 2011, driven by a decline in sales of Electronic Materials products and reduced demand in the European region. In aggregate, changes in product pricing and mix reduced our overall sales by approximately 12 percentage points. Lower sales volume reduced sales by an additional 9 percentage points, and changes in foreign currency exchange rates reduced sales by 3 percentage points. Lower sales in Electronic Materials, including reduced sales of precious metals, was the largest contributor to both the price/mix and sales volume declines during the quarter.

Gross profit declined in the 2012 third quarter compared with the third quarter of 2011. The decline in sales of Electronic Materials products, including high-margin solar pastes, metal powders and surface finishing materials, accounted for about two-thirds of the decline in consolidated gross profit. Raw material costs were little changed from the prior-year quarter, in aggregate, across the Company.

~~Selling, general and administrative (“SG&A”) expenses declined in the 2012 third quarter, in comparison to the prior-year quarter. The primary driver of~~ lower ~~SG&A expenses was reduced incentive compensation expense, compared with the third quarter of 2011.~~

Restructuring and impairment charges increased during the quarter compared with the prior-year quarter as a result of goodwill and other asset impairments related to solar pastes and metal powders businesses within our Electronic Materials segment. In addition, an impairment charge was recorded to reflect the reduced value of property held for sale in connection with sites closed during earlier restructuring initiatives.

Interest expense was little changed in the 2012 third quarter compared with the third quarter of 2011. Average interest rates incurred on borrowings increased slightly, but this was largely offset by lower average borrowings during the quarter.

~~During the 2012 third quarter, income tax expense included a reserve against net deferred tax assets. As a result, income tax expense was substantially higher than in the prior-year period.~~

We recorded a net loss for the third quarter compared with net income in the 2011 third quarter primarily as a result of the increase in restructuring and impairment charges and additional income tax expense. In addition, lower net sales resulted in reduced gross profit that had a further negative impact on profitability compared with the prior-year quarter.

~~Outlook~~

~~Our ability to forecast future financial performance is limited because of uncertainty surrounding~~ customer demand and economic conditions in a number of key markets and regions around the world. Customer demand for our solar pastes is difficult to forecast because of uncertainty in end-market demand, as well as uncertainty related to customers’ responses to our announcement that we are exploring strategic options for the solar pastes business. We do not expect demand for solar pastes to improve meaningfully during the remainder of 2012.

~~Economic conditions in Europe have deteriorated over the past several quarters, and they may continue to deteriorate through the rest of 2012~~reduced plant utilization due to sovereign debt issues and other macroeconomic drivers. The growth in economic activity in Asia-Pacific, including China, appears to be slowing from the rates experienced earlier in 2012. Weakening economic conditions in Europe and slower growth in Asia may affect demand for our products sold to customers in these regions, although the magnitude of these effects is difficult to estimate.

The assumptions we use in actuarial calculations for our defined benefit pension and other postretirement benefit plans have a significant impact on benefit obligations and annual net periodic benefit costs. We determine the discount rate for our U.S. pension and other postretirement benefit plans based on a bond model and for our non-U.S. plans we use a yield curve method. Given the volatility of market conditions and the interest rate environment, it is difficult to predict these factors. An

increase in the discount rate would reduce future benefit expense, and a decrease in discount rate would result in an increase of future benefit expense. As of September 30, 2012, an increase or decrease in the discount rate of 1% on our U.S. pension and other postretirement benefit liabilities, holding all other assumptions constant, would result in a decrease or increase in our pre-tax loss and our benefit liability of approximately $50 million.holiday shutdowns.

Factors that could adversely affect our future ~~financial~~ performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012.

Results of ~~Operations~~Operations—Consolidated

For the three and nine months ended September 30, ~~2011,~~2012, amounts originally reported have been adjusted for the effects of applying retrospectively the ~~refined allocations~~discontinued operations of FPL as described in Note ~~14, Reporting for Segments,~~12, Discontinued Operations and the ~~change~~changes in ~~accounting principle~~our reportable segments as described in Note ~~2, Recent Accounting Pronouncements and Change in Accounting Principle.~~15, Reporting for Segments. Both notes are part of the condensed consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q.

Comparison of the three months ended September 30, ~~2012~~2013 and ~~2011~~2012

   Three months ended
September 30,
   2012 As adjusted
2011 $ Change % Change
   (Dollars in thousands, except per share amounts)
Net sales
   $ 414,840    $ 546,114    $ (131,274 ) (24.0 )%
Cost of sales
   352,501    442,304    (89,803 ) (20.3 )%


Gross profit
   62,339    103,810    (41,471 ) (39.9 )%
Gross profit percentage
   15.0 % 19.0 %
Selling, general and administrative expenses
   65,109    65,766    (657 ) (1.0 )%
Restructuring and impairment charges
   198,790    869    197,921
Other expense (income):

Interest expense
   7,101    7,030    71
Interest earned
   (57 ) (50 ) (7 )
Foreign currency losses, net
   869    1,726    (857 )
Miscellaneous expense, net
   792    64    728


(Loss) income before income taxes
   (210,265 ) 28,405    (238,670 )
Income tax expense
   105,473    9,057    96,416


Net (loss) income
   $ (315,738 ) $ 19,348    $ (335,086 )


Diluted (loss) earnings per share
   $ (3.66 ) $ 0.22    $ (3.88 )

~~Net sales declined by 24.0%~~For the three months ended September 30, 2013, Ferro net income was $13.0 million, compared with net loss of $315.7 million for the three months ended September 30, ~~2012,~~2012. For the three months ended September 30, 2013, Ferro net income attributable to common shareholders was $12.7 million, or $0.15 per share, compared with Ferro net loss attributable to common shareholders of $316.1 million, or $3.66 loss per share, for the ~~third quarter of 2011. The most significant driver of~~three months ended September 30, 2012.

Net Sales


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Net sales excluding precious metals	$	387,025		$	372,904		$	14,121			3.8	%
Sales of precious metals		21,079			35,961			(14,882	)		(41.4	)%

Net sales		408,104			408,865			(761	)		(0.2	)%
Cost of sales		323,857			348,155			(24,298	)		(7.0	)%

Gross profit	$	84,247		$	60,710		$	23,537			38.8	%

Gross profit as a % of net sales excluding precious metals		21.8	%		16.3	%

Net sales decreased by 0.2% in the ~~net sales decline was reduced customer demand for our Electronic Materials products, including our solar pastes, metal powders and surface finishing materials. In addition, sales declined in Europe~~three months ended September 30, 2013, compared with the prior-year same period. Net sales excluding precious metals increased $14.1 million, driven by increased sales in our Performance Coatings, Performance Colors and Glass and Specialty Plastics segments, partially offset by decreased sales in our Polymer Additives and Pigments, Powders and Oxides segments. The exit of solar pastes during the first quarter ~~due to weak economic conditions~~of 2013 drove the decrease in ~~the region. Lower~~ sales of precious metals accounted for 49% of the overall sales decline, driven by reduced sales volume and lower prices for silver. In aggregate, changes in product pricing and mix reduced overall net sales by approximately 12 percentage points. Lower sales volume contributed an additional 9 percentage pointscompared to the ~~sales decline and changes in foreign currency exchange rates reduced sales by approximately 3 percentage points.~~prior year.

Gross Profit

Gross profit ~~declined during the 2012 third quarter as a result of lower net sales and changes in product mix. Gross profit percentage declined to 15.0% of net sales from 19.0%~~increased 38.8% in the three months ended September 30, 2013, compared to the prior-year ~~quarter. In total,~~same period. The significant drivers of the increased gross profit are strong demand and lower raw material and production costs in our Performance Coatings segment and favorable product mix in our Performance Colors and Glass segment. These increases were ~~little changed from~~partially offset by unfavorable product mix in our Pigments, Powders and Oxides segment and the ~~prior-year quarter. Product price changes were generally more favorable than changes~~impact of reduced demand for certain plasticizer products in raw materials, except in the Electronic Materials segment where product prices declined more quickly than raw material costs. Charges, primarily related to write-downs of solar pastes inventories and residual costs at closed manufacturing sites involved in earlier restructuring initiatives, reduced gross profit by $5.8 million during the third quarter. Gross profit was reduced by charges of $0.7 millionour Polymer Additives segment. Additionally, during the third quarter of ~~2011,~~2012, inventory charges related to obsolete solar pastes impacted gross profit by approximately $5 million.

Selling, General and Administrative Expenses

~~Selling,~~evaluate segment performance, as discussed in Note 15. The metric that was utilized historically was segment income, which included selling, general and administrative (“SG&A”) expenses ~~decreased slightly~~that were directly incurred by each segment, as well as certain allocated costs. Segment gross profit is the metric that is now utilized. Further, we have refined our approach to managing SG&A expenses and are intensely focused on analyzing expenses at the individual site level, and also across functional areas within the Company, as opposed to the segment level, and will evaluate performance in this manner.


	Three months ended September 30,
	2013		2012		$ Change			% Change
	(Dollars in thousands)
Performance Materials	$	34,205	$	42,620	$	(8,415	)		(19.7	)%
Performance Chemicals		5,864		6,709		(845	)		(12.6	)%
Corporate		19,009		14,534		4,475			30.8	%

Selling, general and administrative expenses	$	59,078	$	63,863	$	(4,785	)		(7.5	)%

SG&A expenses were $4.8 million lower in the three months ended September 30, 2013 compared with the prior-year ~~quarter. Because~~same period. As a percentage of ~~the decline in~~ sales, SG&A expenses ~~increased to 15.7% of net sales~~decreased 110 basis points from ~~12.0% of net sales~~15.6% in the ~~2011~~ third ~~quarter.~~quarter of 2012 to 14.5% in the third quarter of 2013. The

~~decline~~ primary drivers of the change in SG&A expenses were lower bad debt expense in the third quarter of 2013 compared to the prior-year same period, and lower pension and other postretirement benefit expense resulting from a lower discount rate and higher plan assets, generating higher expected returns, compared to the prior-year same period. Personnel expenses decreased compared to the prior year driven by the exit of solar pastes and the various personnel actions taken during ~~the quarter included lower~~2012 and into 2013, however, there was an increase in incentive compensation ~~expense. Partially offsetting~~of approximately $11 million compared to the ~~lower~~prior-year same period. The change in other SG&A expenses ~~were higher special charges and additional reserves~~was primarily driven by a charge taken for ~~bad debt. SG&A expenses~~a reserve required in the ~~2012~~ third quarter ~~included special charges~~ of ~~$3.2 million~~2012 that ~~were primarily related to a write-down of other tax assets, residual expenses at sites that were closed during earlier restructuring initiatives and severance costs.~~did not recur in the current year, partially offset by higher professional fees.

The following table includes SG&A ~~expenses in the 2011 third quarter included charges of $0.8 million sites closed as a result of earlier restructuring initiatives.~~components with significant changes between 2013 and 2012:


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Personnel expenses	$	32,554		$	42,033		$	(9,479	)		(22.6	)%
Incentive compensation		7,350			(4,090	)		11,440			NM
Stock-based compensation		1,744			1,894			(150	)		(7.9	)%
Pension and other postretirement benefits		(425	)		1,146			(1,571	)		NM
Idle sites		—			476			(476	)		(100.0	)%
Bad debt expense		(89	)		2,759			(2,848	)		NM
Other		17,944			19,645			(1,701	)		(8.7	)%

Selling, general and administrative expenses	$	59,078		$	63,863		$	(4,785	)		(7.5	)%

NM — Not meaningful

Restructuring and Impairment Charges


	Three months ended September 30,
	2013		2012			$ Change			% Change
	(Dollars in thousands)
Employee severance	$	478	$	(34	)	$	512			NM
Other restructuring costs		3,356		(83	)		3,439			NM
Impairment		—		198,812			(198,812	)		NM

Restructuring and impairment charges	$	3,834	$	198,695		$	(194,861	)		NM

NM — Not meaningful

Restructuring and impairment charges ~~increased~~decreased significantly in the third quarter of 2013 compared to ~~$198.8 million~~the prior-year same period. The drivers of the decrease were the significant nonrecurring impairments of goodwill and property, plant and equipment in the third quarter of 2012, partially offset by additional charges related to our ongoing restructuring plans during the ~~2012~~ third ~~quarter. The charges included a $147.3 million impairment~~quarter of goodwill associated with the Electronic Materials segment. Impairment charges of $40.5 million were also recorded to reduce the value of long-lived assets, also related to the Electronic Materials segment. These impairments were the result of reduced forecasts for future profitability, primarily for our solar pastes and metal powders businesses within Electronic Materials. In addition, an impairment charge of $11.0 million was recorded to reduce the value of assets held for sale, primarily properties and buildings related to manufacturing sites that were closed as part of earlier restructuring activities.2013.

Interest Expense

Interest expense in the third quarter of 2013 was ~~little changed from~~consistent with the prior-year ~~quarter.~~same period. The ~~impact~~components of ~~slightly higher average~~ interest ~~rates was largely offset by lower average borrowing during the quarter.~~expense are as follows:

We are exposed to the impact of exchange rate fluctuations on foreign currency positions arising from our international sales and operations. We manage these currency risks principally by entering into forward contracts. The carrying value of the open contracts at each quarter-end are adjusted to fair value and the resulting gains or losses are charged to income or expense during the period, partially offsetting the effect of changes in foreign currency exchange rates on the underlying positions.


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Interest expense	$	6,592		$	6,507		$	85			1.3	%
Amortization of bank fees		393			483			(90	)		(18.6	)%
Interest capitalization		(219	)		(274	)		55			(20.1	)%

Interest expense	$	6,766		$	6,716		$	50			0.7	%

Income Tax Expense

During the ~~2012~~ third quarter ~~we recognized~~of 2013, income tax expense ~~of $105.5~~was $0.5 million compared with the income tax expense of ~~$9.1~~$105.4 million in the ~~2011~~ third ~~quarter. The higher income~~quarter of 2012. Income tax expense for the current period was less than the expense recorded in the prior-year same period primarily due to ~~recording a charge~~the reserve that was recorded in the third quarter of ~~$112.3 million to reserve for~~2012 on a significant portion of our deferred tax assets.

Results of Operations—Segment Information

Comparison of the three months ended September 30, 2013 and 2012

Performance Materials

Pigments, Powders and Oxides


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales excluding precious metals	$	35,551		$	38,286		$	(2,735	)		(7.1	)%
Segment precious metal sales		12,096			25,767			(13,671	)		(53.1	)%

Segment net sales		47,647			64,053			(16,406	)		(25.6	)%
Segment gross profit		8,390			7,231			1,159			16.0	%
Gross profit as a % of segment net sales excluding precious metals		23.6	%		18.9	%

Sales in Pigments, Powders and Oxides decreased due to the exit of solar pastes during the first quarter of 2013, which comprised approximately $4 million of the decrease in net sales excluding precious metals from the prior-year same period. The ~~reserve for~~decrease in sales related to the ~~deferred tax assets~~exit of solar pastes was partially mitigated by increased sales of our metal powders products produced in the United States compared to the prior year. The decreased sales from the exit of solar pastes were further mitigated by tolling revenue of approximately $1 million during the third quarter of 2013 related to a supply agreement entered into with the buyer of our solar pastes assets. Sales were unfavorably impacted by product mix, including the shift away from solar pastes products, which was only partially mitigated by increased volume and pricing benefits in the third quarter. The decrease in precious metal sales was primarily driven by the ~~significant impairment charges that~~exit of solar pastes. Regionally, the United States drove the decrease in sales, primarily due to the exit of solar pastes. Gross profit increased from the prior-year same period primarily due to favorable production costs and higher volume, partially offset by unfavorable mix.

Performance Colors and Glass


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales excluding precious metals	$	85,076		$	76,204		$	8,872			11.6	%
Segment precious metal sales		8,983			10,194			(1,211	)		(11.9	)%

Segment net sales		94,059			86,398			7,661			8.9	%
Segment gross profit		28,713			21,086			7,627			36.2	%
Gross profit as a % of segment net sales excluding precious metals		33.7	%		27.7	%

Net sales excluding precious metals increased compared to the prior-year same period, primarily driven by sales of our glass products. Sales of our glass products increased over the prior-year same period by approximately $7 million, with the remainder of the increase primarily coming from our electronic packaging materials products. Net sales excluding precious metals were ~~incurred during~~impacted by favorable product mix, favorable pricing, and higher volume compared to the prior-year same period. Regionally, Europe and the United States increased approximately $5 million and $2 million, respectively, compared to the prior-year same period. Other regions increased by approximately $1 million in total. Gross profit increased from the prior-year same period due to favorable volume and product mix, favorable pricing, and favorable production costs.

Performance Coatings


	Three months ended September 30,
	2013			2012			$ Change		% Change
	(Dollars in thousands)
Segment net sales	$	151,873		$	137,228		$	14,645		10.7	%
Segment gross profit		36,410			23,858			12,552		52.6	%
Gross profit as a % of segment net sales		24.0	%		17.4	%

Sales increased in Performance Coatings due to higher sales of our inks products and porcelain enamel products compared to the prior-year same period. The impact of these increases was approximately $12 million, with the balance of the increase due to higher sales of other tile coating products. Sales were favorably impacted by higher volumes and mix, partially offset by unfavorable pricing, most significantly related to our tile products. Regionally, Europe drove the largest increase in sales, approximately $11 million, due to increased customer demand and favorable product mix. Asia-Pacific and the United States also both increased by approximately $2 million and $1 million, respectively. Gross profit increased from the prior-year same period primarily due to favorable raw material and production costs and higher volume, partially offset by unfavorable pricing impacts.

Performance Chemicals

Polymer Additives


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales	$	71,599		$	79,881		$	(8,282	)		(10.4	)%
Segment gross profit		6,251			8,907			(2,656	)		(29.8	)%
Gross profit as a % of segment net sales		8.7	%		11.2	%

Sales decreased in Polymer Additives primarily due to the continued decline in sales volume of certain plasticizer products, which is being driven by changing environmental regulations. Regionally, sales declined in the United States by approximately $8 million, comprising the majority of the decrease in the segment. Approximately $6 million of the United States sales decline related to lower volume of the noted plasticizer products. Gross profit decreased from the prior-year same period as a result of the lower sales volume, unfavorable pricing impacts, and unfavorable manufacturing costs.

Specialty Plastics


	Three months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales	$	42,926		$	41,305		$	1,621			3.9	%
Segment gross profit		6,881			6,984			(103	)		(1.5	)%
Gross profit as a % of segment net sales		16.0	%		16.9	%

Sales increased in Specialty Plastics primarily due to strong demand for certain plastic colorants products and filled and reinforced plastics products. Sales were favorably impacted by higher volume, which was only partially offset by unfavorable price and mix impacts. Regionally, Europe and Latin America drove a sales increase totaling approximately $3 million, which was partially offset by a sales decrease in the United States of approximately $1 million. Gross profit was flat compared to the prior-year same period.


	Three months ended September 30,
	2013		2012		$ Change			% Change
	(Dollars in thousands)
Geographic Revenues
United States	$	157,421	$	173,648	$	(16,227	)		(9.3	)%
International		250,683		235,217		15,466			6.6	%

Total	$	408,104	$	408,865	$	(761	)		(0.2	)%

Net sales declined slightly compared to the prior-year same period, with a decrease in the United States being partially mitigated by increased net sales in international regions. In the third ~~quarter. Additionally, we incurred pre-tax losses in jurisdictions already with full valuation allowances for which no tax benefit is recognized.~~

~~We recorded a net loss~~quarter of ~~$315.7 million~~2013, sales originating in the ~~quarter,~~United States were 39% of total net sales, compared with ~~net income~~42% of $19.3 million in the prior-year quarter. The change was primarily the result of increased restructuring and impairment charges and higher income tax expense. In addition, reduced gross profit resulting from lower net sales ~~contributed to the decline in profitability~~ in the third quarter of ~~2011.~~2012. The decline in sales in the United States was primarily driven by the exit of solar pastes, in combination with reduced demand for certain plasticizer products that is being driven by changing environmental regulations. The increase in international regions was primarily driven by increased sales in Europe across all segments except for Polymer Additives, resulting in increased sales of approximately $18 million compared to the prior-year same period. Further, Latin America experienced slight increases across most segments. Higher sales in Europe and Latin America were partially offset by decreased sales in Asia-Pacific of approximately $5 million, which were primarily due to the exit of solar pastes and lower sales of metal powders products.

Results of Operations—Consolidated

Comparison of the nine months ended September 30, 2013 and 2012

For the nine months ended September 30, 2013, Ferro net income was $11.6 million, compared with net loss of $309.6 million for the nine months ended September 30, 2012. For the nine months ended September 30, 2013, Ferro net income attributable to common shareholders was $11.4 million, or $0.13 per share, compared with Ferro net loss attributable to common shareholders of $310.4 million, or $3.60 loss per share, for the nine months ended September 30, 2012.

Net Sales

   Three months ended
September 30,
   2012 As adjusted
2011    $ Change % Change
   (Dollars in thousands)
Segment Sales

Electronic Materials
   $ 66,188    $ 156,081       $ (89,893 ) (57.6 )%
Performance Coatings
   137,229    153,365       (16,136 ) (10.5 )%
Color and Glass Performance Materials
   84,262    100,525       (16,263 ) (16.2 )%
Polymer Additives
   79,881    85,634       (5,753 ) (6.7 )%
Specialty Plastics
   41,305    43,606       (2,301 ) (5.3 )%
Pharmaceuticals
   5,975    6,903       (928 ) (13.4 )%




Total segment sales
   $ 414,840    $ 546,114       $ (131,274 ) (24.0 )%




Segment Income

Electronic Materials
   $ (6,311 ) $ 16,463       $ (22,774 ) NM
Performance Coatings
   3,210    11,069       (7,859 ) (71.0 )%
Color and Glass Performance Materials
   5,636    8,365       (2,729 ) (32.6 )%
Polymer Additives
   5,398    4,252       1,146    27.0 %
Specialty Plastics
   3,728    2,717       1,011    37.2 %
Pharmaceuticals
   85    1,254       (1,169 ) NM




Total segment income
   $ 11,746    $ 44,120       $ (32,374 ) (73.4 )%


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Net sales excluding precious metals	$	1,181,470		$	1,211,992		$	(30,522	)		(2.5	)%
Sales of precious metals		79,613			132,844			(53,231	)		(40.1	)%

Net sales		1,261,083			1,344,836			(83,753	)		(6.2	)%
Cost of sales		1,009,945			1,112,587			(102,642	)		(9.2	)%

Gross profit	$	251,138		$	232,249		$	18,889			8.1	%

Gross profit as a % of net sales excluding precious metals		21.3	%		19.2	%

Net sales decreased by 6.2% in the nine months ended September 30, 2013, compared with the prior-year same period. Net sales excluding precious metals decreased $30.5 million, driven by decreased sales in our Pigments, Powders and Oxides segment, primarily due to the exit of solar pastes during the first quarter of 2013, and decreased sales in our Polymer Additives segment. Partially mitigating these decreases were increased sales in our Performance Colors and Glass segment. The exit of solar pastes during the first quarter of 2013 was also the primary driver of the decrease in sales of precious metals compared to the prior year.

Gross Profit

Gross profit increased 8.1% in the nine months ended September 30, 2013, compared to the prior-year same period. The significant drivers of the increased gross profit are favorable product mix in our Performance Colors and Glass segment and strong demand and lower raw material and production costs, partially offset by unfavorable price impacts, in our Performance Coatings segment. These increases were partially offset by unfavorable mix in our Pigments, Powders and Oxides segment and the impact of reduced demand for certain plasticizer products and unfavorable production costs in our Polymer Additives segment. Additionally, in the prior year, inventory charges related to obsolete solar pastes impacted gross profit by approximately $5 million.

Selling, General and Administrative Expenses

The following table presents our segments summarized into their respective operating groups, with Pigments, Powders and Oxides, Performance Colors and Glass, and Performance Coatings comprising Performance Materials, and Polymer Additives and Specialty Plastics comprising Performance Chemicals. In conjunction with the changes to segments, we also changed the profitability metric utilized by management to evaluate segment performance, as discussed in Note 15. The metric that was utilized historically was segment income, which included selling, general and administrative (“SG&A”) expenses that were directly incurred by each segment, as well as certain allocated costs. Segment gross profit is the metric that is now utilized. Further, we have refined our approach to managing SG&A expenses and are intensely focused on analyzing expenses at the individual site level, and also across functional areas within the Company, as opposed to the segment level, and will evaluate performance in this manner.

   Nine months ended
September 30,
   2013    2012    $ Change % Change
   (Dollars in thousands)
Performance Materials
   $ 113,700       $ 137,393       $ (23,693 ) (17.2 )%
Performance Chemicals
   17,575       24,294       (6,719 ) (27.7 )%
Corporate
   53,711       40,988       12,723    31.0 %






Selling, general and administrative expenses
   $ 184,986       $ 202,675       $ (17,689 ) (8.7 )%

SG&A expenses were $17.7 million lower in the nine months ended September 30, 2013 compared with the prior-year same period. As a percentage of sales, SG&A expenses decreased 40 basis points from 15.1% for the nine months ended September 30, 2012 to 14.7% for the nine months ended September 30, 2013. The primary drivers of the reduction in SG&A expenses were the various personnel actions taken during 2012 and into 2013, which drove decreases in personnel expenses and stock-based compensation expense. The decreases were partially offset by an increase in incentive compensation of approximately $14 million in the first nine months of 2013 compared to the prior-year same period. In addition, a lower discount rate and increased expected returns on our pension plan assets has reduced pension and other postretirement benefit expense in the first nine months of 2013 compared to the prior-year same period. Our expenses related to idle sites have decreased in the current year as a result of selling the majority of our idle sites in the current year, and our bad debt expense has decreased approximately $2 million compared to the prior-year same period.

The following table includes SG&A components with significant changes between 2013 and 2012:


	Nine months ended September 30,
	2013			2012		$ Change			% Change
	(Dollars in thousands)
Personnel expenses	$	107,881		$	130,850	$	(22,969	)		(17.6	)%
Incentive compensation		14,147			115		14,032			NM
Stock-based compensation		4,392			5,699		(1,307	)		(22.9	)%
Pension and other postretirement benefits		(1,258	)		1,108		(2,366	)		NM
Idle sites		—			1,791		(1,791	)		(100.0	)%
Bad debt expense		1,835			4,174		(2,339	)		(56.0	)%
Other		57,989			58,938		(949	)		(1.6	)%

Selling, general and administrative expenses	$	184,986		$	202,675	$	(17,689	)		(8.7	)%

NM — Not meaningful

Restructuring and Impairment Charges


	Nine months ended September 30,
	2013			2012		$ Change			% Change
	(Dollars in thousands)
Employee severance	$	19,647		$	4,858	$	14,789			NM
Other restructuring costs		7,094			—		7,094			NM
Impairment		(3	)		198,876		(198,879	)		NM

Restructuring and impairment charges	$	26,738		$	203,734	$	(176,996	)		NM

NM — Not meaningful

Restructuring and impairment charges decreased significantly in the first nine months of 2013 compared to the prior-year same period. The drivers of the decrease were the significant nonrecurring impairments of goodwill and property, plant and equipment in the third quarter of 2012, partially offset by charges related to our ongoing restructuring plans during the first nine months of 2013.

~~Electronic Materials~~ Interest Expense

Interest expense in the first nine months of 2013 increased compared to the prior-year same period, primarily due to the write-off of deferred financing fees resulting from amending our revolving credit facility and the commitment amount being reduced from $350.0 million to $250.0 million, and reduced capitalization of interest costs resulting from an information systems tools project that did not recur in the current year. The components of interest expense are as follows:


	Nine months ended September 30,
	2013			2012			$ Change		% Change
	(Dollars in thousands)
Interest expense	$	19,763		$	19,495		$	268		1.4	%
Amortization of bank fees		1,885			1,459			426		29.2	%
Interest capitalization		(614	)		(1,388	)		774		(55.8	)%

Interest expense	$	21,034		$	19,566		$	1,468		7.5	%

Income Tax Expense

Income tax expense for the nine months ended September 30, 2013 was $4.0 million, or 16.8% of pre-tax income. In the prior-year same period, we recorded income tax expense of $113.1 million, or (57.3)% of pre-tax income. The change in the effective tax rate was primarily due to the reserve for a significant portion of the Company’s deferred tax assets, which was recorded in the third quarter of 2012.

Results of Operations—Segment ~~Results.~~Information

Comparison of the nine months ended September 30, 2013 and 2012

Performance Materials

Pigments, Powders and Oxides


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales excluding precious metals	$	110,146		$	124,429		$	(14,283	)		(11.5	)%
Segment precious metal sales		45,802			94,969			(49,167	)		(51.8	)%

Segment net sales		155,948			219,398			(63,450	)		(28.9	)%
Segment gross profit		25,882			28,363			(2,481	)		(8.7	)%
Gross profit as a % of segment net sales excluding precious metals		23.5	%		22.8	%

Sales ~~declined~~ in ~~Electronic Materials~~Pigments, Powders and Oxides decreased primarily due to the exit of solar pastes during the first quarter of 2013, which comprised approximately $19 million of the decrease in net sales excluding precious metals from the prior-year same period. The decreased sales from the exit of solar pastes were partially mitigated by tolling revenue of approximately $3 million during the period related to a supply agreement entered into with the buyer of our solar pastes assets. Net sales excluding precious metals were unfavorably impacted by product mix, including the shift away from solar pastes products, and unfavorable pricing impacts, which was only partially mitigated by higher volume. The decrease in precious metal sales was driven by the exit of solar pastes. Regionally, the United States drove the decrease in sales, due to the exit of solar pastes. Gross profit decreased from the prior-year same period primarily due to unfavorable mix, which was partially mitigated by favorable production costs and higher volume.

Performance Colors and Glass


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales excluding precious metals	$	264,822		$	256,931		$	7,891			3.1	%
Segment precious metal sales		33,811			37,875			(4,064	)		(10.7	)%

Segment net sales		298,633			294,806			3,827			1.3	%
Segment gross profit		87,203			77,220			9,983			12.9	%
Gross profit as a % of segment net sales excluding precious metals		32.9	%		30.1	%

Net sales excluding precious metals increased compared to the prior-year same period, primarily driven by sales of our glass products. Sales of our glass products increased over the prior-year same period by approximately $12 million, partially offset by decreased sales of our colors products of approximately $4 million. Net sales excluding precious metals were favorably impacted by pricing and product mix, partially offset by lower volume. Regionally, Latin America, Europe and the United States increased over the prior-year same period, and Asia Pacific was flat. Gross profit increased from the prior-year same period as a result of ~~reduced demand for our conductive pastes used~~favorable pricing and production costs, partially offset by unfavorable volume and mix.

Performance Coatings


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales	$	445,969		$	447,065		$	(1,096	)		(0.2	)%
Segment gross profit		100,237			85,328			14,909			17.5	%
Gross profit as a % of segment net sales		22.5	%		19.1	%

Sales decreased in ~~solar cell manufacturing and metal powders used in other electronics applications. In addition, sales of polishing materials declined~~Performance Coatings primarily due to lower ~~product prices that reflected lower costs for a key raw material. Changes in volume reduced~~ sales of our tile colors products of approximately $16 million, which was partially mitigated by increased sales of inks of approximately ~~$35~~$11 million and other tile coating products and porcelain enamel products of approximately $3 million compared ~~with~~to the ~~third quarter of 2011. Changes in product pricing~~prior-year same period. Sales were unfavorably impacted by price, partially mitigated by higher volume and ~~mix lowered sales by an additional $54 million and changes in foreign currency exchange rates reduced sales by $1 million. Sales of precious metals declined by $59~~mix. Regionally, Latin America was the most significant decrease, approximately $12 million, due to ~~lower~~reduced customer demand and the impact of selling our borate mine in Argentina that contributed to Performance Coatings sales in the prior-year same period. Sales in the United States also decreased approximately $1 million compared to the prior-year same period. The decreased sales were partially mitigated by increased sales in Europe, driven by increased sales of both tile and porcelain enamel products, and Asia-Pacific, driven by increased sales of porcelain enamel products. Gross profit increased from the prior-year same period primarily due to favorable raw material and production costs and higher volume, partially offset by unfavorable pricing impacts.

Performance Chemicals

Polymer Additives


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales	$	229,266		$	251,055		$	(21,789	)		(8.7	)%
Segment gross profit		20,616			26,871			(6,255	)		(23.3	)%
Gross profit as a % of segment net sales		9.0	%		10.7	%

Sales decreased in Polymer Additives primarily due to the continued decline in sales volume of ~~solar pastes~~certain plasticizer products that is being driven by changing environmental regulations. Regionally, this drove a decrease in United States sales of approximately $18 million and ~~precious metal powders and~~Europe sales of approximately $5 million, which were partially mitigated by increased sales in Latin America of approximately $2 million. Gross profit decreased from the prior-year same period as a result of ~~lower precious metal prices. The costs of precious metals are passed through~~the reduced sales volume, partially offset by favorable pricing impacts, primarily in Europe.

Specialty Plastics


	Nine months ended September 30,
	2013			2012			$ Change			% Change
	(Dollars in thousands)
Segment net sales	$	131,267		$	132,512		$	(1,245	)		(0.9	)%
Segment gross profit		22,116			23,207			(1,091	)		(4.7	)%
Gross profit as a % of segment net sales		16.8	%		17.5	%

Sales decreased in Specialty Plastics primarily due to ~~our customers as an element of our~~unfavorable product ~~prices. Reduced sales of products produced in~~mix. Regionally, the United States ~~and in Asia-Pacific accounted for most~~drove the majority of the overall sales decline. Segment income declined due to a $24 million reduction in gross profit that was primarily the result of lower sales volume and reduced product prices. A $1 million decline in SG&A expense offset a portion of the gross profit decline.

~~Performance Coatings Segment Results.~~ Sales declined in Performance Coatings, driven by changes in foreign currency exchange rates and changes in product pricing and mix. Changes in foreign currency exchange rates reduced sales by $9 million and changes in product pricing and mix accounted fordecrease, approximately $5 million, of the sales decline. Reduced sales volume contributed an additional $2 million to the lower sales recorded during the quarter. Sales declined primarily in Europe-Middle East-Africa. Segment income declined primarily as a result of an $8 million decline in gross profit.

~~Color and Glass Performance Materials Segment Results.~~ Sales declined in Color and Glass Performance Materials as a result of changes in sales volume, product pricing and mix, as well as changes in foreign currency exchange rates. Changes in sales volume reduced saleswhich was partially mitigated by $8 million during the quarter. Changes in product pricing and mix accounted for $4 million of the sales decline and changes in foreign currency exchange rates reduced sales by an additional $4 million. The sales decline was the most significant in Europe-Middle East-Africa, with smaller declines in the United States and Latin America. Segment income declined due to a $5 million decline in gross profit driven by the reduced sales, partially offset by a $2 million decline in SG&A expenses.

~~Polymer Additives Segment Results.~~ Sales declined in Polymer Additives as a result of changes in product pricing and mix and changes in foreign currency exchange rates. Changes in product pricing and mix reduced sales by $4 million and changes in foreign currency exchange rates reduced sales an additional $2 million, compared with the third quarter of 2011. Reduced sales volume in the Europe-Middle East-Africa region was the primary driver of the sales decline, with a smaller reduction in United States sales. The sales decline in Europe-Middle East-Africa reflected reduced market demand resulting from a weak macroeconomic environmentincreases in Europe and ~~reduced demand for certain plasticizer products due to changing environmental regulations. Segment income increased due to a $0.4 million increase in gross~~Latin America that totaled approximately $4 million. Gross profit ~~and a $0.7 million decline in SG&A expenses.~~

~~Specialty Plastics Segment Results.~~ Sales declined in Specialty Plastics as a result of reduced sales volume and changes in foreign currency exchange rates, partially offset by changes in product pricing and mix. Lower sales volume reduced sales by $3 million and changes in foreign currency exchange rates reduced sales by an additional $1 million. Changes in product pricing and mix increased sales by approximately $2 million. Lower sales in Europe-Middle East-Africa weredecreased from the primary driver of the sales decline. Segment income increased as a result of a $0.6 million increase in gross profit and a $0.4 million decline in SG&A expenses. The improvement in gross profit was primarily driven by changes in product pricing. The reduction in SG&A expenses was driven by cost reduction initiatives.

~~Pharmaceuticals Segment Results.~~ ~~Sales declined in Pharmaceuticals due to changes in product pricing and mix. Segment income declined~~prior-year same period, primarily due to ~~reduced gross profit resulting from higher manufacturing~~unfavorable production costs, unfavorable mix and ~~lower sales.~~unfavorable pricing impacts.


	Three months ended September 30,										Nine months ended September 30,
	2012		2011		$ Change			% Change			2013		2012		$ Change			% Change
	(Dollars in thousands)										(Dollars in thousands)
Geographic Revenues
United States	$	179,623	$	265,077	$	(85,454	)		(32.2	)%	$	506,439	$	586,192	$	(79,753	)		(13.6	)%
International		235,217		281,037		(45,820	)		(16.3	)%		754,644		758,644		(4,000	)		(0.5	)%

Total	$	414,840	$	546,114	$	(131,274	)		(24.0	)%	$	1,261,083	$	1,344,836	$	(83,753	)		(6.2	)%

Net sales declined in the United States and international regions compared ~~with~~to the prior-year ~~quarter.~~same period. In the ~~2012 third quarter,~~first nine months of 2013, sales originating in the United States were ~~43%~~40% of total net sales, compared with 49% of net sales in the third quarter of 2011. The decline in U.S. sales was largely due to reduced sales of our solar pastes, metal powders and surface finishing products within the Electronic Materials segment. Sales originating in Asia-Pacific also declined primarily as a result of lower

~~Electronic Materials sales. Sales in Europe-Middle East-Africa declined due to reduced customer demand resulting from a weakened macroeconomic environment in the region.~~

~~Comparison of the nine months ended September 30, 2012 and 2011~~

   Nine months ended
September 30,
   2012 As adjusted
2011 $ Change % Change
   (Dollars in thousands, except per share amounts)
Net sales
   $ 1,362,735    $ 1,713,097    $ (350,362 ) (20.5 )%
Cost of sales
   1,124,228    1,374,614    (250,386 ) (18.2 )%


Gross profit
   238,507    338,483    (99,976 ) (29.5 )%
Gross profit percentage
   17.5 % 19.8 %
Selling, general and administrative expenses
   206,306    210,153    (3,847 ) (1.8 )%
Restructuring and impairment charges
   203,829    4,044    199,785
Other expense (income):

Interest expense
   20,689    21,208    (519 )
Interest earned
   (192 ) (193 ) 1
Foreign currency losses, net
   792    4,049    (3,257 )
Miscellaneous expense, net
   3,027    458    2,569


(Loss) income before income taxes
   (195,944 ) 98,764    (294,708 )
Income tax expense
   113,618    32,825    80,793


Net (loss) income
   $ (309,562 ) $ 65,939    $ (375,501 )


Diluted (loss) earnings per share
   $ (3.60 ) $ 0.75    $ (4.35 )

Net sales declined by 20.5% for the nine months ended September 30, 2012, compared with the first nine months of 2011. The most significant driver of the sales decline was reduced customer demand for our Electronic Materials products, including our solar pastes, metal powders and surface finishing materials. In addition, sales declined in Europe compared with the prior-year quarter due to weak economic conditions in the region. Lower sales of precious metals accounted for 62% of the overall sales decline, driven by reduced sales volume and lower prices for silver. In aggregate, changes in product pricing and mix reduced overall net sales by approximately 10 percentage points. Lower sales volume reduced sales by an additional 8 percentage points and changes in foreign currency exchange rates contributed approximately 2 percentage points to the overall sales decline during the first nine months of 2012.

~~Gross profit declined as a result of reduced sales and a change in product mix due to the decline in Electronic Materials sales. Gross profit percentage declined to 17.5% of net sales from 19.8%~~44% of net sales in the first nine months of ~~2011. In total, raw material costs increased by approximately $7~~2012. Approximately $55 million ~~compared with the first three quarters~~ of 2011 and these costs were offset by increased product prices. Gross profit was reduced by $7.2 million due to charges primarily related to write-downs of solar pastes inventory and residual costs at closed manufacturing sites involved in earlier restructuring initiatives. Gross profit was reduced by charges of $3.6 million during the first nine months of 2011, also as a result of residual costs at sites closed as a result of previous restructuring actions.

Selling, general and administrative (“SG&A”) expenses declined by $3.8 million compared with the first nine months of 2011. Due primarily to reduced sales, SG&A expenses increased to 15.1% of net sales compared with 12.3% of net sales in the prior-year period. SG&A expenses declined primarily as a result of reduced incentive compensation expenses, depreciation expense, business travel costs and professional fees. Increased special charges, increased healthcare benefit expense for U.S. employees, higher reserves for bad debt and expenses related to an initiative to improve management information systems tools partially offset the decline in SG&A expenses during the first nine months of 2012. SG&A expenses during the first nine months of 2012 included charges of $6.0 million that were primarily related to a write-down of other tax assets, residual expenses at sites closed as a part of earlier restructuring initiatives and severance costs. SG&A expenses in the first nine months of 2011 included charges of $3.3 million, primarily related to expenses at sites closed as a result of earlier restructuring initiatives.

Restructuring and impairment charges increased to $203.8 million during the first three quarters of 2012. The charges included a $147.3 million impairment of goodwill associated with the Electronic Materials segment. Impairment charges of $40.5 million were also recorded to reduce the value of long-lived assets, also in the Electronic Materials segment. These impairments were the result of reduced forecasts for future profitability, primarily for our solar pastes and metal powders businesses within Electronic Materials. In addition, an impairment charge of $11.0 million was recorded to reduce the value of assets held for sale, primarily properties and buildings related to manufacturing sites that were closed as part of earlier restructuring activities. Restructuring charges during the first nine months of 2012 also included charges of $4.6 million related to a restructuring initiative in our Performance Coatings business in Europe.

Interest expense declined by $0.5 million in the first nine months of 2012 compared with the first nine months of 2011. The lower expense primarily was a result of increased capitalized interest and lower average borrowings.

~~We are exposed to the impact of exchange rate fluctuations on foreign currency positions arising from our international~~ sales and operations. We manage these currency risks principally by entering into forward contracts. The carrying value of the open contracts at each quarter-end are adjusted to fair value and the resulting gains or losses are charged to income or expense during the period, partially offsetting the effect of changes in foreign currency exchange rates on the underlying positions.

We recorded miscellaneous expense, net, of $3.0 million during the first nine months of 2012. Included in miscellaneous expense was a loss of $0.8 million related to the sale of a mining operation in Argentina.

During the first nine months of 2012, income tax expense was $113.6 million, or (58.0%) of pre-tax income. Income tax expense was $32.8 million during the first nine months of 2011, or 33.2% of pre-tax income. The change in the effective tax rate during the first three quarters of 2012 was primarily due to recording a charge of $112.3 million to reserve for a significant portion of our deferred tax assets. The reserve for the deferred tax assets was primarily driven by the significant impairment charges that were incurred during the third quarter. In addition, we incurred pre-tax losses in jurisdictions with full valuation allowances for which no tax benefit is recognized.

We recorded a net loss of $309.6 million in the first nine months of 2012 compared with net income of $65.9 million in the prior-year period, primarily driven by increased restructuring and impairment charges as well as higher income tax expense. In addition, lower sales and the resulting decline in gross profit had a negative impact on our profitability.

   Nine months ended
September 30,
   2012 As adjusted
2011    $ Change % Change
   (Dollars in thousands)
Segment Sales

Electronic Materials
   $ 228,625    $ 538,790       $ (310,165 ) (57.6 )%
Performance Coatings
   447,058    453,546       (6,488 ) (1.4 )%
Color and Glass Performance Materials
   285,586    306,806       (21,220 ) (6.9 )%
Polymer Additives
   251,055    262,767       (11,712 ) (4.5 )%
Specialty Plastics
   132,512    132,745       (233 ) (0.2 )%
Pharmaceuticals
   17,899    18,443       (544 ) (2.9 )%




Total segment sales
   $ 1,362,735    $ 1,713,097       $ (350,362 ) (20.5 )%




Segment Income (Loss)

Electronic Materials
   $ (10,968 ) $ 69,617       $ (80,585 ) NM
Performance Coatings
   20,968    27,913       (6,945 ) (24.9 )%
Color and Glass Performance Materials
   24,102    28,133       (4,031 ) (14.3 )%
Polymer Additives
   13,903    15,347       (1,444 ) (9.4 )%
Specialty Plastics
   12,182    7,416       4,766    64.3 %
Pharmaceuticals
   1,892    3,525       (1,633 ) (46.3 )%




Total segment income
   $ 62,079    $ 151,951       $ (89,872 ) (59.1 )%

~~NM — Not meaningful~~

~~Electronic Materials Segment Results.~~ Sales declined in Electronic Materials primarily as a result of reduced demand for our conductive pastes used in solar cell manufacturing and metal powders used in other electronics applications. In addition,

sales of polishing materials declined primarily due to lower product prices that reflected lower costs for a key raw material. Changes in product pricing and mix reduced sales by approximately $168 million compared with the first nine months of 2011. Changes in sales volume reduced sales by an additional $141 million and changes in foreign currency exchange rates lowered sales by $1 million. Sales of precious metals declined by $211 million due to lower sales of solar pastes and metal powders and as a result of lower precious metal prices. The costs of precious metals are passed through to our customers as an element of our product prices. The decline in sales was driven primarily by reduced sales of products produced in the United States was driven by the exit of solar pastes, including sales of precious metals, and ~~in Asia-Pacific. Segment income declined~~approximately $18 million was due to ~~a $83 million reduction in gross profit resulting from lower sales volume and reduced product pricing. SG&A expense decreased by $2 million compared with the first nine months of 2011.~~

~~Performance Coatings Segment Results.~~ Sales declined in Performance Coatings primarily as a result of changes in foreign currency exchange rates, partially offset by increased sales volume. Changes in foreign currency exchange rates reduced sales by $22 million and changes in product pricing and mix lowered sales by an additional $8 million. Higher sales volume increased sales by $24 million. Sales declined in Europe-Middle East-Africa due to a weak macroeconomic environment and the resulting decline in customer demand. Sales increased in the United States, Asia-Pacific and Latin America compared with the first nine months of 2011. Segment income declined, primarily as a result of a $7 million reduction in gross profit resulting from lower sales and changes in product mix.

~~Color and Glass Performance Materials Segment Results.~~ Sales declined in Color and Glass Performance Materials primarily due to changes in foreign currency exchange rates and lower sales volume. Changes in foreign currency exchange rates reduced sales by $11 million and lower sales volume reduced sales by $8 million compared with the first nine months of 2011. Changes in product pricing and mix reduced sales by an additional $2 million. The sales reduction occurred primarily in Europe-Middle East-Africa. Segment income declined as a result of an $7 million reduction in gross profit, partially offset by a $3 million reduction in SG&A expense. The lower gross profit was driven primarily by reduced sales and changes in product mix.

~~Polymer Additives Segment Results.~~ Sales in Polymer Additives declined primarily due to lower sales volume and changes in foreign currency exchange rates. Reduced sales volume lowered sales by $5 million and changes in foreign currency exchange rates contributed an additional $5 million of the sales decline. In addition, changes in product pricing and mix reduced sales by $2 million. The sales decline occurred primarily in Europe-Middle East-Africa reflecting reduced market demand resulting from a weak macroeconomic environment in the region and reduced demand for certain plasticizer products, ~~due to~~which is being driven by changing environmental regulations. ~~Segment income declined primarily as a result a $1.8~~International sales decreased approximately $12 million, ~~reduction in gross profit resulting from the decline in sales, partially offset by a $0.4 million decline in SG&A expenses.~~

~~Specialty Plastics Segment Results.~~ Sales in Specialty Plastics were little changed in the first nine months of 2012 compared with the first nine months of 2011. Lower sales volume reduced sales by approximately $4 million and changes in foreign currency exchange rates reduced sales by an additional $3 million. Changes in product pricing and mix increased sales by $7 million compared with the prior-year period. Sales declined in Europe-Middle East-Africa and increased in the United States. Segment income increased due to a $4 million increase in gross profit, primarily the result of changes in product pricing. In addition, SG&A expenses declined by $1 million compared to the prior-year period.

~~Pharmaceuticals Segment Results.~~ ~~Sales declined in Pharmaceuticals due to changes in product pricing and mix. Segment income declined due to higher manufacturing costs and reduced gross profit resulting from lower sales.~~

   Nine months ended
September 30,
   2012    2011    $ Change % Change
   (Dollars in thousands)
Geographic Revenues

United States
   $ 604,091       $ 830,880       $ (226,789 ) (27.3 )%
International
   758,644       882,217       (123,573 ) (14.0 )%






Total
   $ 1,362,735       $ 1,713,097       $ (350,362 ) (20.5 )%

Net sales declined in both the United States and international regions compared with the first nine months of 2011. During the first nine months of 2012, sales originating in the United States were 44% of total net sales, down from 49% in the first nine months of 2011. The decline in U.S. sales was primarily due to reduced sales of our ~~Electronic Materials products. Sales originating~~Performance Coatings products in Latin America, continued reduction in demand for certain plasticizer products in Europe totaling approximately $5 million, and the impact of the exit of solar pastes on Asia-Pacific, ~~region also declined as a result~~totaling approximately $9 million. The declines in international regions were partially mitigated by increased sales of ~~lower Electronic Materials sales. Sales~~our Performance Coatings and Specialty Plastics products in ~~Europe-Middle East-Africa declined primarily due to reduced customer demand resulting from a weakening macroeconomic environment~~Europe, totaling approximately $12 million, container glass products sales in ~~the region.~~

Latin America of approximately $6 million, and Performance Coatings products sales in Asia-Pacific of approximately $2 million.

Summary of Cash Flows for the nine months ended September 30, ~~2012~~2013 and ~~2011~~2012

   Nine months ended
September 30,
   2012 2011 $ Change
   (Dollars in thousands)
Net cash provided by (used for) operating activities
   19,536    (17,370 ) 36,906
Net cash used for investing activities
   (43,763 ) (49,356 ) 5,593
Net cash provided by financing activities
   26,072    58,833    (32,761 )
Effect of exchange rate changes on cash and cash equivalents
   (19 ) 758    (777 )


Increase (decrease) in cash and cash equivalents
   $ 1,826    $ (7,135 ) $ 8,961


	Nine months ended September 30,
	2013			2012			$ Change
	(Dollars in thousands)
Net cash provided by operating activities		3,003			19,536			(16,533	)
Net cash provided by (used for) investing activities		12,878			(43,763	)		56,641
Net cash (used for) provided by financing activities		(9,664	)		26,072			(35,736	)
Effect of exchange rate changes on cash and cash equivalents		60			(19	)		79

Increase in cash and cash equivalents	$	6,277		$	1,826		$	4,451

Details of net cash provided by ~~(used for)~~ operating activities were as follows:


	Nine months ended September 30,									Nine months ended September 30,
	2012			As adjusted 2011			$ Change			2013			2012			$ Change
	(Dollars in thousands)									(Dollars in thousands)
Cash flows from operating activities:
Net (loss) income	$	(309,562	)	$	65,939		$	(375,501	)
Impairment and reserve charges		311,084			—			311,084
Net income (loss)										$	11,582		$	(309,562	)	$	321,144
(Gain) loss on sale of assets and business											(10,686	)		1,018			(11,704	)
Restructuring and impairment charges											4,355			311,084			(306,729	)
Depreciation and amortization		41,734			48,523			(6,789	)		38,000			41,734			(3,734	)
Precious metals deposits		—			28,086			(28,086	)
Accounts receivable		(23,006	)		(63,733	)		40,727			(23,079	)		(23,006	)		(73	)
Inventories		15,637			(41,550	)		57,187			12,118			15,637			(3,519	)
Accounts payable		(4,254	)		3,989			(8,243	)		(5,864	)		(4,254	)		(1,610	)
Other changes in current assets and liabilities, net		7,814			(36,365	)		44,179			(8,363	)		7,814			(16,177	)
Other adjustments, net		(19,911	)		(22,259	)		2,348			(15,060	)		(20,929	)		5,869

Net cash provided by (used for) operating activities	$	19,536		$	(17,370	)	$	36,906
Net cash provided by operating activities										$	3,003		$	19,536		$	(16,533	)

Cash flows from operating activities.Cash flows from operating activities ~~increased~~decreased by ~~$36.9~~$16.5 million in the first nine months of ~~2012~~2013 compared with the prior-year same period. ~~Year-over-year~~The decrease in cash flows was primarily the result of increased cash outflows related to our restructuring activities of $22.4 million during the first nine months of 2013. Reconciling net income to cash flows from operating activities increased $311.1 million due to noncash impairment and reserve charges, $57.2 million due to changes in inventories, $44.2 million due to other changes in current assets and liabilities, and $40.7 million due to changes in accounts receivable. Partially offsetting these effects, year-over-year cash flows from operating activities decreased $375.5 million due to changes in net income, $28.1 million due to changes in precious metals deposits, and $8.2 million due to changes in accounts payable.

We recorded a net loss in the first nine months of 2012 compared with net income in the prior-year period primarily as a result of noncash impairment charges and additional income tax expense. Noncash impairment charges included a $147.3 million impairment of goodwill associated with the Electronic Materials segment and a $40.5 million impairment of long-lived assets, primarily in the Electronic Materials segment. These impairments were the result of reduced forecasts for future profitability, primarily for our solar pastes and metal powders businesses within Electronic Materials. In addition, an impairment charge of $11.0 million was recorded to reduce the value of assets held for sale, primarily properties and buildings related to manufacturing sites that were closed as part of earlier restructuring activities. We also recorded a charge of $112.3 million to reserve for a significant portion of our deferred tax assets. The reserve for the deferred tax assets was primarily driven by the significant impairment charges that were incurred during the third quarter.

Accounts receivable increased in the first nine months of 2011 and the first six months of 2012 as a result of improved customer demand over the final months of the respective prior years. While accounts receivables declined in the third quarter of 2012 due to lower sales, they did not reach the level of the prior year end.

Inventories and accounts payable also increased in the first nine months of 2011 as a result of higher production activity driven by improved customer demand compared with the final months of 2010. They decreased in the first nine months of 2012 due to lower production activity driven by lower customer demand compared with the final months of 2011.

~~Other changes in current assets and liabilities provided $7.8~~approximately $4.4 million of cash in the first nine months of 2012, primarily from decreases in other current assets. Other changes in current assets and liabilities used $36.4 million of cash in the first nine months of 2011, primarily from the payment of 2010 year-end incentive compensation and increases in other current assets.

~~The return of precious metal deposits provided $28.1 million of cash in the first nine months of 2011 due to additional credit lines not requiring collateral.~~

~~Other adjustments to reconcile net income to net cash provided by (used for) operating activities include noncash foreign currency gains and losses,~~non-cash restructuring charges, ~~retirement benefits, stock-based compensation,~~depreciation and ~~deferred taxes,~~amortization, as well as ~~changes to other non-current~~the net financial statement impact of the sale of solar assets and ~~liabilities.~~

~~Cash flows from investing activities.~~ ~~Cash flows from investing activities increased $6.3~~Ferro Pfansteihl Laboratories, Inc. (“FPL”). Approximately $25.5 million in interest was paid during the current year compared to $25.3 million in the first nine months of ~~2012 compared with~~2012. Interest payments were primarily comprised of semiannual interest on our outstanding senior notes. Inventories increased from year end, but less than the increase in the prior-year ~~period. Capital expenditures~~same period, which is primarily the result of decreased sales compared to ~~$46.2~~the prior-year, as well as stronger inventory management. The increase in accounts receivables from year end is consistent with that seen in the first nine months of 2012.

Cash flows from investing activities.Cash flows from investing activities increased $56.6 million in the first nine months of ~~2012 from $51.9~~2013 compared with the prior-year same period. Cash received for the sale of solar assets and FPL, totaling $27.7 million, comprised the majority of the increase. Capital expenditures decreased to $21.2 million in the first nine months of ~~2011.~~2013 from $46.2 million in the prior-year for the comparable period.

Cash flows from financing activities. Cash flows from financing activities decreased ~~$32.8~~$35.7 million in the first nine months of ~~2012~~2013 compared with the prior-year same period. In the first nine months of 2013, we increased borrowings under our domestic accounts receivable asset securitization program by $8 million and increased borrowings through our revolving credit facility by $16.9 million. The additional borrowings from the credit facility were used primarily to fund the extinguishment of our 6.50% convertible senior notes which matured during the third quarter. In the first nine months of 2012, we borrowed $20.0 million through our domestic accounts receivable asset securitization program ~~$3.8 million in loans payable to banks~~ and $3.2 million through our revolving credit facility. In the same period of 2011, we borrowed $45.0 million through our domestic accounts receivable asset securitization program, $9.7 million through our international accounts receivable sales program and $13.1 million through our revolving credit facility, and we redeemed in cash all outstanding 7% Series A ESOP Convertible Preferred Stock for $9.4 million plus earned but unpaid dividends.

Capital Resources and Liquidity

7.875% Senior Notes

The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. The principal amount outstanding was $250.0 million at September 30, ~~2012,~~2013, and December 31, ~~2011. Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings.~~2012. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.

6.50% Convertible Senior Notes

million.

Revolving Credit Facility

Decrease the Revolving Loan Commitment Amount from $350.0 million to $250.0 million;

~~Eliminate the fixed charge coverage covenant;~~

thereafter, it will be 3.50; and

~~Include a maximum capital expenditures covenant limiting~~Amend the ~~capital expenditures of~~requirements for Permitted Acquisitions such that for the Company to ~~(i) $20.0~~consummate a Permitted Acquisition the Company must have minimum liquidity of $100.0 million for the three months ended June 30, 2012, (ii) $35.0 million for the six months ended September 30, 2012, (iii) $50.0 million for the nine months ended December 31, 2012, (iv) $65.0 million for the twelve months ended March 31, 2013, and ~~(v) $65.0 million for the 2013 fiscal year and each fiscal year thereafter. Certain unused capital expenditures will be permitted to be carried forward to the following fiscal year; and~~

Secured Leverage Ratio must be less than 1.50.

Domestic Receivable Sales Programs

We have an asset securitization program for Ferro’s U.S. trade accounts receivable. We sell interests in our domestic receivables to various purchasers, and we may obtain up to $50.0 million in the form of cash or letters of credit. Advances received under this program are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. In the second quarter of ~~2012,~~2013, we extended the maturity of this credit facility through May ~~2013.~~2014. At September 30, ~~2012,~~2013, advances received of ~~$20.0~~$48.0 million were secured by ~~$88.0~~$77.6 million of accounts receivable, and based on available and qualifying receivables, ~~$30.0~~$2.0 million of additional borrowings were available under the program. At December 31, 2012, we had borrowed $40.0 million under this facility. During the third quarter of 2013 we amended the agreement. The interest rate under ~~this program~~the amended agreement is the sum of (A) either (1) ~~commercial paper rates, (2)~~ LIBOR rates or ~~(3)~~(2) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At September 30, ~~2012,~~2013, the interest rate was 0.6%. ~~We had no borrowings under this program at December 31, 2011.~~

International Receivable Sales Programs

We have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At September 30, ~~2012,~~2013, commitments supporting these programs totaled ~~$18.0~~$18.9 million, advances received of ~~$6.6~~$5.6 million were secured by ~~$8.9~~$8.7 million of accounts receivable, and based on available and qualifying receivables, ~~$0.3~~$0.2 million of additional borrowings were available under the programs. At December 31, 2012, we had borrowed $6.1 million under this facility. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At September 30, ~~2012,~~2013, the weighted-average interest rate was 1.9%.

Off Balance Sheet Arrangements

Consignment Arrangements for Precious Metals. In the production of some of our products, we use precious metals, some of 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. We had on hand precious metals owned by participants in our precious metals program of ~~$188.6~~$89.5 million at September 30, ~~2012,~~2013, and ~~$187.9~~$112.2 million at December 31, ~~2011,~~2012, measured at fair value based on market prices for identical ~~assets.~~assets and net of credits. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding at September 30, ~~2012,~~2013, or December 31, ~~2011,~~2012, 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.

Cash and Cash Equivalents

As of September 30, 2013, we had $35.9 million of cash and cash equivalents, of which $35.6 million was held in foreign countries. Cash generated in the U.S. is generally used to pay down amounts outstanding under our revolving credit facility. If needed, we could repatriate the majority of foreign cash 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.

Liquidity Requirements

Our liquidity requirements primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, capital investments, precious metals cash collateral requirements, and postretirement obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows from operating activities are primarily driven by earnings before noncash charges and changes in working capital needs. ~~In the first nine months of 2012, cash flows from financing and operating activities were used to fund our investing activities.~~ We had additional borrowing capacity of ~~$374.7~~$238.5 million at September 30, ~~2012,~~2013, and ~~$397.5~~$361.5 million at December 31, ~~2011,~~2012, available under various credit facilities, primarily our revolving credit facility. We have taken a variety of actions to enhance liquidity and to ensure short-term covenant compliance, including ongoing restructuring activities, suspension of dividend payments on our common stock in 2009, and the ~~exploration~~sale of ~~strategic options~~assets related to our solar pastes ~~business.~~product line in 2013.

Our ~~level~~credit facilities and the indenture governing our senior notes contain a number of ~~debt, debt service requirements, and~~restrictive covenants, including those described in more detail in Note 6 to the consolidated financial statements under Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2012. These covenants include customary operating restrictions that limit our ability to ~~access~~engage in certain activities, including additional loans and investments; prepayments, redemptions and repurchases of debt; and mergers, acquisitions and asset sales. We are also subject to customary financial covenants under our credit ~~markets could have important consequences~~facilities, including a leverage ratio and an interest coverage ratio. These covenants under our credit facilities restrict the amount of our borrowings, reducing our flexibility to ~~our business~~fund ongoing operations and ~~uses~~strategic initiatives. These facilities and our senior notes are described in more detail in “Capital Resources and Liquidity” under Item 7 and in Note 6 to the consolidated financial statements under Item 8 of ~~cash flows. The Company has recently accessed credit markets~~our Annual Report on Form 10-K for the following transactions. In 2010, we issued 7.875% Senior Notes, which mature in 2018, and entered into the 2010 Credit Facility, which matures in 2015. In 2011, we entered into several international accounts receivable sales programs. In 2012, we extended our domestic asset securitization facility and amended the 2010 Credit Facility to provide additional operating flexibility.year ended December 31, 2012.

We may from time to time seek to retire or repurchase our outstanding debt through open market purchases, privately negotiated transactions, or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

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

We assess on an ongoing basis our portfolio of businesses, as well as our financial and capital structure, to ensure that we have sufficient capital and liquidity to meet our strategic objectives. As part of this process, from time to time we evaluate the possible divestiture of businesses that are not critical to our core strategic objectives and, where appropriate, pursue the sale of such businesses. A reduced forecast for our solar pastes sales and a diminished outlook for our future opportunities in the solar market led to our decision to ~~examine strategic options for the~~sell assets related to our solar pastes ~~business.~~product line in 2013. We also evaluate and pursue acquisition opportunities that we believe will enhance our strategic position. Generally, we publicly announce divestiture and acquisition transactions only when we have entered into definitive agreements relating to those transactions.

Critical Accounting Policies and Their Application

Effective July 1, 2012, we changed our method of recognizing actuarial gains and losses for pension and other postretirement benefits for all of our defined benefit plans. Historically, we recognized actuarial gains and losses in accumulated other comprehensive income within shareholders’ equity on our consolidated balance sheets on an annual basis and amortized them into our operating results over the remaining service period of plan participants to the extent such gains and losses were outside of a corridor. We have elected to recognize actuarial gains and losses in operating results in the year in which the gains and losses occur. While the historical method of recognizing expense was acceptable, we believe the new method is preferable because it results in more timely recognition in our operating results of actuarial gains and losses as they arise. This change will improve the transparency in our operating results by more quickly recognizing the effects of economic and interest rate trends on plan obligations, investments and assumptions. These gains and losses are generally only measured annually as of December 31 and, accordingly, will be recorded during the fourth quarter of each year. In accordance with ASC Topic 250, Accounting Changes and Error Corrections, all prior periods presented in this Quarterly Report on Form 10-Q have been adjusted to apply the new method retrospectively.

There were no ~~other~~ material changes to our critical accounting policies described in “Critical Accounting Policies” within Item 7 of ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2011.~~

2012.

Impact of Newly Issued Accounting Pronouncements

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

Risk Factors

Certain statements contained here and in future filings with the SEC reflect the Company’s expectations with respect to future performance and constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment, which are difficult to predict and are beyond the control of the Company. Factors that could adversely affect our future financial performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Our exposure to interest rate risk arises from our debt portfolio. We manage this risk by controlling the mix of fixed-rate versus variable-rate debt after considering the interest rate environment and expected future cash flows. Our objective is to limit variability in earnings, cash flows and overall borrowing costs caused by changes in interest rates, while preserving operating flexibility.

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

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


	September 30, 2012			December 31, 2011			September 30, 2013			December 31, 2012
	(Dollars in thousands)						(Dollars in thousands)
Variable-rate debt and utilization of accounts receivable sales programs:
Change in annual interest expense from 1% change in interest rates	$	417		$	163		$	763		$	543
Fixed-rate debt:
Carrying amount		288,975			288,604			255,421			289,148
Fair value		282,730			292,523			267,011			270,240
Change in fair value from 1% increase in interest rates		(11,215	)		(13,071	)		(10,324	)		(10,113	)
Change in fair value from 1% decrease in interest rates		11,858			13,902			10,844			10,668
Foreign currency forward contracts:
Notional amount		287,297			249,337			231,342			250,680
Carrying amount and fair value		(4,811	)		6,225			(2,467	)		(4,758	)
Change in fair value from 10% appreciation of U.S. dollar		14,351			12,216			11,455			13,205
Change in fair value from 10% depreciation of U.S. dollar		(17,540	)		(14,930	)		(14,000	)		(16,140	)

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Ferro is committed to maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the U.S. Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) of the Exchange Act, Ferro has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. The evaluation examined those disclosure controls and procedures as of September 30, ~~2012,~~2013, 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 September 30, ~~2012.~~2013.

Changes in Internal Control over Financial Reporting

During the third quarter of 2012, we implemented in Europe and Egypt standardized business processes along with the systems to support them. These changes are part of a multi-phase, multi-year initiative to simplify, standardize and optimize our key business processes and improve management information systems tools globally. We plan to continue implementing such processes and systems in other geographic regions over the course of the next few years. In connection with these implementations, we continue to enhance the design and documentation of our internal controls over financial reporting processes to maintain suitable controls over our financial reporting.

~~Except as described above,~~2013, 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.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

There are various lawsuits and claims pending against the Company and its consolidated subsidiaries. We do not currently expect the ultimate liabilities, if any, and expenses related to such lawsuits and claims to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

Item 1A. Risk Factors

There were no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012.

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

Our ability to pay common stock dividends is limited by certain covenants in our ~~2012 Amended~~2010 Credit Facility, ~~which~~as amended, ~~our 2010 Credit Facility,~~ and the bond indenture governing the Senior Notes. The covenant in our ~~2012 Amended~~2010 Credit Facility, as amended, is the more limiting of the two covenants and is described under the ~~2010~~Revolving Credit Facility in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2011.~~2012.

The following table summarizes purchases of our common stock by the Company and affiliated purchasers during the three months ended September 30, ~~2012:~~2013:

Total Number
of Shares
~~Shares~~
Purchased⁽¹⁾

Average Price
Paid per Share

Total Number
of Shares
~~Shares~~
Purchased as
Part of
Publicly
Announced
Plans or
Programs

Maximum
Number of
Shares that
May
Yet Be
Purchased
Under the
~~the~~ Plans or
Programs

(In thousands, except for per share amounts)

July 1, ~~2012~~2013 to July 31, ~~2012~~2013

—

August 1, ~~2012~~2013 to August 31, ~~2012~~2013

—

September 1, ~~2012~~2013 to September 30, ~~2012~~2013

—

Total

—

~~(1) During the quarter, no shares were repurchased or surrendered by employees to meet minimum tax withholding obligations under current and previous long-term incentive plans.~~

⁽¹⁾	Consists of shares of common stock surrendered by employees to meet minimum tax withholding obligations under current and previous long-term incentive plans.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

SIGNATURES

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


				FERRO CORPORATION (Registrant)

Date: October ~~29, 2012~~			23, 2013
		/s/ Peter T. Thomas
				~~/s/ James F. Kirsch~~
				~~James F. Kirsch~~Peter T. Thomas
				~~Chairman,~~ President and Chief Executive Officer (Principal Executive Officer)

Date: October ~~29, 2012~~			23, 2013

				/s/ Jeffrey L. Rutherford

	Jeffrey L. Rutherford
				Vice President and Chief Financial Officer (Principal Financial Officer)

EXHIBIT INDEX

The following exhibits are filed with this report or are incorporated here by reference to a prior filing in accordance with Rule 12b-32 under the Securities and Exchange Act of 1934.


Exhibit:

3		Articles of incorporation and by-laws:

3.1		Eleventh Amended Articles of Incorporation of Ferro Corporation (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S-3, filed March 5, 2008).

3.2		Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed December 29, 1994 (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Registration Statement on Form S-3, filed March 5, 2008).

3.3		Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on June 23, 1998 (incorporated by reference to Exhibit 4.3 to Ferro Corporation’s Registration Statement on Form S-3, filed March 5, 2008).

3.4		Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on October 14, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).

3.5		Ferro Corporation Amended and Restated Code of Regulations (incorporated by reference to Exhibit ~~3.1~~3.5 to Ferro Corporation’s ~~Current~~Quarterly Report on Form ~~8-K, filed December 14, 2011).~~10-Q for the quarter ended June 30, 2013.)

4		Instruments defining rights of security holders, including indentures:

4.1		Senior Indenture, dated as of March 5, 2008, by and between Ferro Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.5 to Ferro Corporation’s Registration Statement on Form S-3, filed March 5, 2008).

4.2		First Supplemental Indenture, dated August 19, 2008, by and between Ferro Corporation and U.S. Bank National Association (with Form of 6.50% Convertible Senior Note due 2013) (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Current Report on Form 8-K, filed August 19, 2008).

4.3		Form of Indenture, by and between Ferro Corporation and Wilmington Trust FSB (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S-3ASR, filed July 27, 2010).

4.4		First Supplemental Indenture, dated August 24, 2010, by and between Ferro Corporation and Wilmington Trust FSB (with Form of 7.875% Senior Notes due 2018) (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Current Report on Form 8-K, filed August 24, 2010).

		The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.

1810		~~Letter~~Material Contracts:

10.1		Fourth Amendment to Amended and Restated Receivables Purchase Agreement, dated as of ~~Independent Registered Public Accounting Firm Regarding Change in Accounting Principle~~September 20, 2013, by and among PNC Bank, National Association, Ferro Finance Corporation and Market Street Funding LLC.

31		Certifications:

31.1		Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).

31.2		Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).

32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.

32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.

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

*	Indicates management contract or compensatory plan, contract or arrangement in which one or more Directors and/or executives of Ferro Corporation may be participants.

In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

3839


	Three months ended September 30, 2012									Nine months ended September 30, 2012
	Prior accounting method			Effect of accounting change			As reported			Prior accounting method			Effect of accounting change			As reported
	(Dollars in thousands, except per share amounts)
Net sales	$	414,840		$	—		$	414,840		$	1,362,735		$	—		$	1,362,735
Cost of sales		352,501			—			352,501			1,124,228			—			1,124,228

Gross profit		62,339			—			62,339			238,507			—			238,507
Selling, general and administrative expenses		69,397			(4,288	)		65,109			221,727			(15,421	)		206,306
Restructuring and impairment charges		198,790			—			198,790			203,829			—			203,829
Other expense (income):
Interest expense		7,101			—			7,101			20,689			—			20,689
Interest earned		(57	)		—			(57	)		(192	)		—			(192	)
Foreign currency losses, net		869			—			869			792			—			792
Miscellaneous expense, net		792			—			792			3,027			—			3,027

(Loss) income before income taxes		(214,553	)		4,288			(210,265	)		(211,365	)		15,421			(195,944	)
Income tax expense		103,934			1,539			105,473			108,226			5,392			113,618

Net (loss) income		(318,487	)		2,749			(315,738	)		(319,591	)		10,029			(309,562	)
Less: Net income attributable to noncontrolling interests		376			—			376			830			—			830

Net (loss) income attributable to Ferro Corporation common shareholders	$	(318,863	)	$	2,749		$	(316,114	)	$	(320,421	)	$	10,029		$	(310,392	)

(Loss) earnings per share attributable to Ferro Corporation common shareholders:
Basic (loss) earnings	$	(3.69	)	$	0.03		$	(3.66	)	$	(3.71	)	$	0.11		$	(3.60	)
Diluted (loss) earnings		(3.69	)		0.03			(3.66	)		(3.71	)		0.11			(3.60	)


	Three months ended September 30, 2011									Nine months ended September 30, 2011
	As originally reported			Effect of accounting change			As adjusted			As originally reported			Effect of accounting change			As adjusted
	(Dollars in thousands, except per share amounts)
Net sales	$	546,114		$	—		$	546,114		$	1,713,097		$	—		$	1,713,097
Cost of sales		442,304			—			442,304			1,374,614			—			1,374,614

Gross profit		103,810			—			103,810			338,483			—			338,483
Selling, general and administrative expenses		67,530			(1,764	)		65,766			217,896			(7,743	)		210,153
Restructuring and impairment charges		869			—			869			4,044			—			4,044
Other expense (income):
Interest expense		7,030			—			7,030			21,208			—			21,208
Interest earned		(50	)		—			(50	)		(193	)		—			(193	)
Foreign currency losses, net		1,726			—			1,726			4,049			—			4,049
Miscellaneous expense, net		64			—			64			458			—			458

Income before income taxes		26,641			1,764			28,405			91,021			7,743			98,764
Income tax expense		8,419			638			9,057			29,987			2,838			32,825

Net income		18,222			1,126			19,348			61,034			4,905			65,939
Less: Net income attributable to noncontrolling interests		40			—			40			573			—			573

Net income attributable to Ferro Corporation		18,182			1,126			19,308			60,461			4,905			65,366
Dividends on preferred stock		—			—			—			(165	)		—			(165	)

Net income attributable to Ferro Corporation common shareholders	$	18,182		$	1,126		$	19,308		$	60,296		$	4,905		$	65,201

Earnings per share attributable to Ferro Corporation common shareholders:
Basic (loss) earnings	$	0.21		$	0.01		$	0.22		$	0.70		$	0.06		$	0.76
Diluted (loss) earnings		0.21			0.01			0.22			0.69			0.06			0.75


	September 30, 2012									December 31, 2011
	Prior accounting method			Effect of accounting change			As reported			As originally reported			Effect of accounting change			As adjusted
	(Dollars in thousands)
Assets
Total assets	$	1,119,634		$	—		$	1,119,634		$	1,440,651		$	—		$	1,440,651

Liabilities and Equity
Total liabilities	$	845,490		$	—		$	845,490		$	858,157		$	—		$	858,157
Equity
Retained earnings		73,215			(95,945	)		(22,730	)		393,636			(105,974	)		287,662
Accumulated other comprehensive (loss) income		(75,312	)		95,945			20,633			(82,075	)		105,974			23,899
Other equity accounts		276,241			—			276,241			270,933			—			270,933

Total equity		274,144			—			274,144			582,494			—			582,494

Total liabilities and equity	$	1,119,634		$	—		$	1,119,634		$	1,440,651		$	—		$	1,440,651


Description	September 30,		Fair Value Measurements Using						Total Gains
Description	2012		Level 1		Level 2		Level 3		(Losses)
	(Dollars in thousands)
Assets held for use	$	2,000	$	—	$	—	$	2,000	$	(40,526	)
Assets held for sale		3,400		—		—		3,400		(10,973	)


	December 31, 2012
	Carrying			Fair Value
	Amount			Total			Level 1		Level 2			Level 3
	(Dollars in thousands)
Cash and cash equivalents	$	29,576		$	29,576		$	29,576	$	—		$	—
Loans payable		(48,599	)		(48,599	)		—		(48,599	)		—
7.875% Senior Notes		(250,000	)		(231,500	)		—		(231,500	)		—
6.50% Convertible Senior Notes, net of unamortized discounts		(34,417	)		(34,803	)		—		(34,803	)		—
Revolving credit facility		(2,596	)		(2,634	)		—		(2,634	)		—
Other long-term notes payable		(4,731	)		(3,937	)		—		(3,937	)		—
Foreign currency forward contracts, net		(4,758	)		(4,758	)		—		(4,758	)		—


Exhibit:

101		XBRL Documents:

101.INS		XBRL Instance Document**

101.SCH		XBRL Schema Document**

101.CAL		XBRL Calculation Linkbase Document**

101.LAB		XBRL Labels Linkbase Document**

101.PRE		XBRL Presentation Linkbase Document**

101.DEF		XBRL Definition Linkbase Document**

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company