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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, 2017~~March 31, 2020


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

Commission File Number 1-584

FERRO CORPORATION

(Exact name of registrant as specified in its charter)


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

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

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

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 ☐o

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 o

~~YES ☒ NO ☐~~

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


Large ~~accelerated filer~~Accelerated Filer	☒x		Accelerated ~~filer~~Filer	☐o
Non-accelerated ~~filer~~Filer	☐o	~~(Do not check if a smaller reporting company)~~	Smaller ~~reporting company~~Reporting Company	☐o
			Emerging ~~growth company~~Growth Company	☐o

If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐o

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

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $1.00	FOE	NYSE

At ~~October~~March 31, ~~2017,~~2020, there were ~~83,857,289~~82,242,817 shares of Ferro Common Stock, par value $1.00, outstanding.

Table of Contents

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	27 24
Item 3. Quantitative and Qualitative Disclosures about Market Risk	44 32
Item 4. Controls and Procedures	45 33
PART II
Item 1. Legal Proceedings	46 34
Item 1A. Risk Factors	46 34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46 35
Item 3. Defaults Upon Senior Securities	46 35
Item 4. Mine Safety Disclosures	46 35
Item 5. Other Information	46
~~Item 6. Exhibits~~	46
	35
~~Exhibit 31.1~~Item 6. Exhibits	35
~~Exhibit 31.2~~
Exhibit ~~32.1~~31.1
Exhibit ~~32.2~~31.2
Exhibit 32.1
Exhibit 32.2

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations



	Three Months Ended
	March 31,
(Dollars in thousands, except per share amounts)	2020		2019
Net sales	$	252,326	$	263,382
Cost of sales		171,588		185,523
Gross profit		80,738		77,859
Selling, general and administrative expenses		56,046		56,931
Restructuring and impairment charges		1,165		1,740
Other expense (income):
Interest expense		5,530		6,295
Interest earned		(254)		(811)
Foreign currency losses (gains), net		(1,315)		1,964
Miscellaneous expense (income), net		(1,463)		46
Income before income taxes		21,029		11,694
Income tax expense		5,117		2,893
Income from continuing operations		15,912		8,801
Income from discontinued operations, net of income taxes		221		5,077
Net income		16,133		13,878
Less: Net income attributable to noncontrolling interests		10		274
Net income attributable to Ferro Corporation common shareholders	$	16,123	$	13,604
Earnings per share attributable to Ferro Corporation common shareholders:
Basic earnings:
Continuing operations	$	0.19	$	0.10
Discontinued operations		—		0.06
	$	0.19	$	0.16
Diluted earnings:
Continuing operations	$	0.19	$	0.10
Discontinued operations		—		0.06
	$	0.19	$	0.16

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands, except per share amounts)
Net sales

$
350,012

$
288,527

$
1,019,199

$
863,955
Cost of sales

246,396

199,546

708,447

592,372
Gross profit

103,616

88,981

310,752

271,583
Selling, general and administrative expenses

65,485

55,588

186,957

166,105
Restructuring and impairment charges

1,471

26

7,713

1,694
Other expense (income):

Interest expense

7,248

5,304

19,921

15,579
Interest earned

(201)

(214)

(556)

(414)
Foreign currency losses, net

1,021

867

5,575

2,867
Loss on extinguishment of debt

—

—

3,905

—
Miscellaneous (income) expense, net

(1,726)

705

(2,264)

(2,079)
Income before income taxes

30,318

26,705

89,501

87,831
Income tax expense

7,353

6,157

23,186

22,659
Income from continuing operations

22,965

20,548

66,315

65,172
Loss from discontinued operations, net of income taxes

—

(29,222)

—

(64,464)
Net income (loss)

22,965

(8,674)

66,315

708
Less: Net income attributable to noncontrolling interests

148

210

575

589
Net income (loss) attributable to Ferro Corporation common shareholders

$
22,817

$
(8,884)

$
65,740

$
119
Earnings (loss) per share attributable to Ferro Corporation common shareholders:

Basic earnings (loss):

Continuing operations

$
0.27

$
0.24

$
0.79

$
0.78
Discontinued operations

—

(0.35)

—

(0.77)

$
0.27

$
(0.11)

$
0.79

$
0.01
Diluted earnings (loss):

Continuing operations

$
0.27

$
0.24

$
0.77

$
0.77
Discontinued operations

—

(0.35)

—

(0.77)

$
0.27

$
(0.11)

$
0.77

$
—

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

(Dollars in thousands)
Net income (loss)

$
22,965

$
(8,674)

$
66,315

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

Foreign currency translation (loss) income

(2,996)

2,680

18,081

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

104

—

104

—
Postretirement benefit liabilities (loss) gain

(33)

(2)

(21)

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

(2,925)

2,678

18,164

(1,974)
Total comprehensive income (loss)

20,040

(5,996)

84,479

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

294

191

837

450
Comprehensive income (loss) attributable to Ferro Corporation

$
19,746

$
(6,187)

$
83,642

$
(1,716)



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Net income	$	16,133	$	13,878
Other comprehensive income (loss), net of income tax:
Foreign currency translation income (loss)		(18,366)		3,508
Cash flow hedging instruments, unrealized loss		(9,040)		(4,314)
Other comprehensive loss, net of income tax		(27,406)		(806)
Total comprehensive income (loss)		(11,273)		13,072
Less: Comprehensive income (loss) attributable to noncontrolling interests		(84)		380
Comprehensive income (loss) attributable to Ferro Corporation	$	(11,189)	$	12,692

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



		September 30,		December 31,			March 31,		December 31,
		2017		2016
		(Dollars in thousands)
(Dollars in thousands)							2020		2019
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents		$	52,211	$	45,582		$	43,018	$	96,202
Accounts receivable, net			337,887		259,687			150,639		139,333
Inventories			286,848		229,847			266,275		264,476
Other receivables			50,057		37,814			63,777		69,365
Other current assets			19,533		9,087			16,838		22,373
Current assets held-for-sale								289,325		291,420
Total current assets			746,536		582,017			829,872		883,169
Other assets
Property, plant and equipment, net			288,774		262,026			295,899		302,249
Goodwill			197,819		148,296			170,778		172,209
Intangible assets, net			190,985		137,850			124,120		127,815
Deferred income taxes			106,081		106,454			100,391		98,714
Operating leased assets								17,294		20,088
Other non-current assets			45,472		47,126			78,302		72,023
Non-current assets held-for-sale								155,313		158,354
Total assets		$	1,575,667	$	1,283,769		$	1,771,969	$	1,834,621
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	18,477	$	17,310		$	8,730	$	8,703
Accounts payable			155,542		127,655			105,093		138,799
Accrued payrolls			40,950		35,859			27,697		27,447
Accrued expenses and other current liabilities			85,927		65,203			71,661		73,016
Current liabilities held-for-sale								122,366		133,780
Total current liabilities			300,896		246,027			335,547		381,745
Other liabilities
Long-term debt, less current portion			673,464		557,175			797,017		798,862
Postretirement and pension liabilities			170,199		162,941			168,216		174,021
Operating leased non-current liabilities								11,973		14,474
Other non-current liabilities			83,995		62,594			60,058		56,976
Non-current liabilities held-for-sale								37,620		38,341
Total liabilities			1,228,554		1,028,737			1,410,431		1,464,419
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 83.8 million and 83.4 million shares outstanding at September 30, 2017, and December 31, 2016, respectively			93,436		93,436
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 82.2 million and 82.0 million shares outstanding at March 31, 2020, and December 31, 2019, respectively								93,436		93,436
Paid-in capital			303,428		306,566			291,820		294,543
Retained earnings			180,430		114,690			278,139		262,016
Accumulated other comprehensive loss			(88,741)		(106,643)			(136,688)		(109,376)
Common shares in treasury, at cost			(151,900)		(160,936)			(174,911)		(180,243)
Total Ferro Corporation shareholders’ equity			336,653		247,113			351,796		360,376
Noncontrolling interests			10,460		7,919			9,742		9,826
Total equity			347,113		255,032			361,538		370,202
Total liabilities and equity		$	1,575,667	$	1,283,769		$	1,771,969	$	1,834,621

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

Ferro Corporation Shareholders

Common Shares

Accumulated

in Treasury

Other

Non-

Common

Paid-in

Retained

Comprehensive

controlling

Total

Shares

Amount

Stock

Capital

Earnings

(Loss)

Interests

Equity

(In thousands)
Balances at December 31, 2015

9,431

$
(166,020)

$
93,436

$
314,854

$
135,507

$
(61,318)

$
7,822

$
324,281
Net income

—

—

—

—

119

—

589

708
Other comprehensive (loss)

—

—

—

—

—

(1,835)

(139)

(1,974)
Purchase of treasury stock

1,175

(11,429)

—

—

—

—

—

(11,429)
Stock-based compensation transactions

(556)

15,095

—

(10,015)

—

—

—

5,080
Distributions to noncontrolling interests

—

—

—

—

—

—

(502)

(502)
Balances at September 30, 2016

10,050

(162,354)

93,436

304,839

135,626

(63,153)

7,770

316,164

Balances at December 31, 2016

9,996

(160,936)

93,436

306,566

114,690

(106,643)

7,919

255,032
Net income

—

—

—

—

65,740

—

575

66,315
Other comprehensive income

—

—

—

—

—

17,902

262

18,164
Stock-based compensation transactions

(359)

9,036

—

(3,138)

—

—

—

5,898
Change in ownership interest

—

—

—

—

—

—

2,178

2,178
Distributions to noncontrolling interests

—

—

—

—

—

—

(474)

(474)
Balances at September 30, 2017

9,637

$
(151,900)

$
93,436

$
303,428

$
180,430

$
(88,741)

$
10,460

$
347,113



	Ferro Corporation Shareholders
	Common Shares									Accumulated
	in Treasury									Other		Non-
				Common		Paid-in		Retained		Comprehensive		controlling		Total
(In thousands)	Shares	Amount		Stock		Capital		Earnings		Loss		Interests		Equity
Balances at December 31, 2019	11,431	$	(180,243)	$	93,436	$	294,543	$	262,016	$	(109,376)	$	9,826	$	370,202
Net income	—		—		—		—		16,123		—		10		16,133
Other comprehensive loss	—		—		—		—		—		(27,312)		(94)		(27,406)
Stock-based compensation transactions	(238)		5,332		—		(2,723)		—		—		—		2,609
Balances at March 31, 2020	11,193	$	(174,911)	$	93,436	$	291,820	$	278,139	$	(136,688)	$	9,742	$	361,538


	Ferro Corporation Shareholders
	Common Shares									Accumulated
	in Treasury									Other		Non-
				Common		Paid-in		Retained		Comprehensive		controlling		Total
(In thousands)	Shares	Amount		Stock		Capital		Earnings		Loss		Interests		Equity
Balances at December 31, 2018	10,433	$	(165,545)	$	93,436	$	298,123	$	255,978	$	(105,361)	$	9,218	$	385,849
Net income	—		—		—		—		13,604		—		274		13,878
Other comprehensive income (loss)	—		—		—		—		—		(912)		106		(806)
Purchase of treasury stock	1,441		(25,000)		—		—		—		—		—		(25,000)
Stock-based compensation transactions	(370)		8,422		—		(6,446)		—		—		—		1,976
Balances at March 31, 2019	11,504	$	(182,123)	$	93,436	$	291,677	$	269,582	$	(106,273)	$	9,598	$	375,897

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Months Ended

September 30,

2017

2016

(Dollars in thousands)
Cash flows from operating activities

Net cash provided by operating activities

$
34,691

$
6,742
Cash flows from investing activities

Capital expenditures for property, plant and equipment and other long lived assets

(30,134)

(18,217)
Proceeds from sale of assets

—

3,598
Proceeds from sale of equity method investment

2,268

—
Business acquisitions, net of cash acquired

(71,930)

(11,417)
Other investing

551

—
Net cash used in investing activities

(99,245)

(26,036)
Cash flows from financing activities

Net (repayments) borrowings under loans payable

(10,803)

2,606
Proceeds from revolving credit facility, maturing 2019

15,628

212,906
Principal payments on revolving credit facility, maturing 2019

(327,183)

(149,696)
Proceeds from term loan facility, maturing 2024

623,827

—
Principal payments on term loan facility, maturing 2024

(3,232)

—
Principal payments on term loan facility, maturing 2021

(243,250)

(52,250)
Proceeds from revolving credit facility, maturing 2022

69,787

—
Principal payments on revolving credit facility, maturing 2022

(42,400)

—
Principal payments on other long-term debt

(2,978)

—
Proceeds from other long-term debt

2,700

—
Payment of debt issuance costs

(12,927)

(661)
Acquisition related contingent consideration payment

(1,315)

—
Purchase of treasury stock

—

(11,429)
Other financing activities

182

416
Net cash provided by financing activities

68,036

1,892
Effect of exchange rate changes on cash and cash equivalents

3,147

(422)
Increase (decrease) in cash and cash equivalents

6,629

(17,824)
Cash and cash equivalents at beginning of period

45,582

58,380
Cash and cash equivalents at end of period

$
52,211

$
40,556
Cash paid during the period for:

Interest

$
20,594

$
15,032
Income taxes

$
16,619

$
12,929



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Cash flows from operating activities
Net cash used in operating activities	$	(71,535)	$	(67,527)
Cash flows from investing activities
Capital expenditures for property, plant and equipment and other long-lived assets		(8,316)		(23,326)
Collections of financing receivables		28,827		20,186
Business acquisitions, net of cash acquired		—		(251)
Other investing activities		745		—
Net cash provided by (used in) investing activities		21,256		(3,391)
Cash flows from financing activities
Net borrowings under loans payable		137		33
Principal payments on term loan facility - Amended Credit Facility		(2,050)		(2,050)
Proceeds from revolving credit facility - Amended Credit Facility		180,000		104,174
Principal payments on revolving credit facility - Amended Credit Facility		(180,000)		(52,866)
Purchase of treasury stock		—		(25,000)
Other financing activities		216		(414)
Net cash provided by (used in) financing activities		(1,697)		23,877
Effect of exchange rate changes on cash and cash equivalents		(1,208)		377
Decrease in cash and cash equivalents		(53,184)		(46,664)
Cash and cash equivalents at beginning of period		104,402		104,301
Cash and cash equivalents at end of period		51,218		57,637
Less: Cash and cash equivalents of discontinued operations at end of period		8,200		8,200
Cash and cash equivalents of continuing operations at end of period	$	43,018	$	49,437
Cash paid during the period for:
Interest	$	7,853	$	8,232
Income taxes	$	4,431	$	3,940

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of Ferro Corporation (“Ferro,” “we,” “us” or “the Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, the instructions to Form 10-Q, and Article 10 of Regulation S-X. These statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the periods presented. The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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

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

Operating results for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2020, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, ~~2017.~~ 2020.

During the fourth quarter of 2019, substantially all of the assets and liabilities of our Tile Coatings business were classified as held-for-sale in the accompanying consolidated balance sheets. As further discussed in Note 4, we entered into a definitive agreement to sell our Tile Coatings business which has historically been included in the Performance Coatings reportable segment. Therefore, the associated operating results, net of income tax, have been classified as discontinued operations in the accompanying consolidated statements of operations for all periods presented. Throughout this Quarterly Report on Form 10-Q, unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

Subsequent to the treatment of the Tile Coatings business as discontinued operations, the remaining businesses within Performance Coatings were included within the Performance Colors and Glass reportable segment, which as of January 1, 2020, was renamed Functional Coatings.

Certain reclassifications have been made to the prior year financial statements to conform to current year classifications. The reclassification relates to the balance sheet presentation of assets and liabilities as held for sale and statement of operations presentation of results classified as discontinued operations in relation to the Tile Coatings business transaction.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

~~In March 2016,~~This section provides a description of new accounting pronouncements ("Accounting Standard Update" or "ASU") issued by the Financial Accounting Standards Board ~~(“FASB”~~("FASB") ~~issued Accounting Standards Update (“ASU”) 2016-09,~~ ~~Compensation – Stock Compensation: (Topic 718): Improvements~~that are applicable to ~~Employee Share-Based Payment Accounting.~~ ~~ASU 2016-09 is intended to simplify several aspects~~the Company.

The following ASUs were adopted as of ~~the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities,~~January 1, 2020 and classification on the statement of cash flows. This new guidance requires all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled. Cash flow related to excess tax benefits will no longer be classified asdid not have a financing activity on the statement of cash flows but will be presented with all other income tax cash flows as an operating activity. The new guidance also provides an accounting policy election to account for award forfeitures as they occur. Finally, the updated standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and clarifies that all cash tax payments made on an employee’s behalf for withheld shares should be presented as financing activities on the statement of cash flows.

The Company adopted ASU 2016-09, in the first quarter of 2017. As a result of the adoption, tax benefits of $0.3 million were recorded in income tax expense. The Company has elected to account for award forfeitures as they occur. In addition, the Company elected to apply the presentation requirements for cash flows related to excess tax benefits prospectively. The presentation requirements for cash flows related to employee taxes paid for withheld shares had nomaterial impact on the ~~statements of cash flows since the Company has historically presented such payments as financing activities.~~ consolidated financial statements:

~~NewAccounting Standards~~

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



Standard		Description
ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, issued December, 2019 ‎		Simplifies the accounting for income taxes by removing certain exceptions and by: altering the recognition of franchise tax partially based on income; requiring evaluation of proper treatment of a step up in the tax basis of goodwill; specifying requirements regarding the allocation of tax expense to a legal entity that is not subject to tax; requiring the effect of an enacted change in tax laws or rates be reflected in the annual effective tax rate computation in the interim period that includes the enactment date, and; other minor codification improvements. ASU 2019-12 was early adopted by the Company.
ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, issued June 2016 ‎		Changes the way entities recognize impairment of financial assets by requiring immediate recognition of estimated credit losses expected to occur over the remaining life of the financial asset. Additional disclosures are required regarding an entity’s assumptions, models and methods for estimating the expected credit loss.

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~~periods within those fiscal years. The Company is in the process of assessing~~NewAccounting Standards Not Yet Adopted

We are currently evaluating the impact ~~that the adoption of this ASU will have~~ on our ~~consolidated~~ financial ~~statements.~~

~~In May 2017, the FASB issued ASU 2017-09,~~ ~~Compensation – Stock Compensation: (Topic 718): Scope of Modification Accounting.~~ ~~ASU 2017-09 provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718.~~This pronouncement is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

~~In March 2017, the FASB issued ASU 2017-07,~~ ~~Compensation – Retirement Benefits: (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Costs.~~ ASU 2017-07 requires that an employer report the service cost component in the same line item as other compensation costs arising from services rendered during the period. The other components of net benefit costs are to be presented in the income statement separately from the service costs component and outside a subtotal of income from operations. Employers will have to disclose the line(s) used to present the other components of net periodic benefit cost, if the components are not presented separately in the income statement. This pronouncement is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

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

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

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

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

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

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

~~Table of Contents~~
Standard
Description
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, issued March, 2020
Provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities through December 31, 2022.
ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, issued August, 2018
Modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years beginning after December 15, 2020 and is to be applied using a retrospective approach for all periods presented. Early adoption is permitted.

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

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

3. Revenue

Revenues disaggregated by geography and reportable segment for the three months ended March 31, 2020, follow:


(Dollars in thousands)	EMEA		United States		Asia Pacific		Latin America		Total
Functional Coatings	$	75,857	$	46,694	$	21,756	$	11,128	$	155,435
Color Solutions		37,889		41,159		9,296		8,547		96,891
Total net sales	$	113,746	$	87,853	$	31,052	$	19,675	$	252,326

Revenues disaggregated by geography and reportable segment for the three months ended March 31, 2019, follow:


(Dollars in thousands)	EMEA		United States		Asia Pacific		Latin America		Total
Functional Coatings	$	78,265	$	51,979	$	22,898	$	13,884	$	167,026
Color Solutions		35,567		43,599		8,825		8,365		96,356
Total net sales	$	113,832	$	95,578	$	31,723	$	22,249	$	263,382

4. Discontinued Operations

During ~~2014, we commenced a process to market for sale~~the fourth quarter of 2019, substantially all of the assets and liabilities of our ~~Europe-based Polymer Additives business. We determined that the criteria to classify these assets~~Tile Coatings business were classified as held-for-sale ~~under ASC Topic 360, Property, Plant and Equipment, were met at that time. On August 22, 2016, we completed~~in the ~~disposition~~accompanying consolidated balance sheets. We entered into a definitive agreement to sell our Tile Coatings business which has historically been a part of our Performance Coatings reportable segment. Therefore, the Europe-based Polymer Additives business to Plahoma Two AG, an affiliate of the LIVIA Group. The Company made a capital contribution of €12 million (approximately $13.6 million) to its subsidiaries that owned the assets prior to the close of the sale. In August 2016, prior to the sale, an impairment charge of $26.8 million was recorded under ASC Topic 360 Property, Plant and Equipment. The charge was calculated as the difference of the executed transaction price and the carrying value of the assets. The impairment charge included $1.1 million associated ~~with the reclassification of foreign currency translation loss from Accumulated other comprehensive loss (Note 17). We have classified the Europe-based Polymer Additives~~ operating results, net of income tax, have been classified as discontinued operations in the accompanying ~~condensed~~ consolidated statements of operations for ~~the three and nine months ended September 30, 2016.~~ all periods presented.

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The table below summarizes results for the ~~Europe-based Polymer Additives assets,~~Tile Coatings business for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2020 and 2019 which are reflected in our ~~condensed~~ consolidated statements of operations as discontinued operations. Interest expense has been allocated to the discontinued operations based on the ratio of net assets of ~~each~~the business to consolidated net assets excluding debt.



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Net sales	$	114,750	$	124,166
Cost of sales		86,902		100,169
Gross profit		27,848		23,997
Selling, general and administrative expenses		18,808		15,149
Restructuring and impairment charges		279		387
Interest expense		2,231		2,989
Interest earned		(24)		(15)
Foreign currency losses (gains), net		5,765		(1,226)
Miscellaneous expense, net		542		229
Income from discontinued operations before income taxes		247		6,484
Income tax expense		26		1,407
Income from discontinued operations, net of income taxes		221		5,077
Less: Net income (loss) attributable to noncontrolling interests		(23)		105
Net income attributable to Tile Coatings business	$	244	$	4,972

The following table summarizes the assets and liabilities which are classified as held-for-sale at March 31, 2020 and December 31, 2019:



	March 31,		December 31,
(Dollars in thousands)	2020		2019
Cash and cash equivalents	$	8,200	$	8,200
Accounts receivable, net		158,035		156,645
Inventories		98,502		101,127
Other receivables		21,747		22,442
Other current assets		2,841		3,006
Current assets held-for-sale		289,325		291,420
Property, plant and equipment, net		95,495		97,185
Goodwill		3		3
Amortizable intangible assets, net		39,293		39,692
Deferred income taxes		14,135		14,425
Other non-current assets		6,387		7,049
Non-current assets held-for-sale		155,313		158,354
Total assets held-for-sale	$	444,638	$	449,774

Loans payable and current portion of long-term debt	$	4,053	$	3,678
Accounts payable		84,719		96,998
Accrued payrolls		3,637		4,838
Accrued expenses and other current liabilities		29,957		28,266
Current liabilities held-for-sale		122,366		133,780
Long-term debt, less current portion		25,331		25,805
Postretirement and pension liabilities		7,629		7,473
Other non-current liabilities		4,660		5,063
Non-current liabilities held-for-sale		37,620		38,341
Total liabilities held-for-sale	$	159,986	$	172,121

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Three Months Ended

Nine Months Ended

September 30, 2016

September 30, 2016

(Dollars in thousands)
Net sales
$
3,831

$
18,481
Cost of sales

5,654

28,473
Gross loss

(1,823)

(9,992)
Selling, general and administrative expenses

588

3,094
Restructuring and impairment charges

26,843

50,902
Interest expense

49

325
Miscellaneous income

(4)

(392)
Loss from discontinued operations before income taxes

(29,299)

(63,921)
Income tax (benefit) expense

(77)

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

$
(64,464)

~~4. Acquisitions~~

~~Dip Tech Ltd.~~

~~On August 2, 2017, the Company acquired~~ ~~100% of the equity interests of~~ ~~Dip Tech Ltd. (“Dip-Tech”), a leading provider of digital printing solutions for glass coatings, for~~ ~~$77.3~~ ~~million, excluding customary adjustments. Dip-Tech is headquartered in Kfar Saba, Israel.~~ The ~~fair value of the consideration transferred was~~following table summarizes cash ~~paid at closing of $60.4 million and contingent consideration of $16.9 million.~~ ~~The Company incurred acquisition costs~~flow data relating to discontinued operations for the three ~~and nine~~ months ended ~~September 30, 2017, of $2.1 million, which is included in Selling, general~~March 31, 2020 and administrative expenses in our condensed consolidated statements of operations. The acquired business contributed net sales of $6.4 million for the three and nine months ended September 30, 2017, and net loss attributable to Ferro Corporation of $1.1 million for the three and nine months ended September 30, 2017. The net loss attributable to Ferro Corporation was driven by the amortization of inventory step up costs of $0.8 million and acquired intangible asset amortization2019:

~~Table of Contents~~



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Depreciation	$	—	$	2,927
Amortization of intangible assets		—		798
Capital expenditures		(1,147)		(4,982)
Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end		667		2,428

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

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

~~Gardenia Quimica S.A.~~

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

~~Smalti per Ceramiche, s.r.l~~

~~On April 24, 2017, the Company acquired 100% of the equity interests of S.P.C. Group s.r.l., and 100% of the equity interests of Smalti per Ceramiche, s.r.l. (“SPC”), for~~ €~~17.~~9 ~~million (approximately $19.~~4 ~~million), including the assumption of debt of~~ €5.7 million (approximately $6.2 million). SPC is a high-end tile coatings manufacturer based in Italy focused on fast-growing specialty products. SPC’s products, strong technology, design capabilities, and customer-centric business model are complementary to our Performance Coatings segment, and position us for continued growth in the high-end tile markets. The Company incurred acquisition costs for the three and nine months ended September 30, 2017, of $0.1 million and $1.3 million, respectively, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations.

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

~~Cappelle Pigments NV~~

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

The information included herein has been prepared based on the preliminary allocation of the purchase price using estimates of the fair value and useful lives of the assets acquired and liabilities assumed, which were determined with the assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. As of September 30, 2017, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $28.6 million of net working capital, $24.1 million of personal and real property, $3.5 million of goodwill and $3.5 million of a deferred tax liability on the condensed consolidated balance sheet.

~~Table of Contents~~

~~Electro-Science Laboratories, Inc.~~

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

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

~~Delta Performance Products, LLC~~

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

~~Pinturas Benicarló, S.L.~~

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

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

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

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5. Inventories



	September 30,		December 31,		March 31,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2020		2019
Raw materials	$	92,387	$	72,943	$	78,501	$	80,176
Work in process		48,131		38,859		48,996		49,717
Finished goods		146,330		118,045		138,778		134,583
Total inventories	$	286,848	$	229,847	$	266,275	$	264,476

In the production of some of our products, we use precious metals, which we obtain from financial institutions under consignment agreements with terms of one year or less. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign. These fees were ~~$0.3 million and $0.2~~$1.1 million for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively, and were $0.8 million and $0.6 million for the nine months ended September 30, 2017 and 2016, respectively.~~2019. We had on-hand precious metals owned by participants in our precious metals consignment program of ~~$36.3~~$68.8 million at ~~September 30, 2017,~~March 31, 2020, and ~~$28.7~~$66.2 million at December 31, ~~2016,~~2019, measured at fair value based on market prices for identical ~~assets and net of credits.~~assets.

6. Property, Plant and Equipment

Property, plant and equipment is reported net of accumulated depreciation of ~~$493.6~~$412.7 million at ~~September 30, 2017,~~March 31, 2020 and ~~$439.4~~$412.9 million at December 31, ~~2016.~~ 2019. As discussed in Note 4, the assets of our Tile Coatings business were classified as held-for-sale under ASC Topic 360; Property, Plant, and Equipment. As such, additional accumulated depreciation of $135.3 million at March 31, 2020 and $137.6 million at December 31, 2019 were classified as Non-current assets held for sale.

Unpaid capital expenditure liabilities, which are non-cash investing activities, were ~~$3.2~~$1.9 million at ~~September 30, 2017,~~March 31, 2020 and ~~$2.4~~$3.4 million at ~~September 30, 2016.~~ March 31, 2019.

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

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

~~Fair Value Measurements Using~~

~~Total~~

~~Description~~

~~Level 1~~

~~Level 2~~

~~Level 3~~

~~Total~~

~~(Losses)~~

~~(Dollars in thousands)~~

~~December 31, 2016~~

~~Assets held for sale~~

—

~~(50,902)~~

~~Table of Contents~~

7. Goodwill and Other Intangible Assets

Details and activity in the Company’s goodwill by segment follow:

Performance

Performance

Color

Colors and

Coatings

Solutions

Glass

Total

(Dollars in thousands)
Goodwill, net at December 31, 2016

$
28,090

$
40,421

$
79,785

$
148,296
Acquisitions

4,145
2,4

—

37,371
1,3

41,516
Foreign currency adjustments

3,062

1,582

3,363

8,007
Goodwill, net at September 30, 2017

$
35,297

$
42,003

$
120,519

$
197,819



	Functional		Color
(Dollars in thousands)	Coatings		Solutions		Total
Goodwill, net at December 31, 2019	$	121,902	$	50,307	$	172,209
Foreign currency adjustments		(1,049)		(382)		(1,431)
Goodwill, net at March 31, 2020	$	120,853	$	49,925	$	170,778

~~(1)~~

~~During the first quarter of 2017, the Company recorded a purchase price adjustment within the measurement period for goodwill related to the ESL acquisition.~~

~~(2)~~

~~During the second quarter of 2017, the Company recorded goodwill related to the SPC acquisition. Refer to Note 4 for additional details.~~

~~(3)~~

~~During the third quarter of 2017, the Company recorded goodwill related to the Dip-Tech acquisition. Refer to Note 4 for additional details.~~

~~(4)~~

~~During the third quarter of 2017, the Company recorded goodwill related to the Gardenia acquisition. Refer to Note 4 for additional details.~~


	March 31,		December 31,
(Dollars in thousands)	2020		2019
Goodwill, gross	$	229,245	$	230,676
Accumulated impairment		(58,467)		(58,467)
Goodwill, net	$	170,778	$	172,209

September 30,

December 31,

2017

2016

(Dollars in thousands)
Goodwill, gross

$
256,286

$
206,763
Accumulated impairment losses

(58,467)

(58,467)
Goodwill, net

$
197,819

$
148,296

Goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. As of ~~September 30, 2017,~~March 31, 2020, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment test.

1411

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Amortizable intangible assets consisted of the following:


	September 30,		December 31,		March 31,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2020		2019
Gross amortizable intangible assets:
Patents	$	5,334	$	5,147	$	5,394	$	5,434
Land rights		4,876		4,746		2,931		2,900
Technology/know-how and other		129,003		84,837		112,894		112,940
Customer relationships		92,678		80,153		65,618		66,454
Total gross amortizable intangible assets		231,891		174,883		186,837		187,728
Accumulated amortization:
Patents		(5,228)		(4,981)		(5,373)		(5,413)
Land rights		(2,825)		(2,698)		(1,449)		(1,378)
Technology/know-how and other		(40,723)		(34,775)		(53,411)		(50,973)
Customer relationships		(9,204)		(5,311)		(15,072)		(14,831)
Total accumulated amortization		(57,980)		(47,765)		(75,305)		(72,595)
Amortizable intangible assets, net	$	173,911	$	127,118	$	111,532	$	115,133

Indefinite-lived intangible assets consisted of the following:


	September 30,		December 31,		March 31,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2020		2019
Indefinite-lived intangibles assets:
Trade names and trademarks	$	17,074	$	10,732	$	12,588	$	12,682

8. Debt

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

September 30,

December 31,

2017

2016

(Dollars in thousands)
Loans payable

$
10,409

$
11,452
Current portion of long-term debt

8,068

5,858
Loans payable and current portion of long-term debt

$
18,477

$
17,310



	March 31,		December 31,
(Dollars in thousands)	2020		2019
Current portion of long-term debt	$	8,730	$	8,703
Current portion of long-term debt	$	8,730	$	8,703

Long-term debt consisted of the following:



	September 30,		December 31,		March 31,		December 31,
	2017		2016
	(Dollars in thousands)

Term loan facility, net of unamortized issuance costs, maturing 2021(1)	$	—	$	239,530
Term loan facility, net of unamortized issuance costs, maturing 2024(2)		641,842		—
Revolving credit facility, maturing 2019		—		311,555
Revolving credit facility, maturing 2022		27,387		—
(Dollars in thousands)					2020		2019
Term loan facility, net of unamortized issuance costs, maturing 2024⁽¹⁾					$	799,950	$	801,764
Capital lease obligations		5,292		3,720		2,315		2,305
Other notes		7,011		8,228		3,482		3,496
Total long-term debt		681,532		563,033		805,747		807,565
Current portion of long-term debt		(8,068)		(5,858)		(8,730)		(8,703)
Long-term debt, less current portion	$	673,464	$	557,175	$	797,017	$	798,862

~~Table of Contents~~

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

~~(2)~~ The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of ~~$7.7 million.~~$3.7 million at March 31, 2020, and $3.9 million at December 31, 2019.

~~2014~~Amended Credit Facility

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

Table of Contents

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

~~In conjunction with the refinancing of the Previous Credit Facility, we recorded~~2024, a charge of $3.9 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our condensed consolidated statement of operations for the nine months ended September 30, 2017.

~~2017 Credit Facility~~

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

~~The Credit Facility consists of a $400 million secured revolving line of credit with a term of five years, a $357.5~~$235 million secured term loan facility with a ~~term~~maturity of ~~seven years~~February 14, 2024 and a ~~€250~~$230 million secured ~~euro~~ term loan facility with a ~~term~~maturity of ~~seven years.~~February 14, 2024. The term loans are payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company is required, on an annual basis, to make a prepayment ~~of term loans until they are fully paid and then to the revolving loans~~ in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit ~~Facility.~~Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans.

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

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

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

The ~~interest rates applicable to the Euro~~base rate for term loans will be ~~a Euro Interbank Offered Rate (“EURIBOR”)~~the highest of (i) the federal funds rate plus an0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable ~~margin.~~margin for base rate loans is 1.25%.

The base rate for U.S. term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) syndication agent’s prime rate or (iii) the daily LIBOR rate plus 1.00%. The applicable margin for base rate loans is 1.50%.

~~The LIBOR rate for U.S. term loans shall not be less than 0.75% and the applicable margin for LIBOR rate U.S. term loans is 2.50%.~~

~~The EURIBOR rate for Euro term loans shall not be less than 0% and the applicable margin for EURIBOR rate loans is 2.75%.~~

For LIBOR rate term loans and EURIBOR rate term loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate or EURIBOR rate, as applicable, for the corresponding duration.

The LIBOR rate for term loans shall not be less than 0.0% and the applicable margin for LIBOR rate term loans is 2.25%.

For LIBOR rate term loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.

At ~~September 30, 2017,~~March 31, 2020, the Company had borrowed ~~$355.7~~$347.9 million under the ~~secured term loan facility~~Tranche B-1 Loans at an interest rate of ~~3.73% and €248.8~~3.70%, $230.3 million under the ~~secured euro term loan facility~~Tranche B-2 Loans at an interest rate of ~~2.75%~~3.70%, and $225.4 million under the Tranche B-3 Loans at an interest rate of 3.70%. At ~~September 30, 2017,~~March 31, 2020, there were no0 additional borrowings available under the ~~term loan facilities.~~ WeTranche B-1 Loans, Tranche B-2 Loans, or Tranche B-3 Loans. In connection with these borrowings, we entered into ~~interest rate~~ swap agreements in the second quarter of ~~2017. These~~

~~Table of Contents~~

~~swaps converted $150 million and~~ ~~€90 million of our term loans from variable interest rates to fixed interest rates.~~2018. At ~~September 30, 2017,~~March 31, 2020, the effective interest rate for the ~~term loan facilities~~Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, after adjusting for the interest rate swap, was ~~4.27% for the secured term loan facility~~5.05%, 2.74%, and ~~3.00% for the euro term loan facility.~~2.48%, respectively.

Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the ~~revolving credit line~~2018 Revolving Credit Facility will be, at the Company’s option, equal to either a base rate or a LIBOR rate plus, in both cases, an applicable variable margin. The variable margin will be based on the ratio of (a) the Company’s total consolidated net debt outstanding (as defined in the Amended Credit Agreement) at such time to (b) the Company’s consolidated EBITDA (as defined in the Amended Credit Agreement) computed for the period of four consecutive fiscal quarters most recently ended.

The base rate for revolving loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) syndication agent’s prime rate or (iii) the daily LIBOR rate plus 1.00%. The applicable margin for base rate loans will vary between 0.75% and 1.75%.

~~The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.75% and 2.75%.~~

For LIBOR rate revolving loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.

The base rate for revolving loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans will vary between 0.50% to 1.50%.

The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.50% and 2.50%.

For LIBOR rate revolving loans, the Company may choose to set the duration on individual borrowings for periods of one, two, three or six months, with the interest rate based on the applicable LIBOR rate for the corresponding duration.

At ~~September 30, 2017,~~March 31, 2020, there were ~~$27.4 million~~0 borrowings under the ~~revolving credit line at an interest rate of 3.48%.~~2018 Revolving Credit Facility. After reductions for outstanding letters of credit secured by these facilities, we had ~~$367.9~~$495.8 million of additional borrowings available under the revolving credit facilities at ~~September 30, 2017.~~March 31, 2020.

Table of Contents

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

Specific to the ~~revolving credit facility,~~2018 Revolving Facility, the Company is subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Amended Credit Facility agreement may be accelerated and become immediately due and payable. At ~~September 30, 2017,~~March 31, 2020, we were in compliance with the covenants of the Amended Credit Facility.

Credit Facility

On February 14, 2017, the Company entered into the Credit Facility with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes. The Credit Facility consisted of a $400 million secured revolving line of credit with a term of five years, a $357.5 million secured term loan facility with a term of seven years and a €250 million secured Euro term loan facility with a term of seven years. For further discussion of the Company’s Credit Facility, refer to Note 9 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.

International Receivable Sales Programs

We have several international programs to sell without recourse trade accounts receivable to financial institutions. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. The Company continues to service the receivables sold in exchange for a fee. The servicing fee for the three months ended March 31, 2020, was immaterial. The program, whose maximum capacity is €100 million, is scheduled to expire in December 31, 2023. Generally, at the transfer date, the Company receives cash equal to approximately 65% of the value of the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in operating activities in our consolidated statement of cash flows. The proceeds from the deferred purchase price are reflected in investing activities.

The outstanding principal amount of receivables sold under this program was $20.9 million at March 31, 2020 and $19.3 million at December 31, 2019. The carrying amount of deferred purchase price was $7.4 million at March 31, 2020 and $6.6 million at December 31, 2019 and is recorded in Other receivables. Trade accounts receivable collected to be remitted were $12.8 million at March 31, 2020 and December 31, 2019 and is recorded in Accrued expenses and other current liabilities. As discussed in Note 4, during the fourth quarter of 2019, we entered into a definitive agreement to sell our Tile Coatings business. As such, our Tile Coatings business was classified as held-for-sale. At March 31, 2020 and December 31, 2019, $48.2 million and $52.6 million, respectively, of the outstanding principal amount of receivables sold under this program pertained to the Tile Coatings business. The carrying amount of the deferred purchase price at March 31, 2020 and December 31, 2019 was $20.6 million and $20.5 million, respectively. Both are recorded in Current assets held-for-sale in our consolidated balance sheets.

Activity from these programs for the three months ended March 31, 2020 and 2019 is detailed below:



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Trade accounts receivable sold to financial institutions	$	50,537	$	9,117
Cash proceeds from financial institutions ⁽¹⁾		35,390		6,554

(1)In the three months ended March 31, 2020 and 2019, our Tile Coatings business received cash proceeds from financial institutions of $29.7 million and $29.9 million, respectively. Refer to Note 4 for additional discussion of the Tile Coatings business and its classification as discontinued operations.

Other Financing Arrangements

We maintain other lines of credit to provide global flexibility for our short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled ~~$61.8 million and $7.3~~$28.1 million at ~~September 30, 2017,~~March 31, 2020 and December 31, ~~2016, respectively.~~2019. The unused portions of these lines provided additional liquidity of ~~$43.5~~$25.0 million at ~~September 30, 2017,~~March 31, 2020 and ~~$6.7 million at~~ December 31, ~~2016.~~2019.

1714

Table of Contents

9. Financial Instruments

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



	March 31, 2020
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	43,018	$	43,018	$	43,018	$	—	$	—
Term loan facility - Amended Credit Facility ⁽¹⁾		(799,950)		(709,631)		—		(709,631)		—
Other long-term notes payable		(3,482)		(1,594)		—		(1,594)		—
Cross currency swaps		27,833		27,833		—		27,833		—
Interest rate swaps		(26,773)		(26,773)		—		(26,773)		—
Foreign currency forward contracts, net		(947)		(947)		—		(947)		—

September 30, 2017

Carrying

Fair Value

Amount

Total

Level 1

Level 2

Level 3

(Dollars in thousands)
Cash and cash equivalents

$
52,211

$
52,211

$
52,211

$
—

$
—
Loans payable

(10,409)

(10,409)

—

(10,409)

—
Term loan facility, maturing 2024(1)

(641,842)

(644,916)

—

(644,916)

—
Revolving credit facility, maturing 2022

(27,387)

(27,835)

—

(27,835)

—
Other long-term notes payable

(7,011)

(3,781)

—

(3,781)

—
Interest rate swaps - asset

298

298

—

298

—
Interest rate swaps - liability

(132)

(132)

—

(132)

—
Foreign currency forward contracts, net

52

52

—

52

—



	December 31, 2019
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	96,202	$	96,202	$	96,202	$	—	$	—
Term loan facility - Amended Credit Facility ⁽¹⁾		(801,764)		(799,750)		—		(799,750)		—
Other long-term notes payable		(3,496)		(1,557)		—		(1,557)		—
Cross currency swaps		22,111		22,111		—		22,111		—
Interest rate swaps		(14,698)		(14,698)		—		(14,698)		—
Foreign currency forward contracts, net		601		601		—		601		—

December 31, 2016

Carrying

Fair Value

Amount

Total

Level 1

Level 2

Level 3

(Dollars in thousands)
Cash and cash equivalents

$
45,582

$
45,582

$
45,582

$
—

$
—
Loans payable

(11,452)

(11,452)

—

(11,452)

—
Term loan facility, maturing 2021(1)

(239,530)

(252,052)

—

(252,052)

—
Revolving credit facility, maturing 2019

(311,555)

(318,389)

—

(318,389)

—
Other long-term notes payable

(8,228)

(7,315)

—

(7,315)

—
Foreign currency forward contracts, net

350

350

—

350

—

(1)The carrying ~~values~~value of the term loan ~~facilities are~~facility is net of unamortized debt issuance costs of ~~$7.7~~$3.7 million and ~~$3.7~~$3.9 million for the period ended ~~September 30, 2017,~~March 31, 2020, and December 31, ~~2016,~~2019, respectively.

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

Derivative Instruments

The Company may use derivative instruments to partially offset its business exposure to foreign currency and interest rate risk on expected future cash flows, on net ~~investment~~investments in certain foreign subsidiaries and on certain existing assets and liabilities. However, the Company may choose not to hedge in countries where it is not economically feasible to enter into hedging arrangements or where hedging inefficiencies exist, such as timing of transactions.

Derivatives Designated as Hedging Instruments

~~Interest rate swaps.~~ ~~To reduce our exposure to interest rate changes on our variable-rate debt, we entered into interest rate swap agreements in the second quarter of 2017. These swaps converted $150 million~~Cash Flow Hedges. For derivative instruments that are designated and ~~€90 million of our term loans from variable interest~~

~~Table of Contents~~

~~rates to fixed interest rates. These swaps~~ qualify ~~and were designated~~ as cash flow ~~hedges. The effective portions~~hedges, the gain or loss on the derivative is recorded as a component of ~~cash flow hedges are recorded in accumulated~~Accumulated other comprehensive ~~income~~loss (“~~AOCI”~~AOCL”) and ~~are~~ reclassified into earnings in the same period during which the ~~underlying~~ hedged ~~items impact~~transaction affects earnings. ~~The ineffective portions of cash flow hedges is recognized immediately into earnings.~~

The Company ~~did not have any ineffectiveness related to the~~utilizes interest rate swaps ~~during~~to limit exposure to market fluctuations on floating-rate debt.

During the ~~three~~second quarter of 2018, the Company entered into variable to fixed interest rate swaps with a maturity date of February 14, 2024. The notional amount is $313.6 million at March 31, 2020. These swaps are hedging risk associated with the Tranche B-1 Loans. These interest rate swaps are designated as cash flow hedges.As of March 31, 2020, the Company expects it will reclassify net losses of approximately $7.1million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

Table of Contents

The Company has converted a U.S. dollar denominated, variable rate debt obligation into a Euro fixed rate obligation using receive-float, pay-fixed cross currency swaps in the second quarter of 2018. These swaps are hedging currency and ~~nine months ended September 30, 2017.~~ interest rate risk associated with the Tranche B-3 Loans. These cross currency swaps are designated as cash flow hedges.The notional amount is $225.4 million at March 31, 2020, with a maturity date of February 14, 2024. As of March 31, 2020, the Company expects it will reclassify net gains of approximately $1.7 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

The amount of gain (loss) recognized in ~~AOCI~~AOCL and the amount of ~~gain~~loss (gain) reclassified into earnings for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, follow:



					Amount of Loss (Gain)
	Amount of Gain (Loss)				Reclassified from				Location of Gain (Loss)
	Recognized in AOCL				AOCL into Income				Reclassified from
(Dollars in thousands)	2020		2019		2020		2019		AOCL into Income
Interest rate swaps	$	(12,874)	$	(4,107)	$	(498)	$	178	Interest expense
Cross currency swaps		5,258		5,080		1,168		1,632	Interest expense
					$	670	$	1,810	Total Interest expense
Cross currency swap						3,622		4,944	Foreign currency losses, net
					$	3,622	$	4,944	Total Foreign currency losses, net

The total amounts of expense and the respective line items in which the effect of cash flow hedges is presented in the condensed consolidated statement of operations for the three months ended March 31, 2020 and 2019, are as follows:

Amount of Gain Recognized

Amount of Gain Reclassified

in AOCI - Effective Portion

from AOCI into Income - Effective Portion

2017

2016

2017

2016

(Dollars in thousands)
Interest rate swap

$
166

$
—

$
—

$
—


	March 31,		March 31,
(Dollars in thousands)	2020		2019
Interest expense	$	5,530	$	6,295
Foreign currency losses (gains), net		(1,315)		1,964

Net Investment Hedges. For derivatives that are designated and qualify as net investment hedges, the gain or loss on the derivative is reported as a component of the currency translation adjustment in AOCL. These cross currency swaps are designated as hedges of our net investment in European operations. Time value is excluded from the assessment of effectiveness and the amount of interest paid or received on the swaps will be recognized as an adjustment to interest expense in earnings over the life of the swaps.

In the second quarter of 2018, the Company entered into cross currency swap agreements under which we pay variable rate interest in Euros and receive variable rate interest in U.S. dollars. The notional amount is €96.0 million at March 31, 2020, with a maturity date of February 14, 2024. These swaps are hedging risk associated with the net investment in Euro denominated operations due to fluctuating exchange rates and are designated as net investment hedges. The changes in the fair value of these designated cross-currency swaps will be recognized in AOCL.

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

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

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

~~The amount of loss recognized in AOCI and the amount of loss reclassified into earnings~~income on derivative (amount excluded from effectiveness testing) for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016, respectively,~~2019, follow:

Amount of (Loss) Recognized

Amount of Loss Reclassified from

in AOCI - Effective Portion

AOCI into Income - Effective Portion

2017

2016

2017

2016

(Dollars in thousands)
Net investment hedge

$
(8,020)

$
—

$
—

$
—


									Amount of Gain
					Amount of Gain				Recognized in Income on
	Amount of Gain				Reclassified from				Derivative (Amount Excluded				Location of Gain
	Recognized in AOCL				AOCL into Income				from Effectiveness Testing)				in Earnings
(Dollars in thousands)	2020		2019		2020		2019		2020		2019
Cross currency swaps	$	2,659	$	3,737	$	—	$	—	$	780	$	1,001	Interest expense

1916

Table of Contents

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

Derivatives Not Designated as Hedging Instruments

Foreign ~~currency forward contracts.~~Currency Forward Contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not formally designated as hedges. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as Foreign currency losses, net in the condensed consolidated statements of operations. We recognized net ~~losses~~gains of ~~$1.4 million and $4.1~~$0.3 million in the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and net ~~losses~~gains of ~~$1.2 million and $5.8~~$1.5 million in the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2019, respectively, arising from the change in fair value of our financial instruments, which partially offset the related net gains and losses on international trade transactions. The notional amount of foreign currency forward contracts was ~~$212.1~~$618.0 million at ~~September 30, 2017,~~March 31, 2020 and ~~$338.2~~$625.9 million at December 31, ~~2016.~~2019.

The following table presents the effect on our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, of our foreign currency forward contracts:

Amount of (Loss)

Recognized in Earnings

Three Months Ended

September 30,

2017

2016

Location of (Loss) in Earnings

(Dollars in thousands)

Foreign currency forward contracts

$
(1,438)

$
(1,163)

Foreign currency losses, net



	Amount of Gain (Loss)
	Recognized in Earnings
	Three Months Ended
	March 31,				Location of Gain (Loss) in Earnings
(Dollars in thousands)	2020		2019
Foreign currency forward contracts	$	268	$	1,524	Foreign currency losses, net

Amount of (Loss)

Recognized in Earnings

Nine Months Ended

September 30,

2017

2016

Location of (Loss) in Earnings

(Dollars in thousands)

Foreign currency forward contracts

$
(4,149)

$
(5,848)

Foreign currency losses, net

~~Table of Contents~~

Location and Fair Value Amount of Derivative Instruments

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



	September 30,		December 31,			March 31,		December 31,
	2017		2016		Balance Sheet Location
	(Dollars in thousands)
(Dollars in thousands)						2020		2019		Balance Sheet Location
Asset derivatives:
Interest rate swaps	$	298	$	—	Other assets
Cross currency swaps						$	3,270	$	6,711	Other current assets
Cross currency swaps							24,563		15,400	Other non-current assets
Foreign currency forward contracts		620		1,854	Other current assets		1,189		1,474	Other current assets
Liability derivatives:
Interest rate swaps		(132)		—	Accrued expenses and other current liabilities	$	(7,054)	$	(3,723)	Accrued expenses and other current liabilities
Interest rate swaps							(19,719)		(10,975)	Other non-current liabilities
Foreign currency forward contracts	$	(568)	$	(1,504)	Accrued expenses and other current liabilities		(2,136)		(873)	Accrued expenses and other current liabilities

10. Income Taxes

Income tax expense for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020 was ~~$23.2~~$5.1 million, or ~~25.9%~~24.3% of pre-tax ~~income, compared with $22.7~~income. Income tax expense for the three months ended March 31, 2019 was $2.9 million, or ~~25.8%~~24.7% of pre-tax ~~income in the prior-year same period.~~income. The tax expense induring the ~~first nine~~three months ~~of 2017~~ended March 31, 2020 and ~~2016,~~March 31, 2019, as a percentage of pre-tax income, is ~~lower~~higher than the U.S. federal statutory income tax rate of ~~35%~~21% primarily as a result of foreign statutory rate differences.

In response to the COVID-19 outbreak, various global legislation was passed in March 2020. The Company is still assessing the applicability of the stimulus elements within the global legislation, however, it is not expected to have a material impact on the income taxes in the Company's consolidated financial statements.

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11. Contingent Liabilities

We have recorded environmental liabilities of ~~$6.6~~$5.7 million at ~~September 30, 2017,~~March 31, 2020 and $7.2 million at December 31, ~~2016,~~2019, for costs associated with the remediation of certain of our current or former properties that have been contaminated. The ~~liability~~balance at ~~September 30, 2017,~~March 31, 2020 and December 31, ~~2016, was~~2019, were primarily comprised of liabilities related to a non-operating facility in Brazil, and for retained environmental obligations related to a site in the United States that was part of the sale of our North American and Asian metal powders product ~~lines~~line in 2013. ~~The~~These costs include, but are not limited to, legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring, and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring, ~~and~~ the ultimate cost of required ~~remediation.~~remediation, and other circumstances.

~~There~~In November 2017, Suffolk County Water Authority filed a complaint, Suffolk County Water Authority v. The Dow Chemical Company et al., against the Company and a number of other companies in the U.S. Federal Court for the Eastern District of New York with regard to the product 1,4 dioxane. The plaintiff alleges, among other things, that the Suffolk County water supply is contaminated with 1,4 dioxane and that the defendants are ~~various lawsuits~~liable for unspecified costs of cleanup and remediation of the water supply, among other damages. The Company has not manufactured 1,4 dioxane since 2008, denies the allegations related to liability for the plaintiff’s claims, ~~pending~~and is vigorously defending this proceeding. Since December 2018, additional complaints were filed in the same court by 25 other New York municipal water suppliers and in New York State Supreme Court by one water supplier against the Company and others making substantially similar allegations regarding the contamination of their respective water supplies with 1,4 dioxane. The Company is likewise vigorously defending these additional actions. The Company currently does not expect the outcome of these proceedings to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of these proceedings due to the unpredictable nature of litigation.

In 2013, the Supreme Court in Argentina ruled favorably related to certain export taxes associated with a divested operation. The liability recorded at March 31, 2020 and December 31, 2019 is $0.5 million and $0.6 million, respectively.

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

12. Retirement Benefits

Net periodic benefit cost (credit) ~~cost~~ of our U.S. pension plans (including our unfunded nonqualified plans), non-U.S. pension plans, and postretirement health care and life insurance benefit plans for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, respectively, follow:



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans
	Three Months Ended March 31,
(Dollars in thousands)	2020		2019		2020		2019		2020		2019
Service cost	$	3	$	3	$	285	$	281	$	1	$	1
Interest cost		2,387		2,963		330		469		132		175
Expected return on plan assets		(3,708)		(3,153)		(112)		(166)		—		—
Amortization of prior service cost		—		—		(5)		5		—		—
Net periodic benefit (credit) cost	$	(1,318)	$	(187)	$	498	$	589	$	133	$	176

21Interest cost, expected return on plan assets and amortization of prior service cost are recorded in Miscellaneous expense (income), net on the condensed consolidated statement of operations.

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U.S. Pension Plans

Non-U.S. Pension Plans

Other Benefit Plans

Three Months Ended September 30,

2017

2016

2017

2016

2017

2016

(Dollars in thousands)
Service cost

$
4

$
4

$
432

$
346

$
—

$
—
Interest cost

3,666

3,937

621

914

211

236
Expected return on plan assets

(4,740)

(4,935)

(227)

(493)

—

—
Amortization of prior service cost

2

3

11

12

—

—
Net periodic benefit (credit) cost

$
(1,068)

$
(991)

$
837

$
779

$
211

$
236

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

U.S. Pension Plans

Non-U.S. Pension Plans

Other Benefit Plans

Nine Months Ended September 30,

2017

2016

2017

2016

2017

2016

(Dollars in thousands)
Service cost

$
13

$
13

$
1,259

$
1,081

$
—

$
—
Interest cost

10,997

11,812

1,801

2,808

632

708
Expected return on plan assets

(14,218)

(14,805)

(659)

(1,538)

—

—
Amortization of prior service cost

5

8

33

34

—

—
Net periodic benefit (credit) cost

$
(3,203)

$
(2,972)

$
2,434

$
2,385

$
632

$
708

13. Stock-Based Compensation

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

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

In the first ~~nine months~~quarter of ~~2017,~~2020, our Board of Directors granted ~~0.2~~0.3 million stock options, 0.2 million performance share units, and 0.2 million restricted stock units under the Plan.

We estimate the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock option grants made during the ~~nine~~three months ended ~~September 30, 2017:~~March 31, 2020:



	Stock Options
Weighted-average grant-date fair value	$	~~7.29~~ 5.28
Expected life, in years		~~6.0~~ 5.2
Risk-free interest rate		~~1.9% - 2.3~~1.4	%
Expected volatility		~~48.0% -51.5~~35.1	%

The weighted average grant date fair value of our performance share units granted in the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, was ~~$14.89.~~$14.64. We measure the fair value of performance share units based on the closing market price of our common stock on the date of the grant. These shares are evaluated each reporting period for respective attainment rates against the performance criteria.

~~Table~~The weighted-average grant date fair value of ~~Contents~~

our restricted share units granted in the three months ended March 31, 2020, was $14.64. We measure the fair value of restricted share units based on the closing market price of our common stock on the date of the grant. The restricted share units vest over three years. ~~The weighted-average grant date fair value per unit for grants made during the nine months ended September 30, 2017, was $14.73.~~

We recognized stock-based compensation expense of ~~$6.9~~$2.8 million for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020 and ~~$5.3 million for the nine months ended September 30, 2016.~~2019. At ~~September 30, 2017,~~March 31, 2020, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately ~~$9.6~~$12.8 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of ~~2020.~~2022.

14. Restructuring and ~~Cost Reduction~~Optimization Programs

Total restructuring ~~and impairment~~ charges were ~~$1.5 million and $7.7 million for the three and nine months ended September 30, 2017, respectively, and $0.0~~$1.2 million and $1.7 million for the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2020 and March 31, 2019, respectively. ~~Included~~As discussed in Note 4, our Tile Coatings business was classified as held-for-sale during the fourth quarter of 2019. As such, there were additional restructuring charges of $0.3 million and $0.4 million for the ~~nine~~three months ended ~~September 30, 2017, was an impairment charge~~March 31, 2020 and March 31, 2019 classified as Net income from discontinued operations, net of ~~$1.5 million related~~income taxes.

In the second quarter of 2019, we developed and initiated a program across the organization with the objective of realigning the business and lowering our cost structure. The program involves our global operations and certain functions and initiatives to ~~an equity method investment. The remainder~~increase operational efficiencies, some of ~~the charges relate to our restructuring and cost reduction programs,~~ which ~~are primarily related to costs~~is associated with integration of our recent ~~acquisitions, and~~acquisitions. As a result of these actions, the Company expects to incur total charges of approximately $8.0 million, substantially all of which will be for severance costs expected. The remaining activities of the program are expected to be recognized within the next 12 months. Charges associated with the program were $0.2 million for the three months ended March 31, 2020.

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The charges associated with these programs are further summarized below.



	Employee		Other		Asset				Employee		Other
	Severance		Costs		Impairment		Total
	(Dollars in thousands)
Balances at December 31, 2016	$	239	$	1,489	$	—	$	1,728
(Dollars in thousands)									Severance		Costs		Total
Balances at December 31, 2019									$	747	$	1,492	$	2,239
Restructuring charges		2,455		2,583		1,176		6,214		658		507		1,165
Cash payments		(2,555)		(1,529)		—		(4,084)		(394)		(464)		(858)
Non-cash items		64		(1,282)		(1,176)		(2,394)		(23)		(11)		(34)
Balances at September 30, 2017	$	203	$	1,261	$	—	$	1,464
Balances at March 31, 2020									$	988	$	1,524	$	2,512

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

15. Leases

The Company has leases for equipment, office space, plant sites and distribution centers. Certain of these leases include options to extend the lease and some include options to terminate the lease early. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

There are no leases that have not yet commenced that create significant rights and obligations for the Company.

The components of lease cost are shown below:



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019		Income Statement Location
Operating lease cost⁽¹⁾	$	1,259	$	1,360	Selling, general and administrative expenses
Operating lease cost⁽²⁾		2,131		2,234	Cost of sales
Finance lease cost
Amortization of right-of-use assets		72		51	Cost of sales
Interest of lease liabilities		7		3	Interest expense
Net lease cost	$	3,469	$	3,648

(1)Included in operating lease cost is $0.2 million of short-term lease costs for the three months ended March 31, 2020 and March 31, 2019 and $0.1 million of variable lease costs for the three months ended March 31, 2020 and March 31, 2019.

(2)Included in operating lease cost is $0.6 million of short-term lease costs for the three months ended March 31, 2020 and March 31, 2019 and $0.3 million and $0.2 million of variable lease costs for the three months ended March 31, 2020 and March 31, 2019, respectively.

Supplemental balance sheet information related to leases are shown below:


	March 31,		December 31,
(Dollars in thousands)	2020		2019		Balance Sheet Location
Assets
Operating leased assets	$	17,294	$	20,088	Operating leased assets
Finance leased assets ⁽¹⁾		805		859	Property, plant and equipment, net
Total leased assets	$	18,099	$	20,947
Liabilities
Current
Operating	$	5,822	$	6,515	Accrued expenses and other current liabilities
Finance		466		438	Loans payable and current portion of long-term debt
Noncurrent
Operating		11,973		14,474	Operating lease non-current liabilities
Finance		1,849		1,867	Long-term debt, less current portion
Total lease liabilities	$	20,110	$	23,294

(1)Finance leases are net of accumulated depreciation of $3.4 million and $3.4 million for March 31, 2020 and December 31, 2019, respectively.

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~~15.~~Supplemental cash flow information related to leases are shown below:



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	7	$	3
Operating cash flows from operating leases		2,019		2,260
Financing cash flows from finance leases		65		45
Leased assets obtained in exchange for new finance lease liabilities		104		129
Leased assets obtained in exchange for new operating lease liabilities		1,499		24,035


			March 31,
			2020
Weighted-average remaining lease term (years)
Operating leases			4.1
Finance leases			5.9
Weighted-average discount rate
Operating leases			4.0%
Finance leases			5.3%

Maturities of lease liabilities are shown below as of March 31, 2020:


(Dollars in thousands)	Capital ‎Leases		Operating ‎Leases
Remaining in 2020	$	567	$	5,996
2021		520		5,666
2022		504		3,246
2023		448		1,929
2024		346		1,044
2025		279		789
Thereafter		418		1,688
Net minimum lease payments	$	3,082	$	20,358
Less: interest		767		2,563
Present value of lease liabilities	$	2,315	$	17,795

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16. Earnings Per Share

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



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
(Dollars in thousands, except per share amounts)									2020		2019
Basic earnings per share computation:
Income from continuing operations									$	15,912	$	8,801
Less: Net income attributable to noncontrolling interests from continuing operations										33		169
Net income attributable to Ferro Corporation from continuing operations										15,879		8,632
Income from discontinued operations, net of income taxes										221		5,077
Less: Net income attributable to noncontrolling interests from discontinued operations										(23)		105
Net income attributable to Ferro Corporation from discontinued operations										244		4,972
Total									$	16,123	$	13,604
	2017		2016		2017		2016
	(Dollars in thousands, except per share amounts)
Basic earnings per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119
Adjustment for loss from discontinued operations		—		29,222		—		64,464
Total	$	22,817	$	20,338	$	65,740	$	64,583
Weighted-average common shares outstanding		83,735		83,268		83,646		83,263		82,096		82,480
Basic earnings per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.27	$	0.24	$	0.79	$	0.78	$	0.19	$	0.10
Diluted earnings per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119
Adjustment for loss from discontinued operations		—		29,222		—		64,464
Net income attributable to Ferro Corporation common shareholders									$	15,879	$	8,632
Adjustment for income from discontinued operations										244		4,972
Total	$	22,817	$	20,338	$	65,740	$	64,583	$	16,123	$	13,604

Weighted-average common shares outstanding		83,735		83,268		83,646		83,263		82,096		82,480
Assumed exercise of stock options		808		544		671		499		297		596
Assumed exercise of deferred stock unit conditions		—		80		—		—
Assumed satisfaction of restricted stock unit conditions		424		473		383		419		85		145
Assumed satisfaction of performance stock unit conditions		483		111		474		58
Assumed satisfaction of performance share unit conditions										44		80
Weighted-average diluted shares outstanding		85,450		84,476		85,174		84,239		82,522		83,301
Diluted earnings per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.27	$	0.24	$	0.77	$	0.77	$	0.19	$	0.10

The number of anti-dilutive ~~or unearned~~ shares ~~was 1.6 million and 1.8~~were 3.0 million for the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2020 and ~~2.3 million and 2.5~~2.2 million for the three ~~and nine~~ months ended ~~September 30, 2016, respectively.~~March 31, 2019. These shares ~~were~~are excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.

~~16.~~17. Share Repurchase Program

The Company’s Board of Directors has approved a share repurchase ~~programs,~~program under which the Company is authorized to repurchase up to ~~$100~~$150 million of the Company’s outstanding shares of ~~Common Stock~~common stock on the open market, including through a Rule 10b5-1 plan, or in privately negotiated transactions.

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

~~For~~As of March 31, 2020, $46.2 million remains authorized under the ~~nine months ended September 30, 2016,~~program for the ~~Company repurchased 1,175,437~~ ~~shares~~repurchase of common ~~stock at an average price of $9.~~72 ~~per share for a total cost of $11.4 million. As of September 30, 2017, Company shares having an aggregate value of up to $50.0 million may still be purchased under the programs.~~stock.

2422

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~~17.~~18. Accumulated Other Comprehensive ~~Income (Loss)~~Loss

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

Three Months Ended September 30,

Postretirement

Net Gain

Benefit Liability

Translation

on Cash

Other

Adjustments

Adjustments

Flow Hedges
Adjustments

Total

(Dollars in thousands)
Balances at June 30, 2016

$
1,106

$
(66,886)

$
—

$
(70)

$
(65,850)
Other comprehensive income (loss) before reclassifications, before tax

—

1,584

—

—

1,584
Reclassification to earnings:

Postretirement benefit liabilities loss, before tax

(2)

—

—

—

(2)
Foreign currency translation adjustment, before tax(1)

—

1,115

—

—

1,115
Current period other comprehensive income (loss), before tax

(2)

2,699

—

—

2,697
Tax effect

—

—

—

—

—
Current period other comprehensive income (loss), net of tax

(2)

2,699

—

—

2,697
Balances at September 30, 2016

$
1,104

$
(64,187)

$
—

$
(70)

$
(63,153)

Balances at June 30, 2017

$
1,153

$
(86,753)

$
—

$
(70)

$
(85,670)
Other comprehensive income (loss) before reclassifications, before tax

—

(141)

166

—

25
Reclassification to earnings:

Postretirement benefit liabilities income, before tax

(39)

—

—

—

(39)
Current period other comprehensive income (loss), before tax

(39)

(141)

166

—

(14)
Tax effect

(6)

3,001

62

—

3,057
Current period other comprehensive income (loss), net of tax

(33)

(3,142)

104

—

(3,071)
Balances at September 30, 2017

$
1,120

$
(89,895)

$
104

$
(70)

$
(88,741)



	Three Months Ended March 31,
		Postretirement		Foreign		Net Gain (Loss)
		Benefit Liability		Currency		on Cash Flow
(Dollars in thousands)		Adjustments		Items		Hedges		Total
Balances at December 31, 2018		$	1,126	$	(103,190)	$	(3,297)	$	(105,361)
Other comprehensive income before reclassifications, before tax			—		4,036		973		5,009
Reclassification to earnings:
Cash flow hedge loss, before tax			—		—		(6,754)		(6,754)
Current period other comprehensive income (loss), before tax			—		4,036		(5,781)		(1,745)
Tax effect			—		634		(1,467)		(833)
Current period other comprehensive income (loss), net of tax			—		3,402		(4,314)		(912)
Balances at March 31, 2019		$	1,126	$	(99,788)	$	(7,611)	$	(106,273)

Balances at December 31, 2019		$	1,206	$	(97,575)	$	(13,007)	$	(109,376)
Other comprehensive loss before reclassifications, before tax			—		(17,837)		(7,616)		(25,453)
Reclassification to earnings:
Cash flow hedge loss, before tax			—		—		(4,292)		(4,292)
Current period other comprehensive loss, before tax			—		(17,837)		(11,908)		(29,745)
Tax effect			—		435		(2,868)		(2,433)
Current period other comprehensive loss, net of tax			—		(18,272)		(9,040)		(27,312)
Balances at March 31, 2020		$	1,206	$	(115,847)	$	(22,047)	$	(136,688)

Nine Months Ended September 30,

Postretirement

Net Gain

Benefit Liability

Translation

on Cash

Other

Adjustments

Adjustments

Flow Hedges

Adjustments

Total

(Dollars in thousands)
Balances at December 31, 2015

$
811

$
(62,059)

$
—

$
(70)

$
(61,318)
Other comprehensive income (loss) before reclassifications, before tax

—

(3,243)

—

—

(3,243)
Reclassification to earnings:

Postretirement benefit liabilities income, before tax

320

—

—

—

320
Foreign currency translation adjustment, before tax(1)

—

1,115

—

—

1,115
Current period other comprehensive income (loss), before tax

320

(2,128)

—

—

(1,808)
Tax effect

27

—

—

—

27
Current period other comprehensive income (loss), net of tax

293

(2,128)

—

—

(1,835)
Balances at September 30, 2016

$
1,104

$
(64,187)

$
—

$
(70)

$
(63,153)

Balances at December 31, 2016

$
1,141

$
(107,714)

$
—

$
(70)

$
(106,643)
Other comprehensive income (loss) before reclassifications, before tax

—

20,820

166

—

20,986
Reclassification to earnings:

Postretirement benefit liabilities income, before tax

(30)

—

—

—

(30)
Current period other comprehensive income (loss), before tax

(30)

20,820

166

—

20,956
Tax effect

(9)

3,001

62

—

3,054
Current period other comprehensive income (loss), net of tax

(21)

17,819

104

—

17,902
Balances at September 30, 2017

$
1,120

$
(89,895)

$
104

$
(70)

$
(88,741)

19. Reporting for Segments

~~Table~~As discussed in Note 4, during the fourth quarter of ~~Contents~~

~~(1) Includes~~2019, we entered into a ~~release~~definitive agreement to sell our Tile Coatings business which has historically been the majority of ~~accumulated foreign currency translation of $1.1 million related to the Company’s sale~~our Performance Coatings reportable segment. Substantially all of the ~~Europe-based Polymer Additives~~assets and liabilities of our Tile Coatings business ~~(Note 3), which is~~were classified as held-for-sale in the accompanying consolidated balance sheets and results are included within discontinued operation in ~~Loss from discontinued operations, net of income taxes in our condensed~~the consolidated ~~statements~~statement of operations for all periods presented. The retained assets, liabilities and operations of the ~~three and nine months ended September 30, 2016.~~Performance Coatings reportable segment are reflected within our Functional Coatings reportable segment.

~~18. Reporting for Segments~~

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

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



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016
	(Dollars in thousands)
Performance Coatings	$	146,238	$	130,453	$	424,549	$	399,166
Performance Colors and Glass		110,578		92,793		320,733		276,896
(Dollars in thousands)									2020		2019
Functional Coatings									$	155,435	$	167,026
Color Solutions		93,196		65,281		273,917		187,893		96,891		96,356
Total net sales	$	350,012	$	288,527	$	1,019,199	$	863,955	$	252,326	$	263,382

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



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2017		2016		2017		2016
	(Dollars in thousands)
Performance Coatings	$	35,470	$	33,636	$	109,205	$	104,985
Performance Colors and Glass		37,880		32,282		115,385		100,825
(Dollars in thousands)									2020		2019
Functional Coatings									$	47,817	$	48,230
Color Solutions		31,044		23,178		87,642		65,868		33,787		28,396
Other cost of sales		(778)		(115)		(1,480)		(95)		(866)		1,233
Total gross profit		103,616		88,981		310,752		271,583		80,738		77,859
Selling, general and administrative expenses		65,485		55,588		186,957		166,105		56,046		56,931
Restructuring and impairment charges		1,471		26		7,713		1,694		1,165		1,740
Other expense, net		6,342		6,662		26,581		15,953		2,498		7,494
Income before income taxes	$	30,318	$	26,705	$	89,501	$	87,831	$	21,029	$	11,694

~~19. Subsequent Events~~

On November 1, 2017, the Company acquired 100% of the equity interests of Endeka Group, a global producer of high-value coatings and key raw materials for €63.8 million (approximately $74.3 million), excluding customary adjustments and fees.

~~The operating results related to the Endeka Group acquisition will be included in the Company’s condensed consolidated financial statements commencing on the date of the acquisition.~~

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

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

Overview

Net sales for the three months ended ~~September 30, 2017, increased~~March 31, 2020, decreased by ~~$61.5~~$11.1 million, or ~~21.3%~~4.2%, compared with the prior-year same period. ~~The~~Net sales decreased by $11.6 million in Functional Coatings, which was partially mitigated by an increase ~~in net sales was driven by higher sales~~of $0.5 million in Color ~~Solutions, Performance Colors and Glass and Performance Coatings of $27.9 million, $17.8 million and $15.8 million, respectively.~~Solutions. During the three months ended ~~September 30, 2017,~~March 31, 2020, gross profit increased ~~$14.6~~$2.9 million, or ~~16.4%~~3.7%, compared with the prior-year same period; as a percentage of net sales, it ~~decreased~~increased approximately ~~120~~240 basis points to ~~29.6%~~32.0%. Our total gross profit for the first quarter of 2020 was $80.7 million, compared with $77.9 million for the three months ended March 31, 2019. The increase in gross profit was attributable to higher gross profit ~~across all of our segments, with increases~~ in Color Solutions ~~Performance Colors and Glass and Performance~~of $5.4 million, partially offset by lower gross profit in Functional Coatings of ~~$7.9 million, $5.6 million and $1.8 million, respectively.~~ $0.4 million.

For the three months ended ~~September 30, 2017,~~March 31, 2020, selling, general and administrative (“SG&A”) expenses ~~increased $9.9~~decreased $0.9 million, or ~~17.8%~~1.6%, compared with the prior-year same period. ~~The increase was primarily driven by $6.7 million~~As a percentage of ~~expenses related~~net sales, it increased approximately 60 basis points to ~~acquisitions completed within the last year.~~22.2%.

For the three months ended ~~September 30, 2017,~~March 31, 2020, net income was ~~$23.0~~$16.1 million, compared with net ~~loss~~income of ~~$8.7~~$13.9 million for the prior-year same period, and net income attributable to common shareholders was ~~$22.8~~$16.1 million, compared with net ~~loss~~income attributable to common shareholders of ~~$8.9~~$13.6 million for the prior-year same period. Income from continuing operations was ~~$23.0~~$15.9 million for the three months ended ~~September 30, 2017,~~March 31, 2020, compared with ~~$20.5~~$8.8 million in 2019.

Outlook

While the novel coronavirus (“COVID-19”) pandemic did not have a significant effect on the Company’s reported results for the ~~three months ended September 30, 2016. Our total gross profit for the third~~first quarter of ~~2017 was $103.6 million, compared with $89.0 million for the three months ended September 30, 2016.~~

~~Outlook~~

~~For the remainder of 2017,~~2020, we expect a more negative impact on our business and results of operations in the second quarter of 2020 and perhaps thereafter. Having said that, we expect the impact of COVID-19 to be less severe in the future than it might otherwise be because many Ferro products and services support niche markets in “critical” or “essential” industries such as healthcare, food and beverage, energy, information technology, and defense, and these industries generally have been allowed by governments around the world to continue operating in spite of the pandemic. The extent to ~~benefit from strong organic growth in~~which our ~~businesses, in addition to contributions from recent acquisitions. With respect to gross margins, we could continue to~~operations will be impacted by the ~~raw material headwinds that have been experienced throughout~~pandemic will depend largely on future developments, including the ~~year thus far, which~~severity of the pandemic and actions by government authorities to contain it or treat its impact, as more fully discussed below.

As we would expect to cover through pricing actions, product reformations and other optimization actions, with some lag. We expect Selling, general and administrative costs to continue to leverage favorably as a percentage of Net sales, compared with the prior year. Further, as we movemanage through the ~~balance of~~challenges caused by the ~~year,~~COVID-19 pandemic, controlling what we ~~will continue to monitor current~~can and ~~near-term increasing customer demand levels, and align our production and inventories accordingly.~~

Weplanning for contingencies, we remain focused on executing our key strategic priorities. These include advancing our optimization initiatives, the ~~integration~~preparation for and completion of the sale of our ~~recent acquisitions~~Tile Coatings business and ~~achieving~~continuing to develop innovative products that our customers need.

We anticipate continued uncertainty in macroeconomic conditions going forward. This may result in volatility in foreign exchange rates and in interest rates, which could impact our reported results through the ~~identified synergies.~~course of 2020.

COVID-19

In March 2020, the World Health Organization declared the outbreak of COVID-19 to be a global pandemic and recommended containment and mitigation measures worldwide. COVID-19 has spread through Asia, Europe, the Middle East and North and South America, all regions in which we have operations. In response, government authorities have issued an evolving set of mandates, including requirements to shelter-in-place, curtail business operations, restrict travel, and avoid physical interaction. These mandates have substantially disrupted normal business activities in many segments of the global economy. We are monitoring the impact of the outbreak of COVID-19 on our business, including how it may impact our customers, employees, supply chain, and distribution network.

Our manufacturing facilities generally have continued to operate since the pandemic was declared in early March 2020, with most sites experiencing only relatively brief or no suspensions of activity. While COVID-19 did not have a significant effect on our reported results for the first quarter of 2020, we are unable to reliably predict the ultimate impact that it may have on our business, future results of operations, financial position or cash flows. We anticipate an adverse impact of COVID-19 on the U.S and global economies and expect a negative impact on our business in the second quarter and possibly in subsequent quarters, primarily as a result of reduced demand in certain of our end markets, such as the automotive sector. In addition, we may be required to take further precautionary and preemptive actions to comply with orders or directives of national, state or local authorities, and we may take additional actions that we determine to be in the best interests of our employees, customers, suppliers and other stakeholders, which could disrupt or restrict our ability to operate our facilities and travel to our domestic and international sites. The extent to which our operations will be impacted by COVID-19 in the remaining quarters of 2020 depends on a variety of factors, including, the duration, severity and scope of the pandemic, which remain uncertain.

Table of Contents

We believe we are well positioned from a liquidity perspective to manage through the effects of the COVID-19 pandemic. Subsequent to the end of the first quarter, we borrowed $180.0 million under our revolving credit facility out of an abundance of caution associated with the pandemic. As of May 5, 2020, we had liquidity of approximately $550.0 million, consisting of cash and availability under our various credit facilities, primarily our revolving credit facility. We are in compliance with the covenants under our various credit facilities and expect to remain in compliance. We will continue to ~~drive innovation~~evaluate and ~~optimization throughout our business.~~take action to preserve liquidity and generate cash flow during the crisis, including by limiting capital expenditures and discretionary spending, as appropriate and where possible.

Factors that could adversely affect our future performance include those described under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q and Item 1A of Part I of ~~our~~the Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.
‎

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Table of Contents

Results of Operations - Consolidated

Comparison of the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~ 2019

For the three months ended ~~September 30, 2017,~~March 31, 2020, net income from continuing operations was ~~$23.0~~$15.9 million, compared with ~~$20.5 million income from continuing operations for the three months ended September 30, 2016. Net income was $23.0 million, compared with net loss of $8.7~~$8.8 million for the three months ended ~~September 30, 2016.~~March 31, 2019. For the three months ended ~~September 30, 2017,~~March 31, 2020, net income attributable to common shareholders was ~~$22.8~~$16.1 million, or earnings per share of ~~$0.27,~~$0.19, compared with net ~~loss~~income attributable to common shareholders of ~~$8.9~~$13.6 million, or ~~loss~~earnings per share of ~~$0.11,~~$0.16, for the three months ended ~~September 30, 2016.~~March 31, 2019.

Net Sales



	Three Months Ended										Three Months Ended
	September 30,										March 31,
	2017			2016			$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)											2020			2019			$ Change		% Change
Net sales	$	350,012		$	288,527		$	61,485	21.3	%	$	252,326		$	263,382		$	(11,056)	(4.2)	%
Cost of sales		246,396			199,546			46,850	23.5	%		171,588			185,523			(13,935)	(7.5)	%
Gross profit	$	103,616		$	88,981		$	14,635	16.4	%	$	80,738		$	77,859		$	2,879	3.7	%
Gross profit as a % of net sales		29.6	%		30.8	%						32.0	%		29.6	%

Net sales ~~increased~~decreased by ~~$61.5~~$11.1 million, or ~~21.3%~~4.2%, infor the three months ended ~~September 30, 2017,~~March 31, 2020, compared with the prior-year same period, driven by lower sales in Functional Coatings of $11.6 million, partially offset by higher sales in Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$27.9 million, $17.8 million and $15.8 million, respectively.~~$0.5 million. The ~~increase~~decrease in net sales was driven ~~in part~~ by ~~acquisitions including Cappelle, which contributed sales~~lower volume and mix of ~~$17.8 million, ESL, which contributed sales of $10.5~~$6.2 million and ~~SPC, which contributed sales~~unfavorable foreign currency impacts of ~~$7.8~~$5.0 million, ~~each~~partially mitigated by higher product pricing of ~~which was acquired after the third quarter of 2016. The increase in net sales was also driven by organic growth, with Color Solutions growing $10.1 million and Performance Coatings growing $7.2~~$0.1 million.

Gross Profit

Gross profit increased ~~$14.6~~$2.9 million, or ~~16.4%~~3.7%, infor the three months ended ~~September 30, 2017,~~March 31, 2020, compared with the prior-year same period, and as a percentage of net sales, it ~~decreased 120~~increased approximately 240 basis points to ~~29.6%~~32.0%. The increase in gross profit was primarily attributable to ~~increases across all of our segments, with increases~~an increase in Color Solutions ~~Performance Colors and Glass and Performance~~of $5.4 million, partially offset by a decrease in Functional Coatings of ~~$7.9 million, $5.6 million and $1.8 million, respectively.~~$0.4 million. The increase in gross profit was primarily driven by ~~acquisitions~~lower raw material costs of ~~$11.9 million, favorable product pricing of $6.0~~$4.5 million, lower manufacturing costs of ~~$4.7~~$3.9 million and ~~favorable~~higher product pricing of $0.1 million, partially offset by unfavorable sales volume and mix of $4.1 million, unfavorable foreign currency impacts of ~~$1.6 million, partially offset by higher raw material costs of $8.6 million and lower sales volumes and mix of $0.3~~$1.2 million.

Geographic Revenues

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



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2020		2019		$ Change		% Change
Geographic Revenues on a sales origination basis
Europe	$	169,718	$	124,801	$	44,917	36.0	%
EMEA									$	113,746	$	113,832	$	(86)	(0.1)	%
United States		88,391		77,211		11,180	14.5	%		87,853		95,578		(7,725)	(8.1)	%
Asia Pacific		50,864		46,646		4,218	9.0	%		31,052		31,723		(671)	(2.1)	%
Latin America		41,039		39,869		1,170	2.9	%		19,675		22,249		(2,574)	(11.6)	%
Net sales	$	350,012	$	288,527	$	61,485	21.3	%	$	252,326	$	263,382	$	(11,056)	(4.2)	%

The ~~increase~~decline in net sales of ~~$61.5~~$11.1 million, compared with the prior-year same period, was driven by ~~an increase~~a decrease in sales from all regions. The ~~increase~~decrease in sales from ~~Europe~~the United States was ~~primarily~~ attributable to lower sales in Functional Coatings and Color Solutions of $5.3 million and $2.4 million, respectively. The decrease in sales from Latin America was attributable to lower sales in Functional Coatings of $2.8 million, partially offset by higher sales in Color Solutions ~~Performance Coatings and Performance Colors and Glass~~ of ~~$17.9 million, $14.7 million and $12.3 million, respectively.~~$0.2 million. The ~~increase~~decrease in sales from ~~the United~~

~~Table of Contents~~

~~States~~Asia Pacific was attributable to lower sales in Functional Coatings of $1.1 million, partially offset by higher sales in Color Solutions ~~and Performance Colors and Glass~~ of ~~$7.9 million and $3.9 million, respectively.~~$0.5 million. The ~~increase~~decrease in sales from ~~Latin America and Asia Pacific~~EMEA was attributable to lower sales in Functional Coatings of $2.4 million, partially offset by higher sales ~~across all segments.~~in Color Solutions of $2.3 million.

Table of Contents

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

Three Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Geographic Revenues on a shipped-to basis

Europe

$
161,764

$
122,986

$
38,778

31.5
%
Asia Pacific

75,274

62,812

12,462

19.8
%
United States

65,356

60,172

5,184

8.6
%
Latin America

47,618

42,557

5,061

11.9
%
Net sales

$
350,012

$
288,527

$
61,485

21.3
%

Selling, General and Administrative Expenses

The following table includes SG&A components with significant changes between ~~2017~~2020 and ~~2016.~~2019.



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
Personnel expenses	$	36,364	$	29,634	$	6,730	22.7	%
(Dollars in thousands)									2020		2019		$ Change		% Change
Personnel expenses (excluding R&D personnel expenses)									$	22,749	$	26,179	$	(3,430)	(13.1)	%
Research and development expenses										10,087		10,980		(893)	(8.1)	%
Business development										535		1,858		(1,323)	(71.2)	%
Incentive compensation		3,637		2,153		1,484	68.9	%		2,120		1,288		832	64.6	%
Stock-based compensation		1,510		1,442		68	4.7	%		2,759		2,769		(10)	(0.4)	%
Intangible asset amortization										1,678		2,343		(665)	(28.4)	%
Pension and other postretirement benefits		(20)		(109)		89	(81.7)	%		158		245		(87)	(35.5)	%
Bad debt		289		797		(508)	(63.7)	%		136		6		130	NM	%
Business development		4,649		3,660		989	27.0	%
Intangible asset amortization		2,898		1,555		1,343	86.4	%
All other expenses		16,158		16,456		(298)	(1.8)	%		15,824		11,263		4,561	40.5	%
Selling, general and administrative expenses	$	65,485	$	55,588	$	9,897	17.8	%	$	56,046	$	56,931	$	(885)	(1.6)	%

SG&A expenses were ~~$9.9~~$0.9 million ~~higher~~lower in the three months ended ~~September 30, 2017,~~March 31, 2020, compared with the prior-year same period. The ~~higher~~lower SG&A expenses compared ~~with~~to the prior-year same period are primarily driven by ~~expenses associated with businesses acquired within the last year of approximately $6.7 million. The acquisitions were the primary driver of the increase in~~lower personnel expenses, business development expenses and ~~accounted for the entire increase in intangible asset amortization. The increase in incentive compensation of $1.5 million was driven~~research and development expenses, partially offset by ~~the Company’s performance relative~~higher miscellaneous expenses, primarily related to ~~targets established for certain awards compared with the prior-year same period.~~increased consulting and legal services.

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

~~Table of Contents~~


	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019		$ Change		% Change
Strategic services	$	25,616	$	28,259	$	(2,643)	(9.4)	%
Functional services		25,551		24,615		936	3.8	%
Incentive compensation		2,120		1,288		832	64.6	%
Stock-based compensation		2,759		2,769		(10)	(0.4)	%
Selling, general and administrative expenses	$	56,046	$	56,931	$	(885)	(1.6)	%

Three Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Strategic services

$
34,408

$
29,385

$
5,023

17.1
%
Functional services

25,930

22,608

3,322

14.7
%
Incentive compensation

3,637

2,153

1,484

68.9
%
Stock-based compensation

1,510

1,442

68

4.7
%
Selling, general and administrative expenses

$
65,485

$
55,588

$
9,897

17.8
%

Restructuring and Impairment Charges



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2020		2019		$ Change		% Change
Employee severance	$	660	$	20	$	640	3,200.0	%	$	658	$	1,020	$	(362)	(35.5)	%
Other restructuring costs		811		6		805	13,416.7	%		507		720		(213)	(29.6)	%
Restructuring and impairment charges	$	1,471	$	26	$	1,445	5,557.7	%	$	1,165	$	1,740	$	(575)	(33.0)	%

Restructuring and impairment charges ~~increased~~decreased in the ~~third quarter of 2017~~three months ended March 31, 2020, compared with the prior-year same period. The ~~increase was~~decrease primarily ~~due~~relates to ~~actions taken~~lower costs associated with optimization programs in ~~connection with recent acquisitions designed to achieve our targeted synergies.~~the first three months of 2020.

Interest Expense



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2020		2019		$ Change		% Change
Interest expense	$	6,326	$	4,967	$	1,359	27.4	%	$	5,846	$	6,347	$	(501)	(7.9)	%
Amortization of bank fees		943		347		596	171.8	%		929		900		29	3.2	%
Interest swap amortization										(316)		(316)		—	—	%
Interest capitalization		(21)		(10)		(11)	110.0	%		(929)		(636)		(293)	46.1	%
Interest expense	$	7,248	$	5,304	$	1,944	36.7	%	$	5,530	$	6,295	$	(765)	(12.2)	%

Interest expense ~~increased~~decreased in the ~~third quarter of 2017~~three months ended March 31, 2020, compared with the prior-year same period. The ~~increase~~decrease in interest expense was due to ~~an increase~~decreases in the average long-term debt balance and the average interest rate and an increase in capitalized interest during the three months ended ~~September 30, 2017,~~March 31, 2020, compared with the prior-year same ~~period and an increase~~period.

Table of the amortization of debt issuance costs associated with the 2017 Credit Facility, partially offset by a favorable average borrowing rate as a result of the refinancing completed in the first quarter of 2017.Contents

Income Tax Expense

~~During the third quarter of 2017, income~~Income tax expense for the three months ended March 31, 2020 was ~~$7.4~~$5.1 million, or 24.3% of pre-tax income. ~~In the third quarter of 2016, we recorded~~Income tax expense ~~of $6.2~~for the three months ended March 31, 2019 was $2.9 million, or ~~23.1%~~24.7% of pre-tax income. The tax expense infor the ~~third quarter of 2017~~three months ended March 31, 2020 and ~~2016,~~March 31, 2019, as a percentage of pre-tax income, is ~~lower~~higher than the U.S. federal statutory income tax rate of ~~35%,~~21% primarily as a result of foreign statutory rate differences.

~~Table of Contents~~

Results of Operations - Segment Information

Comparison of the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~ 2019

~~Performance~~Functional Coatings



	Three Months Ended											Change due to
	March 31,												Volume /
(Dollars in thousands)	2020			2019			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	155,435		$	167,026		$	(11,591)	(6.9)	%	$	(43)	$	(8,023)	$	(3,525)	$	—
Segment gross profit		47,817			48,230			(413)	(0.9)	%		(43)		(3,434)		(1,038)		4,102
Gross profit as a % of segment net sales		30.8	%		28.9	%

Three Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions
Other

(Dollars in thousands)

Segment net sales

$
146,238

$
130,453

$
15,785

12.1
%

$
2,683

$
3,428

$
1,043

$
8,631

$
—
Segment gross profit

35,470

33,636

1,834

5.5
%

2,683

967

697

2,651

(5,164)
Gross profit as a % of segment net sales

24.3
%

25.8
%

Net sales ~~increased in Performance Coatings~~decreased compared with the prior-year same period, primarily driven by lower sales ~~from SPC of $7.8 million, and increases~~ in ~~sales of colors, frits and glazes,~~industrial, automotive and porcelain enamel products of ~~$2.9~~$5.1 million, ~~$2.4~~$3.2 million and ~~$1.1~~$3.1 million, respectively.The ~~increase~~decrease in net sales was driven by ~~sales~~unfavorable volume and mix of $8.0 million and foreign currency impacts of $3.5 million. Gross profit decreased from ~~acquisitions of $8.6 million, higher sales~~the prior-year same period primarily due to unfavorable volume and mix of $3.4 million ~~higher product pricing of $2.7 million,~~ and ~~favorable~~ foreign currency impacts of $1.0 million. Gross profit increased $1.8 million from the prior-year same period, primarily driven by gross profit from acquisitions of $2.7 million, favorable product pricing impacts of $2.7 million, higher sales volumes and mix of $1.0 million, and favorable foreign currency impacts of $0.7 million, partially ~~offset~~mitigated by ~~higher~~favorable raw material costs of ~~$4.8~~$2.8 million and ~~higher~~favorable manufacturing costs of ~~$0.4~~$1.3 million.



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2020		2019		$ Change		% Change
Segment net sales by Region
Europe	$	83,910	$	69,171	$	14,739	21.3	%
EMEA									$	75,857	$	78,265	$	(2,408)	(3.1)	%
United States										46,694		51,979		(5,285)	(10.2)	%
Asia Pacific										21,756		22,898		(1,142)	(5.0)	%
Latin America		26,699		26,523		176	0.7	%		11,128		13,884		(2,756)	(19.9)	%
Asia Pacific		24,264		22,715		1,549	6.8	%
United States		11,365		12,044		(679)	(5.6)	%
Total	$	146,238	$	130,453	$	15,785	12.1	%	$	155,435	$	167,026	$	(11,591)	(6.9)	%

The net sales ~~increase~~decrease of ~~$15.8~~$11.6 million was primarily driven by ~~increases~~lower sales from all regions. The decrease in sales from ~~Europe, Asia Pacific and Latin America, partially offset by lower sales in~~ the United ~~States. The increase in sales from Europe~~States was primarily attributable to ~~SPC, which was acquired in second quarter of 2017, which contributed $7.8 million, and higher~~lower sales of ~~colors, frits and glazes, and~~automotive, porcelain enamel, industrial and electronic products of ~~$3.0~~$1.5 million, $1.5 million, $1.3 million and $1.0 million, respectively. The ~~increase~~decrease in sales from Latin America was primarily attributable to lower sales from all groups.The decrease in sales from EMEA was primarily attributable to lower sales of industrial, automotive and porcelain enamel products of $4.3 million, $0.9 million and $0.8 million, respectively, partially mitigated by higher sales of electronic products of $3.4 million. The decrease in sales from Asia Pacific was ~~driven~~primarily attributable to decreased sales of porcelain enamel, automotive and decoration products of $0.7 million, $0.6 million and $0.3 million, partially mitigated by higher sales of ~~digital inks and porcelain enamel~~industrial products of ~~$1.1 million and $0.4~~$0.5 million. ~~Latin America sales remained relatively flat and the decrease in sales in the United States is fully attributable to lower sales of porcelain enamel.~~

~~Performance Colors and Glass~~Color Solutions



	Three Months Ended											Change due to									Three Months Ended											Change due to
	September 30,												Volume /								March 31,												Volume /
	2017			2016			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)
(Dollars in thousands)																					2020			2019			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	110,578		$	92,793		$	17,785	19.2	%	$	490	$	(1,519)	$	2,000	$	16,814	$	—	$	96,891		$	96,356		$	535	0.6	%	$	169	$	1,851	$	(1,485)	$	—
Segment gross profit		37,880			32,282			5,598	17.3	%		490		(1,536)		644		5,397		603		33,787			28,396			5,391	19.0	%		169		(624)		(190)		6,036
Gross profit as a % of segment net sales		34.3	%		34.8	%																34.9	%		29.5	%

3128

Table of Contents

Net sales increased compared with the prior-year same period, primarily driven by ~~$10.5~~higher sales of pigment products of $7.1 million, partially offset by decreased sales of ~~sales from ESL, which was acquired in the fourth quarter~~surface technology products of ~~2016, and~~ $6.4 million ~~in sales from Dip-Tech, which was acquired in the third quarter~~and dispersions and colorants of ~~2017.~~$0.2 million. The increase in net sales was driven by ~~acquisitions~~favorable volume and mix of ~~$16.8 million, favorable foreign currency impacts of $2.0~~$1.9 million and higher product pricing of ~~$0.5~~$0.2 million, partially offset by unfavorable ~~volume and mix~~foreign currency impacts of $1.5 million. Gross profit increased from the prior-year same period, primarily due to ~~acquisitions, which contributed $5.4 million,~~ favorable manufacturing costs of ~~$1.5~~$4.3 million, favorable ~~foreign currency impacts~~raw material costs of ~~$0.6~~$1.7 million and higher product pricing of ~~$0.5~~$0.2 million, partially ~~offset~~mitigated by ~~lower~~unfavorable sales ~~volumes~~volume and mix of ~~$1.5~~$0.6 million and ~~unfavorable raw material costs~~foreign currency impacts of ~~$0.9~~$0.2 million.



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2020		2019		$ Change		% Change
Segment net sales by Region
Europe	$	52,408	$	40,149	$	12,259	30.5	%
United States		35,836		31,924		3,912	12.3	%	$	41,159	$	43,599	$	(2,440)	(5.6)	%
EMEA										37,889		35,567		2,322	6.5	%
Asia Pacific		16,663		15,112		1,551	10.3	%		9,296		8,825		471	5.3	%
Latin America		5,671		5,608		63	1.1	%		8,547		8,365		182	2.2	%
Total	$	110,578	$	92,793	$	17,785	19.2	%	$	96,891	$	96,356	$	535	0.6	%

The net sales increase of ~~$17.8~~$0.5 million was driven by higher sales from ~~all regions.~~EMEA, Asia Pacific and Latin America, partially offset by lower sales from the United States. The increase in sales from ~~Europe~~EMEA was primarily attributable to ~~$8.9 million in sales from acquisitions and~~ higher sales ~~in decoration~~of pigment products of ~~$2.4~~$2.5 million, partially offset by decreased sales of dispersions and colorants of $0.2 million.The increase in sales from ~~the United States~~Asia Pacific was primarily attributable to sales from acquisitions of $7.9 million, partially offset by a decrease in sales of automobile and industrial products of $2.1 million and $1.7 million, respectively. The increase from Asia Pacific was due to an increase in sales of decoration and automobile products of $0.9 million and $0.7 million, respectively. Sales from Latin America remained relatively flat.

~~Color Solutions~~

Three Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
93,196

$
65,281

$
27,915

42.8
%

$
2,781

$
6,505

$
860

$
17,769

$
—
Segment gross profit

31,044

23,178

7,866

33.9
%

2,781

305

225

3,841

714
Gross profit as a % of segment net sales

33.3
%

35.5
%

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

~~Table of Contents~~

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

Three Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

United States

$
41,190

$
33,243

$
7,947

23.9
%
Europe

33,400

15,481

17,919

115.7
%
Asia Pacific

9,937

8,819

1,118

12.7
%
Latin America

8,669

7,738

931

12.0
%
Total

$
93,196

$
65,281

$
27,915

42.8
%

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

~~Results of Operations - Consolidated~~

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

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

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Net sales

$
1,019,199

$
863,955

$
155,244

18.0
%
Cost of sales

708,447

592,372

116,075

19.6
%
Gross profit

$
310,752

$
271,583

$
39,169

14.4
%
Gross profit as a % of net sales

30.5
%

31.4
%

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

~~Gross Profit~~

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

~~Table of Contents~~

$21.8 million, $14.6 million and $4.2 million, respectively. The increase in gross profit was primarily driven by acquisitions of $31.2 million, lower manufacturing costs of $20.2 million, higher sales volumes and mix of $7.0 million, and favorable product pricing of $5.5$6.0 million, partially ~~offset by higher raw material costs of $20.7 million and unfavorable foreign currency impacts of $2.6 million.~~

~~Geographic Revenues~~

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

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Geographic Revenues on a sales origination basis

Europe

$
490,008

$
392,392

$
97,616

24.9
%
United States

265,385

224,234

41,151

18.4
%
Asia Pacific

142,732

134,470

8,262

6.1
%
Latin America

121,074

112,859

8,215

7.3
%
Net sales

$
1,019,199

$
863,955

$
155,244

18.0
%

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

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

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Geographic Revenues on a shipped-to basis

Europe

$
464,872

$
387,776

$
77,096

19.9
%
Asia Pacific

220,095

177,492

42,603

24.0
%
United States

197,135

180,390

16,745

9.3
%
Latin America

137,097

118,297

18,800

15.9
%
Net sales

$
1,019,199

$
863,955

$
155,244

18.0
%

~~Table of Contents~~

~~Selling, General and Administrative Expenses~~

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

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Personnel expenses

$
102,872

$
89,214

$
13,658

15.3
%
Incentive compensation

7,932

7,299

633

8.7
%
Stock-based compensation

6,901

5,279

1,622

30.7
%
Pension and other postretirement benefits

(139)

33

(172)

(521.2)
%
Bad debt

(78)

1,020

(1,098)

(107.6)
%
Business development

11,260

8,615

2,645

30.7
%
Intangible asset amortization

7,037

4,312

2,725

63.2
%
All other expenses

51,172

50,333

839

1.7
%
Selling, general and administrative expenses

$
186,957

$
166,105

$
20,852

12.6
%

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

~~Table of Contents~~

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

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Strategic services

$
99,081

$
86,801

$
12,280

14.1
%
Functional services

73,043

66,726

6,317

9.5
%
Incentive compensation

7,932

7,299

633

8.7
%
Stock-based compensation

6,901

5,279

1,622

30.7
%
Selling, general and administrative expenses

$
186,957

$
166,105

$
20,852

12.6
%

~~Restructuring and Impairment Charges~~

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Employee severance

$
2,455

$
1,161

$
1,294

111.5
%
Equity method investment impairment

1,499

—

1,499

—
%
Asset impairment

1,176

—

1,176

—
%
Other restructuring costs

2,583

533

2,050

384.6
%
Restructuring and impairment charges

$
7,713

$
1,694

$
6,019

355.3
%

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

~~Interest Expense~~

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Interest expense

$
17,591

$
14,629

$
2,962

20.2
%
Amortization of bank fees

2,375

991

1,384

139.7
%
Interest capitalization

(45)

(41)

(4)

9.8
%
Interest expense

$
19,921

$
15,579

$
4,342

27.9
%

Interest expense increased in the first nine months of 2017 compared with the prior-year same period. The increase in interest expense was due to an increase in the average long-term debt balance during the nine months ended September 30, 2017, compared with the prior-year same period and an increase of the amortization of debt issuance costs associated with the 2017 Credit Facility, partially offset by a favorable average borrowing rate as a result of the refinancing completed in the first quarter of 2017.

~~Income Tax Expense~~

During the first nine months of 2017, income tax expense was $23.2 million, or 25.9% of pre-tax income. In the first nine months of 2016, we recorded tax expense of $22.7 million, or 25.8% of pre-tax income. The tax expense in the first nine months of 2017 and 2016, as a percentage of pre-tax income, is lower than the U.S. federal statutory income tax rate of 35%, primarily as a result of foreign statutory rate differences.

~~Table of Contents~~

~~Results of Operations - Segment Information~~

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

~~Performance Coatings~~

Nine Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions
Other

(Dollars in thousands)

Segment net sales

$
424,549

$
399,166

$
25,383

6.4
%

$
(427)

$
20,333

$
(8,851)

$
14,328

$
—
Segment gross profit

109,205

104,985

4,220

4.0
%

(427)

6,174

(2,006)

3,961

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

25.7
%

26.3
%

Net sales increased in Performance Coatings compared with the prior-year same period, primarily driven by sales from SPC of $13.5 million and an increase in organic growth across all product lines. The increase in net sales was driven by higher sales volume and mix of $20.3 million and sales from acquisitions of $14.3 million, partially offset by unfavorable foreign currency impacts of $8.9 million and lower product pricing of $0.4 million. Gross profit increased $4.2 million from the prior-year same period, primarily driven by lower manufacturing costs of $7.7 million, higher sales volumes and mix of $6.2 million and gross profit from acquisitions of $4.0 million, partially offset by higher raw material costs of $11.2 million, unfavorable foreign currency impacts of $2.0 million and unfavorable product pricing impacts of $0.4 million.

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

Europe

$
241,884

$
221,422

$
20,462

9.2
%
Latin America

80,268

75,933

4,335

5.7
%
Asia Pacific

68,670

66,784

1,886

2.8
%
United States

33,727

35,027

(1,300)

(3.7)
%
Total

$
424,549

$
399,166

$
25,383

6.4
%

The net sales increase of $25.4 million was driven by increases in sales from Europe, Latin America and Asia Pacific, partially offset by a decrease in sales from the United States. The increase in sales from Europe was primarily driven by sales from SPC of $13.5 million and an increase in sales of colors and porcelain enamel of $3.2 million and $2.6 million, respectively. The sales increase from Latin America was primarily drivenmitigated by higher sales of frits and glazes and porcelain enamel of $3.8 million and $0.8 million, respectively. The sales increase from Asia Pacific was primarily driven by higher sales of digital inks and porcelain enamel of $2.5 million and $0.9 million, respectively, partially offset by lower sales of frits and glazes of $1.7 million. The decrease in sales from the United States was attributable to lower sales of porcelain enamel.

~~Table of Contents~~

~~Performance Colors and Glass~~

Nine Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
320,733

$
276,896

$
43,837

15.8
%

$
1,672

$
1,263

$
(1,105)

$
42,007

$
—
Segment gross profit

115,385

100,825

14,560

14.4
%

1,672

(1,881)

(488)

14,925

332
Gross profit as a % of segment net sales

36.0
%

36.4
%

~~The net sales increase of $43.8 million was driven by sales from ESL of $31.8 million, Dip-Tech of $6.4 million and organic growth in electronic~~pigment products of ~~$4.3~~$3.4 million. The increase in net sales was driven by acquisitions of $42.0 million, higher product pricing of $1.7 million, and favorable volume and mix of $1.3 million, partially offset by unfavorable foreign currency impacts of $1.1 million. Gross profit increased from the prior-year same period, primarily due to gross profit from acquisitions of $14.9 million, favorable manufacturing costs of $2.8 million, and higher product pricing of $1.7 million, partially offset by unfavorable raw material costs of $2.5 million, lower sales volumes and mix of $1.9 million, and unfavorable foreign currency impacts of $0.5 million.

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

Europe

$
144,586

$
121,206

$
23,380

19.3
%
United States

112,772

96,833

15,939

16.5
%
Asia Pacific

47,091

44,102

2,989

6.8
%
Latin America

16,284

14,755

1,529

10.4
%
Total

$
320,733

$
276,896

$
43,837

15.8
%

The net sales increase of $43.8 million was driven by higher sales from all regions. The increase in sales from Europe was primarily driven by higher sales from acquisitions. The increase in sales from the United States was driven by sales from ESL of $20.2 million, partially offset by a decrease in sales of industrial products. The increase from Asia Pacific was primarily due to higher sales of automobile and decoration products of $1.6 million and $0.8 million, respectively. The increase from Latin America was primarily driven by an increase in sales of decoration products of $1.8 million, partially offset by a decrease in sales of automobile and industrial products.

~~Table of Contents~~

~~Color Solutions~~

Nine Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
273,917

$
187,893

$
86,024

45.8
%

$
4,211

$
24,208

$
(317)

$
57,922

$
—
Segment gross profit

87,642

65,868

21,774

33.1
%

4,211

2,664

(145)

12,308

2,736
Gross profit as a % of segment net sales

32.0
%

35.1
%

Net sales increased compared with the prior-year same period, primarily due to sales from Cappelle of $55.8 million, and higher sales of pigments and surface technology products of $17.8 million and $10.5 million, respectively. The increase in net sales was driven by sales from acquisitions of $57.9 million, higher volumes and mix of $24.2 million, and higher product pricing of $4.2 million, partially offset by unfavorable foreign currency impacts of $0.3 million. Gross profit increased from the prior-year same period due to gross profit from acquisitions of $12.3 million, lower manufacturing costs of $9.7 million, higher product pricing of $4.2 million, and higher sales volumes and mix of $2.7 million, partially offset by unfavorable raw material costs of $7.0 million and unfavorable foreign currency impacts of $0.1 million.

Nine Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

United States

$
118,886

$
92,374

$
26,512

28.7
%
Europe

103,538

49,764

53,774

108.1
%
Asia Pacific

26,971

23,584

3,387

14.4
%
Latin America

24,522

22,171

2,351

10.6
%
Total

$
273,917

$
187,893

$
86,024

45.8
%

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

Summary of Cash Flows for the ~~nine~~three months ended ~~September 2017~~March 31, 2020 and ~~2016~~ 2019

Nine Months Ended

September 30,

2017

2016

$ Change

(Dollars in thousands)
Net cash provided by operating activities

$
34,691

$
6,742

$
27,949
Net cash used in investing activities

(99,245)

(26,036)

(73,209)
Net cash provided by financing activities

68,036

1,892

66,144
Effect of exchange rate changes on cash and cash equivalents

3,147

(422)

3,569
Increase (decrease) in cash and cash equivalents

$
6,629

$
(17,824)

$
24,453



	Three Months Ended
	March 31,
(Dollars in thousands)	2020		2019		$ Change
Net cash used in operating activities	$	(71,535)	$	(67,527)	$	(4,008)
Net cash provided by (used in) investing activities		21,256		(3,391)		24,647
Net cash provided by (used in) financing activities		(1,697)		23,877		(25,574)
Effect of exchange rate changes on cash and cash equivalents		(1,208)		377		(1,585)
Decrease in cash and cash equivalents	$	(53,184)	$	(46,664)	$	(6,520)

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



	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2017		2016		$ Change
	(Dollars in thousands)
(Dollars in thousands)							2020		2019		$ Change
Cash flows from operating activities:
Net income	$	66,315	$	708	$	65,607	$	16,133	$	13,878	$	2,255
(Gain) on sale of assets and business		(1,214)		(3,459)		2,245
Loss on sale of assets								487		164		323
Depreciation and amortization		36,040		33,599		2,441		10,451		14,264		(3,813)
Interest amortization		2,375		991		1,384		929		900		29
Restructuring and impairment		3,629		37,173		(33,544)		307		179		128
Loss on extinguishment of debt		3,905		—		3,905
Accounts receivable		(44,952)		(44,370)		(582)		(50,541)		(43,733)		(6,808)
Inventories		(31,379)		(20,453)		(10,926)		(11,297)		(12,652)		1,355
Accounts payable		581		(3,209)		3,790		(39,651)		(43,680)		4,029
Other current assets and liabilities, net		(11,655)		9,479		(21,134)
Other adjustments, net		11,046		(3,717)		14,763
Net cash provided by operating activities	$	34,691	$	6,742	$	27,949
Other current asset, liabilities and adjustments, net								1,647		3,153		(1,506)
Net cash used in operating activities							$	(71,535)	$	(67,527)	$	(4,008)

Cash flows from operating activities. Cash flows ~~provided by~~from operating activities decreased $4.0 million during the three months ended March 31, 2020 compared with the prior-year same period. The decrease in cash from operating activities was primarily due to a decrease in depreciation and amortization of $3.8 million and higher cash outflows for net working capital of $1.4 million, partially mitigated by an increase in net income of $2.3 million.

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Cash flows used in investing activities. Cash flows from investing activities increased ~~$27.9~~$24.6 million induring the ~~first nine~~three months ~~of 2017~~ended March 31, 2020 compared with the prior-year same period. The increase in cash from investing activities was primarily due to ~~higher earnings after consideration of non-cash items, partially offset by higher~~lower cash outflows for ~~net working~~ capital expenditures of ~~$7.7~~$15.0 million and ~~other current assets and liabilities~~higher collections of ~~$6.3 million.~~financing receivables from the international receivable sales program (Note 8) of $8.6 million in the three months ended March 31, 2020, compared to the prior-year same period.

Cash flows from ~~investing~~financing activities.Cash flows ~~used in investing~~from financing activities ~~increased $73.2~~decreased $25.6 million induring the ~~first nine~~three months ~~of 2017~~ended March 31, 2020 compared with the prior-year same period. The increase was primarily due to higher cash outflows for acquisitions of $60.5 million, higher capital expenditures of $11.9 million, and lower proceeds from a closed site in Australia of $3.6 million which occurred during the nine months ended September 30, 2016. The cash outflow was partially offset by proceeds from the sale of an equity method investment of $2.3 million.

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

~~Capital Resources and Liquidity~~

~~2017 Credit Facility~~

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

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

Certain of the Company’s U.S. subsidiaries have guaranteed the Company’s obligations under the Credit Facility and such obligations are secured by (a) substantially all of the personal property of the Company and the U.S. subsidiary guarantors and (b) a pledge of 100% of the stock of certain of the Company’s U.S. subsidiaries and 65% of the stock of certain of the Company’s direct foreign subsidiaries.

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

~~The LIBOR rate for U.S. term loans shall not be less than 0.75% and the applicable margin for LIBOR rate U.S. term loans is 2.50%.~~

~~The EURIBOR rate for Euro term loans shall not be less than 0% and the applicable margin for EURIBOR rate loans is 2.75%.~~

At September 30, 2017, the Company had borrowed $355.7 million under the secured term loan facility at an interest rate of 3.73% and €248.8 million under the secured euro term loan facility at an interest rate of 2.75%. At September 30, 2017, there were no additional borrowings available under the term loan facilities.

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

~~The LIBOR rate for revolving loans shall not be less than 0% and the applicable margin for LIBOR rate revolving loans will vary between 1.75% and 2.75%.~~

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

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

~~Specific to~~from the revolving credit facility decreased by $51.3 million, partially offset by lower cash outflows for the ~~Company is subject~~purchase of treasury stock of $25.0 million.

Capital Resources and Liquidity

Refer to Note 8 to the consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for a ~~financial covenant regarding the Company’s maximum leverage ratio. If an event~~discussion of ~~default occurs, all amounts~~major debt instruments that were outstanding ~~under the Credit Agreement may be accelerated and become immediately due and payable. At September 30, 2017, we were in compliance with the covenants of the Credit Facility.~~during 2020.

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Off Balance Sheet Arrangements

Consignment and Customer Arrangements for Precious Metals. We use precious metals, primarily silver, in the production of some of our products. We obtain precious metals from financial institutions under consignment agreements. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment. These fees were ~~$0.3~~$1.1 million ~~and $0.2 million~~ for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016.~~ 2019. We had on hand precious metals owned by participants in our precious metals program of ~~$36.3~~$68.8 million at ~~September 30, 2017,~~March 31, 2020, and ~~$28.7~~$66.2 million at December 31, ~~2016,~~2019, measured at fair value based on market prices for identical ~~assets and net of credits.~~assets.

The consignment agreements under our precious metals program involve short-term commitments that typically mature within 30 to 90 days of each transaction and are typically renewed on an ongoing basis. As a result, the Company relies on the continued willingness of financial institutions to participate in these arrangements to maintain this source of liquidity. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding at ~~September 30, 2017,~~March 31, 2020, or December 31, ~~2016,~~ 2019, 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.

Bank Guarantees and Standby Letters of Credit.

At ~~September 30, 2017,~~March 31, 2020, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that ~~totaled~~ totaled $~~7.1~~5.0 million. These agreements primarily relate to Ferro’s insurance programs, foreign energy purchase contracts and foreign tax payments.

~~Other Financing Arrangements~~

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

Liquidity Requirements

Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under the revolving credit facility, and cash flows from operating activities. As of ~~September 30, 2017,~~March 31, 2020, we had ~~$52.2~~$43.0 million of cash and cash equivalents. The majority of our cash and cash equivalents were held by foreign subsidiaries. Cash generated in the U.S. is generally used to pay down amounts outstanding under our revolving credit facility and for general corporate purposes, including acquisitions. If needed, we could repatriate the majority of cash held by foreign subsidiaries without the need to accrue and pay U.S. income taxes. We do not anticipate a liquidity need requiring such repatriation of these funds to the U.S.

During the fourth quarter of 2019, we entered into a definitive agreement to sell our Tile Coatings business which has historically been a part of our Performance Coatings reportable segment. We expect to use the proceeds of the sale to settle long-term obligations.

Our liquidity requirements and uses primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, acquisition costs, capital investments, precious metals cash collateral requirements, and postretirement obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows ~~from~~provided by operating activities are primarily driven by earnings before non-cash charges and changes in working capital needs. WeAs of May 5, 2020, we had ~~additional borrowing capacity~~liquidity of ~~$411.4~~approximately $550.0 million, ~~at September 30, 2017,~~consisting of cash and ~~$112.0 million at December 31, 2016, available~~availability under our various credit facilities, primarily our revolving credit facility.

~~Our revolving credit facility~~The 2018 Revolving Facility subjects us to a customary financial covenant regarding the Company’s maximum leverage ratio. This covenant under our Amended Credit Facility restricts the amount of our borrowings, reducing our flexibility to fund ongoing operations and strategic initiatives.

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As of ~~September 30, 2017,~~March 31, 2020, we were in compliance with our maximum leverage ratio covenant of ~~4.25x~~4.00x as our actual ratio was ~~2.79x,~~2.76, providing ~~$80.3~~$91.2 million of EBITDA cushion on the leverage ratio, as defined within the Amended Credit Facility. To the extent that economic conditions in key markets deteriorate or we are unable to meet our business projections and EBITDA, as defined within the Amended Credit Facility, falls below approximately ~~$130~~$203 million for ~~rolling~~the most recently ended trailing four quarters, based on reasonably consistent net debt levels with those as of March 31, ~~2017,~~

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2020, we could become unable to maintain compliance with our leverage ratio covenant. In such case, our lenders could demand immediate payment of outstanding amounts and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all.

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

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

Critical Accounting Policies and Their Application

There were no material changes to our critical accounting policies described in “Critical Accounting Policies” within Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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 II of this Quarterly Report on Form 10-Q and Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

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

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

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



	September 30,		December 31,		March 31,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2020		2019
Variable-rate debt:
Carrying amount	$	679,638	$	562,537
Carrying amount⁽¹⁾					$	799,950	$	801,764
Fair value		683,160		581,893		709,631		799,750
Increase in annual interest expense from 1% increase in interest rates		4,311		5,611		2,637		2,656
Decrease in annual interest expense from 1% decrease in interest rates		(2,420)		(5,611)		(2,637)		(2,656)
Fixed-rate debt:
Carrying amount		7,011		8,228		3,482		3,496
Fair value		3,781		7,315		1,594		1,557
Change in fair value from 1% increase in interest rates		NM		NM		NM		NM
Change in fair value from 1% decrease in interest rates		NM		NM		NM		NM
Interest rate swaps:
Notional amount		256,326		—		313,614		314,412
Carrying amount and fair value		166		—		(26,773)		(14,698)
Change in fair value from 1% increase in interest rates		7,995		—		10,023		11,399
Change in fair value from 1% decrease in interest rates		(5,270)		—		(6,887)		(10,676)
Cross currency swaps:
Notional amount						340,550		341,419
Carrying amount and fair value						27,833		22,111
Change in fair value from 10% appreciation of U.S. dollar						(34,126)		(34,795)
Change in fair value from 10% depreciation of U.S. dollar						34,126		34,795
Foreign currency forward contracts:
Notional amount		212,100		338,186		617,975		625,908
Carrying amount and fair value		52		350		(947)		601
Change in fair value from 10% appreciation of U.S. dollar		4,406		15,589		7,185		3,540
Change in fair value from 10% depreciation of U.S. dollar		(5,385)		(19,054)		(8,781)		(4,144)

(1)The carrying value of the term loan facility is net of unamortized debt issuance costs of $3.7 million and $3.9 million for the period ended March 31, 2020 and December 31, 2019, respectively.

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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, 2017,~~March 31, 2020, 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, 2017.~~March 31, 2020.

Changes in Internal Control over Financial Reporting

During the ~~third~~first quarter of ~~2017,~~2020, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.We have not observed any material impact to our internal controls over financial reporting despite the fact that many of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

~~There~~In November 2017, Suffolk County Water Authority filed a complaint, Suffolk County Water Authority v. The Dow Chemical Company et al., against the Company and a number of other companies in the U.S. Federal Court for the Eastern District of New York with regard to the product 1,4 dioxane. The plaintiff alleges, among other things, that the Suffolk County water supply is contaminated with 1,4 dioxane and that the defendants are ~~various lawsuits~~liable for unspecified costs of cleanup and remediation of the water supply, among other damages. The Company has not manufactured 1,4 dioxane since 2008, denies the allegations related to liability for the plaintiff’s claims, ~~pending~~and is vigorously defending this proceeding. Since December 2018, additional complaints were filed in the same court by 25 other New York water suppliers against the Company and others making substantially similar allegations regarding the contamination of their respective water supplies with 1,4 dioxane. An additional complaint also was filed by the Hicksville Water District against the Company and others in New York State Supreme Court making substantially similar allegations and seeking damages of $900 million. The Company is likewise vigorously defending these additional actions. The Company currently does not expect the outcome of these proceedings to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of these proceedings due to the unpredictable nature of litigation.

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

Item 1A. Risk Factors

~~There were no material changes~~Reference is made to ~~the risk factors disclosed~~Part 1, Item 1A. “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019. The risk factor set forth below updates, and should be read together with, such risk factors. Furthermore, the impact of the novel coronavirus COVID-19 may exacerbate the risks discussed therein, any of which could have a material effect on the Company.

COVID-19 has spread around the world, including in Asia, Europe, the Middle East, and North and South America, all of which are regions in which Ferro has operations. The spread of COVID-19 has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and business shutdowns. The measures taken by the authorities have impacted and may further impact our workforce and operations, the operations of our customers, and those of our vendors and suppliers. There is considerable uncertainty regarding measures that authorities may implement in the future, which may restrict our operations and those of our suppliers and customers and disrupt logistics and other supply and distribution service providers. The spread of COVID-19 has caused us to modify our business practices (including site operations, employee workplace practices, travel, and participation in meetings, events, and conferences), and we may take further actions as required or recommended by authorities or deemed to be in the best interests of our employees and business partners. There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be adversely affected. These circumstances could negatively impact our business, results of operations, financial condition and cash flows.

The degree to which COVID-19 will impact our results depends on many factors, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the outbreak, its severity, actions to contain the virus or limit its impact, and the speed and extent to which normal economic and operating conditions resume. Even after the COVID-19 outbreak has subsided, we may experience material adverse impacts to our business as a result of the economic impact and any recession or other macroeconomic weakness that may occur.

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

Our ~~ability to pay~~Board of Directors has not declared any dividends on common stock ~~dividends is limited by certain covenants in our~~during 2020 or 2019. The Company’s Amended Credit Facility restricts the amount of dividends we can pay on our common stock. Any future dividends declared would be at the discretion of our Board of Directors and would depend on our financial condition, results of operations, cash flows, contractual obligations, the terms our financing agreements at the time a dividend is considered, and other ~~than dividends payable solely in Capital Securities, as defined in the agreement.~~relevant factors.

The following table summarizes purchases of our common stock by the Company and affiliated purchasers during the three months ended ~~September 30, 2017:~~March 31, 2020:



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



				Total Amount of		Maximum Dollar
				Shares Purchased		Amount that May
	Total Number			as Part of Publicly		Yet Be Purchased
	of Shares	Average Price		Announced Plans		Under the Plans
(Dollars in thousands, except for per share amounts)	Purchased	Paid per Share		or Programs		or Programs
January 1, 2020 to January 31, 2020	—	$	—	$	—	$	46,192,535
February 1, 2020 to February 29, 2020	—	$	—	$	—	$	46,192,535
March 1, 2020 to March 31, 2020	—	$	—	$	—	$	46,192,535
Total	—			$	—

~~__________________________~~

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.

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~~SIGNATURES~~

SIGNATURES

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


		FERRO CORPORATION (Registrant)

Date:	~~November 1, 2017~~May 11, 2020
		/s/ Peter T. Thomas
		Peter T. Thomas
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 1, 2017~~May 11, 2020
		/s/ Benjamin J. Schlater
		Benjamin J. Schlater
		Group Vice President and Chief Financial Officer (Principal Financial Officer)

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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:

~~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 17, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).
3.5	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on April 25, 2014 (incorporated by reference to Exhibit 3.5 to Ferro’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2014).
3.6	Ferro Corporation Amended and Restated Code of Regulations (incorporated by reference to Exhibit 3.1 to Ferro Corporation's current Report on Form 8-K filed December 12, ~~2016.)~~2016).
31	Certifications:
31.1	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
~~10.1~~31.2	~~Credit Agreement, dated as~~Certification of February 14, 2017, among Ferro Corporation, the lenders party thereto, PNC Bank, National Association, as the administrative agent, collateral agent and a letter of credit issuer, Deutsche Bank AG New York Branch, as the syndication agent and as a letter of credit issuer, and the various financial institutions and other persons from timePrincipal Financial Officer Pursuant to ~~time party thereto (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s current Report on Form 8-K, filed February 17, 2017)~~Rule 13a-14(a)/15d-14(a).
~~10.2~~32.1	Second Incremental Assumption Agreement, dated August 29, 2016, by and among Ferro Corporation, PNC Bank, National Association, as the administrative agent, the collateral agent and as an issuer, JPMorgan Chase Bank, N.A., as an issuer, and various financial institutions as lenders. (incorporated by referenceCertification of Principal Executive Officer Pursuant to ~~Exhibit 10.1 to Ferro Corporation’s current Report on Form 8K, filed August 30, 2016).~~18 U.S.C. 1350.
~~10.3~~32.2		~~Retention Agreement, dated September 1, 2016, by and between Jeffrey L. Rutherford and Ferro Corporation (incorporated by reference~~Certification of Principal Financial Officer Pursuant to Exhibit 10.2 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016).*18 U.S.C. 1350.
~~10.4~~101		~~Separation Agreement and Release, dated January 3, 2017, by and between Jeffrey L. Rutherford and Ferro Corporation. (incorporated by reference to Exhibit 10.4 to Ferro Corporation’s~~Inline XBRL Documents:
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Schema Document
101.CAL		Inline XBRL Calculation Linkbase Document
101.LAB		Inline XBRL Labels Linkbase Document
101.PRE		Inline XBRL Presentation Linkbase Document
101.DEF		Inline XBRL Definition Linkbase Document
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*
~~10.5~~	~~Change~~2020, formatted in ~~Control Agreement, dated September 1, 2016, by~~Inline XBRL and ~~between Benjamin Schlater and Ferro Corporation. (incorporated by reference to~~contained in Exhibit 10.5 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*101.

4837

~~Table of Contents~~

~~Exhibit:~~


31	~~Certifications:~~
~~31.1~~	~~Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).~~
~~31.2~~	~~Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).~~
~~32.1~~	~~Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.~~
~~32.2~~	~~Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.~~
~~101~~	~~XBRL Documents:~~
~~101.INS~~	~~XBRL Instance Document~~
~~101.SCH~~	~~XBRL Schema Document~~
~~101.CAL~~	~~XBRL Calculation Linkbase Document~~
~~101.LAB~~	~~XBRL Labels Linkbase Document~~
~~101.PRE~~	~~XBRL Presentation Linkbase Document~~
~~101.DEF~~	~~XBRL Definition Linkbase Document~~

~~__________________________~~

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

** Certain exhibits and schedules have been omitted and the registrant agrees to furnish a copy of any omitted exhibits and schedules to the Securities and Exchange Commission



Standard		Description
ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, issued March, 2020		Provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU are effective for all entities through December 31, 2022.
ASU No. 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans, issued August, 2018		Modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years beginning after December 15, 2020 and is to be applied using a retrospective approach for all periods presented. Early adoption is permitted.



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


						Performance
	Performance			Color		Colors and
	Coatings			Solutions		Glass			Total
	(Dollars in thousands)
Goodwill, net at December 31, 2016	$	28,090		$	40,421	$	79,785		$	148,296
Acquisitions		4,145	2,4		—		37,371	1,3		41,516
Foreign currency adjustments		3,062			1,582		3,363			8,007
Goodwill, net at September 30, 2017	$	35,297		$	42,003	$	120,519		$	197,819



	September 30, 2017
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Cash and cash equivalents	$	52,211	$	52,211	$	52,211	$	—	$	—
Loans payable		(10,409)		(10,409)		—		(10,409)		—
Term loan facility, maturing 2024(1)		(641,842)		(644,916)		—		(644,916)		—
Revolving credit facility, maturing 2022		(27,387)		(27,835)		—		(27,835)		—
Other long-term notes payable		(7,011)		(3,781)		—		(3,781)		—
Interest rate swaps - asset		298		298		—		298		—
Interest rate swaps - liability		(132)		(132)		—		(132)		—
Foreign currency forward contracts, net		52		52		—		52		—



	December 31, 2016
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Cash and cash equivalents	$	45,582	$	45,582	$	45,582	$	—	$	—
Loans payable		(11,452)		(11,452)		—		(11,452)		—
Term loan facility, maturing 2021(1)		(239,530)		(252,052)		—		(252,052)		—
Revolving credit facility, maturing 2019		(311,555)		(318,389)		—		(318,389)		—
Other long-term notes payable		(8,228)		(7,315)		—		(7,315)		—
Foreign currency forward contracts, net		350		350		—		350		—


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


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



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



	Three Months Ended September 30,
		Postretirement					Net Gain
		Benefit Liability		Translation			on Cash	Other
		Adjustments		Adjustments			Flow Hedges	Adjustments		Total
		(Dollars in thousands)
Balances at June 30, 2016		$	1,106	$	(66,886)	$	—	$	(70)	$	(65,850)
Other comprehensive income (loss) before reclassifications, before tax			—		1,584		—		—		1,584
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax			(2)		—		—		—		(2)
Foreign currency translation adjustment, before tax(1)			—		1,115		—		—		1,115
Current period other comprehensive income (loss), before tax			(2)		2,699		—		—		2,697
Tax effect			—		—		—		—		—
Current period other comprehensive income (loss), net of tax			(2)		2,699		—		—		2,697
Balances at September 30, 2016		$	1,104	$	(64,187)	$	—	$	(70)	$	(63,153)

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



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

		(Dollars in thousands)
Balances at December 31, 2015		$	811	$	(62,059)	$	—	$	(70)	$	(61,318)
Other comprehensive income (loss) before reclassifications, before tax			—		(3,243)		—		—		(3,243)
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			320		—		—		—		320
Foreign currency translation adjustment, before tax(1)			—		1,115		—		—		1,115
Current period other comprehensive income (loss), before tax			320		(2,128)		—		—		(1,808)
Tax effect			27		—		—		—		27
Current period other comprehensive income (loss), net of tax			293		(2,128)		—		—		(1,835)
Balances at September 30, 2016		$	1,104	$	(64,187)	$	—	$	(70)	$	(63,153)

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