~~rti8Mag~~

~~Mag~~

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~~June 30, ~~2017~~2021


☐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 31, 2017,~~June 30, 2021, there were ~~83,857,289~~82,704,290 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 25
Item 3. Quantitative and Qualitative Disclosures about Market Risk	44 36
Item 4. Controls and Procedures	45 37
PART II
Item 1. Legal Proceedings	46 38
Item 1A. Risk Factors	46 38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	46 38
Item 3. Defaults Upon Senior Securities	46 38
Item 4. Mine Safety Disclosures	46 38
Item 5. Other Information	46
~~Item 6. Exhibits~~	46
	39
~~Exhibit 31.1~~Item 6. Exhibits	39
~~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				Nine Months Ended				Three Months Ended				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	2017		2016		2017		2016
	(Dollars in thousands, except per share amounts)
(Dollars in thousands, except per share amounts)									2021		2020		2021		2020
Net sales	$	350,012	$	288,527	$	1,019,199	$	863,955	$	294,331	$	204,801	$	582,689	$	457,127
Cost of sales		246,396		199,546		708,447		592,372		199,496		141,057		392,751		312,645
Gross profit		103,616		88,981		310,752		271,583		94,835		63,744		189,938		144,482
Selling, general and administrative expenses		65,485		55,588		186,957		166,105		59,026		50,541		112,864		106,587
Restructuring and impairment charges		1,471		26		7,713		1,694		1,970		8,619		7,154		9,784
Other expense (income):
Interest expense		7,248		5,304		19,921		15,579		5,006		6,177		14,443		11,707
Interest earned		(201)		(214)		(556)		(414)		(52)		(307)		(649)		(561)
Foreign currency losses, net		1,021		867		5,575		2,867
Foreign currency losses (gains), net										3,209		1,143		4,367		(172)
Loss on extinguishment of debt		—		—		3,905		—		—		—		1,981		—
Miscellaneous (income) expense, net		(1,726)		705		(2,264)		(2,079)
Income before income taxes		30,318		26,705		89,501		87,831
Miscellaneous income, net										(253)		(703)		(2,353)		(2,166)
Income (loss) before income taxes										25,929		(1,726)		52,131		19,303
Income tax expense		7,353		6,157		23,186		22,659		8,502		200		16,146		5,317
Income from continuing operations		22,965		20,548		66,315		65,172
Loss from discontinued operations, net of income taxes		—		(29,222)		—		(64,464)
Income (loss) from continuing operations										17,427		(1,926)		35,985		13,986
Income (loss) from discontinued operations, net of income taxes										(1,536)		(3,238)		88,306		(3,017)
Net income (loss)		22,965		(8,674)		66,315		708		15,891		(5,164)		124,291		10,969
Less: Net income attributable to noncontrolling interests		148		210		575		589		382		376		819		386
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119	$	15,509	$	(5,540)	$	123,472	$	10,583
Earnings (loss) per share attributable to Ferro Corporation common shareholders:
Basic earnings (loss):
Basic earnings:
Continuing operations	$	0.27	$	0.24	$	0.79	$	0.78	$	0.21	$	(0.03)	$	0.43	$	0.17
Discontinued operations		—		(0.35)		—		(0.77)		(0.02)		(0.04)		1.07		(0.04)
	$	0.27	$	(0.11)	$	0.79	$	0.01	$	0.19	$	(0.07)	$	1.50	$	0.13
Diluted earnings (loss):
Diluted earnings:
Continuing operations	$	0.27	$	0.24	$	0.77	$	0.77	$	0.20	$	(0.03)	$	0.42	$	0.16
Discontinued operations		—		(0.35)		—		(0.77)		(0.02)		(0.04)		1.06		(0.04)
	$	0.27	$	(0.11)	$	0.77	$	—	$	0.18	$	(0.07)	$	1.48	$	0.12

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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2021		2020		2021		2020
Net income (loss)	$	15,891	$	(5,164)	$	124,291	$	10,969
Other comprehensive income (loss), net of income tax:
Foreign currency translation gain (loss)		687		3,857		(60,414)		(14,509)
Cash flow hedging instruments, unrealized income (loss)		1,283		(1,560)		8,069		(10,600)
Postretirement benefit liabilities income		(1)		—		129		—
Other comprehensive income (loss), net of income tax		1,969		2,297		(52,216)		(25,109)
Total comprehensive income (loss)		17,860		(2,867)		72,075		(14,140)
Less: Comprehensive income (loss) attributable to noncontrolling interests		(157)		340		206		256
Comprehensive income (loss) attributable to Ferro Corporation	$	18,017	$	(3,207)	$	71,869	$	(14,396)

See accompanying notes to condensed consolidated financial statements.

Table of Contents

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



		September 30,		December 31,			June 30,		December 31,
		2017		2016
		(Dollars in thousands)
(Dollars in thousands)							2021		2020
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents		$	52,211	$	45,582		$	143,717	$	174,077
Accounts receivable, net			337,887		259,687			162,375		137,008
Inventories			286,848		229,847			260,237		260,332
Other receivables			50,057		37,814			64,240		72,272
Other current assets			19,533		9,087			20,988		18,261
Current assets held-for-sale								—		307,854
Total current assets			746,536		582,017			651,557		969,804
Other assets
Property, plant and equipment, net			288,774		262,026			332,197		330,045
Goodwill			197,819		148,296			174,005		175,351
Intangible assets, net			190,985		137,850			112,545		119,500
Deferred income taxes			106,081		106,454			110,735		115,962
Operating leased assets								13,817		15,446
Other non-current assets			45,472		47,126			25,825		80,618
Non-current assets held-for-sale								—		154,207
Total assets		$	1,575,667	$	1,283,769		$	1,420,681	$	1,960,933
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	18,477	$	17,310		$	8,871	$	8,839
Accounts payable			155,542		127,655			136,303		135,296
Accrued payrolls			40,950		35,859			28,366		27,166
Accrued expenses and other current liabilities			85,927		65,203			150,463		124,770
Current liabilities held-for-sale								—		107,545
Total current liabilities			300,896		246,027			324,003		403,616
Other liabilities
Long-term debt, less current portion			673,464		557,175			354,729		791,509
Postretirement and pension liabilities			170,199		162,941			165,951		181,610
Operating leased non-current liabilities								8,588		10,064
Other non-current liabilities			83,995		62,594			55,118		62,050
Non-current liabilities held-for-sale								—		71,149
Total liabilities			1,228,554		1,028,737			908,389		1,519,998
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 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; 82.7 million and 82.4 million shares outstanding at June 30, 2021, and December 31, 2020, respectively								93,436		93,436
Paid-in capital			303,428		306,566			289,285		293,682
Retained earnings			180,430		114,690			428,287		304,815
Accumulated other comprehensive loss			(88,741)		(106,643)			(141,313)		(89,710)
Common shares in treasury, at cost			(151,900)		(160,936)			(165,689)		(172,256)
Total Ferro Corporation shareholders’ equity			336,653		247,113			504,006		429,967
Noncontrolling interests			10,460		7,919			8,286		10,968
Total equity			347,113		255,032			512,292		440,935
Total liabilities and equity		$	1,575,667	$	1,283,769		$	1,420,681	$	1,960,933

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, 2020	11,065	$	(172,256)	$	93,436	$	293,682	$	304,815	$	(89,710)	$	10,968	$	440,935
Net income (loss)	—		—		—		—		107,963		—		437		108,400
Other comprehensive income (loss)	—		—		—		—		—		(54,111)		(74)		(54,185)
Change in ownership interest	—		—		—		(2,530)		—		—		(2,888)		(5,418)
Stock-based compensation transactions	(255)		5,154		—		(2,614)		—		—		—		2,540
Balances at March 31, 2021	10,810	$	(167,102)	$	93,436	$	288,538	$	412,778	$	(143,821)	$	8,443	$	492,272
Net income (loss)	—		—		—		—		15,509		—		382		15,891
Other comprehensive income (loss)	—		—		—		—		—		2,508		(539)		1,969
Stock-based compensation transactions	(79)		1,413		—		747		—		—		—		2,160
Balances at June 30, 2021	10,731	$	(165,689)	$	93,436	$	289,285	$	428,287	$	(141,313)	$	8,286	$	512,292


	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 (loss)	—		—		—		—		16,123		—		10		16,133
Other comprehensive income (loss)	—		—		—		—		—		(27,312)		(94)		(27,406)
Stock-based compensation transactions	(238)		5,332		—		(2,723)		—		—		—		2,609
Balances at March 31, 2020	11,193	$	(174,911)	$	93,436	$	291,820	$	278,139	$	(136,688)	$	9,742	$	361,538
Net income (loss)	—		—		—		—		(5,540)		—		376		(5,164)
Other comprehensive income (loss)	—		—		—		—		—		2,333		(36)		2,297
Stock-based compensation transactions	(8)		159		—		1,825		—		—		—		1,984
Balances at June 30, 2020	11,185	$	(174,752)	$	93,436	$	293,645	$	272,599	$	(134,355)	$	10,082	$	360,655

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



	Six Months Ended
	June 30,
(Dollars in thousands)	2021		2020
Cash flows from operating activities
Net cash used in operating activities	$	(46,410)	$	(104,561)
Cash flows from investing activities
Capital expenditures for property, plant and equipment and other long-lived assets		(20,574)		(14,982)
Collections of financing receivables		59,326		62,580
Proceeds from sale of businesses, net		415,230		—
Business acquisitions, net of cash acquired		(2,200)		—
Other investing activities		236		778
Net cash provided by investing activities		452,018		48,376
Cash flows from financing activities
Net borrowings (payments) under loans payable		(112)		11,420
Principal payments on term loan facility - Amended Credit Facility		(439,100)		(4,100)
Proceeds from revolving credit facility - Amended Credit Facility		50,000		360,000
Principal payments on revolving credit facility - Amended Credit Facility		(50,000)		(343,383)
Other financing activities		(3,551)		(1,418)
Net cash provided by (used in) financing activities		(442,763)		22,519
Effect of exchange rate changes on cash and cash equivalents		(1,405)		(505)
Decrease in cash and cash equivalents		(38,560)		(34,171)
Cash and cash equivalents at beginning of period		182,277		104,402
Cash and cash equivalents at end of period		143,717		70,231
Less: Cash and cash equivalents of discontinued operations at end of period		—		8,200
Cash and cash equivalents of continuing operations at end of period	$	143,717	$	62,031
Cash paid during the period for:
Interest	$	16,438	$	16,736
Income taxes	$	12,751	$	7,722

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.~~2020.

~~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~~Americas region and the Europe-based Polymer Additives business 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.Asia Pacific region.

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

Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, ~~2017.~~ 2021.

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, with the exception of the statements of cash flows and unless otherwise indicated, amounts and activity are presented on a continuing operations basis.

On February 25, 2021, we completed the sale of our Tile Coatings business to Pigments Spain, S.L., a company of the Esmalglass-Itaca-Fritta group, which is a portfolio company of certain Lone Star Funds.

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 as held for sale in relation to the Tile Coatings business transaction. Additional reclassification relates to the disclosure of revenue disaggregation by geographic regions. As of January 1, 2021, the United States and Latin America regions were combined into the Americas region.

Pending Merger

On May 11, 2021, Ferro, PMHC II Inc., a Delaware corporation (“Prince”) and PMHC Fortune Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Prince (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Ferro (the “Merger”), with Ferro continuing as the surviving corporation in the Merger and as a direct or indirect wholly owned subsidiary of Prince. The board of directors of Ferro has approved the Merger Agreement.

On the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), and as a result of the Merger, each share of common stock of Ferro (“Ferro Common Stock”) that is issued and outstanding immediately prior to the Effective Time (other than (i) shares of Ferro Common Stock held by Ferro as treasury stock or held directly by Prince or any subsidiary of Prince (including Merger Sub) immediately prior to the Effective Time (which will be canceled without payment of any consideration), (ii) shares of Ferro Common Stock for which dissenters rights have been properly exercised and perfected and not withdrawn and (iii) shares of restricted stock) will be converted into the right to receive $22.00 in cash, without interest (the “Merger Consideration”).

Pursuant to the Merger Agreement, as of the Effective Time, each option to acquire shares of Ferro Common Stock, whether vested or unvested, that is outstanding immediately prior to the Effective Time will be converted into the right to receive an amount in cash (less any applicable withholding taxes) equal to (A) the number of shares of Ferro Common Stock subject to such option, multiplied by (B) the excess, if any, of the Merger Consideration over the applicable per share exercise price of such option.

Table of Contents

In addition, pursuant to the Merger Agreement, as of the Effective Time, (i) each outstanding share of Ferro restricted stock, each restricted share unit (other than performance share units), deferred share unit, phantom share unit or similar stock right, whether vested or unvested, that is outstanding immediately prior to the Effective Time will be converted into the right to receive an amount in cash (less any applicable withholding taxes) equal to (A) the number of shares of Ferro Common Stock subject to such right, multiplied by (B) the Merger Consideration, and (ii) each Ferro performance-based share unit, whether vested or unvested, that is outstanding immediately prior to the Effective Time will be converted into the right to receive an amount in cash (less any applicable withholding taxes) equal to (A) the number of shares of Ferro Common Stock subject to such performance-based share unit, calculated based on the greater of (x) actual performance achieved in accordance with the terms of such performance-based share unit and the Merger Agreement and (y) target level performance over the entire performance period applicable with respect to such performance-based share unit, multiplied by (B) the Merger Consideration.

Ferro and Prince have agreed to use their respective reasonable best efforts to consummate the Merger, including making filings with and seeking approvals from certain governmental entities necessary in connection with the Merger, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”). In furtherance thereof, Prince has agreed to accept certain divestitures or restrictions on the assets of Prince, Ferro and their respective subsidiaries, if and to the extent necessary to obtain such approvals, subject to certain specified limitations set forth in the Merger Agreement.

Consummation of the Merger is subject to certain customary conditions, including (i) the adoption of the Merger Agreement by the holders of two-thirds of the outstanding shares of Ferro Common Stock, (ii) the absence of any law prohibiting or order preventing the consummation of the Merger, (iii) the receipt of certain regulatory approvals, including expiration or termination of any applicable waiting period under the HSR Act, (iv) the absence of a material adverse effect with respect to Ferro, and (v) compliance in all material respects on the part of each of Ferro and Prince with such party’s covenants under the Merger Agreement. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct, subject to certain materiality exceptions.

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~~ that are applicable to the Company.

NewAccounting Standards ~~Update (“ASU”) 2016-09,~~ ~~Compensation – Stock Compensation: (Topic 718): Improvements to Employee Share-Based Payment Accounting.~~ ~~ASU 2016-09 is intended to simplify several aspects~~Not Yet Adopted

We are currently evaluating the impact on our financial statements of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This new guidance requires all income tax effects of awards to be recognized as income tax expense or benefit in the income statement when the awards vest or are settled. Cash flow related to excess tax benefits will no longer be classified as a financing activity on the statement of cash flows but will be presented with all other income tax cash flows as an operating activity. The new guidance also provides an accounting policy election to account for award forfeitures as they occur. Finally, the updated standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting and clarifies that all cash tax payments made on an employee’s behalf for withheld shares should be presented as financing activities on the statement of cash flows.following ASUs:

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

~~NewAccounting Standards~~

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

~~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.

~~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 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 of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. This pronouncement is effective for annual periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

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

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

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

~~Table of Contents~~

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.

Table of Contents

3. Revenue

3.Revenues disaggregated by geography and reportable segment for the three months ended June 30, 2021, follow:


(Dollars in thousands)	EMEA		Americas		Asia Pacific		Total
Functional Coatings	$	92,569	$	72,046	$	30,294	$	194,909
Color Solutions		37,958		50,014		11,450		99,422
Total net sales	$	130,527	$	122,060	$	41,744	$	294,331

Revenues disaggregated by geography and reportable segment for the three months ended June 30, 2020, follow:


(Dollars in thousands)	EMEA		Americas		Asia Pacific		Total
Functional Coatings	$	51,071	$	58,868	$	21,733	$	131,672
Color Solutions		27,874		36,145		9,110		73,129
Total net sales	$	78,945	$	95,013	$	30,843	$	204,801

Revenues disaggregated by geography and reportable segment for the six months ended June 30, 2021, follow:


(Dollars in thousands)	EMEA		Americas		Asia Pacific		Total
Functional Coatings	$	179,941	$	139,964	$	59,826	$	379,731
Color Solutions		77,000		103,868		22,090		202,958
Total net sales	$	256,941	$	243,832	$	81,916	$	582,689

Revenues disaggregated by geography and reportable segment for the six months ended June 30, 2020, follow:


(Dollars in thousands)	EMEA		Americas		Asia Pacific		Total
Functional Coatings	$	126,928	$	116,690	$	43,489	$	287,107
Color Solutions		65,763		85,851		18,406		170,020
Total net sales	$	192,691	$	202,541	$	61,895	$	457,127

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 all periods presented.

On February 25, 2021, we completed the ~~three~~sale of our Tile Coatings business to Pigments Spain, S.L., a company of the Esmalglass-Itaca-Fritta group (the “Buyer”), which is a portfolio company of certain Lone Star Funds, for $460.0 million in cash, subject to post-closing adjustments. The transaction resulted in net proceeds of approximately $415.2 million after expenses and ~~nine~~a gain of $100.1 million, which is recorded within Income from discontinued operations, net of income taxes in our consolidated statement of operations for the quarter ended March 31, 2021. We entered into a Transition Services Agreement (“TSA”) with the Buyer, which is designed to facilitate an orderly transfer of business operations. The services provided under the TSA will terminate at various points in times between six to twelve months ~~ended September 30, 2016.~~ from the completion of the sale. Except for customary post-closing adjustments and transition services, we have no continuing involvement with the Buyer subsequent to the completion of the sale.

Table of Contents

The table below summarizes results for the ~~Europe-based Polymer Additives assets,~~Tile Coatings business for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2021 and 2020, which are reflected in our ~~condensed~~ consolidated statements of operations as discontinued ~~operations.~~operations, net of income taxes. 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				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2021		2020		2021		2020
Net sales	$	—	$	75,254	$	83,579	$	190,004
Cost of sales		—		59,073		60,634		145,975
Gross profit		—		16,181		22,945		44,029
Selling, general and administrative expenses		—		15,542		20,327		34,350
Restructuring and impairment charges		—		1,758		303		2,037
Interest expense		—		2,517		1,682		4,748
Interest earned		—		(129)		(189)		(153)
Foreign currency losses (gains), net		—		(804)		363		4,961
Gain on sale of business, net		—		—		(100,057)		—
Miscellaneous expense, net		—		705		251		1,247
Income (loss) from discontinued operations before income taxes		—		(3,408)		100,265		(3,161)
Income tax expense (benefit)		1,536		(170)		11,959		(144)
Income (loss) from discontinued operations, net of income taxes		(1,536)		(3,238)		88,306		(3,017)
Less: Net income attributable to noncontrolling interests		—		67		64		44
Net income (loss) attributable to Tile Coatings business	$	(1,536)	$	(3,305)	$	88,242	$	(3,061)

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



	December 31,
(Dollars in thousands)	2020
Cash and cash equivalents	$	8,200
Accounts receivable, net		211,548
Inventories		84,239
Other receivables		1,630
Other current assets		2,237
Current assets held-for-sale		307,854
Property, plant and equipment, net		93,430
Intangible assets, net		42,126
Deferred income taxes		12,267
Other non-current assets		6,384
Non-current assets held-for-sale		154,207
Total assets held-for-sale	$	462,061

Loans payable and current portion of long-term debt	$	3,927
Accounts payable		85,308
Accrued payrolls		5,946
Accrued expenses and other current liabilities		12,364
Current liabilities held-for-sale		107,545
Long-term debt, less current portion		56,359
Postretirement and pension liabilities		8,119
Other non-current liabilities		6,671
Non-current liabilities held-for-sale		71,149
Total liabilities held-for-sale	$	178,694

Table of Contents

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~~six months ended ~~September~~June 30, ~~2017, of $2.1 million, which is included in Selling, general~~2021 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 amortization2020:



	Six Months Ended
	June 30,
(Dollars in thousands)	2021		2020
Capital expenditures	$	(1,074)	$	(1,909)
Gain on sale of discontinued operations		(100,057)		—
Non-cash operating activities - restructuring and impairment charges		—		1,070
Non-cash investing activities - capital expenditures, consisting of unpaid capital expenditure liabilities at period end		—		507

~~Table of Contents~~

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.

~~Table of Contents~~

5. Inventories



	September 30,		December 31,		June 30,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2021		2020
Raw materials	$	92,387	$	72,943	$	75,348	$	81,344
Work in process		48,131		38,859		45,566		48,770
Finished goods		146,330		118,045		139,323		130,218
Total inventories	$	286,848	$	229,847	$	260,237	$	260,332

In the production of some of our products, we use precious metals, which we obtain from financial institutions under consignment agreements with terms of one year or less. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign. These fees were ~~$0.3 million and $0.2 million for the three months ended September 30, 2017 and 2016, respectively, and were~~ $0.8 million and $0.6 million for the ~~nine~~three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, and $1.4 million and $1.7 million for the six months ended June 30, 2021 and 2020, respectively. We had on-hand precious metals owned by participants in our precious metals consignment program of ~~$36.3~~$100.7 million at ~~September~~June 30, ~~2017,~~2021, and ~~$28.7~~$87.2 million at December 31, ~~2016,~~2020, 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~~$452.4 million at ~~September~~June 30, ~~2017,~~2021 and ~~$439.4~~$456.3 million at December 31, ~~2016.~~ 2020. As discussed in Note 4, the assets of our Tile Coatings business were classified as held-for-sale under ASC Topic 360; Property, Plant, and Equipment. As such, additional accumulated depreciation of $135.3 million at December 31, 2020 was classified as Non-current assets held for sale.

Unpaid capital expenditure liabilities, which are non-cash investing activities, were ~~$3.2~~$1.1 million at ~~September~~June 30, ~~2017,~~2021 and ~~$2.4~~$0.3 million at ~~September~~June 30, ~~2016.~~ 2020.

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, 2020	$	123,570	$	51,781	$	175,351
Foreign currency adjustments		(1,061)		(285)		(1,346)
Goodwill, net at June 30, 2021	$	122,509	$	51,496	$	174,005

~~(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.~~


	June 30,		December 31,
(Dollars in thousands)	2021		2020
Goodwill, gross	$	232,472	$	233,818
Accumulated impairment		(58,467)		(58,467)
Goodwill, net	$	174,005	$	175,351

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~~June 30, ~~2017,~~2021, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment test.

1412

Table of Contents

Amortizable intangible assets consisted of the following:


	September 30,		December 31,		June 30,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2021		2020
Gross amortizable intangible assets:
Patents	$	5,334	$	5,147	$	5,540	$	5,589
Land rights		4,876		4,746		3,209		3,173
Technology/know-how and other		129,003		84,837		116,455		116,015
Customer relationships		92,678		80,153		66,944		68,142
Total gross amortizable intangible assets		231,891		174,883		192,148		192,919
Accumulated amortization:
Patents		(5,228)		(4,981)		(5,518)		(5,566)
Land rights		(2,825)		(2,698)		(1,693)		(1,630)
Technology/know-how and other		(40,723)		(34,775)		(66,116)		(61,104)
Customer relationships		(9,204)		(5,311)		(19,290)		(18,317)
Total accumulated amortization		(57,980)		(47,765)		(92,617)		(86,617)
Amortizable intangible assets, net	$	173,911	$	127,118	$	99,531	$	106,302

Indefinite-lived intangible assets consisted of the following:


	September 30,		December 31,		June 30,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2021		2020
Indefinite-lived intangibles assets:
Trade names and trademarks	$	17,074	$	10,732	$	13,014	$	13,198

8. Debt

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



	September 30,		December 31,		June 30,		December 31,
	2017		2016
	(Dollars in thousands)
Loans payable	$	10,409	$	11,452
(Dollars in thousands)					2021		2020
Current portion of long-term debt		8,068		5,858	$	8,871	$	8,839
Loans payable and current portion of long-term debt	$	18,477	$	17,310	$	8,871	$	8,839

Long-term debt consisted of the following:

September 30,

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

—
Capital lease obligations

5,292

3,720
Other notes

7,011

8,228
Total long-term debt

681,532

563,033
Current portion of long-term debt

(8,068)

(5,858)
Long-term debt, less current portion

$
673,464

$
557,175



	June 30,		December 31,
(Dollars in thousands)	2021		2020
Term loan facility, net of unamortized issuance costs, maturing 2024⁽¹⁾	$	356,978	$	793,731
Finance lease obligations		2,733		2,911
Other notes		3,889		3,706
Total long-term debt		363,600		800,348
Current portion of long-term debt		(8,871)		(8,839)
Long-term debt, less current portion	$	354,729	$	791,509

~~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.~~$1.4 million at June 30, 2021 and $3.7 million at December 31, 2020.

~~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. On May 4, 2020, the Company entered into an amendment (Third Amendment to Credit Agreement) to the Amended Credit Facility, which added an approval to Section 7.2.8 Permitted Dispositions for the Tile Coatings Business Disposition. 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~~June 30, ~~2017,~~2021, the Company had borrowed ~~$355.7~~$155.1 million under the ~~secured term loan facility~~Tranche B-1 Loans at an interest rate of ~~3.73% and €248.8~~2.40%, $102.7 million under the ~~secured euro term loan facility~~Tranche B-2 Loans at an interest rate of ~~2.75%~~2.40%, and $100.5 million under the Tranche B-3 Loans at an interest rate of 2.40%. At ~~September~~June 30, ~~2017,~~2021, 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~~June 30, ~~2017,~~2021, the effective interest rate for all tranches of the term loan ~~facilities after adjusting for the interest rate swap~~facility, inclusive of hedging activities, was ~~4.27% for the secured term loan facility and 3.00% for the euro term loan facility.~~4.83%.

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~~June 30, ~~2017,~~2021, 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~~June 30, ~~2017.~~2021.

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~~June 30, ~~2017,~~2021, we were in compliance with the covenants of the Amended Credit Facility.

As noted in Note 4, on February 25, 2021, we completed the sale of our Tile Coatings business. Proceeds from the close of the transaction, in addition to current cash balances, were used to pay down our term loan facility in the amount of $435.0 million on February 25, 2021. The debt pay-down reduced outstanding amounts of the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, by $188.3 million, $124.7 million and $122.0 million, respectively. In conjunction with the prepayment of debt, we recorded a charge of $2.0 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our consolidated statement of operations for the six months ended June 30, 2021.

Receivable Sales Programs

We have several international programs to sell without recourse trade accounts receivable to financial institutions. During the third quarter of 2020, these programs were amended to include a domestic program. 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 and six months ended June 30, 2021, was immaterial. The program, whose maximum capacity is €85 million, is scheduled to expire on December 31, 2023. Generally, at the transfer date, the Company receives cash equal to approximately 80% of the value of the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in operating activities in our consolidated statement of cash flows. The proceeds from the deferred purchase price are reflected in investing activities.

The outstanding principal amount of receivables sold under this program, which has not yet been collected from the customer, was $45.1 million at June 30, 2021 and $24.5 million at December 31, 2020. The carrying amount of deferred purchase price was $9.9 million at June 30, 2021 and $9.8 million at December 31, 2020 and is recorded in Other receivables. Trade accounts receivable collected from customers to be remitted to financial institutions were $44.5 million at June 30, 2021 and $36.0 million at December 31, 2020 recorded in Accrued expenses and other current liabilities.

Activity from these programs for the six months ended June 30, 2021 and 2020 is detailed below:



	Six Months Ended
	June 30,
(Dollars in thousands)	2021		2020
Trade accounts receivable sold to financial institutions	$	312,676	$	91,048
Cash proceeds from financial institutions ⁽¹⁾		250,927		58,794

(1)Excluded from the table above, in the six months ended June 30, 2020, our Tile Coatings business received cash proceeds from financial institutions of $47.3 million. 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~~$25.0 million and ~~$7.3~~$28.1 million at ~~September~~June 30, ~~2017,~~2021 and December 31, ~~2016,~~2020, respectively. The unused portions of these lines provided additional liquidity of ~~$43.5~~$25.0 million at ~~September~~June 30, ~~2017,~~2021 and ~~$6.7 million at~~ December 31, ~~2016.~~2020.

1715

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:



	June 30, 2021
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	143,717	$	143,717	$	143,717	$	—	$	—
Term loan facility - Amended Credit Facility ⁽¹⁾		(356,978)		(356,149)		—		(356,149)		—
Other long-term notes payable		(3,889)		(2,342)		—		(2,342)		—
Cross currency swaps		495		495		—		495		—
Interest rate swaps		(19,385)		(19,385)		—		(19,385)		—
Foreign currency forward contracts, net		(3,454)		(3,454)		—		(3,454)		—

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, 2020
	Carrying		Fair Value
(Dollars in thousands)	Amount		Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	174,077	$	174,077	$	174,077	$	—	$	—
Term loan facility - Amended Credit Facility ⁽¹⁾		(793,731)		(783,143)		—		(783,143)		—
Other long-term notes payable		(3,706)		(1,887)		—		(1,887)		—
Cross currency swaps		(5,162)		(5,162)		—		(5,162)		—
Interest rate swaps		(24,694)		(24,694)		—		(24,694)		—
Foreign currency forward contracts, net		2,019		2,019		—		2,019		—

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~~$1.4 million and $3.7 million for the period ended ~~September~~June 30, ~~2017,~~2021, and December 31, ~~2016,~~2020, respectively.

The fair ~~values~~value of cash and cash equivalents are based on the fair values of identical assets. The fair ~~values~~value of loans payable ~~are~~is based on the present value of expected future cash flows and approximate their carrying amounts due to the short periods to maturity. ~~At September 30, 2017, the~~The fair value of the term loan facility is based on market price information and is measured using the last available bid price of the instrument on a secondary ~~market and at December 31, 2016, is based on the present~~market. The fair 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 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~~value 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~~Company utilizes interest rate swaps to limit exposure to market fluctuations on floating-rate debt.

During the 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 $309.6 million at June 30, 2021. These swaps are hedging risk associated with the Tranche B-1, B-2 and B-3 Loans. These interest rate swaps are designated as cash flow ~~hedges is recognized immediately~~hedges.As of June 30, 2021, the Company expects it will reclassify net losses of approximately $8.4million, currently recorded in AOCL, into ~~earnings.~~ 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 ~~did not have any ineffectiveness related~~has converted a U.S. dollar denominated, variable rate debt obligation into a Euro fixed rate obligation using receive-float, pay-fixed cross currency swaps in the second quarter of 2018. These swaps are hedging currency and interest rate risk associated with the Tranche B-3 Loan. These cross-currency swaps are designated as cash flow hedges. In conjunction with the pay-down of debt discussed in Note 8, we terminated all cross-currency swaps, except for one, which we de-designated and re-designated to hedge the remaining Tranche B-3 Loan after the interest rate swaps. Due to the original designation layering, the other comprehensive loss from the cross-currency swap at re-designation and the other comprehensive loss from the terminated cross-currency swaps ~~during~~were written-off as the ~~three and nine months ended September~~interest payments were deemed remote. The Company paid counterparties $3.5 million to settle the terminated derivatives, resulting in a net $4.5 million being reclassified from AOCL to Interest expense as a result of this remote transaction. The remaining notional amount is $38.7 million at June 30, ~~2017.~~ 2021, with a maturity date of February 14, 2024. As of June 30, 2021, the Company expects it will reclassify net losses of approximately $0.1 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of this derivative.

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~~June 30, ~~2017~~2021 and ~~2016, respectively,~~2020, 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)	2021		2020		2021		2020		AOCL into Income
Interest rate swaps	$	(385)	$	(1,934)	$	(1,841)	$	(824)	Interest expense
Cross currency swaps		(388)		(3,902)		(113)		851	Interest expense
					$	(1,954)	$	27	Total Interest expense
Cross currency swaps						(433)		(4,204)	Foreign currency losses (gains), net
					$	(433)	$	(4,204)	Total Foreign currency losses (gains), net

The amount of gain (loss) recognized in AOCL and the amount of loss (gain) reclassified into earnings for the six months ended June 30, 2021 and 2020, follow:

Amount of Gain Recognized

Amount of Gain Reclassified

in AOCI - Effective Portion

from AOCI into Income - Effective Portion

2017

2016

2017

2016

(Dollars in thousands)
Interest rate swap

$
166

$
—

$
—

$
—



					Amount of Loss (Gain)
	Amount of Gain (Loss)				Reclassified from				Location of Gain (Loss)
	Recognized in AOCL				AOCL into Income				Reclassified from
(Dollars in thousands)	2021		2020		2021		2020		AOCL into Income
Interest rate swaps	$	1,053	$	(14,808)	$	(3,613)	$	(1,322)	Interest expense
Cross currency swaps		2,308		1,356		(123)		2,019	Interest expense
					$	(3,736)	$	697	Total Interest expense
Cross currency swaps						2,494		(582)	Foreign currency losses (gains), net
					$	2,494	$	(582)	Total Foreign currency losses (gains), 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 and six months ended June 30, 2021 and 2020, are as follows:


	Three months ended				Six Months Ended
	June 30,				June 30,
(Dollars in thousands)	2021		2020		2021		2020
Interest expense	$	5,006	$	6,177	$	14,443	$	11,707
Foreign currency losses (gains), net		3,209		1,143		4,367		(172)

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 net investment hedge was terminated in the fourth quarter of 2020. These swaps were hedging risk associated with the net investment in Euro denominated operations due to fluctuating exchange rates and were designated as net investment hedges. The changes in the fair value of these designated cross-currency swaps were recognized in AOCL.

Table of Contents

The amount of gain (loss) on net investment hedges recognized in AOCL and the amount of gain recognized in ~~AOCI~~income on derivative (amount excluded from effectiveness testing) for the three months ended June 30, 2021 and 2020, follow:


					Amount of Gain
					Recognized in Income on
	Amount of Gain (Loss)				Derivative (Amount Excluded				Location of Gain
	Recognized in AOCL				from Effectiveness Testing)				in Earnings
(Dollars in thousands)	2021		2020		2021		2020
Cross currency swaps	$	—	$	(1,569)	$	—	$	612	Interest expense

The amount of gain on net investment hedges recognized in AOCL and the amount of gain ~~reclassified into earnings~~recognized in income on derivative (amount excluded from effectiveness testing) for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016, respectively,~~2020, follow:


					Amount of Gain
					Recognized in Income on
	Amount of Gain (Loss)				Derivative (Amount Excluded				Location of Gain
	Recognized in AOCL				from Effectiveness Testing)				in Earnings
(Dollars in thousands)	2021		2020		2021		2020
Cross currency swaps	$	—	$	1,090	$	—	$	1,392	Interest expense

~~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 for the three months ended September 30, 2017 and 2016, respectively, 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)

$
—

$
—

$
—

~~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 (gains), net in the condensed consolidated statements of operations. We recognized net gains of $0.2 million and net losses of ~~$1.4 million and $4.1~~$6.1 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, respectively, and net ~~losses~~gains of ~~$1.2~~$0.1 million and ~~$5.8~~$0.4 million in the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, respectively, arising from the change in fair value of our financial instruments, which partially offset the related net gains and losses on international trade transactions. The notional amount of foreign currency forward contracts was ~~$212.1~~$776.7 million at ~~September~~June 30, ~~2017,~~2021 and ~~$338.2~~$494.2 million at December 31, ~~2016.~~2020.

The following table presents the effect on our condensed consolidated statements of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, 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)				Amount of Gain (Loss)
	Recognized in Earnings				Recognized in Earnings
	Three Months Ended				Six Months Ended
	June 30,				June 30,				Location of Gain (Loss) in Earnings
(Dollars in thousands)	2021		2020		2021		2020
Foreign currency forward contracts	$	(1,280)	$	142	$	(7,546)	$	410	Foreign currency losses (gains), 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

2018

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,			June 30,		December 31,
	2017		2016		Balance Sheet Location
	(Dollars in thousands)
(Dollars in thousands)						2021		2020		Balance Sheet Location
Asset derivatives:
Interest rate swaps	$	298	$	—	Other assets
Cross currency swaps						$	9	$	9	Other current assets
Cross currency swaps							486		—	Other non-current assets
Foreign currency forward contracts		620		1,854	Other current assets		1,118		2,649	Other current assets
Liability derivatives:
Interest rate swaps		(132)		—	Accrued expenses and other current liabilities	$	(8,415)	$	(8,436)	Accrued expenses and other current liabilities
Interest rate swaps							(10,970)		(16,258)	Other non-current liabilities
Cross currency swaps							—		(67)	Accrued expenses and other current liabilities
Cross currency swaps							—		(5,104)	Other non-current liabilities
Foreign currency forward contracts	$	(568)	$	(1,504)	Accrued expenses and other current liabilities		(4,572)		(630)	Accrued expenses and other current liabilities

10. Income Taxes

Income tax expense for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021 was ~~$23.2~~$16.1 million, or ~~25.9%~~31.0% of pre-tax ~~income, compared with $22.7~~income. Income tax expense for the six months ended June 30, 2020 was $5.3 million, or ~~25.8%~~27.5% of pre-tax ~~income in the prior-year same period.~~income. The tax expense induring the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 and ~~2016,~~June 30, 2020, 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.

11. Contingent Liabilities

We have recorded environmental liabilities of ~~$6.6~~$5.7 million at ~~September~~June 30, ~~2017,~~2021 and ~~$7.2 million at~~ December 31, ~~2016,~~2020, for costs associated with the remediation of certain of our current or former properties that have been contaminated. The ~~liability~~balance at ~~September~~June 30, ~~2017,~~2021 and December 31, ~~2016, was~~2020, were primarily comprised of liabilities related to a non-operating facility in Brazil, and for retained environmental obligations related to a site in the United States that was part of the sale of our North American and Asian metal powders product ~~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 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.

Table of Contents

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~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, follow:

~~Table of Contents~~



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans
	Three Months Ended June 30,
(Dollars in thousands)	2021		2020		2021		2020		2021		2020
Service cost	$	—	$	3	$	333	$	294	$	—	$	—
Interest cost		1,881		2,388		343		343		68		133
Expected return on plan assets		(3,824)		(3,708)		(116)		(116)		—		—
Amortization of prior service cost		—		—		(21)		(4)		—		—
Net periodic benefit (credit) cost	$	(1,943)	$	(1,317)	$	539	$	517	$	68	$	133

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 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016,~~2020, respectively, follow:



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans				U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans
													Six Months Ended June 30,
	Nine Months Ended September 30,

	2017		2016		2017		2016		2017		2016

	(Dollars in thousands)
(Dollars in thousands)													2021		2020		2021		2020		2021		2020
Service cost	$	13	$	13	$	1,259	$	1,081	$	—	$	—	$	—	$	6	$	672	$	579	$	—	$	1
Interest cost		10,997		11,812		1,801		2,808		632		708		3,761		4,775		678		673		136		265
Expected return on plan assets		(14,218)		(14,805)		(659)		(1,538)		—		—		(7,648)		(7,416)		(230)		(228)		—		—
Amortization of prior service cost		5		8		33		34		—		—		—		—		(41)		(9)		—		—
Net periodic benefit (credit) cost	$	(3,203)	$	(2,972)	$	2,434	$	2,385	$	632	$	708	$	(3,887)	$	(2,635)	$	1,079	$	1,015	$	136	$	266

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

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~~half of ~~2017,~~2021, our Board of Directors granted ~~0.2~~0.3 million stock options, 0.2 million performance share units, and 0.2 million restricted ~~stock~~share 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~~six months ended ~~September~~June 30, ~~2017:~~2021:



	Stock Options
Weighted-average grant-date fair value	$	~~7.29~~ 5.94
Expected life, in years		6.0
Risk-free interest rate		~~1.9% - 2.3~~0.76	%
Expected volatility		~~48.0% -51.5~~40.39	%

The ~~weighted average~~weighted-average grant date fair value of our performance share units granted in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, was ~~$14.89.~~$16.00. We measure the fair value of performance share units based on the closing market price of our common stock on the date of the grant. These shares are evaluated each reporting period for respective attainment rates against the performance criteria.

2220

Table of Contents

The weighted-average grant date fair value of our restricted share units granted in the six months ended June 30, 2021, was $15.07. We measure the fair value of restricted share units based on the closing market price of our common stock on the date of the grant. The restricted share units vest over three years. ~~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~~$2.7 million and $5.1 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017,~~2021, respectively, and ~~$5.3~~$2.7 million and $5.5 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2016.~~2020, respectively. At ~~September~~June 30, ~~2017,~~2021, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately ~~$9.6~~$11.9 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of ~~2020.~~2024.

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

Total restructuring ~~and impairment~~ charges were ~~$1.5~~$2.0 million and ~~$7.7~~$7.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, respectively, and ~~$0.0~~$8.6 million and $9.8 million for the three and six months ended June 30, 2020, respectively. As discussed in Note 4, our Tile Coatings business was classified as held-for-sale during the fourth quarter of 2019. As such, there were additional restructuring charges of $0.3 million for the six months ended June 30, 2021 and $1.7 million and $2.0 million for the three and six months ended June 30, 2020, respectively, classified as Net income from discontinued operations, net of income taxes.

Organizational Optimization Plan

In conjunction with the sale of the Tile Coatings business, discussed in Note 4, we developed our Organizational Optimization Plan and initiated a program across the organization with the objective of realigning the business and lowering our cost structure. As a result of these actions, the Company expects to incur total charges of approximately$5.7 million, substantially all of which will be for anticipated severance costs. The remaining activities of the program are expected to be recognized throughout the remainder of 2021. Charges associated with the program were $1.0 million and $3.1 million for the three and six months ended June 30, 2021, respectively.

Americas Manufacturing Optimization Plan

In the second quarter of 2019, we developed our Americas Manufacturing Optimization Plan and initiated a program across the organization with the objective of realigning the business and lowering our cost structure. The Americas Manufacturing Optimization Plan is focused on the construction of a new manufacturing center of excellence located in Villagran, Mexico. We are in the process of consolidating two plants located in the United States and two sites in Latin America into the expanded Villagran location. As a result of these actions, the Company expects to incur total charges of approximately $9.5 million, substantially all of which will be for anticipated severance costs. The remaining activities of the program are expected to be recognized within the next 12 months. Charges associated with the program were $0.7 million and $2.4 million for the three and six months ended June 30, 2021, respectively, and $0.8 million and $1.0 million for the three and six months ended June 30, 2020, respectively.

Global Optimization Plan

The program involves our global operations and certain functions and initiatives to increase operational efficiencies, some of which is associated with integration of our acquisitions. Actions associated with the Global Optimization Plan were substantially completed, and as such, we do not anticipate material charges related to this plan for the remainder of 2021. Charges associated with the program were $0.3 million and $1.7 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016, respectively. Included in the charges~~2021, respectively, and $7.8 million and $8.8 million for the ~~nine~~three and six months ended ~~September~~June 30, ~~2017, was an impairment charge of $1.5 million related to an equity method investment.~~ 2020, respectively.

The ~~remainder of the~~ charges ~~relate to our restructuring and cost reduction programs, which are primarily related to costs~~ associated with ~~integration of our recent acquisitions, and~~these programs are further summarized below.

Employee

Other

Asset

Severance

Costs

Impairment

Total

(Dollars in thousands)
Balances at December 31, 2016

$
239

$
1,489

$
—

$
1,728
Restructuring charges

2,455

2,583

1,176

6,214
Cash payments

(2,555)

(1,529)

—

(4,084)
Non-cash items

64

(1,282)

(1,176)

(2,394)
Balances at September 30, 2017

$
203

$
1,261

$
—

$
1,464



	Employee		Other
(Dollars in thousands)	Severance		Costs		Total
Balances at December 31, 2020	$	5,510	$	4,460	$	9,970
Restructuring charges		5,439		1,715		7,154
Cash payments		(6,005)		(1,025)		(7,030)
Balances at June 30, 2021	$	4,944	$	5,150	$	10,094

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.

2321

Table of Contents

15. 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				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
(Dollars in thousands, except per share amounts)									2021		2020		2021		2020
Basic earnings per share computation:
Income (loss) from continuing operations									$	17,427	$	(1,926)	$	35,985	$	13,986
Less: Net income attributable to noncontrolling interests from continuing operations										382		309		755		342
Net income (loss) attributable to Ferro Corporation from continuing operations										17,045		(2,235)		35,230		13,644
Income (loss) from discontinued operations, net of income taxes										(1,536)		(3,238)		88,306		(3,017)
Less: Net income attributable to noncontrolling interests from discontinued operations										—		67		64		44
Net income (loss) attributable to Ferro Corporation from discontinued operations										(1,536)		(3,305)		88,242		(3,061)
Total									$	15,509	$	(5,540)	$	123,472	$	10,583
	2017		2016		2017		2016
Weighted-average common shares outstanding										82,665		82,246		82,581		82,171
Basic earnings (loss) per share from continuing operations attributable to Ferro Corporation common shareholders									$	0.21	$	(0.03)	$	0.43	$	0.17
Diluted earnings per share computation:
Net income (loss) attributable to Ferro Corporation from continuing operations									$	17,045	$	(2,235)	$	35,230	$	13,644
Net income (loss) attributable to Ferro Corporation from discontinued operations										(1,536)		(3,305)		88,242		(3,061)
Total									$	15,509	$	(5,540)	$	123,472	$	10,583
	(Dollars in thousands, except per share amounts)
Basic earnings per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119
Adjustment for loss from discontinued operations		—		29,222		—		64,464
Total	$	22,817	$	20,338	$	65,740	$	64,583
Weighted-average common shares outstanding		83,735		83,268		83,646		83,263
Basic earnings per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.27	$	0.24	$	0.79	$	0.78
Diluted earnings per share computation:
Net income (loss) attributable to Ferro Corporation common shareholders	$	22,817	$	(8,884)	$	65,740	$	119
Adjustment for loss from discontinued operations		—		29,222		—		64,464
Total	$	22,817	$	20,338	$	65,740	$	64,583
Weighted-average common shares outstanding		83,735		83,268		83,646		83,263		82,665		82,246		82,581		82,171
Assumed exercise of stock options		808		544		671		499		562		543		478		799
Assumed exercise of deferred stock unit conditions		—		80		—		—
Assumed satisfaction of restricted stock unit conditions		424		473		383		419		123		93		169		109
Assumed satisfaction of performance stock unit conditions		483		111		474		58
Assumed satisfaction of performance share unit conditions										159		45		128		200
Weighted-average diluted shares outstanding		85,450		84,476		85,174		84,239		83,509		82,927		83,356		83,279
Diluted earnings per share from continuing operations attributable to Ferro Corporation common shareholders	$	0.27	$	0.24	$	0.77	$	0.77
Diluted earnings (loss) per share from continuing operations attributable to Ferro Corporation common shareholders									$	0.20	$	(0.03)	$	0.42	$	0.16

The number of anti-dilutive ~~or unearned~~ shares ~~was 1.6~~were 2.1 million and ~~1.8~~2.2 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, respectively, and ~~2.3~~2.7 million and ~~2.5~~2.3 million for the three and ~~nine~~six months ended ~~September~~June 30, ~~2016,~~2020, respectively. These shares ~~were~~are excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.

16. Share Repurchase ~~Program~~ Programs

The Company’s Board of Directors has approved share repurchase programs 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.~~factors, including limitations contained in the Merger Agreement with Prince. The share repurchase programs do not obligate the Company to repurchase any dollar amount or number of common shares, and may be suspended or discontinued at any time.

~~For~~As of June 30, 2021, $46.2 million remains authorized under the ~~nine months ended September 30, 2016,~~programs 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

Table of Contents

17. 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 June 30,
		Postretirement		Foreign		Net Gain (Loss)
		Benefit Liability		Currency		on Cash Flow
(Dollars in thousands)		Adjustments		Items		Hedges		Total
Balances at March 31, 2020		$	1,206	$	(115,847)	$	(22,047)	$	(136,688)
Other comprehensive income (loss) before reclassifications, before tax			—		3,388		(5,836)		(2,448)
Reclassification to earnings:
Cash flow hedge income (loss), before tax			—		—		4,177		4,177
Current period other comprehensive income (loss), before tax			—		3,388		(1,659)		1,729
Tax effect			—		(505)		(99)		(604)
Current period other comprehensive income (loss), net of tax			—		3,893		(1,560)		2,333
Balances at June 30, 2020		$	1,206	$	(111,954)	$	(23,607)	$	(134,355)

Balances at March 31, 2021		$	3,329	$	(131,509)	$	(15,641)	$	(143,821)
Other comprehensive income (loss) before reclassifications, before tax			—		1,564		(773)		791
Reclassification to earnings:
Postretirement benefit liabilities income (loss), before tax			(1)		—		—		(1)
Cash flow hedge income (loss), before tax			—		—		2,387		2,387
Current period other comprehensive income (loss), before tax			(1)		1,564		1,614		3,177
Tax effect			—		338		331		669
Current period other comprehensive income (loss), net of tax			(1)		1,226		1,283		2,508
Balances at June 30, 2021		$	3,328	$	(130,283)	$	(14,358)	$	(141,313)



	Three Months Ended September 30,											Six Months Ended June 30,
		Postretirement					Net Gain						Postretirement		Foreign		Net Gain (Loss)
		Benefit Liability		Translation			on Cash	Other					Benefit Liability		Currency		on Cash Flow
		Adjustments		Adjustments			Flow Hedges	Adjustments		Total
		(Dollars in thousands)
Balances at June 30, 2016		$	1,106	$	(66,886)	$	—	$	(70)	$	(65,850)
(Dollars in thousands)													Adjustments		Items		Hedges		Total
Balances at December 31, 2019													$	1,206	$	(97,575)	$	(13,007)	$	(109,376)
Other comprehensive income (loss) before reclassifications, before tax			—		1,584		—		—		1,584			—		(14,449)		(13,452)		(27,901)
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax			(2)		—		—		—		(2)
Foreign currency translation adjustment, before tax(1)			—		1,115		—		—		1,115
Cash flow hedge income (loss), before tax														—		—		(115)		(115)
Current period other comprehensive income (loss), before tax			(2)		2,699		—		—		2,697			—		(14,449)		(13,567)		(28,016)
Tax effect			—		—		—		—		—			—		(70)		(2,967)		(3,037)
Current period other comprehensive income (loss), net of tax			(2)		2,699		—		—		2,697			—		(14,379)		(10,600)		(24,979)
Balances at September 30, 2016		$	1,104	$	(64,187)	$	—	$	(70)	$	(63,153)
Balances at June 30, 2020													$	1,206	$	(111,954)	$	(23,607)	$	(134,355)

Balances at June 30, 2017		$	1,153	$	(86,753)	$	—	$	(70)	$	(85,670)
Balances at December 31, 2020													$	3,199	$	(70,482)	$	(22,427)	$	(89,710)
Other comprehensive income (loss) before reclassifications, before tax			—		(141)		166		—		25			—		(76,466)		3,361		(73,105)
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			(39)		—		—		—		(39)
Postretirement benefit liabilities income (loss), before tax														129		—		—		129
Currency translation reclassification to income on divestiture														—		17,305		—		17,305
Amount reclassification to income (remote transaction)														—		—		4,509		4,509
Cash flow hedge income (loss), before tax														—		—		1,242		1,242
Current period other comprehensive income (loss), before tax			(39)		(141)		166		—		(14)			129		(59,161)		9,112		(49,920)
Tax effect			(6)		3,001		62		—		3,057			—		640		1,043		1,683
Current period other comprehensive income (loss), net of tax			(33)		(3,142)		104		—		(3,071)			129		(59,801)		8,069		(51,603)
Balances at September 30, 2017		$	1,120	$	(89,895)	$	104	$	(70)	$	(88,741)
Balances at June 30, 2021													$	3,328	$	(130,283)	$	(14,358)	$	(141,313)

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)

2523

Table of Contents

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

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				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	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)									2021		2020		2021		2020
Functional Coatings									$	194,909	$	131,672	$	379,731	$	287,107
Color Solutions		93,196		65,281		273,917		187,893		99,422		73,129		202,958		170,020
Total net sales	$	350,012	$	288,527	$	1,019,199	$	863,955	$	294,331	$	204,801	$	582,689	$	457,127

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				Six Months Ended
	September 30,				September 30,				June 30,				June 30,
	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)									2021		2020		2021		2020
Functional Coatings									$	59,521	$	36,119	$	121,397	$	83,936
Color Solutions		31,044		23,178		87,642		65,868		36,692		26,985		70,360		60,772
Other cost of sales		(778)		(115)		(1,480)		(95)		(1,378)		640		(1,819)		(226)
Total gross profit		103,616		88,981		310,752		271,583		94,835		63,744		189,938		144,482
Selling, general and administrative expenses		65,485		55,588		186,957		166,105		59,026		50,541		112,864		106,587
Restructuring and impairment charges		1,471		26		7,713		1,694		1,970		8,619		7,154		9,784
Other expense, net		6,342		6,662		26,581		15,953		7,910		6,310		17,789		8,808
Income before income taxes	$	30,318	$	26,705	$	89,501	$	87,831
Income (loss) before income taxes									$	25,929	$	(1,726)	$	52,131	$	19,303

~~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.

2624

Table of Contents

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

Overview

Net sales for the three months ended ~~September~~June 30, ~~2017,~~2021, increased by ~~$61.5~~$89.5 million, or ~~21.3%~~43.7%, compared with the prior-year same period. ~~The increase~~Net sales increased by $63.2 million in ~~net sales was driven by higher sales~~Functional Coatings and $26.3 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~~June 30, ~~2017,~~2021, gross profit increased ~~$14.6~~$31.1 million, or ~~16.4%~~48.8%, compared with the prior-year same period; as a percentage of net sales, it ~~decreased~~increased approximately ~~120~~110 basis points to ~~29.6%~~32.2%. Our total gross profit for the second quarter of 2021 was $94.8 million, compared with $63.7 million for the three months ended June 30, 2020. The increase in gross profit was attributable to higher gross profit ~~across all~~in Functional Coatings of ~~our segments, with increases~~$23.4 million and in Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$7.9 million, $5.6 million and $1.8 million, respectively.~~ $9.7 million.

For the three months ended ~~September~~June 30, ~~2017,~~2021, selling, general and administrative (“SG&A”) expenses increased ~~$9.9~~$8.5 million, or ~~17.8%~~16.8%, 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 decreased approximately 460 basis points to ~~acquisitions completed within the last year.~~20.1%.

For the three months ended ~~September~~June 30, ~~2017,~~2021, net income was ~~$23.0~~$15.9 million, compared with net loss of ~~$8.7~~$5.2 million for the prior-year same period, and net income attributable to common shareholders was ~~$22.8~~$15.5 million, compared with net loss attributable to common shareholders of ~~$8.9~~$5.5 million for the prior-year same period. Income from continuing operations was ~~$23.0~~$17.4 million for the three months ended ~~September~~June 30, ~~2017,~~2021, compared with ~~$20.5~~loss from continuing operations of $1.9 million for the ~~three months ended September 30, 2016. Our total gross profit for~~prior-year same period.

Outlook

Ferro continued to experience higher demand across all business segments in the ~~third~~ quarter as customer markets recover. The impact of ~~2017 was $103.6 million, compared with $89.0 million for~~ the ~~three months ended September 30, 2016.~~

~~Outlook~~

~~For~~COVID pandemic through the remainder of ~~2017, we expect~~2021 is unknown, even with the rollout of vaccines. Ferro expects to continue to benefit from ~~strong organic growth~~strategic actions taken prior to and during the pandemic to optimize our business, invest in ~~our businesses, in addition to contributions from recent acquisitions. With respect~~technology platforms, align with macrotrends, and focus on higher-margin, higher-growth markets, all of which contributed to gross ~~margins,~~margin expansion in the second quarter of 2021.

Ferro provides products and services that are essential to our customers as they innovate to address trends in their markets and develop next generation products. We sell our products and services in multiple markets and geographies around the world, which limits exposure to any one industry or region. In addition, we serve a diverse set of industries, including automotive, construction, appliances, healthcare, food and beverage, information technology, energy and defense. COVID-related behavior changes have accelerated demand for certain products, especially those in industries supporting mobility, entertainment and personal technology, smart appliances, construction, and sustainable product packaging.

Ferro continues to maintain protocols for the safety and well-being of our personnel. We monitor the impact of the outbreak of COVID-19 on our business, including how it may impact our customers, employees, supply chain and distribution network and take action, as appropriate, to address these circumstances. In some areas around the world, government mandates have been lifted and economic conditions have improved in certain sectors of the economy relative to 2020. Recently, some regions have experienced increasing numbers of COVID-19 cases, and if this continues and if public authorities intensify efforts to contain the spread of COVID-19, normal business activity may be further disrupted, and economic conditions could ~~continue~~weaken.

In 2021, following the completion of the sale of our Tile Coatings Business, we are transitioning to a smaller, more agile and more streamlined global business with a more coherent and focused portfolio aligned with evolving megatrends. On May 11, 2021, Ferro announced that it has entered into a definitive agreement to be ~~impacted~~acquired by Prince International Corporation, a portfolio company of American Securities LLC. The transaction is expected to close in the raw material headwinds that have been experienced throughout the year thus far, which we would expect to cover through pricing actions, product reformations and other optimization actions, with some lag. We expect Selling, general and administrative costs to continue to leverage favorably as a percentagefirst quarter of Net sales, compared with the prior year. Further, as we move through the balance of the year, we will continue to monitor current and near-term increasing customer demand levels, and align our production and inventories accordingly. 2022.

~~We remain focused on the integration of our recent acquisitions and achieving the identified synergies.~~ We will continue to ~~drive innovation~~refine our manufacturing footprint, optimize logistics and ~~optimization throughout~~streamline sourcing and procurement in our ~~business.~~operations around the world.

Foreign currency rates may continue to be volatile through 2021 and changes in interest rates could adversely impact reported results. We continue to expect cash flow from operating activities to be positive for 2021.

Factors that could adversely affect our future performance include those described under the heading “Risk Factors” in Item 1A of Part I of ~~our~~the Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

‎

2725

Table of Contents

Results of Operations - Consolidated

Comparison of the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~ 2020

For the three months ended ~~September~~June 30, ~~2017,~~2021, net income from continuing operations was ~~$23.0 million, compared with $20.5 million income from continuing operations for the three months ended September 30, 2016. Net income was $23.0~~$17.4 million, compared with net loss of ~~$8.7~~$1.9 million for the three months ended ~~September~~June 30, ~~2016.~~2020. For the three months ended ~~September~~June 30, ~~2017,~~2021, net income attributable to common shareholders was ~~$22.8~~$15.5 million, or earnings per share of ~~$0.27,~~$0.19, compared with net loss ~~attributable to common shareholders~~ of ~~$8.9~~$5.5 million, or loss per share of ~~$0.11,~~$0.07, for the three months ended ~~September~~June 30, ~~2016.~~2020.

Net Sales



	Three Months Ended										Three Months Ended
	September 30,										June 30,
	2017			2016			$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)											2021			2020			$ Change		% Change
Net sales	$	350,012		$	288,527		$	61,485	21.3	%	$	294,331		$	204,801		$	89,530	43.7	%
Cost of sales		246,396			199,546			46,850	23.5	%		199,496			141,057			58,439	41.4	%
Gross profit	$	103,616		$	88,981		$	14,635	16.4	%	$	94,835		$	63,744		$	31,091	48.8	%
Gross profit as a % of net sales		29.6	%		30.8	%						32.2	%		31.1	%

Net sales increased by ~~$61.5~~$89.5 million, or ~~21.3%~~43.7%, infor the three months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same period, driven by higher sales in Functional Coatings and Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$27.9 million, $17.8~~$63.2 million and ~~$15.8~~$26.3 million, respectively. The increase in net sales was driven ~~in part~~ by ~~acquisitions including Cappelle, which contributed sales~~favorable volume and mix of ~~$17.8~~$78.0 million, ~~ESL, which contributed sales~~favorable foreign currency impacts of ~~$10.5~~$9.5 million and ~~SPC, which contributed sales~~higher product pricing of $7.8 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 $10.1 million and Performance Coatings growing $7.2$2.0 million.

Gross Profit

Gross profit increased ~~$14.6~~$31.1 million, or ~~16.4%~~48.8%, infor the three months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same ~~period, and as~~period. As a percentage of net sales, ~~it decreased 120~~gross profit increased approximately 110 basis points to ~~29.6%~~32.2%. The increase in gross profit was primarily attributable to ~~increases across all of our segments, with increases~~an increase in Functional Coatings and Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$7.9 million, $5.6~~$23.4 million and ~~$1.8~~$9.7 million, respectively. The increase in gross profit was primarily driven by ~~acquisitions~~favorable sales volume and mix of ~~$11.9~~$20.1 million, favorable ~~product pricing of $6.0 million, lower~~ manufacturing costs of ~~$4.7~~$4.2 million, ~~and~~ favorable foreign currency impacts of ~~$1.6~~$3.6 million, ~~partially offset by~~ higher product pricing of $2.0 million and lower 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,								June 30,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Geographic Revenues on a sales origination basis
Europe	$	169,718	$	124,801	$	44,917	36.0	%
EMEA									$	130,527	$	78,945	$	51,582	65.3	%
United States		88,391		77,211		11,180	14.5	%		122,060		95,013		27,047	28.5	%
Asia Pacific		50,864		46,646		4,218	9.0	%		41,744		30,843		10,901	35.3	%
Latin America		41,039		39,869		1,170	2.9	%
Net sales	$	350,012	$	288,527	$	61,485	21.3	%	$	294,331	$	204,801	$	89,530	43.7	%

The increase in net sales of ~~$61.5~~$89.5 million, compared with the prior-year same period, was driven by ~~an increase~~increases in sales from all regions. The increase in sales from ~~Europe~~EMEA was ~~primarily~~ attributable to higher sales in Functional Coatings and Color Solutions ~~Performance Coatings and Performance Colors and Glass~~ of ~~$17.9 million, $14.7~~$41.5 million and ~~$12.3~~$10.1 million, respectively. The increase in sales from the ~~United~~

~~Table of Contents~~

~~States~~Americas was attributable to higher sales in Color Solutions and ~~Performance Colors and Glass~~Functional Coatings of ~~$7.9~~$13.9 million and ~~$3.9~~$13.1 million, respectively. The increase in sales from ~~Latin America and~~ Asia Pacific was attributable to higher sales ~~across all segments.~~in Functional Coatings and Color Solutions of $8.6 million and $2.3 million, respectively.

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 (“SG&A”) Expenses

The following table includes SG&A ~~components with significant~~component changes between ~~2017~~2021 and ~~2016.~~2020.



	Three Months Ended								Three Months Ended
	September 30,								June 30,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
Personnel expenses	$	36,364	$	29,634	$	6,730	22.7	%
(Dollars in thousands)									2021		2020		$ Change		% Change
Personnel expenses (excluding R&D personnel expenses)									$	22,266	$	19,779		2,487	12.6	%
Research and development expenses										7,932		8,331		(399)	(4.8)	%
Business development										7,599		5,303		2,296	43.3	%
Incentive compensation		3,637		2,153		1,484	68.9	%		1,883		1,971		(88)	(4.5)	%
Stock-based compensation		1,510		1,442		68	4.7	%		2,085		2,183		(98)	(4.5)	%
Intangible asset amortization										1,712		1,411		301	21.3	%
Pension and other postretirement benefits		(20)		(109)		89	(81.7)	%		333		183		150	82.0	%
Bad debt		289		797		(508)	(63.7)	%		13		(40)		53	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)	%		15,203		11,420		3,783	33.1	%
Selling, general and administrative expenses	$	65,485	$	55,588	$	9,897	17.8	%	$	59,026	$	50,541	$	8,485	16.8	%

SG&A expenses were ~~$9.9~~$8.5 million higher in the three months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same period. The higher SG&A expenses compared ~~with~~to the prior-year same period are primarily driven by ~~expenses~~other expense, primarily associated with ~~businesses acquired within the last year of approximately $6.7 million. The acquisitions were the primary driver of the increase in~~consulting and professional fees, higher personnel expenses and accounted for the entire increase in intangible asset amortization. The increase in incentive compensation of $1.5 million was driven by the Company’s performance relative to targets established for certain awards compared with the prior-year same period.business development costs.

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
	June 30,
(Dollars in thousands)	2021		2020		$ Change		% Change
Strategic services	$	23,674	$	21,495	$	2,179	10.1	%
Functional services		31,384		24,892		6,492	26.1	%
Incentive compensation		1,883		1,971		(88)	(4.5)	%
Stock-based compensation		2,085		2,183		(98)	(4.5)	%
Selling, general and administrative expenses	$	59,026	$	50,541	$	8,485	16.8	%

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,								June 30,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Employee severance	$	660	$	20	$	640	3,200.0	%	$	1,590	$	7,174	$	(5,584)	(77.8)	%
Other restructuring costs		811		6		805	13,416.7	%		380		1,445		(1,065)	(73.7)	%
Restructuring and impairment charges	$	1,471	$	26	$	1,445	5,557.7	%	$	1,970	$	8,619	$	(6,649)	(77.1)	%

Restructuring and impairment charges ~~increased~~decreased in the ~~third quarter of 2017~~three months ended June 30, 2021, compared with the prior-year same period. The ~~increase was~~decrease primarily ~~due~~relates to ~~actions taken in connection~~previously disclosed plans being substantially completed with ~~recent acquisitions designed~~any remaining costs expected to ~~achieve~~be recognized within the next 12 months. Refer to Note 14 to the consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for a discussion of our ~~targeted synergies.~~optimization plans and related costs.

Interest Expense



	Three Months Ended								Three Months Ended
	September 30,								June 30,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Interest expense	$	6,326	$	4,967	$	1,359	27.4	%	$	5,397	$	6,383	$	(986)	(15.4)	%
Amortization of bank fees		943		347		596	171.8	%		498		866		(368)	(42.5)	%
Interest swap amortization										(316)		(316)		—	—	%
Interest capitalization		(21)		(10)		(11)	110.0	%		(573)		(756)		183	(24.2)	%
Interest expense	$	7,248	$	5,304	$	1,944	36.7	%	$	5,006	$	6,177	$	(1,171)	(19.0)	%

Table of Contents

Interest expense ~~increased~~decreased in the ~~third quarter of 2017~~three months ended June 30, 2021, compared with the prior-year same period. The ~~increase~~decrease in interest expense was primarily due to ~~an increase~~a decrease in the average long-term debt balance, partially offset by higher average interest rate during the three months ended ~~September~~June 30, ~~2017,~~2021, 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.period.

Income Tax Expense

~~During the third quarter of 2017, income~~Income tax expense for the three months ended June 30, 2021 was ~~$7.4~~$8.5 million, or ~~24.3%~~32.8% of pre-tax income. ~~In the third quarter of 2016, we recorded~~Income tax expense ~~of $6.2~~for the three months ended June 30, 2020 was $0.2 million, or ~~23.1%~~(11.6%) of pre-tax ~~income.~~loss. The tax expense infor the ~~third quarter of 2017 and 2016,~~three months ended June 30, 2021, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense during the three months ended June 30, 2020, as a percentage of pre-tax loss, is lower than the U.S. federal statutory income tax rate of ~~35%,~~21% primarily as a result of ~~foreign statutory~~tax rate ~~differences.~~ changes enacted during 2020.

~~Table of Contents~~

Results of Operations - Segment Information

Comparison of the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~ 2020

~~Performance~~Functional Coatings



	Three Months Ended											Change due to									Three Months Ended											Change due to
	September 30,												Volume /								June 30,												Volume /
	2017			2016			$ Change		% Change		Price		Mix		Currency			Acquisitions	Other
	(Dollars in thousands)
(Dollars in thousands)																					2021			2020			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	146,238		$	130,453		$	15,785	12.1	%	$	2,683	$	3,428	$	1,043	$	8,631	$	—	$	194,909		$	131,672		$	63,237	48.0	%	$	1,403	$	55,739	$	6,095	$	—
Segment gross profit		35,470			33,636			1,834	5.5	%		2,683		967		697		2,651		(5,164)		59,521			36,119			23,402	64.8	%		1,403		12,128		2,054		7,817
Gross profit as a % of segment net sales		24.3	%		25.8	%																30.5	%		27.4	%

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

Three Months Ended

September 30,

2017

2016

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

Europe

$
83,910

$
69,171

$
14,739

21.3
%
Latin America

26,699

26,523

176

0.7
%
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
%

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

~~Performance Colors and Glass~~

Three Months Ended

Change due to

September 30,

Volume /

2017

2016

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
110,578

$
92,793

$
17,785

19.2
%

$
490

$
(1,519)

$
2,000

$
16,814

$
—
Segment gross profit

37,880

32,282

5,598

17.3
%

490

(1,536)

644

5,397

603
Gross profit as a % of segment net sales

34.3
%

34.8
%

~~Table of Contents~~

Net sales increased compared with the prior-year same period, primarily driven by ~~$10.5~~higher sales in porcelain enamel, decoration, automotive, industrial, and electronics products of $17.1 million, ~~of sales from ESL, which was acquired in the fourth quarter of 2016,~~$16.9 million, $13.0 million, $8.8 million and ~~$6.4~~$7.4 million, ~~in sales from Dip-Tech, which was acquired in the third quarter of 2017.~~respectively. The increase in net sales was driven by ~~acquisitions~~favorable volume and mix of ~~$16.8~~$55.7 million, ~~favorable~~ foreign currency impacts of ~~$2.0~~$6.1 million and ~~higher~~increased product pricing of ~~$0.5 million, partially offset by unfavorable volume and mix of $1.5~~$1.4 million. Gross profit increased from the prior-year same period primarily due to ~~acquisitions, which contributed $5.4~~favorable volume and mix of $12.1 million, favorable manufacturing costs of ~~$1.5~~$6.1 million, favorable foreign currency impacts of ~~$0.6~~$2.1 million, favorable raw material costs of $1.7 million and ~~higher~~increased product pricing of ~~$0.5~~$1.4 million.



	Three Months Ended
	June 30,
(Dollars in thousands)	2021		2020		$ Change		% Change
Segment net sales by Region
EMEA	$	92,569	$	51,071	$	41,498	81.3	%
Americas		72,046		58,868		13,178	22.4	%
Asia Pacific		30,294		21,733		8,561	39.4	%
Total	$	194,909	$	131,672	$	63,237	48.0	%

The net sales increase of $63.2 million was primarily driven by higher sales from all regions. The increase in sales from EMEA was primarily attributable to higher sales of decoration, industrial, porcelain enamel, automotive and electronics products of $11.9 million, $9.4 million, $8.2 million, $6.7 million and $5.3 million, respectively. The increase in sales from the Americas was primarily attributable to higher sales of porcelain enamel, automotive, electronics and decoration products of $7.0 million, $3.5 million, $1.4 million and $1.3 million, respectively. The increase in sales from Asia Pacific was primarily attributable to higher sales of decoration, automotive, porcelain enamel and electronics products of $3.7 million, $2.8 million, $1.9 million and $0.7 million, respectively, partially offset by lower sales ~~volumes~~of industrial products of $0.5 million.

Color Solutions



	Three Months Ended											Change due to
	June 30,												Volume /
(Dollars in thousands)	2021			2020			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	99,422		$	73,129		$	26,293	36.0	%	$	589	$	22,281	$	3,423	$	—
Segment gross profit		36,692			26,985			9,707	36.0	%		589		7,926		1,568		(376)
Gross profit as a % of segment net sales		36.9	%		36.9	%

Table of Contents

Net sales increased compared with the prior-year same period, primarily driven by higher sales of pigment, surface technology and dispersions and colorants products of $19.8 million, $4.3 million and $2.2 million, respectively. The increase in net sales was driven by favorable volume and mix of ~~$1.5~~$22.3 million, favorable foreign currency impacts of $3.4 million and increased product pricing of $0.6 million. Gross profit increased from the prior-year same period, primarily due to favorable sales volume and mix of $7.9 million, favorable foreign currency impacts of $1.6 million, increased product pricing of $0.6 million and favorable manufacturing costs of $0.1 million, partially offset by unfavorable raw material costs of ~~$0.9~~$0.5 million.



	Three Months Ended								Three Months Ended
	September 30,								June 30,
	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ 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	%
EMEA									$	37,958	$	27,874	$	10,084	36.2	%
Americas										50,014		36,145		13,869	38.4	%
Asia Pacific		16,663		15,112		1,551	10.3	%		11,450		9,110		2,340	25.7	%
Latin America		5,671		5,608		63	1.1	%
Total	$	110,578	$	92,793	$	17,785	19.2	%	$	99,422	$	73,129	$	26,293	36.0	%

The net sales increase of ~~$17.8~~$26.3 million was driven by higher sales from all regions. The increase in sales from ~~Europe~~the Americas was primarily ~~attributable to $8.9 million in~~driven by increased sales ~~from acquisitions~~of pigment, surface technology and ~~higher sales in decoration~~dispersions and colorants products of ~~$2.4 million.~~$7.6 million, $5.2 million and $1.1 million, respectively. The increase in sales from ~~the United States~~EMEA 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~~pigment and ~~surface technology~~dispersions and colorants products of ~~$6.6~~$9.0 million and ~~$3.7~~$1.1 million, respectively. The increase in ~~net~~ sales from Asia Pacific was ~~driven by acquisitions~~attributable to increased sales of ~~$17.8 million, higher volumes and mix~~pigment products 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~~$3.2 million, partially offset by ~~higher raw material costs~~lower sales 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 increase in sales from the United States was primarily driven by sales in surface technology ~~products~~ of ~~$3.7 million, sales from Cappelle of $3.0 million and sales in pigment products of $1.4 million. The increases in sales from Asia Pacific and Latin America of $1.1 million and~~ $0.9 million, ~~respectively, were fully attributable to higher sales for pigment products.~~ respectively.

~~Results of Operations - Consolidated~~

Comparison of the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~ 2020

For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, net income from continuing operations was ~~$66.3~~$36.0 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~~$14.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, net income attributable to common shareholders was ~~$65.7~~$123.5 million, or earnings per share of ~~$0.79,~~$1.50, compared with net income attributable to common shareholders of ~~$0.1~~$10.6 million, or earnings per share of ~~$0.01,~~$0.13, for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2020.

Net Sales



	Nine Months Ended										Six Months Ended
	September 30,										June 30,
	2017			2016			$ Change		% Change

	(Dollars in thousands)
(Dollars in thousands)											2021			2020			$ Change		% Change
Net sales	$	1,019,199		$	863,955		$	155,244	18.0	%	$	582,689		$	457,127		$	125,562	27.5	%
Cost of sales		708,447			592,372			116,075	19.6	%		392,751			312,645			80,106	25.6	%
Gross profit	$	310,752		$	271,583		$	39,169	14.4	%	$	189,938		$	144,482		$	45,456	31.5	%
Gross profit as a % of net sales		30.5	%		31.4	%						32.6	%		31.6	%

Net sales increased by ~~$155.2~~$125.6 million, or ~~18.0%~~27.5%, infor the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same period, driven by higher sales in Functional Coatings and Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$86.0 million, $43.8~~$92.6 million and ~~$25.4~~$33.0 million, respectively. The increase in net sales was driven ~~largely~~ by ~~acquisitions, including Cappelle, which contributed sales~~favorable volume and mix of ~~$55.8~~$102.6 million, ~~ESL, which contributed sales~~favorable foreign currency impacts of ~~$31.8~~$18.8 million and ~~SPC, which contributed sales~~higher product pricing 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$4.2 million.

Gross Profit

Gross profit increased ~~$39.2~~$45.5 million, or ~~14.4%~~31.5%, infor the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same ~~period, and as~~period. As a percentage of net sales, ~~it decreased 90~~gross profit increased approximately 100 basis points to ~~30.5%~~32.6%. The increase in gross profit was primarily attributable to ~~increases across all~~an increase in Functional Coatings of ~~our segments, with increases~~$37.5 million and 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.~~$9.6 million. The increase in gross profit was primarily driven by ~~acquisitions of $31.2 million, lower manufacturing costs of $20.2 million, higher~~favorable sales ~~volumes~~volume and mix of ~~$7.0~~$29.7 million, ~~and~~ favorable foreign currency impacts of $6.5 million, higher product pricing of ~~$5.5~~$4.2 million, ~~partially offset by higher~~lower raw material costs of ~~$20.7~~$3.4 million and ~~unfavorable foreign currency impacts~~favorable manufacturing costs of ~~$2.6~~$1.7 million.

Table of Contents

Geographic Revenues

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



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

	2017		2016		$ Change		% Change

	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
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	%
EMEA									$	256,941	$	192,691	$	64,250	33.3	%
Americas										243,832		202,541		41,291	20.4	%
Asia Pacific		142,732		134,470		8,262	6.1	%		81,916		61,895		20,021	32.3	%
Latin America		121,074		112,859		8,215	7.3	%
Net sales	$	1,019,199	$	863,955	$	155,244	18.0	%	$	582,689	$	457,127	$	125,562	27.5	%

The increase in net sales of ~~$155.2~~$125.6 million, compared with the prior-year same period, was driven by ~~higher~~increases in sales from all regions. The increase in sales from ~~Europe~~EMEA was attributable to higher sales in Functional Coatings and Color Solutions ~~Performance Colors and Glass and Performance Coatings~~ of ~~$53.8 million, $23.4~~$53.0 million and ~~$20.5~~$11.3 million, respectively. The increase in sales from the ~~United States~~Americas was ~~primarily~~ attributable to higher sales in Functional Coatings and Color Solutions ~~and Performance Colors and Glass~~ of ~~$26.5~~$23.3 million and ~~$15.9 million.~~$18.0 million, respectively. The increase in sales from ~~Latin America and~~ Asia Pacific was attributable to higher sales ~~across all segments.~~in Functional Coatings and Color Solutions of $16.3 million and $3.7 million, respectively.

~~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 (“SG&A”) Expenses

The following table includes SG&A ~~components with significant~~component changes between ~~2017~~2021 and ~~2016.~~2020.



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

	2017		2016		$ Change		% Change

	(Dollars in thousands)
Personnel expenses	$	102,872	$	89,214	$	13,658	15.3	%
(Dollars in thousands)									2021		2020		$ Change		% Change
Personnel expenses (excluding R&D personnel expenses)									$	44,612	$	42,528	$	2,084	4.9	%
Research and development expenses										17,115		18,418		(1,303)	(7.1)	%
Business development										11,247		5,838		5,409	92.7	%
Incentive compensation		7,932		7,299		633	8.7	%		4,000		4,091		(91)	(2.2)	%
Stock-based compensation		6,901		5,279		1,622	30.7	%		4,715		4,942		(227)	(4.6)	%
Intangible asset amortization										3,062		3,089		(27)	(0.9)	%
Pension and other postretirement benefits		(139)		33		(172)	(521.2)	%		672		341		331	97.1	%
Bad debt		(78)		1,020		(1,098)	(107.6)	%		42		96		(54)	(56.3)	%
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	%		27,399		27,244		155	0.6	%
Selling, general and administrative expenses	$	186,957	$	166,105	$	20,852	12.6	%	$	112,864	$	106,587	$	6,277	5.9	%

SG&A expenses were ~~$20.9~~$6.3 million higher in the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, compared with the prior-year same period. The higher SG&A expenses compared ~~with~~to 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~~higher business development costs and personnel expenses, partially offset by lower research 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.expenses.

~~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								Six Months Ended
	September 30,								June 30,

	2017		2016		$ Change		% Change
	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Strategic services	$	99,081	$	86,801	$	12,280	14.1	%	$	48,128	$	47,111	$	1,017	2.2	%
Functional services		73,043		66,726		6,317	9.5	%		56,021		50,443		5,578	11.1	%
Incentive compensation		7,932		7,299		633	8.7	%		4,000		4,091		(91)	(2.2)	%
Stock-based compensation		6,901		5,279		1,622	30.7	%		4,715		4,942		(227)	(4.6)	%
Selling, general and administrative expenses	$	186,957	$	166,105	$	20,852	12.6	%	$	112,864	$	106,587	$	6,277	5.9	%

Table of Contents

Restructuring and Impairment Charges



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

	2017		2016		$ Change		% Change

	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Employee severance	$	2,455	$	1,161	$	1,294	111.5	%	$	5,439	$	7,832	$	(2,393)	(30.6)	%
Equity method investment impairment		1,499		—		1,499	—	%
Asset impairment		1,176		—		1,176	—	%
Other restructuring costs		2,583		533		2,050	384.6	%		1,715		1,952		(237)	(12.1)	%
Restructuring and impairment charges	$	7,713	$	1,694	$	6,019	355.3	%	$	7,154	$	9,784	$	(2,630)	(26.9)	%

Restructuring and impairment charges ~~increased~~decreased in the ~~first nine~~six months ~~of 2017~~ended June 30, 2021, compared with the prior-year same period. The ~~increase was~~decrease primarily ~~due~~relates to ~~an “other than temporary impairment” charge~~previously disclosed plans being substantially completed with any remaining costs expected to be recognized within the next 12 months. Refer to Note 14 to the consolidated financial statements under Item 1 of this Quarterly Report on ~~an equity method investment~~Form 10-Q for a discussion of ~~$1.5 million~~our optimization plans 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.related costs.

Interest Expense



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

	2017		2016		$ Change		% Change

	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Interest expense	$	17,591	$	14,629	$	2,962	20.2	%	$	15,122	$	12,229	$	2,893	23.7	%
Amortization of bank fees		2,375		991		1,384	139.7	%		1,102		1,795		(693)	(38.6)	%
Interest swap amortization										(632)		(632)		—	—	%
Interest capitalization		(45)		(41)		(4)	9.8	%		(1,149)		(1,685)		536	(31.8)	%
Interest expense	$	19,921	$	15,579	$	4,342	27.9	%	$	14,443	$	11,707	$	2,736	23.4	%

Interest expense increased in the ~~first nine~~six months ~~of 2017~~ended June 30, 2021, compared with the prior-year same period. The increase in interest expense was primarily due to ~~an increase~~incremental interest expense recognized associated with the termination of certain cross-currency swap instruments and higher average interest rate, partially offset by a decrease in the average long-term debt balance during the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2021, 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.period.

Income Tax Expense

~~During the first nine months of 2017, income~~Income tax expense for the six months ended June 30, 2021 was ~~$23.2~~$16.1 million, or ~~25.9%~~31.0% of pre-tax income. ~~In the first nine months of 2016, we recorded~~Income tax expense ~~of $22.7~~for the six months ended June 30, 2020 was $5.3 million, or ~~25.8%~~27.5% of pre-tax income. The tax expense infor the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 and ~~2016,~~June 30, 2020, 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 ~~nine~~six months ended ~~September~~June 30, ~~2017~~2021 and ~~2016~~ 2020

~~Performance~~Functional Coatings



	Nine Months Ended											Change due to									Six Months Ended											Change due to
	September 30,												Volume /								June 30,												Volume /
	2017			2016			$ Change		% Change		Price		Mix		Currency			Acquisitions	Other
	(Dollars in thousands)
(Dollars in thousands)																					2021			2020			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	424,549		$	399,166		$	25,383	6.4	%	$	(427)	$	20,333	$	(8,851)	$	14,328	$	—	$	379,731		$	287,107		$	92,624	32.3	%	$	3,980	$	76,756	$	11,888	$	—
Segment gross profit		109,205			104,985			4,220	4.0	%		(427)		6,174		(2,006)		3,961		(3,482)		121,397			83,936			37,461	44.6	%		3,980		22,691		3,984		6,806
Gross profit as a % of segment net sales		25.7	%		26.3	%																32.0	%		29.2	%

Net sales increased ~~in Performance Coatings~~ compared with the prior-year same period, primarily driven by higher sales ~~from SPC~~in porcelain enamel, automotive, decoration, electronics and industrial products of ~~$13.5~~$26.9 million, $19.8 million, $16.5 million, $14.8 million and ~~an increase in organic growth across all product lines.~~$14.6 million, respectively. 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 driven by higher sales of frits and glazes and porcelain enamel of $3.8 million and $0.8 million, respectively. The sales increase from Asia Pacific was primarily driven by higher sales of digital inks and porcelain enamel of $2.5 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 products of $4.3 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~~$76.7 million, ~~partially offset by unfavorable~~ foreign currency impacts of ~~$1.1~~$11.9 million and increased product pricing of $4.0 million. Gross profit increased from the prior-year same period primarily due to ~~gross profit from acquisitions~~favorable volume and mix of ~~$14.9~~$22.7 million, favorable manufacturing costs of ~~$2.8~~$4.3 million, ~~and higher~~increased product pricing of ~~$1.7~~$4.0 million, favorable foreign currency impacts of $4.0 million and favorable raw material costs of $2.5 million.

Table of Contents

	Six Months Ended
	June 30,
(Dollars in thousands)	2021		2020		$ Change		% Change
Segment net sales by Region
EMEA	$	179,941	$	126,928	$	53,013	41.8	%
Americas		139,964		116,690		23,274	19.9	%
Asia Pacific		59,826		43,489		16,337	37.6	%
Total	$	379,731	$	287,107	$	92,624	32.3	%

The net sales increase of $92.6 million was primarily driven by higher sales from all regions. The increase in sales from EMEA was primarily attributable to higher sales of porcelain enamel, industrial, decoration, automotive and electronics products of $12.2 million, $12.2 million, $11.1 million, $9.5 million and $8.0 million, respectively. The increase in sales from the Americas was primarily attributable to higher sales of porcelain enamel, electronics, automotive and decoration products of $10.8 million, $5.7 million, $5.5 million and $1.5 million, respectively. The increase in sales from Asia Pacific was primarily attributable to increased sales of automotive, decoration, porcelain enamel, industrial and electronics products of $4.8 million, $3.9 million, $3.9 million, $2.6 million and $1.1 million, respectively.

Color Solutions



	Six Months Ended											Change due to
	June 30,												Volume /
(Dollars in thousands)	2021			2020			$ Change		% Change		Price		Mix		Currency		Other
Segment net sales	$	202,958		$	170,020		$	32,938	19.4	%	$	192	$	25,839	$	6,907	$	—
Segment gross profit		70,360			60,772			9,588	15.8	%		192		7,016		2,557		(177)
Gross profit as a % of segment net sales		34.7	%		35.7	%

Net sales increased compared with the prior-year same period, primarily driven by higher sales of pigment, surface technology and dispersions and colorants products of $23.6 million, $6.3 million and $3.0 million, respectively. The increase in net sales was driven by favorable volume and mix of $25.8 million, favorable foreign currency impacts of $6.9 million and increased product pricing of $0.2 million. Gross profit increased from the prior-year same period, primarily due to favorable sales volume and mix of $7.0 million, favorable foreign currency impacts of $2.6 million, favorable raw material costs of $0.9 million and increased product pricing of $0.2 million, partially offset by unfavorable ~~raw material~~manufacturing costs of ~~$2.5 million, lower sales volumes and mix of $1.9 million, and unfavorable foreign currency impacts of $0.5~~$1.1 million.



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

	2017		2016		$ Change		% Change

	(Dollars in thousands)
(Dollars in thousands)									2021		2020		$ Change		% Change
Segment net sales by Region
Europe	$	144,586	$	121,206	$	23,380	19.3	%
United States		112,772		96,833		15,939	16.5	%
EMEA									$	77,000	$	65,763	$	11,237	17.1	%
Americas										103,868		85,851		18,017	21.0	%
Asia Pacific		47,091		44,102		2,989	6.8	%		22,090		18,406		3,684	20.0	%
Latin America		16,284		14,755		1,529	10.4	%
Total	$	320,733	$	276,896	$	43,837	15.8	%	$	202,958	$	170,020	$	32,938	19.4	%

The net sales increase of ~~$43.8~~$32.9 million was driven by higher sales from all regions. The increase in sales from ~~Europe~~the Americas was primarily driven by ~~higher~~increased sales ~~from acquisitions.~~of pigment, surface technology and dispersions and colorants products of $8.4 million, $8.0 million and $1.6 million, respectively. 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~~EMEA was primarily ~~due~~attributable to higher sales of ~~automobile~~pigment and ~~decoration~~dispersions and colorants products of ~~$1.6~~$9.8 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$1.4 million, respectively. The increase in ~~net sales was driven by~~ sales from ~~acquisitions~~Asia Pacific was attributable to increased sales of ~~$57.9 million, higher volumes and mix~~pigment products of ~~$24.2 million, and higher product pricing of $4.2~~$5.4 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~~$1.7 million. ~~The increases in sales from Asia Pacific and Latin America of $3.3 million and $2.4 million, respectively, were driven by an increase in pigment products.~~

Summary of Cash Flows for the ~~nine~~six months ended ~~September 2017~~June 30, 2021 and ~~2016~~ 2020

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



	Six Months Ended
	June 30,
(Dollars in thousands)	2021		2020		$ Change
Net cash used in operating activities	$	(46,410)	$	(104,561)	$	58,151
Net cash provided by investing activities		452,018		48,376		403,642
Net cash provided by (used in) financing activities		(442,763)		22,519		(465,282)
Effect of exchange rate changes on cash and cash equivalents		(1,405)		(505)		(900)
Decrease in cash and cash equivalents	$	(38,560)	$	(34,171)	$	(4,389)

3932

Table of Contents

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



	Nine Months Ended						Six Months Ended
	September 30,						June 30,
	2017		2016		$ Change
	(Dollars in thousands)
(Dollars in thousands)							2021		2020		$ Change
Cash flows from operating activities:
Net income	$	66,315	$	708	$	65,607	$	124,291	$	10,969	$	113,322
(Gain) on sale of assets and business		(1,214)		(3,459)		2,245
Loss (gain) on sale of assets								(98,746)		506		(99,252)
Depreciation and amortization		36,040		33,599		2,441		19,817		20,854		(1,037)
Interest amortization		2,375		991		1,384		1,102		1,795		(693)
Restructuring and impairment		3,629		37,173		(33,544)		124		6,916		(6,792)
Loss on extinguishment of debt		3,905		—		3,905		1,981		—		1,981
Accounts receivable		(44,952)		(44,370)		(582)		(96,052)		(51,017)		(45,035)
Inventories		(31,379)		(20,453)		(10,926)		(9,183)		(34,771)		25,588
Accounts payable		581		(3,209)		3,790		7,696		(45,089)		52,785
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								2,560		(14,724)		17,284
Net cash used in operating activities							$	(46,410)	$	(104,561)	$	58,151

Cash flows from operating activities. Cash flows ~~provided by~~from operating activities increased ~~$27.9~~$58.2 million induring the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 compared with the prior-year same period. The increase in cash from operating activities was primarily due to ~~higher earnings after consideration of non-cash items, partially offset by higher~~lower cash outflows for net working capital of ~~$7.7~~$33.3 million and ~~other current assets and liabilities~~an increase in net income, net of ~~$6.3 million.~~the gain on the sale of the Tile Coatings business.

~~Cash flows from investing activities.~~ Cash flows used in investing activities. Cash flows from investing activities increased ~~$73.2~~$403.6 million induring the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 compared with the prior-year same period. The increase in cash from investing activities 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~~the Tile Coatings business of ~~$2.3 million.~~$415.2 million, partially offset by higher cash outflows for capital expenditures of $5.6 million and lower collection of financing receivables of $3.3 million in the six months ended June 30, 2021, compared to the prior-year same period.

Cash flows from financing activities. Cash flows ~~provided by~~from financing activities ~~increased $66.1~~decreased $465.3 million induring the ~~first nine~~six months ~~of 2017~~ended June 30, 2021 compared with the prior-year same period. ~~As further discussed~~The decrease in ~~Note 8, during~~cash from financing activities was primarily due to increased principal payments on the ~~nine months ended September 30, 2017, we paid off our Previous~~Amended Credit Facility of $435.0 million, decreased net proceeds from the revolving credit facilities of $16.6 million and ~~entered into our Credit Facility, consisting~~decreased net proceeds from loans payable 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$11.5 million compared to the prior-year same period. Further, compared 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~~

~~On February 14, 2017, the Company entered into a new credit facility (the “Credit Facility”) with a group of lenders~~Refer 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 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 thenNote 8 to the ~~revolving loans in an amount equal to~~consolidated financial statements under Item 1 of this Quarterly Report on Form 10-Q for a ~~portion~~discussion of ~~the Company’s excess cash flow, as calculated pursuant to the Credit Facility.~~major debt instruments that were outstanding during 2021.

~~Table of Contents~~

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 the revolving credit 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 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.

~~Table of Contents~~

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~~$0.8 million and ~~$0.2~~$0.6 million for the three months ended ~~September~~June 30, ~~2017~~2021 and ~~2016.~~ 2020, respectively, and $1.4 million and $1.7 million for the six months ended June 30, 2021 and 2020, respectively. We had on hand precious metals owned by participants in our precious metals program of ~~$36.3~~$100.7 million at ~~September~~June 30, ~~2017,~~2021, and ~~$28.7~~$87.2 million at December 31, ~~2016,~~2020, measured at fair value based on market prices for identical ~~assets and net of credits.~~assets.

The consignment agreements under our precious metals program involve short-term commitments that typically mature within 30 to 90 days of each transaction and are typically renewed on an ongoing basis. As a result, the Company relies on the continued willingness of financial institutions to participate in these arrangements to maintain this source of liquidity. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding at ~~September~~June 30, ~~2017,~~2021, or December 31, ~~2016,~~ 2020, we may be required to furnish cash collateral in the future based on the quantity and market value of the precious metals under consignment and the amount of collateral-free lines provided by the financial institutions. The amount of cash collateral required is subject to review by the financial institutions and can be changed at any time at their discretion, based in part on their assessment of our creditworthiness.

Table of Contents

Bank Guarantees and Standby Letters of ~~Credit.~~Credit

At ~~September~~June 30, ~~2017,~~2021, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that ~~totaled~~ totaled $~~7.1~~4.8 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~~June 30, ~~2017,~~2021, we had ~~$52.2~~$143.7 million of cash and cash equivalents. Cash generated in the U.S. is generally used to pay down amounts outstanding under our revolving credit facility and for general corporate purposes, including acquisitions. If needed, we could repatriate the majority of cash held by foreign subsidiaries without the need to accrue and pay U.S. income taxes. We do not anticipate a liquidity need requiring such repatriation of these funds to the U.S.

On February 25, 2021, we completed the sale of our Tile Coatings business to Pigments Spain, S.L., a company of the Esmalglass-Itaca-Fritta group (the “Buyer”), which is a portfolio company of certain Lone Star Funds, for $460.0 million in cash, subject to post-closing adjustments. The transaction resulted in net proceeds of approximately $415.2 million after expenses. Proceeds from the close of the transaction, in addition to current cash balances, were used to pay down our term loan facility in the amount of $435.0 million on February 25, 2021. The debt pay-down reduced outstanding amounts of the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, by $188.3 million, $124.7 million and $122.0 million, respectively. In conjunction with the prepayment of debt, we recorded a charge of $2.0 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our consolidated statement of operations for the six months ended June 30, 2021.

Our liquidity requirements and uses primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, acquisition costs, capital investments, strategic optimization plans, 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 June 30, 2021, we had ~~additional borrowing capacity~~liquidity of ~~$411.4~~approximately $664.5 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.

As of ~~September~~June 30, ~~2017,~~2021, we were in compliance with our maximum leverage ratio covenant of ~~4.25x~~4.00x as our actual ratio was ~~2.79x,~~1.38, providing ~~$80.3~~$149.3 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~~$78 million for ~~rolling~~the most recently ended trailing four quarters, based on reasonably consistent net debt levels with those as of ~~March 31, 2017,~~

~~Table of Contents~~

June 30, 2021, we could become unable to maintain compliance with our leverage ratio covenant. In such case, our lenders could demand immediate payment of outstanding amounts and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all.

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.

Table of Contents

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.~~2020.

Impact of Newly Issued Accounting Pronouncements

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

Risk Factors

Certain statements contained here and in future filings with the SEC reflect the Company’s expectations with respect to future performance and constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment, which are difficult to predict and are beyond the control of the Company. Factors that could adversely affect our future financial performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2020.

4335

Table of Contents

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Our exposure to interest rate risk arises from our debt portfolio. We manage this risk by controlling the mix of ~~fixed~~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~~in an effort to substantially offset these gains and losses.

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



	September 30,		December 31,		June 30,		December 31,
	2017		2016
	(Dollars in thousands)
(Dollars in thousands)					2021		2020
Variable-rate debt:
Carrying amount	$	679,638	$	562,537
Carrying amount⁽¹⁾					$	356,978	$	793,731
Fair value		683,160		581,893		356,149		783,143
Increase in annual interest expense from 1% increase in interest rates		4,311		5,611		100		2,626
Decrease in annual interest expense from 1% decrease in interest rates		(2,420)		(5,611)		(100)		(2,626)
Fixed-rate debt:
Carrying amount		7,011		8,228		3,889		3,706
Fair value		3,781		7,315		2,342		1,887
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		—		309,624		311,220
Carrying amount and fair value		166		—		(19,385)		(24,694)
Change in fair value from 1% increase in interest rates		7,995		—		7,074		8,407
Change in fair value from 1% decrease in interest rates		(5,270)		—		(4,074)		(3,131)
Cross currency swaps:
Notional amount						38,700		223,675
Carrying amount and fair value						495		(5,162)
Change in fair value from 10% appreciation of U.S. dollar						(4,048)		(24,475)
Change in fair value from 10% depreciation of U.S. dollar						4,048		24,475
Foreign currency forward contracts:
Notional amount		212,100		338,186		776,659		494,187
Carrying amount and fair value		52		350		(3,454)		2,019
Change in fair value from 10% appreciation of U.S. dollar		4,406		15,589		(6,885)		(2,810)
Change in fair value from 10% depreciation of U.S. dollar		(5,385)		(19,054)		8,415		3,435

(1)The carrying value of the term loan facility is net of unamortized debt issuance costs of $1.4 million and $3.7 million for the period ended June 30, 2021 and December 31, 2020, respectively.

4436

Table of Contents

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~~June 30, ~~2017,~~2021, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the disclosure controls and procedures were effective as of ~~September~~June 30, ~~2017.~~2021.

Changes in Internal Control over Financial Reporting

During the ~~third~~second quarter of ~~2017,~~2021, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.We have not observed any material impact to our internal controls over financial reporting despite the fact that many of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.

4537

Table of Contents

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

~~There~~In November 2017, Suffolk County Water Authority filed a complaint, Suffolk County Water Authority v. The Dow Chemical Company et al., against the Company and a number of other companies in the U.S. Federal Court for the Eastern District of New York with regard to the product 1,4 dioxane. The plaintiff alleges, among other things, that the Suffolk County water supply is contaminated with 1,4 dioxane and that the defendants are ~~various lawsuits~~liable for unspecified costs of cleanup and remediation of the water supply, among other damages. The Company has not manufactured 1,4 dioxane since 2008, denies the allegations related to liability for the plaintiff’s claims, ~~pending~~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~~have been no material changes ~~to the~~in our risk factors from those disclosed in ~~the Company’s~~Part I, Item 1A to our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2016.~~2020.

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

Our ~~ability to pay~~Board of Directors have not declared any dividends on common stock ~~dividends is limited by certain covenants in our~~during 2021 or 2020. 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~~June 30, ~~2017:~~2021:



				~~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
April 1, 2021 to April 30, 2021	—	$	—	$	—	$	46,192,535
May 1, 2021 to May 31, 2021	—	$	—	$	—	$	46,192,535
June 1, 2021 to June 30, 2021	—	$	—	$	—	$	46,192,535
Total	—			$	—

~~__________________________~~

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

4639

Table of Contents

~~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~~August 4, 2021
		/s/ Peter T. Thomas
		Peter T. Thomas
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 1, 2017~~August 4, 2021
		/s/ Benjamin J. Schlater
		Benjamin J. Schlater
		Group Vice President and Chief Financial Officer (Principal Financial Officer)

4740

Table of Contents

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:~~


32	Plan of acquisition, reorganization, arrangement or successor:
2.1	Agreement and Plan Merger, dated as of May 11, 2021, by and among Ferro Corporation, PMHC II Inc. and PMHC Fortune Merger Sub, Inc. (incorporated by reference to Exhibit 2.1 to Ferro Corporation’s Current Report on Form 8-K, filed May 11, 2021).
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	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.Certifications:
~~10.1~~31.1	Credit Agreement, dated as 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 time 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).
~~10.2~~	Second Incremental Assumption Agreement, dated August 29, 2016, by and among Ferro Corporation, PNC Bank, National Association, as the administrative agent, the collateral agent and as an issuer, JPMorgan Chase Bank, N.A., as an issuer, and various financial institutions as lenders. (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s current Report on Form 8K, filed August 30, 2016).
~~10.3~~	Retention Agreement, dated September 1, 2016, by and between Jeffrey L. Rutherford and Ferro Corporation (incorporated by reference to Exhibit 10.2 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016).*
~~10.4~~	Separation Agreement and Release, dated January 3, 2017, by and between Jeffrey L. Rutherford and Ferro Corporation. (incorporated by reference to Exhibit 10.4 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*
~~10.5~~	Change in Control Agreement, dated September 1, 2016, by and between Benjamin Schlater and Ferro Corporation. (incorporated by reference to Exhibit 10.5 to Ferro Corporation’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017).*

~~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		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 June 30, 2021, formatted in Inline XBRL and contained in Exhibit 101.

~~__________________________~~

*~~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

4941



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.



	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



	Employee		Other		Asset
	Severance		Costs		Impairment		Total
	(Dollars in thousands)
Balances at December 31, 2016	$	239	$	1,489	$	—	$	1,728
Restructuring charges		2,455		2,583		1,176		6,214
Cash payments		(2,555)		(1,529)		—		(4,084)
Non-cash items		64		(1,282)		(1,176)		(2,394)
Balances at September 30, 2017	$	203	$	1,261	$	—	$	1,464