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
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
	(Dollars in thousands, except per share amounts)								(Dollars in thousands, except per share amounts)
Net sales	$	395,163	$	350,012	$	1,216,934	$	1,019,199	$	387,548	$	405,532
Cost of sales		289,676		246,396		866,116		708,447		285,692		286,846
Gross profit		105,487		103,616		350,818		310,752		101,856		118,686
Selling, general and administrative expenses		64,344		65,941		207,560		188,368		72,080		73,092
Restructuring and impairment charges		2,561		1,471		10,435		7,713		2,127		4,106
Other expense (income):
Interest expense		8,553		7,248		24,715		19,921		8,545		7,962
Interest earned		(110)		(201)		(497)		(556)		(87)		(201)
Foreign currency losses, net		2,554		1,021		7,054		5,575		738		1,840
Loss on extinguishment of debt		—		—		3,226		3,905
Miscellaneous expense (income), net		74		(2,182)		(523)		(3,675)
Miscellaneous expense, net										275		775
Income before income taxes		27,511		30,318		98,848		89,501		18,178		31,112
Income tax expense		11,368		7,353		29,246		23,186		4,300		7,514
Net income		16,143		22,965		69,602		66,315		13,878		23,598
Less: Net income attributable to noncontrolling interests		85		148		485		575		274		207
Net income attributable to Ferro Corporation common shareholders	$	16,058	$	22,817	$	69,117	$	65,740	$	13,604	$	23,391
Earnings per share attributable to Ferro Corporation common shareholders:
Basic earnings per share	$	0.19	$	0.27	$	0.82	$	0.79	$	0.16	$	0.28
Diluted earnings per share	$	0.19	$	0.27	$	0.81	$	0.77	$	0.16	$	0.27

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income



		Three Months Ended				Nine Months Ended				Three Months Ended
		September 30,				September 30,				March 31,
	��	2018		2017		2018		2017		2019		2018
		(Dollars in thousands)								(Dollars in thousands)
Net income		$	16,143	$	22,965	$	69,602	$	66,315	$	13,878	$	23,598
Other comprehensive income, net of income tax:
Foreign currency translation (loss) income			(5,380)		(2,996)		(29,908)		18,081
Cash flow hedging instruments, unrealized gain			3,610		104		3,588		104
Postretirement benefit liabilities (loss) income			—		(33)		17		(21)
Foreign currency translation income											3,508		5,787
Cash flow hedging instruments, unrealized (loss) gain											(4,314)		1,314
Postretirement benefit liabilities income											—		7
Other comprehensive (loss) income, net of income tax			(1,770)		(2,925)		(26,303)		18,164		(806)		7,108
Total comprehensive income			14,373		20,040		43,299		84,479		13,072		30,706
Less: Comprehensive (loss) income attributable to noncontrolling interests			(115)		294		106		837
Less: Comprehensive income attributable to noncontrolling interests											380		335
Comprehensive income attributable to Ferro Corporation		$	14,488	$	19,746	$	43,193	$	83,642	$	12,692	$	30,371

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Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



		September 30,		December 31,			March 31,		December 31,
		2018		2017			2019		2018
		(Dollars in thousands)					(Dollars in thousands)
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents		$	126,278	$	63,551		$	57,637	$	104,301
Accounts receivable, net			381,435		354,416			329,149		306,882
Inventories			377,555		324,180			366,628		356,998
Other receivables			70,261		67,137			86,022		91,143
Other current assets			27,084		16,448			25,474		23,960
Total current assets			982,613		825,732			864,910		883,284
Other assets
Property, plant and equipment, net			353,878		321,742			385,079		381,341
Goodwill			214,750		195,369			214,815		216,464
Intangible assets, net			189,689		187,616			179,349		184,953
Deferred income taxes			102,606		108,025			103,433		103,488
Operating leased assets								27,110		—
Other non-current assets			38,423		43,718			48,710		42,930
Total assets		$	1,881,959	$	1,682,202		$	1,823,406	$	1,812,460
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	9,637	$	25,136		$	10,156	$	10,260
Accounts payable			217,266		211,711			205,486		256,573
Accrued payrolls			38,855		48,201			33,305		39,989
Accrued expenses and other current liabilities			78,809		70,151			90,466		77,995
Total current liabilities			344,567		355,199			339,413		384,817
Other liabilities
Long-term debt, less current portion			923,640		726,491			860,441		811,137
Postretirement and pension liabilities			159,895		166,680			172,185		173,046
Operating leased non-current liabilities								17,562		—
Other non-current liabilities			65,856		77,152			57,908		57,611
Total liabilities			1,493,958		1,325,522			1,447,509		1,426,611
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 83.7 million and 84.0 million shares outstanding at September 30, 2018, and December 31, 2017, respectively			93,436		93,436
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 81.9 million and 83.0 million shares outstanding at March 31, 2019, and December 31, 2018, respectively								93,436		93,436
Paid-in capital			296,069		302,158			291,677		298,123
Retained earnings			245,002		171,744			269,582		255,978
Accumulated other comprehensive loss			(101,392)		(75,468)			(106,273)		(105,361)
Common shares in treasury, at cost			(154,086)		(147,056)			(182,123)		(165,545)
Total Ferro Corporation shareholders’ equity			379,029		344,814			366,299		376,631
Noncontrolling interests			8,972		11,866			9,598		9,218
Total equity			388,001		356,680			375,897		385,849
Total liabilities and equity		$	1,881,959	$	1,682,202		$	1,823,406	$	1,812,460

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity



	Ferro Corporation Shareholders															Ferro Corporation Shareholders
	Common Shares									Accumulated						Common Shares									Accumulated
	in Treasury									Other		Non-				in Treasury									Other		Non-
				Common		Paid-in		Retained		Comprehensive		controlling		Total					Common		Paid-in		Retained		Comprehensive		controlling		Total
	Shares	Amount		Stock		Capital		Earnings		(Loss)		Interests		Equity		Shares	Amount		Stock		Capital		Earnings		(Loss)		Interests		Equity
	(In thousands)															(In thousands)
Balances at December 31, 2016	9,996	$	(160,936)	$	93,436	$	306,566	$	114,690	$	(106,643)	$	7,919	$	255,032
Balances at December 31, 2017																9,386		(147,056)	$	93,436	$	302,158		171,744		(75,468)		11,866	$	356,680
Net income	—		—		—		—		65,740		—		575		66,315	—		—		—		—		23,391		—		207		23,598
Other comprehensive income	—		—		—		—		—		17,902		262		18,164	—		—		—		—		—		6,980		128		7,108
Stock-based compensation transactions	(359)		9,036		—		(3,138)		—		—		—		5,898	(349)		8,209		—		(6,986)		—		—		—		1,223
Change in ownership interests	—		—		—		—		—		—		2,178		2,178	—		—		—		789		—		—		(2,228)		(1,439)
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
Adjustment for accounting standards update 2016-16																—		—		—		—		4,141		—		—		4,141
Balances at March 31, 2018																9,037		(138,847)		93,436		295,961		199,276		(68,488)		9,973		391,311

Balances at December 31, 2017	9,386		(147,056)		93,436		302,158		171,744		(75,468)		11,866		356,680
Balances at December 31, 2018																10,433		(165,545)		93,436		298,123		255,978		(105,361)		9,218		385,849
Net income	—		—		—		—		69,117		—		485		69,602	—		—		—		—		13,604		—		274		13,878
Other comprehensive loss	—		—		—		—		—		(25,924)		(379)		(26,303)
Other comprehensive (loss) income																—		—		—		—		—		(912)		106		(806)
Purchase of treasury stock	807		(16,999)		—		—		—		—		—		(16,999)	1,441		(25,000)		—		—		—		—		—		(25,000)
Stock-based compensation transactions	(415)		9,969		—		(6,878)		—		—		—		3,091	(370)		8,422		—		(6,446)		—		—		—		1,976
Change in ownership interest	—		—		—		789		—		—		(2,228)		(1,439)
Distributions to noncontrolling interests	—		—		—		—		—		—		(772)		(772)
Adjustment for accounting standards update 2016-16	—		—		—		—		4,141		—		—		4,141
Balances at September 30, 2018	9,778	$	(154,086)	$	93,436	$	296,069	$	245,002	$	(101,392)	$	8,972	$	388,001
Balances at March 31, 2019																11,504	$	(182,123)	$	93,436	$	291,677	$	269,582	$	(106,273)	$	9,598	$	375,897

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows



	Nine Months Ended				Three Months Ended
	September 30,				March 31,
	2018		2017		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Cash flows from operating activities
Net cash provided by operating activities	$	35,686	$	34,691
Net cash used in operating activities					$	(67,527)	$	(34,285)
Cash flows from investing activities
Capital expenditures for property, plant and equipment and other long lived assets		(64,154)		(30,134)		(23,326)		(20,682)
Proceeds from sale of equity method investment		—		2,268
Collections of financing receivables						20,186		—
Business acquisitions, net of cash acquired		(47,802)		(71,930)		(251)		(2,352)
Other investing activities		37		551		—		22
Net cash used in investing activities		(111,919)		(99,245)		(3,391)		(23,012)
Cash flows from financing activities
Net (repayments) under loans payable		(17,182)		(10,803)
Proceeds from revolving credit facility - 2014 Credit Facility		—		15,628
Principal payments on revolving credit facility - 2014 Credit Facility		—		(327,183)
Proceeds from term loan facility - Credit Facility		—		623,827
Principal payments on term loan facility - 2014 Credit Facility		—		(243,250)
Net borrowings under loans payable						33		9,742
Principal payments on term loan facility - Credit Facility		(304,060)		(3,232)		—		(1,664)
Principal payments on term loan facility - Amended Credit Facility		(4,100)		—		(2,050)		—
Proceeds from term loan facility - Amended Credit Facility		466,075		—
Proceeds from revolving credit facility - Credit Facility		134,950		69,787		—		119,550
Principal payments on revolving credit facility - Credit Facility		(212,950)		(42,400)		—		(79,367)
Proceeds from revolving credit facility - Amended Credit Facility		168,023		—		104,174		—
Principal payments on revolving credit facility - Amended Credit Facility		(56,090)		—		(52,866)		—
Proceeds from other long-term debt		—		2,700
Principal payments on other long-term debt		—		(2,978)
Payment of debt issuance costs		(3,466)		(12,927)
Acquisition-related contingent consideration payment		(9,464)		(1,315)		—		(348)
Purchase of treasury stock		(16,999)		—		(25,000)		—
Other financing activities		(3,516)		182		(414)		(2,133)
Net cash provided by financing activities		141,221		68,036		23,877		45,780
Effect of exchange rate changes on cash and cash equivalents		(2,261)		3,147		377		1,262
Increase in cash and cash equivalents		62,727		6,629
Decrease in cash and cash equivalents						(46,664)		(10,255)
Cash and cash equivalents at beginning of period		63,551		45,582		104,301		63,551
Cash and cash equivalents at end of period	$	126,278	$	52,211	$	57,637	$	53,296
Cash paid during the period for:
Interest	$	24,857	$	20,594	$	8,232	$	7,314
Income taxes	$	17,577	$	16,619	$	3,940	$	4,575

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Ferro Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

1. Basis of Presentation

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

2018.

We produce our products primarily in the Europe, Middle East and Africa (“EMEA”) region, the United States (“U.S.”), the Asia Pacific region, and Latin America.

Operating results for the three ~~and nine~~ months ended ~~September 30, 2018,~~March 31, 2019, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, ~~2018.~~2019.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

On ~~April~~January 1, ~~2018,~~2019, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) ~~2017-12,~~2016-02, ~~Derivatives and Hedging~~Leases: (Topic ~~815):~~ 842), using the new transition method under ASU 2018-11, Targeted ~~Improvements to Accounting for Hedging Activities.~~Improvements. ASU ~~2017-12 provides guidance~~2016-02 requires companies to ~~better align~~recognize a lease liability and asset on the balance sheet for operating leases with a term greater than one year. ASU 2018-11 provided an ~~entity’s risk management activities and financial reporting for hedging relationships through changes~~additional transition method to ~~both~~adopt the ~~designation and measurement guidance for qualifying hedging relationships and~~new leasing standard. Under this new transition method, an entity initially applies the ~~presentation of hedge results. The adoption of this ASU did not have an impact~~new leasing standard using a cumulative-effect adjustment to the opening balance of ~~Retained earnings. We~~retained earnings but will ~~apply the~~continue to report comparative periods under existing guidance ~~of this ASU to applicable future transactions.~~in accordance with ASC 840, Leases.

~~On April~~We elected the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. We also elected to combine lease and non-lease components for all asset classes. We elected the short-term lease recognition exemption for all leases that qualify. Consequently, for those leases that qualify, we will not recognize right of use assets or lease liabilities on the balance sheet. The impact of adoption resulted in $28.6 million recognized as total right-of-use assets and total lease liabilities on our consolidated balance sheet as of January 1, ~~2018, we adopted FASB ASU 2018-03,~~ ~~Technical Corrections and Improvements to Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.~~ ~~ASU 2018-03 provides targeted improvements to address certain aspects of recognition, measurement presentation, and disclosure of financial instruments. The~~2019. Other than this impact, the adoption of ASU ~~2018-03~~2016-02 did not have a material impact on ~~the Company’s condensed consolidated financial statements.~~

~~On January 1, 2018, we adopted FASB 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 new guidance would only impact~~ our consolidated financial statements if, in the future, we modified the terms of any of our share-based awards. We will apply the guidance of this ASU to applicable future transactions. The adoption of ASU 2017-09 did not have a material impact on the Company’s condensed consolidated financial statements.

~~On January 1, 2018, we adopted FASB 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 cost component and outside a subtotal of income from operations. This ASU also allows only the service cost component of net benefit costs to be eligible for capitalization. We adopted this ASU using the retrospective approach for the presentation of the service cost component and the other components of the net periodic pension (credit) cost and net periodic postretirement benefit cost in the income statement. This resulted in the reclassification of income of $0.5 million and $1.4 million from Selling, general and administrative expenses to Other income, expense in our condensed consolidated statement of operations for the three and nine months ended September 30, 2018, respectively. The Company used a practical expedient where the amount disclosed in our Retirement Benefits footnote for the prior

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

On January 1, ~~2018,~~2019, we adopted FASB ~~ASU 2017-01,~~ ~~Business Combinations: (Topic 805): Clarifying the Definition of a Business.~~ ASU 2017-01 is intended to clarify the definition of a business with the objective of adding guidance to assist entities in evaluating whether transactions should be accounted for as acquisitions (or dispositions) of assets or businesses. We will apply the guidance of this ASU to applicable future transactions. The adoption of ASU 2017-01 did not have a material impact on the Company’s condensed consolidated financial statements.

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

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

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

~~NewAccounting Standards~~

~~In August 2018, the FASB issued ASU 2018-14,~~ ~~Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans.~~ ASU 2018-14 modifies disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This pronouncement is effective for fiscal years beginning after December 15, 2020. 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 2018, the FASB issued ASU 2018-13,~~ ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement.~~ ASU 2018-13 modifies the disclosure requirements on fair value measurements. This pronouncement is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

~~In February 2018, the FASB issued~~ ASU 2018-02, Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. ASU 2018-02 allows a reclassification from Accumulated Other Comprehensive (Loss) Income to Retained Earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act and requires certain disclosures about stranded tax effects. The Company has elected not to reclassify the stranded tax effects due to the Tax Cuts and Jobs Act within Accumulated Other Comprehensive Loss. As such, the adoption of this standard did not impact our consolidated financial statements.

On January 1, 2019, we adopted FASB ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements. The Company updated the disclosures for the fair value measurements in accordance with the standard updates.

NewAccounting Standards Not Yet Adopted

In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans. ASU 2018-14 modifies

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disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This pronouncement is effective for fiscal years beginning after December 15, ~~2018, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period.~~2020. The Company is in the process of assessing the impact that the adoption of this ASU will have on our consolidated financial statements.

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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 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. In July 2018, the FASB issued ASU 2018-11,~~ ~~Targeted Improvements.~~ This ASU provides an additional transition method to adopt the new leasing standard. Under this new transition method, an entity initially applies the new leasing standard using a cumulative-effect adjustment to the opening balance of retained earnings but will continue to report comparative periods under existing guidance in accordance with ASC 840, ~~Leases~~. The amendments in ASU 2018-11 are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. The Company has elected to adopt ASU 2016-02 using this new transition method. The Company is in the process of assessing the impact the adoption of this ASU will have on our consolidated financial statements.

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

3. Revenue

~~Revenue Recognition~~

Under ASC 606, revenues are recognized when control of the promised goods is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods. In order to achieve that core principle, the Company applies the following five-step approach: 1) identify the contract with a customer, 2) identify the performance obligations, 3) determine the transaction price, 4) allocate the transaction price to the performance obligations in the contract, and 5) recognize revenue when a performance obligation is satisfied.

The Company considers confirmed customer purchase orders, which in some cases are governed by master sales agreements, to be the contracts, from an accounting perspective, with customers. Under our standard contracts, the only performance obligation is the delivery of manufactured goods and the performance obligation is satisfied at a point in time, when the Company transfers control of the manufactured goods. The Company may receive orders for products to be delivered over multiple dates that may extend across several reporting periods. The Company invoices for each order and recognizes revenue for each distinct product upon shipment, once transfer of control has occurred. Payment terms are standard for the industry and jurisdiction in which we operate. In determining the transaction price, the Company evaluates whether the price is subject to refund or adjustment, to determine the net consideration to which the Company expects to be entitled. Discounts or rebates are specifically stated in customer contracts or invoices, and are recorded as a reduction of revenue in the period the related revenue is recognized. The product price as specified on the customer confirmed orders is considered the standalone selling price. The Company allocates the transaction price to each distinct product based on its relative standalone selling price. Revenue is recognized when control of the product is transferred to the customer (i.e., when the Company’s performance obligation is satisfied), which generally occurs at shipment. We review material contracts to determine transfer of control based upon the business practices and legal requirements of each country.

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

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

~~Table of Contents~~

Revenues disaggregated by geography and reportable segment for the three months ended ~~September 30, 2018,~~March 31, 2019, follow:


	EMEA		United States		Asia Pacific		Latin America		Total		EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)										(Dollars in thousands)
Performance Coatings	$	110,261	$	12,170	$	27,914	$	25,594	$	175,939	$	113,426	$	11,691	$	22,865	$	22,365	$	170,347
Performance Colors and Glass		55,782		43,087		18,564		5,844		123,277		57,448		40,288		16,570		6,539		120,845
Color Solutions		33,276		43,699		10,136		8,836		95,947		35,567		43,599		8,825		8,365		96,356
Total net sales	$	199,319	$	98,956	$	56,614	$	40,274	$	395,163	$	206,441	$	95,578	$	48,260	$	37,269	$	387,548

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

~~Revenues disaggregated by geography and reportable segment for the nine months ended September 30,~~March 31, 2018, follow:

~~Revenues disaggregated by geography and reportable segment for the nine months ended September 30, 2017, follow:~~

~~All material contracts have an original duration of one year or less and, as such,~~

On October 1, 2018, the Company ~~uses the practical expedient applicable to such contracts, and has not disclosed the transaction price for the remaining performance obligations as~~acquired 100% of the ~~end~~equity interests of ~~each reporting period, or when~~Quimicer, S.A. (“Quimicer”), for €32.2 million (approximately $37.4 million), including the ~~Company expects to recognize this revenue.~~

~~When~~assumption of debt of €5.2 million (approximately $6.1 million). The information included herein has been prepared based on the ~~period of time between the transfer of control~~preliminary allocation of the ~~goods~~purchase price using estimates of the fair value and useful lives of the ~~time~~assets acquired and liabilities assumed, which were determined with the ~~customer pays for~~assistance of third parties who performed independent valuations using discounted cash flow and comparative market approaches, and estimates made by management. As of March 31, 2019, the ~~goods~~purchase price allocation is ~~one year or less,~~subject to further adjustment until all information is fully evaluated by the Company. The Company ~~uses the practical expedient allowed by ASC 606 that provides relief from adjusting the amount of promised consideration for the effects of a financing component.~~

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

~~4. Acquisitions~~preliminarily recorded $21.5 million of personal and real property, $15.9 million of net working capital, $3.0 million of goodwill and $3.0 million of deferred tax liability on the condensed consolidated balance sheet.

On September 25, 2018, the Company acquired 100% of the equity interests of UWiZ Technology Co., Ltd. (“UWiZ”) for ~~TWD823~~NTD823.4 million (approximately $26.9 million) in cash. 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, 2018,~~March 31, 2019, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $12.5 million of net working capital, $7.1 million of goodwill, $6.6 million of amortizable intangible assets, $2.4 million of personal and real property and $1.7 million of deferred tax liability on the condensed consolidated balance sheet.

On August 31, 2018, the Company acquired 100% of the equity interests of Ernst Diegel GmbH (“Diegel”), including the real property of a related party, for €12.1 million (approximately $14.0 million) in cash. 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, 2018,~~March 31, 2019, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $7.0 million of personal and real property, $4.8 million of net working capital, ~~$2.8 million of goodwill, $2.6 million of deferred tax liability and~~ $2.0 million of amortizable intangible assets, $1.7 million of goodwill and $1.5 million of deferred tax liability on the condensed consolidated balance sheet.

On July 12, 2018, the Company acquired 100% of the equity interests of MRA Laboratories, Inc. (“MRA”) for ~~$15.7~~$16.0 million in cash. 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, 2018,~~March 31, 2019, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded ~~$6.9~~$7.2 million of goodwill, $6.7 million of amortizable intangible assets, $3.4 million of net working capital, $1.6 million of deferred tax liability and $0.3 million of personal and real property on the condensed consolidated balance sheet.

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

On November 1, 2017, the Company acquired 100% of the equity interests of Endeka Group (“Endeka”), a global producer of high-value coatings and key raw materials for the ceramic tile market, for €72.8 ~~million (approximately $84.~~8 ~~million), including the assumption of debt of~~ €~~13.~~1 ~~million (approximately $15.3 million).~~ The Company incurred acquisition costs for the nine months ended September 30, 2018, of $0.5 million, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations. The acquired business contributed net sales of $25.6 million and $86.8 million for the three and nine months ended September 30, 2018, respectively, and net income attributable to Ferro Corporation of $0.6 million and $9.4 million for the three and nine months ended September 30, 2018, 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. During the first half of 2018, the Company adjusted the net working capital on the opening balance sheet and as such, the carrying amount of the personal and real property decreased $4.1 million. As of September 30, 2018, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company. The Company preliminarily recorded $44.1 million of net working capital, $24.1 million of deferred tax assets, $17.7 million of personal and real property and $1.1 million of noncontrolling interest on the condensed consolidated balance sheet.

On August 3, 2017, the Company acquired a majority interest of Gardenia Quimica S.A. (“Gardenia”) for $3.0 million. The Company previously owned 46% of Gardenia and recorded it as an equity method investment. Following this transaction, the Company owned 83.5% and fully consolidates Gardenia. Due to the 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 during the third quarter of 2017. On March 1, 2018, the Company acquired the remaining equity interest in Gardenia for $1.4 million.

~~On August 2, 2017, the Company acquired~~ ~~100% of the equity interests of~~ ~~Dip Tech Ltd. (“Dip-Tech”), a leading provider of digital printing solutions for glass coatings, for~~ ~~$77.0~~ ~~million. Dip-Tech is headquartered in Kfar Saba, Israel. The purchase price consideration consisted of cash paid at closing of $60.~~1 ~~million, net of the net working capital adjustment, and contingent consideration of $16.9 million.~~ The Company incurred acquisition costs of $0.1 million and $2.1 million for the nine months ended September 30, 2018 and 2017, respectively, which is included in Selling, general and administrative expenses in our condensed consolidated statements of operations. The acquired business contributed net sales of $7.7 million and $18.6 million for the three and nine months ended September 30, 2018, respectively, and net loss attributable to Ferro Corporation of $0.7 million and $4.7 million for the three and nine months ended September 30, 2018, respectively. 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 acquired intangible asset amortization costs of $0.9 million and $2.9 million for the three and nine months ended September 30, 2018, respectively and $0.6 million for the three and nine months ended September 30, 2017. Dip-Tech incurred research and development costs of $1.3 million and $4.6 million for the three and nine months ended September 30, 2018, respectively and $1.1 million for the three and nine months ended September 30, 2017.

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 $41.2 million of amortizable intangible assets, $33.5 million of goodwill, $7.2 million of a deferred tax liability, $5.1 million of indefinite-lived intangible assets, $3.2 million of personal and real property and $1.2 million of net working capital on the condensed consolidated balance sheet.

~~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~~ €~~18.~~7 ~~million (approximately $20.~~3 ~~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.

Company recorded $6.1 million of personal and real property, $6.0 million of amortizable intangible assets, $5.2 million of goodwill, $5.0 million of net working capital and $2.0 million of a deferred tax liability on the condensed consolidated balance sheet.

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 ~~$0.5~~$1.1 million and ~~$0.3~~$0.4 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017, respectively, and were $1.3 million and $0.8 million for the nine months ended September 30, 2018 and 2017,~~ respectively. We had on-hand precious metals owned by participants in our precious metals consignment program of ~~$47.1~~$53.6 million at ~~September 30, 2018,~~March 31, 2019, and ~~$37.7~~$55.2 million at December 31, ~~2017,~~2018, measured at fair value based on market prices for identical assets.

Property, plant and equipment is reported net of accumulated depreciation of ~~$520.9~~$527.3 million at ~~September 30, 2018,~~March 31, 2019, and ~~$502.9~~$523.4 million at December 31, ~~2017.~~2018. Unpaid capital expenditure liabilities, which are non-cash investing activities, were ~~$7.7~~$8.4 million at ~~September 30, 2018,~~March 31, 2019, and ~~$3.2~~$4.8 million at ~~September 30, 2017.~~ March 31, 2018.

~~(1) During the first quarter of 2018, the Company recorded a purchase price adjustment within the measurement period for goodwill related to the Dip-Tech acquisition.~~

~~(2) During the second quarter of 2018, the Company recorded goodwill related to the FMU acquisition.~~

~~(3) During the third quarter of 2018, the Company recorded goodwill related to the MRA acquisition. Refer to Note 4 for additional details.~~

~~(4) During the third quarter of 2018, the Company recorded goodwill related to the UWiZ and Diegel acquisition. Refer to Note 4 for additional details.~~

Goodwill is tested for impairment at the reporting unit level on an annual basis in the fourth quarter, and between annual tests if an event occurs, or circumstances change, that would more likely than not reduce the fair value of a reporting unit below its carrying value. As of ~~September 30, 2018,~~March 31, 2019, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment test.

(1) The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of ~~$5.1~~$4.6 million at ~~September 30, 2018,~~March 31, 2019, and ~~$7.5~~$4.8 million at December 31, ~~2017.~~2018.

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

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

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. 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 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.

At ~~September 30, 2018,~~March 31, 2019, the Company had borrowed ~~$353.2~~$351.5 million under the Tranche B-1 Loans at an interest rate of ~~4.64%~~4.85%, ~~$233.8~~$232.7 million under the Tranche B-2 Loans at an interest rate of ~~4.64%~~4.85%, and ~~$228.9~~$227.7 million under the Tranche B-3 Loans at an interest rate of ~~4.64%~~4.85%. At ~~September 30, 2018,~~March 31, 2019, there were no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At March 31, 2019, the effective interest rate for the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, after adjusting for the interest rate swap, was 5.17%, 3.33%, and 2.48%, respectively.

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

At ~~September 30, 2018,~~March 31, 2019, there were ~~$111.9~~$51.3 million borrowings under the ~~revolving credit line~~2018 Revolving Credit Facility at an interest rate of ~~2.59%~~4.49%. After reductions for outstanding letters of credit secured by these facilities, we had ~~$383.4~~$444.0 million of additional borrowings available under the revolving credit facilities at ~~September 30, 2018.~~March 31, 2019.

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 2018 Revolving Facility, the Company is subject to a financial covenant regarding the Company’s maximum leverage ratio. If an event of default occurs, all amounts outstanding under the Amended Credit Facility agreement may be accelerated and become immediately due and payable. At ~~September 30, 2018,~~March 31, 2019, we were in compliance with the covenants of the Amended Credit Facility.

On February 14, 2017, the Company entered into ~~a credit facility (the “Credit Facility”)~~The Credit Facility with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes. The Credit Facility consisted of a $400 million secured revolving line of credit with a term of five years, a $357.5 million secured term loan facility with a term of seven years and a €250 million secured Euro term loan facility with a term of seven years. For further discussion of the Company’s Credit Facility, refer to Note 89 in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

We have several international programs to sell without recourse trade accounts receivable to financial institutions. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the ~~refinancing~~agreements transfer effective control over and risk related to the receivables to the buyers. The Company continues to service the receivables sold in exchange for a fee. The servicing fee for the three months ended March 31, 2019, was immaterial. The program, whose maximum capacity is €100 million, is scheduled to expire in December 2023. Generally, at the transfer date, the Company received cash equal to approximately 65% of the ~~Credit Facility, we recorded a charge~~value of ~~$3.2 million~~the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in ~~connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt~~operating activities in our ~~condensed~~ consolidated statement of ~~operations for~~cash flows. The proceeds from the ~~nine months ended September 30,~~deferred purchase price are reflected in investing activities.

The outstanding principal amount of receivables sold under this program was $63.9 million at March 31, 2019 and $71.3 million at December 31, 2018. The carrying amount of deferred purchase price was $23.1 million at March 31, 2019 and $23.0 million at December 31, 2018, and is recorded in Other receivables.

~~In 2014, the Company entered into a credit facility that was amended on January 25, 2016,~~

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

In conjunction with the refinancing of the 2014 Credit Facility, we recorded a charge of $3.9 million in connection with the write-off of unamortized issuance costs, which is recorded within Loss on extinguishment of debt in our condensed consolidated statement of operations for the nine months ended September 30, 2017.other current liabilities

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 ~~$40.3~~$40.9 million and ~~$64.5~~$41.4 million at ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017,~~2018, respectively. The unused portions of these lines provided additional liquidity of ~~$31.4~~$28.1 million at ~~September 30, 2018,~~March 31, 2019, and ~~$39.4~~$30.3 million at December 31, ~~2017.~~2018.

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



	September 30, 2018										March 31, 2019
	Carrying		Fair Value								Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)										(Dollars in thousands)
Cash and cash equivalents	$	126,278	$	126,278	$	126,278	$	—	$	—	$	57,637	$	57,637	$	57,637	$	—	$	—
Term loan facility, maturing 2024(1)		(810,837)		(813,897)		—		(813,897)		—
Revolving credit facility, maturing 2023		(111,933)		(117,535)		—		(117,535)		—
Term loan facility - Amended Credit Facility(1)												(807,208)		(794,728)		—		(794,728)		—
Revolving credit facility												(51,308)		(50,709)		—		(50,709)		—
Other long-term notes payable		(6,325)		(3,835)		—		(3,835)		—		(8,109)		(5,385)		—		(5,385)		—
Cross currency swaps		14,069		14,069		—		14,069		—		23,000		23,000		—		23,000		—
Cross currency swaps		(992)		(992)		—		(992)		—
Interest rate swaps		1,714		1,714		—		1,714		—
Interest rate swaps		(689)		(689)		—		(689)		—		(9,227)		(9,227)		—		(9,227)		—
Foreign currency forward contracts, net		3,004		3,004		—		3,004		—		1,021		1,021		—		1,021		—



	December 31, 2017										December 31, 2018
	Carrying		Fair Value								Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3		Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)										(Dollars in thousands)
Cash and cash equivalents	$	63,551	$	63,551	$	63,551	$	—	$	—	$	104,301	$	104,301	$	104,301	$	—	$	—
Loans payable		(16,360)		(16,360)		—		(16,360)		—		(50)		(50)		—		(50)		—
Term loan facility, maturing 2024(1)		(645,242)		(646,979)		—		(646,979)		—
Revolving credit facility, maturing 2022		(78,000)		(79,295)		—		(79,295)		—
Term loan facility - Amended Credit Facility(1)												(809,022)		(796,796)		—		(796,796)		—
Other long-term notes payable		(7,112)		(3,973)		—		(3,973)		—		(8,362)		(5,258)		—		(5,258)		—
Interest rate swaps		1,616		1,616		—		1,616		—
Cross currency swaps												17,104		17,104		—		17,104		—
Interest rate swaps		(124)		(124)		—		(124)		—		(5,244)		(5,244)		—		(5,244)		—
Foreign currency forward contracts, net		(469)		(469)		—		(469)		—		(270)		(270)		—		(270)		—

(1) The carrying values of the term loan facility are net of unamortized debt issuance costs of $5.1 m~~illion~~$4.6 million and ~~$7.5~~$4.8 million for the period ended ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017,~~2018, respectively.

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

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

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

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

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

During the second quarter of 2018, the Company entered into variable to fixed interest rate swaps with a maturity date of February ~~28,~~14, 2024. The notional amount is ~~$318.~~$316.48 million at ~~September 30, 2018.~~March 31, 2019. These swaps are hedging risk associated with the Tranche B-1 Loans. These interest rate swaps are designated as cash flow hedges. As of ~~September 30, 2018,~~March 31, 2019, the Company expects it will reclassify net losses of approximately ~~$0.~~$1.74 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

The Company has converted a US dollar denominated, variable rate debt obligation into a ~~euro~~Euro fixed rate obligation using a 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 Loans. These cross currency swaps are designated as cash flow hedges. The notional amount is $2~~28.9~~27.7 million at ~~September 30, 2018,~~March 31, 2019, with a maturity date of February ~~28,~~14, 2024. As of ~~September 30, 2018,~~March 31, 2019, the Company expects it will reclassify net gains of approximately $5.96 million, currently recorded in AOCL, into interest expense in earnings within the next twelve months. However, the actual amount reclassified could vary due to future changes in the fair value of these derivatives.

The amount of (loss) gain recognized in AOCL and the amount of gain (loss) ~~gain~~ reclassified into earnings for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ follow:


					Amount of (Loss) Gain									Amount of Gain (Loss)
	Amount of Gain				Reclassified from				Location of (Loss) Gain	Amount of (Loss) Gain				Reclassified from				Location of Gain (Loss)
	Recognized in AOCL				AOCL into Income				Reclassified from	Recognized in AOCL				AOCL into Income				Reclassified from
	2018			2017	2018		2017		AOCL into Income	2019			2018	2019		2018		AOCL into Income
	(Dollars in thousands)									(Dollars in thousands)
Interest rate swaps	$	2,135	$	166	$	(186)	$	—	Interest expense	$	(4,107)	$	1,709	$	178	$	(136)	Interest expense
Cross currency swaps		3,237		—		1,327		—	Interest expense		5,080		—		1,632		—	Interest expense
					$	1,141	$		Total Interest expense					$	1,810	$	(136)	Total Interest expense
Cross currency swaps						1,549		—	Foreign currency losses, net						4,944		—	Foreign currency losses, net
					$	1,549	$	—	Total Foreign currency losses, net					$	4,944	$	—	Total Foreign currency losses, net

The total amounts of expense line items presented in the condensed consolidated statement of operations in which the effect of cash flow hedges follow:

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

Net investment hedge. ~~To help protect~~For derivatives that are designated and qualify as net investment hedges, the ~~value~~gain or loss on the derivative is reported as a component of ~~the Company’s~~other comprehensive income or loss. These cross currency swaps are designated as hedges of our net investment in European ~~operations against adverse changes~~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 ~~exchange rates,~~earnings over the ~~Company uses non-derivative financial instruments, such as its foreign currency denominated debt, as economic hedges~~life 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.~~swaps.

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

In the second quarter of 2018, the Company entered into cross currency swap agreements ~~where~~under which we pay variable rate interest in Euros and receive variable rate interest in US dollars. The notional amount is ~~$116.9~~€97.0 million at ~~September 30, 2018.~~ March 31, 2019, with a maturity date of February 14, 2024. These swaps are hedging risk associated with the ~~Tranche B-2 Loans. These cross currency swaps~~net investment in Euro denominated operations due to fluctuating exchange rates and are designated as net investment ~~hedges with~~hedges. The changes in the ~~spot method~~fair value of ~~accounting applied. The effective portions of net investment hedges are recorded~~these designated cross-currency swaps will be recognized in ~~AOCL as a part of the cumulative translation adjustment.~~ AOCL.

The amount of gain (loss) on net investment hedges recognized in AOCL, the amount reclassified into earnings and the amount of gain recognized in income on derivative (amount excluded from effectiveness testing) for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ follow:

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

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not formally designated as hedges. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as Foreign currency losses, net in the condensed consolidated statements of operations. We recognized net gains of ~~$1.3 million and $2.7~~$1.5 million in the three ~~and nine~~ months ended ~~September 30, 2018, respectively,~~March 31, 2019, and net ~~losses~~gains of ~~$1.4 million and $4.1~~$0.4 million in the three ~~and nine~~ months ended ~~September 30, 2017, respectively,~~March 31, 2018, 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 $~~371.1~~410.1 million at ~~September 30, 2018,~~March 31, 2019, and ~~$238.5~~$387.2 million at December 31, ~~2017.~~2018.

The following table presents the effect on our condensed consolidated statements of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, of our foreign currency forward contracts:

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

Income tax expense for the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was ~~$29.2~~$4.3 million, or ~~29.6%~~23.7% of pre-tax income. Income tax expense for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2018, was ~~$23.2~~$7.5 million, or ~~25.9%~~24.2% of pre-tax income. The tax expense ~~for~~in the ~~nine months ended September 30,~~first quarter of 2019 and 2018, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences and discrete items recorded in the third quarter. The discrete items recorded in the third quarter primarily include a reduction to the tax expense related to the provision to return adjustments and an increase from the impact of resolving a foreign tax audit. The tax expense for the nine months ended September 30, 2017, as a percentage of pre-tax income, is lower than the U.S. federal statutory income tax rate of 35% primarily as a result of foreign statutory rate differences.

We have recognized the provisional tax impacts related to the 2017 Tax Cut and Jobs Act (the “Tax Act”) under the guidance of the SEC Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”). The ultimate impact may differ from these provisional amounts due to additional analysis, changes in interpretations and assumptions, additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Act. The Company’s preliminary determinations related to the estimable impacts of the Tax Act that are effective for the year ended December 31, 2017 have not changed in the current quarter.

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

We have recorded environmental liabilities of ~~$6.9~~$6.6 million at ~~September 30, 2018,~~March 31, 2019, and ~~$6.7~~$8.5 million at December 31, ~~2017,~~2018, for costs associated with the remediation of certain of our current or former properties that have been contaminated. The liability at ~~September 30, 2018,~~March 31, 2019, and December 31, ~~2017,~~2018, was primarily comprised of liabilities related to a non-operating facility in Brazil, and for retained environmental obligations related to a site in the United States that was part of the sale of our North American and Asian metal powders product lines in 2013. ~~The~~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. During the third quarter of 2018, the Company incurred a $1.5 million environmental liability related to acquired subsidiaries.~~

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 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, and is vigorously defending this proceeding. ~~In March~~Since December 2018, additional complaints have been filed in the ~~defendants, including~~same court by 15 other New York water suppliers against the Company ~~filed a motion to dismiss~~and others making substantially similar allegations regarding the ~~complaint, which was heard by the court in June 2018.~~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 ~~this proceeding~~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 ~~this proceeding~~these proceedings due to the unpredictable nature of litigation.

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.

Net periodic benefit (credit) cost of our U.S. pension plans (including our unfunded nonqualified plans), non-U.S. pension plans, and postretirement health care and life insurance benefit plans for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017,~~ respectively, follow:

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



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

	Nine Months Ended September 30,
													U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans
	2018		2017		2018		2017		2018		2017		Three Months Ended March 31,
													2019		2018		2019		2018		2019		2018
	(Dollars in thousands)												(Dollars in thousands)
Service cost	$	9	$	13	$	1,344	$	1,259	$	2	$	—	$	3	$	3	$	433	$	461	$	1	$	1
Interest cost		8,363		10,997		2,009		1,801		549		632		2,963		2,788		702		689		175		183
Expected return on plan assets		(11,984)		(14,218)		(681)		(659)		—		—		(3,153)		(3,995)		(210)		(233)		—		—
Amortization of prior service cost		—		5		32		33		—		—		—		—		20		11		—		—
Net periodic benefit (credit) cost	$	(3,612)	$	(3,203)	$	2,704	$	2,434	$	551	$	632	$	(187)	$	(1,204)	$	945	$	928	$	176	$	184

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

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

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

In the first ~~nine months~~quarter of ~~2018,~~2019, our Board of Directors granted ~~0.2~~0.3 million stock options, ~~0.1~~0.2 million performance share units, and ~~0.1~~0.2 million restricted stock ~~units.~~units under the Plan.

We estimate the fair value of each stock option on the date of grant using the Black-Scholes option pricing model. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock option grants made during the ~~nine~~three months ended ~~September 30, 2018:~~March 31, 2019:

The weighted average grant date fair value of our performance share units granted in the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was ~~$22.92.~~$17.61. We measure the fair value of performance share units based on the closing market price of our common stock on the date of the grant. These shares are evaluated each reporting period for respective attainment rates against the performance criteria.

The weighted-average grant date fair value ~~per unit for grants made during~~of our restricted share units granted in the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, was ~~$22.27.~~$17.61. 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.

We recognized stock-based compensation expense of ~~$1.4 million and $5.2~~$2.8 million for the three ~~and nine~~ months ended ~~September 30, 2018, respectively,~~March 31, 2019, and ~~$1.5 million and $6.9~~$2.4 million for the three ~~and nine~~ months ended ~~September 30, 2017.~~March 31, 2018. At ~~September 30, 2018,~~March 31, 2019, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately ~~$7.7~~$13.8 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of ~~2021.~~2022.

Total restructuring and impairment charges were ~~$2.6~~$2.1 million and ~~$10.4~~$4.1 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2019 and March 31, 2018, ~~respectively, and $1.5 million and $7.7 million for the three and nine months ended September 30, 2017,~~ respectively. ~~Included in the charges for the nine months ended September 30, 2017, was an impairment charge of $1.5 million related to an equity method investment.~~ The ~~remainder of the~~ charges primarily relate to costs associated with integration of our recent acquisitions and optimization programs, and are further summarized below.

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

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

The right of use asset represents the right to use an underlying asset for the lease term and the lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right of use assets and lease liabilities are recognized as of the commencement date based on the present value of the lease payments over the lease term. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise the applicable option.

The Company’s lease payments consist of both fixed and variable lease payments. Residual value guarantees are not common within the Company’s lease agreements nor are restrictions or covenants imposed by leases. The Company has elected the practical expedient to combine lease and non-lease components. The Company determined the discount rate to be used in measuring lease liabilities at a portfolio level using a collateralized rate. Specifically, we segregated our lease portfolio into different populations based on (1) lease currency, (2) lease term, and (3) creditworthiness of the lessee and security structure. There are no leases that have not yet commenced but that create significant rights and obligations for the Company.

(1) Included in operating lease cost is $0.3 million of short-term lease costs and $0.1 million of variable lease costs.

(2) Included in operating lease cost is $0.7 million of short-term lease costs and $0.3 million of variable lease costs.

(3) Finance leases are net of accumulated depreciation of $5.8 million for March 31, 2019.

Maturities of lease liabilities under ASC 840 are shown below as of December 31, 2018:

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



	Three Months Ended				Nine Months Ended				Three Months Ended
	September 30,				September 30,				March 31,
	2018		2017		2018		2017		2019		2018
	(Dollars in thousands, except per share amounts)								(Dollars in thousands, except per share amounts)
Basic earnings per share computation:
Net income attributable to Ferro Corporation common shareholders	$	16,058	$	22,817	$	69,117	$	65,740	$	13,604	$	23,391
Weighted-average common shares outstanding		83,893		83,735		84,154		83,646		82,480		84,228
Basic earnings per share attributable to Ferro Corporation common shareholders	$	0.19	$	0.27	$	0.82	$	0.79	$	0.16	$	0.28
Diluted earnings per share computation:
Net income attributable to Ferro Corporation common shareholders	$	16,058	$	22,817	$	69,117	$	65,740	$	13,604	$	23,391
Weighted-average common shares outstanding		83,893		83,735		84,154		83,646		82,480		84,228
Assumed exercise of stock options		788		808		811		671		596		839
Assumed satisfaction of restricted stock unit conditions		289		424		281		383		145		279
Assumed satisfaction of performance share unit conditions		192		483		182		474		80		164
Weighted-average diluted shares outstanding		85,162		85,450		85,428		85,174		83,301		85,510
Diluted earnings per share attributable to Ferro Corporation common shareholders	$	0.19	$	0.27	$	0.81	$	0.77	$	0.16	$	0.27

The number of anti-dilutive or unearned shares was ~~1.7~~2.2 million for the three months ended March 31, 2019, and 1.7 million for the three ~~and nine~~ months ended ~~September 30, 2018, respectively, and 1.6 million and 1.8 million for the three and nine months ended September 30, 2017.~~March 31, 2018. These shares were excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.

The Company’s Board of Directors has approved ~~$50 million of~~ a share repurchase program under which the Company is authorized to repurchase up to $150 million of the Company’s outstanding shares of ~~Common Stock~~common stock on the open market, including through a Rule 10b5-1 plan, or in privately negotiated transactions.

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

For the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, the Company repurchased ~~807,816~~1,440,678 shares of common stock at an average price of ~~$21.~~$17.0435 per share for a total cost of ~~$17.0~~$25.0 million. As of ~~September 30, 2018, $33.0~~March 31, 2019, $46.2 million ~~could still be purchased~~remains authorized under the ~~program.~~program for the purchase of common stock.

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

Three Months Ended September 30,

Postretirement

Net Gain

Benefit Liability

Translation

on Cash

Adjustments

Adjustments

Flow Hedges

Total

(Dollars in thousands)
Balances at June 30, 2017

$
1,153

$
(86,823)

$
—

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

—

(141)

—

(141)
Reclassification to earnings:

Postretirement benefit liabilities loss, before tax

(39)

—

—

(39)
Cash flow hedge income, before tax

—

—

166

166
Current period other comprehensive (loss) income, before tax

(39)

(141)

166

(14)
Tax effect

(6)

3,001

62

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

(33)

(3,142)

104

(3,071)
Balances at September 30, 2017

$
1,120

$
(89,965)

$
104

$
(88,741)

Balances at June 30, 2018

$
1,182

$
(101,927)

$
923

$
(99,822)
Other comprehensive (loss) income before reclassifications, before tax

—

(5,086)

6,644

1,558
Reclassification to earnings:

Cash flow hedge loss, before tax

—

—

(3,548)

(3,548)
Current period other comprehensive (loss) income, before tax

—

(5,086)

3,096

(1,990)
Tax effect

—

94

(514)

(420)
Current period other comprehensive (loss) income, net of tax

—

(5,180)

3,610

(1,570)
Balances at September 30, 2018

$
1,182

$
(107,107)

$
4,533

$
(101,392)



	Nine Months Ended September 30,									Three Months Ended March 31,
		Postretirement					Net Gain				Postretirement					Net Gain
		Benefit Liability		Translation			on Cash				Benefit Liability		Translation			on Cash
		Adjustments		Adjustments			Flow Hedges	Total			Adjustments		Adjustments			Flow Hedges	Total
											(Dollars in thousands)
		(Dollars in thousands)
Balances at December 31, 2016		$	1,141	$	(107,784)	$	—	$	(106,643)
Balances at December 31, 2017											$	1,165	$	(77,578)	$	945	$	(75,468)
Other comprehensive income before reclassifications, before tax			—		20,820		—		20,820			—		5,461		1,845		7,306
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax			(30)		—		—		(30)
Cash flow hedge income, before tax			—		—		166		166
Current period other comprehensive (loss) income, before tax			(30)		20,820		166		20,956
Postretirement benefit liabilities income, before tax												16		—		—		16
Cash flow hedge loss, before tax												—		—		(136)		(136)
Current period other comprehensive income, before tax												16		5,461		1,709		7,186
Tax effect			(9)		3,001		62		3,054			9		(198)		395		206
Current period other comprehensive (loss) income, net of tax			(21)		17,819		104		17,902
Balances at September 30, 2017		$	1,120	$	(89,965)	$	104	$	(88,741)
Current period other comprehensive income, net of tax												7		5,659		1,314		6,980
Balances at March 31, 2018											$	1,172	$	(71,919)	$	2,259	$	(68,488)

Balances at December 31, 2017		$	1,165	$	(77,578)	$	945	$	(75,468)
Other comprehensive (loss) income before reclassifications, before tax			—		(29,107)		18,473		(10,634)
Balances at December 31, 2018											$	1,126	$	(103,190)	$	(3,297)	$	(105,361)
Other comprehensive income before reclassifications, before tax												—		4,036		973		5,009
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			22		—		—		22
Cash flow hedge loss, before tax			—		—		(15,235)		(15,235)			—		—		(6,754)		(6,754)
Current period other comprehensive income (loss), before tax			22		(29,107)		3,238		(25,847)			—		4,036		(5,781)		(1,745)
Tax effect			5		422		(350)		77			—		634		(1,467)		(833)
Current period other comprehensive income (loss), net of tax			17		(29,529)		3,588		(25,924)			—		3,402		(4,314)		(912)
Balances at September 30, 2018		$	1,182	$	(107,107)	$	4,533	$	(101,392)
Balances at March 31, 2019											$	1,126	$	(99,788)	$	(7,611)	$	(106,273)

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

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

~~On October 1, 2018, the Company acquired 100% of the equity interests of Quimicer, S.A. for €27.8 million (approximately $32.2 million), excluding customary adjustments and fees.~~

~~The operating results related to the Quimicer, S.A. 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.

In October 2018, the Company’s Board of Directors approved a new share repurchase program under which the Company is authorized to repurchase up to an additional $50 million of the Company’s outstanding common stock on the open market, including through Rule 10b5-1 plans, in privately negotiated transactions, or otherwise.

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

Net sales for the three months ended ~~September 30, 2018, increased~~March 31, 2019, decreased by ~~$45.2~~$18.0 million, or ~~12.9%~~4.4%, compared with the prior-year same period. The ~~increase~~decrease in net sales was driven by ~~higher~~lower sales in Performance Coatings and Color Solutions of $14.3 million and $4.0 million, respectively, partially mitigated by an increase in sales in Performance Colors and Glass ~~and Color Solutions~~ of ~~$29.7 million, $12.7 million and $2.8 million, respectively.~~$0.3 million. During the three months ended ~~September 30, 2018,~~March 31, 2019, gross profit ~~increased $1.9~~decreased $16.8 million, or ~~1.8%~~14.2%, compared with the prior-year same period; as a percentage of net sales, it decreased approximately ~~290~~300 basis points to ~~26.7%~~26.3%. Our total gross profit for the ~~third~~first quarter of ~~2018~~2019 was ~~$105.5~~$101.9 million, compared with ~~$103.6~~$118.7 million for the three months ended ~~September 30, 2017.~~March 31, 2018. The ~~increase~~decrease in gross profit was attributable to ~~increases~~decreases in Performance Coatings, Performance Colors and Glass and ~~Performance Coatings of $2.2 million and $0.8 million, respectively, partially offset by a decrease in~~ Color Solutions of ~~$0.9 million.~~$10.1 million, $3.9 million and $3.8 million, respectively.

For the three months ended ~~September 30, 2018,~~March 31, 2019, selling, general and administrative (“SG&A”) expenses decreased ~~$1.6~~$1.0 million, or ~~2.4%~~1.4%, compared with the prior-year same period. As a percentage of net sales, it ~~decreased~~increased approximately ~~260~~60 basis points to ~~16.3%~~18.6%. The lower SG&A expenses compared to the prior-year same period are primarily driven by a decrease in incentive compensation, partially offset by greater expenses associated with businesses acquired within the last year.

For the three months ended ~~September 30, 2018,~~March 31, 2019, net income was ~~$16.1~~$13.9 million, compared with net income of ~~$23.0~~$23.6 million for the prior-year same period, and net income attributable to common shareholders was ~~$16.1~~$13.6 million, compared with net income attributable to common shareholders of ~~$22.8~~$23.4 million for the prior-year same period.

~~We expect to~~Throughout 2019, we will continue to execute the dynamic ~~innovation~~ and optimization phase of ~~our~~the Company’s value creation strategy, which includes organic and ~~remain focused on driving toward our Vision 2020 goals.~~inorganic growth and optimization initiatives. We expect organic growth ~~to be driven by sales of~~from new products and ~~technical services oriented~~positioning our portfolio to continue transitioning to the higher end of our target markets. We ~~expect~~also intend to ~~invest approximately $100 million~~advance the business through acquisitions, and investments in technology, facilities and equipment. We will continue to ~~$150 million per year in~~implement optimization initiatives throughout the Company to further improve efficiency, productivity and profitability. We will be judicious through the remainder of 2019 with our strategic investments, ~~while~~which may include acquisitions, share repurchases and debt retirement, and remain mindful of our overall leverage.

We believe that 2019 gross margins will compare favorably to the prior year due in part to stabilizing raw materials costs after a period of price inflation.

In the first half of 2019, we ~~remain focused~~expect that uncertainty throughout the global macro-economic landscape could result in slower growth across several industries and geographic regions, particularly Europe and Asia. We expect demand will continue for our technology-driven functional coatings and color solutions in the niche markets on ~~integrating recent acquisitions~~which we focus, and ~~achieving identified synergies.~~that we will continue to develop innovative new products relevant to the megatrends our customers are addressing with their products. We ~~also~~ are actively implementing ~~and executing~~ optimization ~~programs to improve efficiency and upgrade operations~~initiatives throughout our ~~business.~~

~~The Company expects gross margins~~global footprint to ~~rebound in the fourth quarter, as raw material prices decrease~~increase productivity and Ferro pricing is expected to more than offset raw material headwinds for the first time since early 2017. Management believes that actions taken in the third quarter of 2018 reinforced the Company’s ability to deliver its Vision 2020 goals, even if macroeconomic circumstances become more challenging.

Foreign currency rates may continue to be volatile through ~~the fourth quarter of 2018~~2019, and changes in interest rates could adversely impact reported results. We expect cash flow from operating activities to continue to be ~~positive~~available for ~~2018, providing additional liquidity.~~

Factors that could adversely affect our future performance include those described under the heading “Risk Factors” in Item 1A of Part I of ~~our~~this Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

Comparison of the three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~

For the three months ended ~~September 30, 2018,~~March 31, 2019, net income was ~~$16.1~~$13.9 million, compared with net income of ~~$23.0~~$23.6 million for the three months ended ~~September 30, 2017.~~March 31, 2018. For the three months ended ~~September 30, 2018,~~March 31, 2019, net income attributable to common shareholders was ~~$16.1~~$13.6 million, or earnings per share of ~~$0.19,~~$0.16, compared with net income attributable to common shareholders of ~~$22.8~~$23.4 million, or earnings per share of ~~$0.27,~~$0.28, for the three months ended ~~September 30, 2017.~~March 31, 2018.

Net sales ~~increased~~decreased by ~~$45.2~~$18.0 million, or ~~12.9%~~4.4%, for the three months ended ~~September 30, 2018,~~March 31, 2019, compared with the prior-year same period, driven by ~~higher~~lower sales in Performance Coatings and Color Solutions of $14.3 million and $4.0 million, respectively, partially mitigated by an increase in sales in Performance Colors and Glass ~~and Color Solutions~~ of ~~$29.7 million, $12.7 million and $2.8 million, respectively.~~$0.3 million. The ~~increase~~decrease in net sales was driven ~~in part~~ by ~~acquisitions, including Endeka, which contributed sales~~unfavorable foreign currency impacts of ~~$25.6~~$20.7 million and ~~was acquired after the third quarter~~lower volume and mix of ~~2017. The increase in net~~$19.0 million, partially mitigated by sales ~~was also driven by organic growth, with Performance Colors and Glass growing $9.3 million, Performance Coatings growing $3.0~~from acquisitions of $15.7 million and ~~Color Solutions growing $1.8~~higher product pricing of $6.0 million.

Gross profit ~~increased $1.9~~decreased $16.8 million, or ~~1.8%~~14.2%, for the three months ended ~~September 30, 2018,~~March 31, 2019, compared with the prior-year same period, and as a percentage of net sales, it decreased ~~290~~300 basis points to ~~26.7%~~26.3%. The ~~increase~~decrease in gross profit was attributable to ~~increases~~decreases in Performance Coatings, Performance Colors and Glass and ~~Performance Coatings of $2.2 million and $0.8 million, respectively, partially offset by a decrease in~~ Color Solutions of ~~$0.9 million.~~$10.1 million, $3.9 million and $3.8 million, respectively. The ~~increase~~decrease in gross profit was driven by ~~favorable product pricing of $8.9 million, higher~~lower sales volumes and mix of ~~$5.5~~$9.3 million, higher manufacturing costs of $7.8 million, unfavorable foreign currency impacts of $5.9 million and higher raw material costs of $5.1 million, partially mitigated by favorable product pricing of $6.0 million and gross profit from acquisitions of ~~$5.1 million, partially offset by higher raw material costs of $10.8 million, higher manufacturing costs of $4.5 million and unfavorable foreign currency impacts of $2.1~~$4.4 million.

The ~~increase~~decline in net sales of ~~$45.2~~$18.0 million, compared with the prior-year same period, was driven by a decrease in sales from EMEA, Asia Pacific and Latin America, partially mitigated by an increase in sales from ~~EMEA,~~ the United ~~States and Asia Pacific.~~States. The ~~increase~~decrease in sales from EMEA was attributable to ~~higher~~lower sales in Performance Coatings, Color Solutions and Performance Colors and Glass of ~~$26.4~~$5.7 million, $4.9 million and ~~$3.4~~$3.9 million, ~~respectively, partially offset by a~~respectively. The decrease ~~in sales in Color Solutions of $0.1 million. The increase~~ in sales from Asia Pacific was attributable to ~~higher~~lower sales in Performance Coatings and Color Solutions of $3.1 million and $1.1 million, respectively, partially mitigated by an increase in sales in Performance

Colors and Glass of $0.1 million. The decrease in sales from Latin America was attributable to lower sales in Performance Coatings of $4.4 million, partially mitigated by an increase in sales from Performance Colors and Glass ~~and Color Solutions~~ of ~~$3.7 million, $1.9 million and $0.2 million, respectively.~~$1.0 million. The increase in sales from the United States was attributable to higher sales in Performance Colors and Glass and Color Solutions ~~and Performance Coatings~~ of ~~$7.3 million $2.5~~$3.2 million and ~~$0.8~~$2.0 million, ~~respectively. The~~respectively, partially offset by a decrease in ~~sales from Latin America was attributable to lower~~ sales in Performance Coatings of $1.1 ~~million, partially mitigated by an increase in sales from Performance Colors and Glass and Color Solutions of $0.2 million and $0.2 million, respectively.~~

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

The following table includes SG&A components with significant changes between ~~2018~~2019 and ~~2017.~~2018.



	Three Months Ended								Three Months Ended
	September 30,								March 31,
	2018		2017		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Personnel expenses	$	38,245	$	36,364	$	1,881	5.2	%
Personnel expenses (excluding R&D personnel expenses)									$	34,411	$	33,757		654	1.9	%
Research and development expenses										10,998		10,841		157	1.4	%
Business development										2,475		2,423		52	2.1	%
Incentive compensation		(489)		3,637		(4,126)	(113.4)	%		1,375		2,966		(1,591)	(53.6)	%
Stock-based compensation		1,361		1,510		(149)	(9.9)	%		2,769		2,430		339	14.0	%
Intangible asset amortization										2,343		2,073		270	13.0	%
Pension and other postretirement benefits		328		436		(108)	(24.8)	%		323		342		(19)	(5.6)	%
Bad debt		(64)		289		(353)	(122.1)	%		230		105		125	119.0	%
Business development		4,261		4,649		(388)	(8.3)	%
Research and development expenses		9,159		9,698		(539)	(5.6)	%
Intangible asset amortization		2,042		2,898		(856)	(29.5)	%
All other expenses		9,501		6,460		3,041	47.1	%		17,156		18,155		(999)	(5.5)	%
Selling, general and administrative expenses	$	64,344	$	65,941	$	(1,597)	(2.4)	%	$	72,080	$	73,092	$	(1,012)	(1.4)	%

SG&A expenses were ~~$1.6~~$1.0 million lower in the three months ended ~~September 30, 2018,~~March 31, 2019, compared with the prior-year same period. The lower SG&A expenses compared to the prior-year same period are primarily driven by ~~a decrease in~~lower incentive compensation and an adjustment to an environmental reserve, partially offset by greater expenses associated with businesses acquired within the last year.

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

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

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

During the third quarter of 2018, income tax expense was $11.4 million, or 41.3% of pre-tax income. In the third quarter of 2017, we recorded tax expense of $7.4 million, or 24.3% of pre-tax income. The tax expense in the third quarter of 2018, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences and discrete items recorded in the period. The discrete items recorded in the quarter primarily include a reduction to the tax expense related to the provision to return adjustments and an increase from the impact of resolving a foreign tax audit. The tax expense for the third quarter of 2017, as a percentage of pre-tax income, is lower than the U.S. federal statutory income tax rate of 35% primarily as a result of foreign statutory rate differences.

Three Months Ended

Change due to

September 30,

Volume /

2018

2017

$ Change

% Change

Price

Mix

Currency

Acquisitions
Other

(Dollars in thousands)

Segment net sales

$
175,939

$
146,238

$
29,701

20.3
%

$
5,741

$
4,013

$
(6,797)

$
26,744

$
—
Segment gross profit

36,257

35,470

787

2.2
%

5,741

462

(1,059)

4,189

(8,545)
Gross profit as a % of segment net sales

20.6
%

24.3
%

Net sales increased in Performance Coatings compared with the prior-year same period, primarily driven by sales from Endeka of $25.3 million and FMU of $1.0 million, each of which was acquired after the third quarter of 2017, and increases in sales of frits and glazes and digital inks of $2.8 million and $0.8 million, respectively. The increase in net sales was driven by sales from acquisitions of $26.7 million, higher product pricing of $5.7 million and favorable volume and mix of $4.0 million, partially offset by unfavorable foreign currency impacts of $6.8 million. Gross profit increased $0.8 million from the prior-year same period, primarily driven by favorable product pricing impacts of $5.7 million, gross profit from acquisitions of $4.2 million and higher sales volume and mix of $0.5 million, partially offset by higher raw material costs of $8.1 million, unfavorable foreign currency impacts of $1.1 million and higher manufacturing costs of $0.4 million.

The net sales increase of $29.7 million was driven by increases in sales in EMEA, Asia Pacific, and the United States, partially offset by a decrease in sales in Latin America. The increase in sales from EMEA was primarily attributable to sales from Endeka and

Gardenia, which contributed $24.7 million and $0.4 million, respectively, and higher sales of frits and glazes and porcelain enamel of $2.9 million and $0.6 million, respectively, partially offset by a decrease in sales of colors of $2.7 million. The increase in sales from Asia Pacific was driven by higher sales of frits and glazes and digital inks of $1.4 million and $0.7 million, respectively, and sales from FMU and Endeka, which contributed $1.0 million and $0.7 million, respectively. The increase in sales from the United States was fully attributable to higher sales of porcelain enamel. The decrease in sales from Latin America was primarily driven by lower sales of frits and glazes and porcelain enamel of $1.5 million and $0.8 million, respectively, partially mitigated by an increase in sales of digital inks and opacifiers of $0.6 million and $0.6 million, respectively.

Three Months Ended

Change due to

September 30,

Volume /

2018

2017

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
123,277

$
110,578

$
12,699

11.5
%

$
1,077

$
10,175

$
(1,969)

$
3,417

$
—
Segment gross profit

40,095

37,880

2,215

5.8
%

1,077

2,268

(629)

751

(1,251)
Gross profit as a % of segment net sales

32.5
%

34.3
%

Net sales increased compared with the prior-year same period, primarily driven by organic sales of $9.3 million and $1.3 million in sales from Dip-Tech, which was acquired in the third quarter of 2017, and $1.3 million in sales from MRA, which was acquired in the third quarter of 2018. The increase in net sales was driven by favorable volume and mix of $10.2 million, sales from acquisitions of $3.4 million and higher product pricing of $1.1 million, partially offset by unfavorable foreign currency impacts of $2.0 million. Gross profit increased from the prior-year same period, primarily due to favorable volume and mix of $2.3 million, higher product pricing of $1.1 million and higher gross profit from acquisitions of $0.8 million, partially offset by higher raw material costs of $1.0 million, unfavorable foreign currency impacts of $0.6 million and unfavorable manufacturing costs of $0.3 million.

The net sales increase of $12.7 million was driven by higher sales from all regions. The increase in sales from the United States was primarily attributable to an increase in sales of electronics products and decoration products of $3.9 million of $1.0 million, respectively, and increased sales from Dip-Tech and MRA of $1.3 million and $1.3 million, respectively, partially offset by lower sales of industrial products. The increase in sales from EMEA was primarily attributable to higher sales of electronic products and decorations products of $3.4 million and $1.5 million, respectively, partially offset by lower sales from Dip-Tech of $1.1 million. The increase from Asia Pacific was primarily due to an increase in sales of automobile products of $1.2 million and sales from Dip-Tech of $1.0 million. Sales from Latin America remained relatively flat.

Three Months Ended

Change due to

September 30,

Volume /

2018

2017

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
95,947

$
93,196

$
2,751

3.0
%

$
2,123

$
1,110

$
(1,443)

$
961

$
—
Segment gross profit

30,174

31,044

(870)

(2.8)
%

2,123

2,794

(412)

186

(5,562)
Gross profit as a % of segment net sales

31.4
%

33.3
%

Net sales increased compared with the prior-year same period, primarily due to higher sales of surface technology products and sales from Diegel of $1.9 million and $1.0 million, respectively. The increase in net sales was driven by higher product pricing of $2.1 million, higher volume and mix of $1.1 million, and sales from acquisitions of $1.0 million, partially offset by unfavorable foreign currency impacts of $1.4 million. Gross profit decreased from the prior-year same period, primarily due higher manufacturing costs of $3.8 million, higher raw material costs of $1.7 million and unfavorable foreign currency impacts of $0.4 million, partially mitigated by favorable sales volume and mix of $2.8 million, higher product pricing of $2.1 million and gross profit from acquisitions of $0.2 million.

The net sales increase of $2.8 million was driven by higher sales from the United States. The increase in sales from the United States was primarily driven by higher sales of surface technology and pigment products of $1.9 million and $0.5 million, respectively. Sales from Asia Pacific and Latin America remained primarily flat. The decrease in sales in EMEA was primarily attributable to lower sales of pigment products of $1.1 million, partially mitigated by sales from Diegel of $0.9 million.

For the nine months ended September 30, 2018, net income was $69.6 million, compared with net income of $66.3 million for the nine months ended September 30, 2017. For the nine months ended September 30, 2018, net income attributable to common shareholders was $69.1 million, or earnings per share of $0.82, compared with net income attributable to common shareholders of $65.7 million, or earnings per share of $0.79, for the nine months ended September 30, 2017.

Net sales increased by $197.7 million, or 19.4%, in the nine months ended September 30, 2018, compared with the prior-year same period, driven by higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $129.5 million, $49.1 million and $19.2 million, respectively. The increase in net sales was driven by Endeka, which contributed sales of $86.8 million, and Dip-Tech, which contributed sales of $12.2 million. The increase in net sales was also driven by organic growth, with Performance Coatings growing $32.1 million, Performance Colors and Glass growing $30.5 million and Color Solutions growing $18.2 million.

Gross profit increased $40.1 million, or 12.9%, in the nine months ended September 30, 2018, compared with the prior-year same period, and as a percentage of net sales, it decreased 170 basis points to 28.8%. The increase in gross profit was attributable to increases across all segments, with increases in Performance Coatings, Performance Colors and Glass and Color Solutions of $21.1 million, $13.4 million and $6.2 million, respectively. The increase in gross profit was driven by favorable product pricing of $33.0 million, gross profit from acquisitions of $28.4 million, higher sales volumes and mix of $11.6 million, favorable foreign currency impacts of $8.6 million and lower manufacturing costs of $2.3 million, partially offset by higher raw material costs of $43.1 million.

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

The increase in net sales of $197.7 million, compared with the prior-year same period, was driven by an increase in sales from all regions. The increase in sales from EMEA was primarily attributable to higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $113.6 million, $36.2 million and $6.4 million, respectively. The increase in sales from Asia Pacific was primarily attributable to higher sales in Performance Coatings, Performance Colors and Glass and Color Solutions of $14.3 million, $6.1 million and $3.6 million, respectively. The increase in sales from the United States was attributable to higher sales in Color Solutions, Performance Colors and Glass and Performance Coatings of $7.7 million, $5.9 million and $3.0 million, respectively. The increase in sales from Latin America was attributable to higher sales in Color Solutions and Performance Colors and Glass of $1.4 million and $0.9 million, respectively, partially offset by a decrease in sales in Performance Coatings of $1.4 million.

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

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

Nine Months Ended

September 30,

2018

2017

$ Change

% Change

(Dollars in thousands)

Personnel expenses

$
121,073

$
102,872

$
18,201

17.7
%
Incentive compensation

5,008

7,932

(2,924)

(36.9)
%
Stock-based compensation

5,217

6,901

(1,684)

(24.4)
%
Pension and other postretirement benefits

1,009

1,272

(263)

(20.7)
%
Bad debt

430

(78)

508

(651.3)
%
Business development

9,897

11,260

(1,363)

(12.1)
%
Research and development expenses

30,263

26,488

3,775

14.3
%
Intangible asset amortization

6,126

7,037

(911)

(12.9)
%
All other expenses

28,537

24,684

3,853

15.6
%
Selling, general and administrative expenses

$
207,560

$
188,368

$
19,192

10.2
%

SG&A expenses were $19.2 million higher in the nine months ended September 30, 2018, compared with the prior-year same period. The higher SG&A expenses compared with the prior-year same period are primarily driven by businesses acquired within the last year, primarily related to personnel expenses and research and development expenses.

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

Restructuring and impairment charges ~~increased~~decreased in the ~~nine months ended September 30, 2018~~first quarter of 2019 compared with the prior-year same period. The ~~increase~~decrease primarily relates to lower costs associated with integration of our recent acquisitions and optimization ~~programs.~~ programs in the first quarter of 2019, compared with the prior-year same period, partially offset by an increase in employee severance costs.

Interest expense increased in the ~~nine months ended September 30, 2018~~first quarter of 2019 compared with the prior-year same period. The increase in interest expense was due to an increase in the average long-term debt balance during the ~~nine~~three months ended ~~September 30, 2018,~~March 31, 2019, compared with the prior-year same ~~period. Also, interest expense increased due to the~~period, offset by an increase in ~~LIBOR, offset by the decrease in the applicable margin rate from borrowings from the Amended Credit Facility.~~capitalized interest.

During the ~~nine months ended September 30, 2018,~~first quarter of 2019, income tax expense was ~~$29.2~~$4.3 million, or ~~29.6%~~23.7% of pre-tax income. In the ~~nine months ended September 30, 2017,~~first quarter of 2018, we recorded tax expense of ~~$23.2~~$7.5 million, or ~~25.9%~~24.2% of pre-tax income. The tax expense ~~nine months ended September 30,~~in the first quarter of 2019 and 2018, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences and discrete items recorded in the third quarter. The discrete items recorded in the third quarter primarily include a reduction to the tax expense related to the provision to return adjustments and an increase from the impact of resolving a foreign tax audit. The tax expense for the nine months ended September 30, 2017, as a percentage of pre-tax income, is lower than the U.S. federal statutory income tax rate of 35% primarily as a result of foreign statutory rate differences.

Comparison of the ~~nine~~three months ended ~~September 30,~~March 31, 2019 and 2018 ~~and 2017~~



	Nine Months Ended											Change due to									Three Months Ended											Change due to
	September 30,												Volume /								March 31,												Volume /
	2018			2017			$ Change		% Change		Price		Mix		Currency			Acquisitions	Other		2019			2018			$ Change		% Change		Price		Mix		Currency			Acquisitions	Other
	(Dollars in thousands)																				(Dollars in thousands)
Segment net sales	$	554,036		$	424,549		$	129,487	30.5	%	$	21,372	$	5,124	$	5,652	$	97,340	$	—	$	170,347		$	184,648		$	(14,301)	(7.7)	%	$	2,764	$	(15,088)	$	(10,734)	$	8,757	$	—
Segment gross profit		130,319			109,205			21,114	19.3	%		21,372		577		3,419		23,976		(28,230)		33,645			43,765			(10,120)	(23.1)	%		2,764		(5,693)		(2,637)		1,466		(6,020)
Gross profit as a % of segment net sales		23.5	%		25.7	%																19.8	%		23.7	%

Net sales ~~increased~~decreased in Performance Coatings compared with the prior-year same period, primarily driven by ~~sales from Endeka of $82.9 million, SPC of $10.1 million and Gardenia of $3.3 million, and increases~~decreases in sales of frits and glazes ~~porcelain enamel~~ and ~~digital inks~~colors of ~~$15.9 million, $8.3~~$9.9 million and ~~$7.7~~$6.0 million, respectively. The decrease in net sales was driven by unfavorable volume

and mix of $15.1 million, unfavorable foreign currency impacts of $10.7 million, partially mitigated by sales from acquisitions of $8.8 million and higher product pricing of $2.8 million. Gross profit decreased $10.1 million from the prior-year same period, primarily driven by lower sales volume and mix of $5.7 million, higher raw material costs of $3.8 million, unfavorable foreign currency impacts of $2.6 million and higher manufacturing costs of $2.2 million, partially mitigated by favorable product pricing impacts of $2.8 million and gross profit from acquisitions of $1.5 million.

The net sales decrease of $14.3 million was driven by lower sales from all regions. The decrease in sales from EMEA was primarily attributable to lower sales of colors of $5.4 million, frits and glazes of $3.9 million and opacifiers of $3.4 million, partially mitigated by an increase in sales from Quimicer of $7.8 million. The decrease in sales from Latin America was primarily driven by lower sales of frits and glazes and opacifiers of $2.7 million and $0.7 million, respectively. The decrease in sales from Asia Pacific was driven by lower sales of frits and glazes and colors of $3.2 million and $0.5 million, respectively, partially mitigated by sales from FMU, which contributed $1.0 million. The decrease in sales from the United States was fully attributable to lower sales of porcelain enamel.



	Three Months Ended											Change due to
	March 31,												Volume /
	2019			2018			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)
Segment net sales	$	120,845		$	120,505		$	340	0.3	%	$	841	$	2,612	$	(5,787)	$	2,674	$	—
Segment gross profit		39,467			43,328			(3,861)	(8.9)	%		841		(2,440)		(2,090)		1,156		(1,328)
Gross profit as a % of segment net sales		32.7	%		36.0	%

Net sales increased compared with the prior-year same period, primarily driven by sales from acquisitions and increased sales in electronics of $3.0 million and industrial products of $0.8 million, partially offset by lower sales in decoration and automotive products of $3.5 million and $2.6 million, respectively. The increase in net sales was driven by sales from acquisitions of ~~$97.3~~$2.7 million, ~~higher product pricing of $21.4 million, favorable foreign currency impacts of $5.7 million, and~~ favorable volume and mix of ~~$5.1~~$2.6 million and higher product pricing of $0.8 million, partially offset by unfavorable foreign currency impacts of $5.8 million. Gross profit ~~increased $21.1 million~~decreased from the prior-year same period primarily ~~driven~~due to unfavorable volume and mix of $2.4 million, unfavorable foreign currency impacts of $2.1 million and unfavorable manufacturing costs of $1.7 million, partially mitigated by gross profit from acquisitions of ~~$24.0~~$1.2 million, ~~favorable~~higher product pricing ~~impacts~~ of ~~$21.4 million, favorable foreign currency impacts of $3.4 million, lower manufacturing costs of $1.1~~$0.8 million and ~~higher sales volume and mix of $0.6 million, partially offset by higher~~favorable raw material costs of ~~$29.3~~$0.3 million.

The net sales increase of $129.5 million was primarily driven by increases in sales from EMEA and Asia Pacific. The increase in sales from EMEA was primarily attributable to sales from acquisitions which contributed $94.0 million and higher sales of all product lines. The increase in sales from Asia Pacific was driven by sales from acquisitions which contributed $3.4 million and higher sales of frits and glazes, digital inks and porcelain enamel of $6.6 million, $2.8 million and $1.5 million, respectively. The increase in sales from the United States was fully attributable to higher sales of porcelain enamel. The decrease in sales from Latin America was driven by lower sales of porcelain enamel and frits and glazes, partially offset by higher sales of digital inks.

Nine Months Ended

Change due to

September 30,

Volume /

2018

2017

$ Change

% Change

Price

Mix

Currency

Acquisitions

Other

(Dollars in thousands)

Segment net sales

$
369,809

$
320,733

$
49,076

15.3
%

$
3,308

$
17,945

$
9,237

$
18,587

$
—
Segment gross profit

128,785

115,385

13,400

11.6
%

3,308

3,468

3,319

4,209

(904)
Gross profit as a % of segment net sales

34.8
%

36.0
%

Net sales increased compared with the prior-year same period, primarily driven by $12.2 million in sales from Dip-Tech, and $3.9 million in sales from Endeka. The increase in net sales was driven by sales from acquisitions of $18.6 million, favorable volume and mix of $17.9 million, favorable foreign currency impacts of $9.2 million and higher product pricing of $3.3 million. Gross profit increased from the prior-year same period, primarily due to gross profit from acquisitions of $4.2 million, favorable manufacturing costs of $3.5 million, favorable foreign currency impacts of $3.3 million, higher sales volume and mix of $3.5 million and higher product pricing of $3.3 million, partially offset by higher raw material costs of $4.4 million.



	Nine Months Ended
	September 30,
									Three Months Ended
	2018		2017		$ Change		% Change		March 31,
									2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Segment net sales by Region
EMEA	$	180,801	$	144,586	$	36,215	25.0	%	$	57,448	$	61,344	$	(3,896)	(6.4)	%
United States		118,682		112,772		5,910	5.2	%		40,288		37,091		3,197	8.6	%
Asia Pacific		53,142		47,091		6,051	12.8	%		16,570		16,515		55	0.3	%
Latin America		17,184		16,284		900	5.5	%		6,539		5,555		984	17.7	%
Total	$	369,809	$	320,733	$	49,076	15.3	%	$	120,845	$	120,505	$	340	0.3	%

The net sales increase of ~~$49.1~~$0.3 million was driven by higher sales from ~~EMEA, Asia Pacific,~~ the United States, Latin America and ~~Latin America. The increase in~~Asia Pacific, partially offset by lower sales from EMEA was primarily attributable to $10.6 million in sales from acquisitions and higher sales from all product groups. The increase from Asia Pacific was primarily due to an increase in sales of automobile products of $4.6 million and sales from Dip-Tech of $1.4 million.EMEA. The increase in sales from the United States was primarily attributable to an increase in sales ~~from acquisitions~~ of ~~$5.6~~electronics products of $4.1 million, and ~~to higher~~ sales ~~in electronics,~~from MRA of $1.5 million, partially offset by lower sales of ~~automobile~~decoration and automotive products of $1.3 million and ~~industrial products.~~$1.0 million, respectively. The increase in sales from Latin America was ~~primarily~~ attributable to an increase in sales ~~in automobile products~~of decoration and industrial products of $0.6 million and $0.6 million, respectively, partially offset by a decrease in sales of automotive products of $0.2 million. Sales from Asia Pacific remained relatively flat. The decrease in sales from EMEA was primarily attributable to lower sales of decoration ~~products.~~products and electronic products of $3.0 million and $1.2 million, respectively, partially offset by sales from Diegel.



	Nine Months Ended											Change due to									Three Months Ended											Change due to
	September 30,												Volume /								March 31,												Volume /
	2018			2017			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other		2019			2018			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)																				(Dollars in thousands)
Segment net sales	$	293,089		$	273,917		$	19,172	7.0	%	$	8,327	$	3,108	$	6,776	$	961	$	—	$	96,356		$	100,379		$	(4,023)	(4.0)	%	$	2,371	$	(6,523)	$	(4,152)	$	4,281	$	—
Segment gross profit		93,864			87,642			6,222	7.1	%		8,327		7,567		1,878		186		(11,737)		28,396			32,149			(3,753)	(11.7)	%		2,371		(1,206)		(1,143)		1,751		(5,526)
Gross profit as a % of segment net sales		32.0	%		32.0	%																29.5	%		32.0	%

Net sales ~~increased~~decreased compared with the prior-year same period, primarily due to ~~higher~~lower sales of pigments ~~and~~products, partially mitigated by increased sales in surface technology products and sales from Diegel and UWiZ of ~~$10.4~~$2.2 million and ~~$8.2~~$2.1 million, respectively. The ~~increase~~decrease in net sales was driven by lower volume and mix of $6.5 million and unfavorable foreign currency impacts of $4.2 million, partially mitigated by sales from acquisitions of $4.3 million and higher product pricing of ~~$8.3~~$2.4 million. Gross profit decreased from the prior-year same period, primarily due higher manufacturing costs of $3.9 million, ~~favorable~~higher raw material costs of $1.6 million, unfavorable sales volume and mix of $1.2 million and unfavorable foreign currency impacts of ~~$6.8~~$1.1 million, partially mitigated by higher ~~volume and mix~~product pricing of ~~$3.1~~$2.4 million and ~~sales~~gross profit from acquisitions of ~~$1.0~~$1.8 million.

The net sales decrease of $4.0 million was driven by lower sales from EMEA and Asia Pacific, partially mitigated by higher sales from the United States. The decrease in sales from EMEA was primarily attributable to lower sales of pigment products of $7.0 million, partially mitigated by sales from Diegel of $2.1 million. The decrease in sales from Asia Pacific was primarily attributable to lower sales of pigment products of $3.3 million, partially mitigated by sales from UWiZ of $2.1 million. Sales from Latin America

million. Gross profit increased from the prior-year same period, primarily due to higher product pricing of $8.3 million, favorable sales volume and mix of $7.6 million, favorable foreign currency impacts of $1.9 million and gross profit from acquisitions of $0.2 million, partially offset by higher raw material costs of $9.4 million and higher manufacturing costs of $2.3 million.

~~The net sales increase of $19.2 million was driven by higher sales from all regions. The higher sales from EMEA, Asia Pacific and Latin America were driven by sales of pigment products.~~remained relatively flat. The increase in sales from the United States was primarily driven by higher sales of surface technology ~~products.~~

of $4.2 million, partially offset by lower sales of pigment products of $2.6 million.

Summary of Cash Flows for the ~~nine~~three months ended ~~September~~March 31, 2019 and 2018 ~~and 2017~~

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



	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2018		2017		$ Change		2019		2018		$ Change
	(Dollars in thousands)						(Dollars in thousands)
Cash flows from operating activities:
Net income	$	69,602	$	66,315	$	3,287	$	13,878	$	23,598	$	(9,720)
Loss (gain) on sale of assets and business		485		(1,214)		1,699
Loss on sale of assets								164		229		(65)
Depreciation and amortization		40,238		36,040		4,198		14,264		13,392		872
Interest amortization		2,684		2,375		309		900		870		30
Restructuring and impairment		4,277		3,629		648		179		2,429		(2,250)
Loss on extinguishment of debt		3,226		3,905		(679)
Accounts receivable		(36,439)		(44,952)		8,513		(43,733)		(32,657)		(11,076)
Inventories		(58,833)		(31,379)		(27,454)		(12,652)		(28,820)		16,168
Accounts payable		11,103		581		10,522		(43,680)		(7,139)		(36,541)
Other current assets and liabilities, net		(17,331)		(11,655)		(5,676)		(819)		(6,735)		5,916
Other adjustments, net		16,674		11,046		5,628		3,972		548		3,424
Net cash provided by operating activities	$	35,686	$	34,691	$	995
Net cash used in operating activities							$	(67,527)	$	(34,285)	$	(33,242)

Cash flows from operating activities. Cash flows provided by operating activities ~~increased $1.0~~decreased $33.2 million in the first ~~nine~~three months of ~~2018~~2019 compared with the prior-year same period. The ~~increase~~decrease in cash from operating activities was primarily due to ~~an increase~~a decrease in net income of ~~$3.3~~$9.7 million and ~~other non-cash items, partially offset by~~ higher cash outflows for net working capital of ~~$8.4~~$31.4 million, partially offset by an increase in other current assets and liabilities and other adjustments of $9.3 million.

Cash flows used in investing activities. Cash flows used in investing activities ~~increased $12.7~~decreased $19.6 million in the first ~~nine~~three months of ~~2018~~2019 compared with the prior-year same period. The increase in cash from investing activities was primarily due to ~~higher cash outflows for capital expenditures~~collections of ~~$34.0~~financing receivables from the international receivable sales program (Note 8) of $20.2 million ~~partially offset by~~in the first quarter of 2019 and lower cash outflows for business acquisitions, net of cash acquired of ~~$24.1 million.~~$2.1 million in the three months ended March 31, 2019, compared to the prior-year same period.

Cash flows from financing activities. Cash flows provided by financing activities ~~increased $73.2~~decreased $21.9 million in the first ~~nine~~three months of ~~2018~~2019 compared with the prior-year same period. As further discussed in Note 8, during the nine months ended September 30, 2018, we paid off our Credit Facility and entered into our Amended Credit Facility, consisting of a $500 million secured revolving line of credit and $820 million secured term loan facilities. Further, comparedThe decrease was primarily due to the ~~prior-year same period,~~ purchase of treasury stock ~~increased~~of $25.0 million in the ~~nine~~three months ended ~~by $17.0 million.~~March 31, 2019.

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

At ~~September 30, 2018,~~March 31, 2019, the Company had borrowed ~~$353.2~~$351.5 million under the Tranche B-1 Loans at an interest rate of ~~4.64%~~4.85%, ~~$233.8~~$232.7 million under the Tranche B-2 Loans at an interest rate of ~~4.64%~~4.85%, and ~~$228.9~~$227.7 million under the Tranche B-3 Loans at an interest rate of ~~4.64%~~4.85%. At ~~September 30, 2018,~~March 31, 2019, there were no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans and Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At March 31, 2019, the effective interest rate for the Tranche B-1 Loans, Tranche B-2 Loans, and Tranche B-3 Loans, after adjusting for the interest rate swap, was 5.17%, 3.33%, and 2.48%, respectively.

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 ~~$0.5~~$1.1 million and ~~$0.3~~$0.4 million for the three months ended ~~September 30,~~March 31, 2019 and 2018, ~~and 2017~~ respectively. We had on hand precious metals owned by participants in our precious metals program of ~~$47.1~~$53.6 million at ~~September 30, 2018,~~March 31, 2019, and ~~$37.7~~$55.2 million at December 31, ~~2017,~~2018, measured at fair value based on market prices for identical assets.

The consignment agreements under our precious metals program involve short-term commitments that typically mature within 30 to 90 days of each transaction and are typically renewed on an ongoing basis. As a result, the Company relies on the continued willingness of financial institutions to participate in these arrangements to maintain this source of liquidity. On occasion, we have been required to deliver cash collateral. While no deposits were outstanding at ~~September 30, 2018,~~March 31, 2019, or December 31, ~~2017,~~2018, 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.

of deferred purchase price was $23.1 million at March 31, 2019 and $23.0 million at December 31, 2018, and is recorded in Other Receivables.

At ~~September 30, 2018,~~March 31, 2019, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that totaled $~~8.0~~7.4 million. These agreements primarily relate to Ferro’s insurance programs, foreign energy purchase contracts and foreign tax payments.

~~We maintain other lines of credit to provide global flexibility for Ferro’s short-term liquidity requirements. These facilities are uncommitted lines for our international operations and~~ ~~totaled $40.3 million and $64.5 million at September 30, 2018, and December 31, 2017, respectively. We had $31.4 million and $39.4 million~~ ~~of additional borrowings available under these lines at~~ ~~September 30, 2018, and December 31, 2017, respectively.~~

Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under the revolving credit facility, and cash flows from operating activities. As of ~~September 30, 2018,~~March 31, 2019, we had ~~$126.3~~$57.7 million of cash and cash equivalents. The majority of our cash and cash equivalents were held by foreign subsidiaries. Cash generated in the U.S. is generally used to pay down amounts outstanding under our revolving credit facility and for general corporate purposes, including acquisitions. If needed, we could repatriate the majority of cash held by foreign subsidiaries without the need to accrue and pay U.S. income taxes. We do not anticipate a liquidity need requiring such repatriation of these funds to the U.S.

Our liquidity requirements and uses primarily include debt service, purchase commitments, labor costs, working capital requirements, restructuring expenditures, acquisition costs, capital investments, precious metals cash collateral requirements, and postretirement obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows provided by operating activities are primarily driven by earnings before non-cash charges and changes in working capital needs. We had additional borrowing capacity of ~~$414.7~~$472.1 million at ~~September 30, 2018,~~March 31, 2019, and ~~$356.7~~$525.6 million at December 31, ~~2017,~~2018, available under our various credit facilities, primarily the 2018 Revolving 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 30, 2018,~~March 31, 2019, we were in compliance with our maximum leverage ratio covenant of ~~4.25x~~4.00x as our actual ratio was ~~2.93x,~~2.95x, providing ~~$89.7~~$78.4 million of EBITDA cushion on the leverage ratio, as defined within the Amended Credit Facility. To the extent that economic conditions in key markets deteriorate or we are unable to meet our business projections and EBITDA falls below approximately ~~$197~~$219 million for rolling four quarters, based on reasonably consistent net debt levels with those as of ~~September 30, 2018,~~March 31, 2019, we could become unable to maintain compliance with our leverage ratio covenant. In such case, our lenders could demand immediate payment of outstanding amounts and we would need to seek alternate financing sources to pay off such debts and to fund our ongoing operations. Such financing may not be available on favorable terms, if at all.

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

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

There were no material changes to our critical accounting policies described in “Critical Accounting Policies” within Item 7 of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

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

Certain statements contained here and in future filings with the SEC reflect the Company’s expectations with respect to future performance and constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company’s operations and business environment, which are difficult to predict and are beyond the control of the Company. Factors that could adversely affect our future financial performance include those described under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

4536

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

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

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



	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Variable-rate debt:
Carrying amount(1)	$	922,770	$	739,602	$	858,516	$	809,072
Fair value(1)		931,432		742,634		845,437		796,846
Increase in annual interest expense from 1% increase in interest rates		3,821		4,890		3,186		2,680
Decrease in annual interest expense from 1% decrease in interest rates		(3,821)		(2,992)		(3,186)		(2,680)
Fixed-rate debt:
Carrying amount		6,325		7,112		8,109		8,362
Fair value		3,835		3,973		5,385		5,258
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		318,402		258,045		316,806		317,604
Carrying amount and fair value		1,025		1,492		(9,227)		(5,244)
Change in fair value from 1% increase in interest rates		14,909		9,157		13,404		13,945
Change in fair value from 1% decrease in interest rates		(14,096)		(3,678)		(12,923)		(13,508)
Cross currency swaps:
Notional amount		345,763		—		344,025		344,894
Carrying amount and fair value		13,077		—		23,000		17,104
Change in fair value from 10% increase		(35,811)		—		(34,908)		(35,455)
Change in fair value from 10% decrease		40,945		—		39,988		40,575
Foreign currency forward contracts:
Notional amount		371,117		238,457		410,061		387,190
Carrying amount and fair value		3,004		(469)		1,021		(270)
Change in fair value from 10% appreciation of U.S. dollar		10,410		3,541		10,691		8,070
Change in fair value from 10% depreciation of U.S. dollar		(12,735)		(4,328)		(13,490)		(9,863)

(1) The carrying values of the term loan facilitates are net of unamortized debt issuance costs of $4.6 million and $4.8 million for the period ended March 31, 2019 and December 31, 2018, respectively.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There were no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2017.~~2018.

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

Our ~~ability to pay~~Board of Directors has not declared any dividends on common stock ~~dividends is limited by certain covenants in our~~during 2019 or 2018. The Company’s Amended Credit Facility restricts the amount of dividends we can pay on our common stock. Any future dividends declared would be at the discretion of our Board of Directors and would depend on our financial condition, results of operations, cash flows, contractual obligations, the terms our financing agreements at the time a dividend is considered, and other ~~than dividends payable solely in Capital Securities, as defined in the agreement.~~relevant factors.

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

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, 2018 to July 31, 2018

406,115

$
21.05

8,548,782

$
35,437,419
August 1, 2018 to August 31, 2018

114,250

$
21.29

2,432,728

$
33,004,691
September 1, 2018 to September 30, 2018

194

$
21.48

4,167

$
33,000,524
Total

520,559

10,985,677



					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
	Purchased	Paid per Share			or Programs		or Programs
	(Dollars in thousands, except for per share amounts)
January 1, 2019 to January 31, 2019	319,713	$	16.42	$	5,249,278	$	65,943,242
February 1, 2019 to February 28, 2019	831,693	$	17.13	$	14,247,290	$	51,695,952
March 1, 2019 to March 31, 2019	289,272	$	19.03	$	5,503,417	$	46,192,535
Total	1,440,678			$	24,999,985

__________________________

Item 3. Defaults Upon Senior Securities

Not applicable.

Table of Contents

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.

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SIGNATURES

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


		FERRO CORPORATION (Registrant)

Date:	~~November 8, 2018~~April 30, 2019
		/s/ Peter T. Thomas
		Peter T. Thomas
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~November 8, 2018~~April 30, 2019
		/s/ Benjamin J. Schlater
		Benjamin J. Schlater
		Group Vice President and Chief Financial Officer (Principal Financial Officer)


(Mark One)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended ~~September 30, 2018~~March 31, 2019


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

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

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


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	83,910	$	11,365	$	24,264	$	26,699	$	146,238
Performance Colors and Glass		52,408		35,836		16,663		5,671		110,578
Color Solutions		33,400		41,190		9,937		8,669		93,196
Total net sales	$	169,718	$	88,391	$	50,864	$	41,039	$	350,012



	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Raw materials	$	130,660	$	112,300	$	118,651	$	116,219
Work in process		58,622		39,454		60,297		55,884
Finished goods		188,273		172,426		187,680		184,895
Total inventories	$	377,555	$	324,180	$	366,628	$	356,998


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


		Page
PART I
Item 1. Financial Statements (Unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2926
Item 3. Quantitative and Qualitative Disclosures about Market Risk	4637
Item 4. Controls and Procedures	4738
PART II
Item 1. Legal Proceedings	4839
Item 1A. Risk Factors	4839
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4839
Item 3. Defaults Upon Senior Securities	4839
Item 4. Mine Safety Disclosures	4840
Item 5. Other Information	4940
Item 6. Exhibits	4940

Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2


							Performance
	Performance			Color			Colors and
	Coatings			Solutions			Glass			Total
	(Dollars in thousands)
Goodwill, net at December 31, 2017	$	38,236		$	42,535		$	114,598		$	195,369
Acquisitions		5,140	(2)		9,984	(4)		8,236	(1),(3)		23,360
Foreign currency adjustments		(1,533)			(663)			(1,783)			(3,979)
Goodwill, net at September 30, 2018	$	41,843		$	51,856		$	121,051		$	214,750


					Amount of Gain				Amount of Gain Recognized in
	Amount of Gain (Loss)				Reclassified from				Income on Derivative (Amount
	Recognized in AOCL				AOCL into Income				Excluded from Effectiveness Testing)				Location of Gain
	2018		2017		2018			2017	2018			2017	(Loss) in Earnings
	(Dollars in thousands)
Cross currency swaps	$	1,272	$	—	$	—	$	—	$	858	$	—	Interest expense
Net investment hedge		—		(8,020)		—		—		—		—	Foreign currency losses, net



	Amount of Gain (Loss)
	Recognized in Earnings
	Three Months Ended
	September 30,
	2018		2017		Location of Gain (Loss) in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	1,339	$	(1,438)	Foreign currency losses, net



	Stock Options
Weighted-average grant-date fair value	$	~~8.91~~6.47
Expected life, in years		~~5.4~~5.6
Risk-free interest rate		~~2.7~~2.5	%
Expected volatility		~~39.7~~33.9	%



	Employee		Other				Employee		Other
	Severance		Costs		Total		Severance		Costs		Total
	(Dollars in thousands)						(Dollars in thousands)
Balances at December 31, 2017	$	2,286	$	1,234	$	3,520
Balances at December 31, 2018							$	1,151	$	1,288	$	2,439
Restructuring charges		4,711		5,724		10,435		1,155		972		2,127
Cash payments		(5,283)		(875)		(6,158)		(1,460)		(488)		(1,948)
Non-cash items		(125)		(4,253)		(4,378)		(7)		(721)		(728)
Balances at September 30, 2018	$	1,589	$	1,830	$	3,419
Balances at March 31, 2019							$	839	$	1,051	$	1,890



	March 31,
	2019		Balance Sheet Location
	(Dollars in thousands)
Assets
Operating leased assets	$	27,110	Operating leased assets
Finance leased assets(3)		2,290	Property, plant and equipment, net
Total leased assets	$	29,400
Liabilities
Current
Operating	$	9,509	Accrued expenses and other current liabilities
Finance		795	Loans payable and current portion of long-term debt
Noncurrent
Operating		17,562	Operating lease non-current liabilities
Finance		3,177	Long-term debt, less current portion
Total lease liabilities	$	31,043



	Finance		Operating
	Leases		Leases
	(Dollars in thousands)
Remaining in 2019	$	809	$	8,411
2020		786		7,844
2021		546		5,781
2022		1,335		3,512
2023		323		1,888
2024		285		850
Thereafter		696		1,563
Net minimum lease payments	$	4,780	$	29,849
Less: interest		808		2,778
Present value of lease liabilities	$	3,972	$	27,071



	Three Months Ended September 30,
		Postretirement					Net Gain
		Benefit Liability		Translation			on Cash
		Adjustments		Adjustments			Flow Hedges	Total
		(Dollars in thousands)
Balances at June 30, 2017		$	1,153	$	(86,823)	$	—	$	(85,670)
Other comprehensive loss before reclassifications, before tax			—		(141)		—		(141)
Reclassification to earnings:
Postretirement benefit liabilities loss, before tax			(39)		—		—		(39)
Cash flow hedge income, before tax			—		—		166		166
Current period other comprehensive (loss) income, before tax			(39)		(141)		166		(14)
Tax effect			(6)		3,001		62		3,057
Current period other comprehensive (loss) income, net of tax			(33)		(3,142)		104		(3,071)
Balances at September 30, 2017		$	1,120	$	(89,965)	$	104	$	(88,741)

Balances at June 30, 2018		$	1,182	$	(101,927)	$	923	$	(99,822)
Other comprehensive (loss) income before reclassifications, before tax			—		(5,086)		6,644		1,558
Reclassification to earnings:
Cash flow hedge loss, before tax			—		—		(3,548)		(3,548)
Current period other comprehensive (loss) income, before tax			—		(5,086)		3,096		(1,990)
Tax effect			—		94		(514)		(420)
Current period other comprehensive (loss) income, net of tax			—		(5,180)		3,610		(1,570)
Balances at September 30, 2018		$	1,182	$	(107,107)	$	4,533	$	(101,392)


	September 30,		December 31,		March 31,		December 31,
	2018		2017		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Gross amortizable intangible assets:
Patents	$	5,200	$	5,279	$	5,430	$	5,462
Land rights		4,781		4,947		4,846		4,773
Technology/know-how and other		135,683		131,070		131,515		132,084
Customer relationships		98,468		93,500		99,217		100,368
Total gross amortizable intangible assets		244,132		234,796		241,008		242,687
Accumulated amortization:
Patents		(5,149)		(5,226)		(5,409)		(5,440)
Land rights		(2,888)		(2,883)		(2,966)		(2,909)
Technology/know-how and other		(49,063)		(45,214)		(51,384)		(48,898)
Customer relationships		(14,270)		(11,114)		(18,635)		(17,306)
Total accumulated amortization		(71,370)		(64,437)		(78,394)		(74,553)
Amortizable intangible assets, net	$	172,762	$	170,359	$	162,614	$	168,134



				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, 2018 to July 31, 2018	406,115	$	21.05	8,548,782	$	35,437,419
August 1, 2018 to August 31, 2018	114,250	$	21.29	2,432,728	$	33,004,691
September 1, 2018 to September 30, 2018	194	$	21.48	4,167	$	33,000,524
Total	520,559			10,985,677


3	Articles of incorporation and by-laws:
3.1	Eleventh Amended Articles of Incorporation of Ferro Corporation (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.2	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed December 29, 1994 (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.3	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on June 23, 1998 (incorporated by reference to Exhibit 4.3 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.4	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on October 17, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).
3.5	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on April 25, 2014 (incorporated by reference to Exhibit 3.5 to Ferro’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2014).
3.6	Ferro Corporation Amended and Restated Code of Regulations (incorporated by reference to Exhibit 3.1 to Ferro Corporation's current Report on Form 8-K filed December 12, 2016.)
	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10.1	Receivables Purchase and Servicing Agreement, dated December 5, 2018, among Ferro Spain S.A., Vetriceramici-Ferro S.p.A., Ferro Corporation and ING Belgique SA/NV (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s Current Report on Form 8-K filed December 6, 2018).
10.2	First Amendment, dated as of April 25, 2018, to Credit Agreement among Ferro Corporation, Ferro GmbH and Ferro Europe Holding LLC, certain other subsidiaries of Ferro Corporation, PNC Bank, National Association, as the Administrative Agent, Collateral Agent and an Issuer, Deutsche Bank AG New York Branch, as the Syndication Agent and an Issuer, and various financial institutions as lenders (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s current Report on Form 8-K, filed April 27, 2018).
~~10.2~~10.3	Ferro Corporation 2018 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s Current Report on Form 8-K, filed May 7, 2018.
10.4	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).


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