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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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


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

Commission File Number 1-584

FERRO CORPORATION

(Exact name of registrant as specified in its charter)


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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES ☒x NO ☐o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒x NO ☐o

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


Large ~~accelerated filer~~Accelerated Filer	☒x	Accelerated ~~filer~~Filer	☐o
Non-accelerated ~~filer~~Filer	☐o	Smaller ~~reporting company~~Reporting Company	☐o
		Emerging ~~growth company~~Growth Company	☐o

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

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

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


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

At ~~March 31,~~September 30, 2019, there were ~~81,931,428~~81,968,492 shares of Ferro Common Stock, par value $1.00, outstanding.

Table of Contents

TABLE OF CONTENTS


		Page
PART I
Item 1. Financial Statements (Unaudited)	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26 30
Item 3. Quantitative and Qualitative Disclosures about Market Risk	37 46
Item 4. Controls and Procedures	38 47
PART II
Item 1. Legal Proceedings	39 48
Item 1A. Risk Factors	39 48
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39 48
Item 3. Defaults Upon Senior Securities	39 49
Item 4. Mine Safety Disclosures	40 49
Item 5. Other Information	40
~~Item 6. Exhibits~~	40
	49
~~Exhibit 31.1~~Item 6. Exhibits	49
~~Exhibit 31.2~~
Exhibit ~~32.1~~31.1
Exhibit ~~32.2~~31.2
Exhibit 32.1
Exhibit 32.2

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations



	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018
	(Dollars in thousands, except per share amounts)				(Dollars in thousands, except per share amounts)
Net sales	$	387,548	$	405,532	$	365,728	$	395,163	$	1,147,178	$	1,216,934
Cost of sales		285,692		286,846		265,437		289,676		836,773		866,116
Gross profit		101,856		118,686		100,291		105,487		310,405		350,818
Selling, general and administrative expenses		72,080		73,092		67,723		64,344		211,448		207,560
Restructuring and impairment charges		2,127		4,106		6,226		2,561		18,613		10,435
Other expense (income):
Interest expense		8,545		7,962		8,138		8,553		25,198		24,715
Interest earned		(87)		(201)		(93)		(110)		(329)		(497)
Foreign currency losses, net		738		1,840		3,497		2,554		5,615		7,054
Miscellaneous expense, net		275		775
Loss on extinguishment of debt						—		—		—		3,226
Miscellaneous expense (income), net						(2,139)		74		(1,505)		(523)
Income before income taxes		18,178		31,112		16,939		27,511		51,365		98,848
Income tax expense		4,300		7,514		3,729		11,368		13,168		29,246
Net income		13,878		23,598		13,210		16,143		38,197		69,602
Less: Net income attributable to noncontrolling interests		274		207		390		85		902		485
Net income attributable to Ferro Corporation common shareholders	$	13,604	$	23,391	$	12,820	$	16,058	$	37,295	$	69,117
Earnings per share attributable to Ferro Corporation common shareholders:
Basic earnings per share	$	0.16	$	0.28	$	0.16	$	0.19	$	0.45	$	0.82
Diluted earnings per share	$	0.16	$	0.27	$	0.16	$	0.19	$	0.45	$	0.81

See accompanying notes to condensed consolidated financial statements.

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)



	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Net income	$	13,878	$	23,598	$	13,210	$	16,143	$	38,197	$	69,602
Other comprehensive income, net of income tax:
Foreign currency translation income		3,508		5,787
Cash flow hedging instruments, unrealized (loss) gain		(4,314)		1,314
Foreign currency translation loss						(10,966)		(5,380)		(3,585)		(29,908)
Cash flow hedging instruments, unrealized income (loss)						(1,644)		3,610		(13,307)		3,588
Postretirement benefit liabilities income		—		7		—		—		—		17
Other comprehensive (loss) income, net of income tax		(806)		7,108
Other comprehensive loss, net of income tax						(12,610)		(1,770)		(16,892)		(26,303)
Total comprehensive income		13,072		30,706		600		14,373		21,305		43,299
Less: Comprehensive income attributable to noncontrolling interests		380		335
Less: Comprehensive income (loss) attributable to noncontrolling interests						146		(115)		648		106
Comprehensive income attributable to Ferro Corporation	$	12,692	$	30,371	$	454	$	14,488	$	20,657	$	43,193

See accompanying notes to condensed consolidated financial statements.

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Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets



		March 31,		December 31,			September 30,		December 31,
		2019		2018			2019		2018
		(Dollars in thousands)					(Dollars in thousands)
ASSETS	ASSETS					ASSETS
Current assets
Cash and cash equivalents		$	57,637	$	104,301		$	51,741	$	104,301
Accounts receivable, net			329,149		306,882			320,359		306,882
Inventories			366,628		356,998			358,301		356,998
Other receivables			86,022		91,143			90,209		91,143
Other current assets			25,474		23,960			23,239		23,960
Total current assets			864,910		883,284			843,849		883,284
Other assets
Property, plant and equipment, net			385,079		381,341			382,842		381,341
Goodwill			214,815		216,464			203,595		216,464
Intangible assets, net			179,349		184,953			169,947		184,953
Deferred income taxes			103,433		103,488			103,648		103,488
Operating leased assets			27,110		—			23,206		—
Other non-current assets			48,710		42,930			55,595		42,930
Total assets		$	1,823,406	$	1,812,460		$	1,782,682	$	1,812,460
LIABILITIES AND EQUITY	LIABILITIES AND EQUITY					LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt		$	10,156	$	10,260		$	18,136	$	10,260
Accounts payable			205,486		256,573			178,412		256,573
Accrued payrolls			33,305		39,989			34,931		39,989
Accrued expenses and other current liabilities			90,466		77,995			91,185		77,995
Total current liabilities			339,413		384,817			322,664		384,817
Other liabilities
Long-term debt, less current portion			860,441		811,137			827,791		811,137
Postretirement and pension liabilities			172,185		173,046			168,218		173,046
Operating leased non-current liabilities			17,562		—			14,905		—
Other non-current liabilities			57,908		57,611			62,306		57,611
Total liabilities			1,447,509		1,426,611			1,395,884		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; 81.9 million and 83.0 million shares outstanding at March 31, 2019, and December 31, 2018, respectively			93,436		93,436
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 82.0 million and 83.0 million shares outstanding at September 30, 2019, and December 31, 2018, respectively								93,436		93,436
Paid-in capital			291,677		298,123			293,970		298,123
Retained earnings			269,582		255,978			293,273		255,978
Accumulated other comprehensive loss			(106,273)		(105,361)			(121,999)		(105,361)
Common shares in treasury, at cost			(182,123)		(165,545)			(181,094)		(165,545)
Total Ferro Corporation shareholders’ equity			366,299		376,631			377,586		376,631
Noncontrolling interests			9,598		9,218			9,212		9,218
Total equity			375,897		385,849			386,798		385,849
Total liabilities and equity		$	1,823,406	$	1,812,460		$	1,782,682	$	1,812,460

See accompanying notes to condensed consolidated financial statements.

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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, 2017	9,386		(147,056)	$	93,436	$	302,158		171,744		(75,468)		11,866	$	356,680
Net income	—		—		—		—		23,391		—		207		23,598
Other comprehensive income	—		—		—		—		—		6,980		128		7,108
Stock-based compensation transactions	(349)		8,209		—		(6,986)		—		—		—		1,223
Change in ownership interests	—		—		—		789		—		—		(2,228)		(1,439)
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, 2018	10,433		(165,545)		93,436		298,123		255,978		(105,361)		9,218		385,849	10,433	$	(165,545)	$	93,436	$	298,123	$	255,978	$	(105,361)	$	9,218	$	385,849
Net income	—		—		—		—		13,604		—		274		13,878	—		—		—		—		13,604		—		274		13,878
Other comprehensive (loss) income	—		—		—		—		—		(912)		106		(806)	—		—		—		—		—		(912)		106		(806)
Purchase of treasury stock	1,441		(25,000)		—		—		—		—		—		(25,000)	1,441		(25,000)		—		—		—		—		—		(25,000)
Stock-based compensation transactions	(370)		8,422		—		(6,446)		—		—		—		1,976	(370)		8,422		—		(6,446)		—		—		—		1,976
Balances at March 31, 2019	11,504	$	(182,123)	$	93,436	$	291,677	$	269,582	$	(106,273)	$	9,598	$	375,897	11,504		(182,123)		93,436		291,677		269,582		(106,273)		9,598		375,897
Net income																—		—		—		—		10,871		—		238		11,109
Other comprehensive loss																—		—		—		—		—		(3,360)		(116)		(3,476)
Stock-based compensation transactions																(1)		37		—		2,181		—		—		—		2,218
Distributions to noncontrolling interests																—		—		—		—		—		—		(654)		(654)
Balances at June 30, 2019																11,503		(182,086)		93,436		293,858		280,453		(109,633)		9,066		385,094
Net income																—		—		—		—		12,820		—		390		13,210
Other comprehensive loss																—		—		—		—		—		(12,366)		(244)		(12,610)
Stock-based compensation transactions																(36)		992		—		112		—		—		—		1,104
Balances at September 30, 2019																11,467	$	(181,094)	$	93,436	$	293,970	$	293,273	$	(121,999)	$	9,212	$	386,798

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	Ferro Corporation Shareholders
	Common Shares									Accumulated
	in Treasury									Other		Non-
				Common		Paid-in		Retained		Comprehensive		Controlling		Total
	Shares	Amount		Stock		Capital		Earnings		Loss		Interests		Equity
	(In thousands)
Balances at December 31, 2017	9,386	$	(147,056)	$	93,436	$	302,158	$	171,744	$	(75,468)	$	11,866	$	356,680
Net income	—		—		—		—		23,391		—		207		23,598
Other comprehensive income	—		—		—		—		—		6,980		128		7,108
Stock-based compensation transactions	(349)		8,209		—		(6,986)		—		—		—		1,223
Change in ownership interest	—		—		—		789		—		—		(2,228)		(1,439)
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
Net income	—		—		—		—		29,668		—		193		29,861
Other comprehensive loss	—		—		—		—		—		(31,334)		(307)		(31,641)
Purchase of treasury stock	287		(6,014)		—		—		—		—		—		(6,014)
Stock-based compensation transactions	(27)		689		—		281		—		—		—		970
Distributions to noncontrolling interests	—		—		—		—		—		—		(775)		(775)
Balances at June 30, 2018	9,297		(144,172)		93,436		296,242		228,944		(99,822)		9,084		383,712
Net income	—		—		—		—		16,058		—		85		16,143
Other comprehensive loss	—		—		—		—		—		(1,570)		(200)		(1,770)
Purchase of treasury stock	520		(10,985)		—		—		—		—		—		(10,985)
Stock-based compensation transactions	(39)		1,071		—		(173)		—		—		—		898
Distributions to noncontrolling interests	—		—		—		—		—		—		3		3
Balances at September 30, 2018	9,778	$	(154,086)	$	93,436	$	296,069	$	245,002	$	(101,392)	$	8,972	$	388,001

See accompanying notes to condensed consolidated financial statements.

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Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows



	Three Months Ended				Nine Months Ended
	March 31,				September 30,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Cash flows from operating activities
Net cash used in operating activities	$	(67,527)	$	(34,285)
Net cash (used in) provided by operating activities					$	(67,240)	$	35,686
Cash flows from investing activities
Capital expenditures for property, plant and equipment and other long lived assets		(23,326)		(20,682)		(40,820)		(64,154)
Collections of financing receivables		20,186		—		60,904		—
Business acquisitions, net of cash acquired		(251)		(2,352)		(251)		(47,802)
Other investing activities		—		22		1,930		37
Net cash used in investing activities		(3,391)		(23,012)
Net cash provided by (used in) investing activities						21,763		(111,919)
Cash flows from financing activities
Net borrowings under loans payable		33		9,742
Net borrowings (payments) under loans payable						8,220		(17,182)
Principal payments on term loan facility - Credit Facility		—		(1,664)		—		(304,060)
Principal payments on term loan facility - Amended Credit Facility		(2,050)		—		(6,150)		(4,100)
Proceeds from revolving credit facility - Credit Facility		—		119,550		—		134,950
Principal payments on revolving credit facility - Credit Facility		—		(79,367)		—		(212,950)
Proceeds from revolving credit facility - Amended Credit Facility		104,174		—		216,066		168,023
Principal payments on revolving credit facility - Amended Credit Facility		(52,866)		—		(193,595)		(56,090)
Proceeds from term loan facility - Amended Credit Facility						—		466,075
Payment of debt issuance costs						—		(3,466)
Acquisition-related contingent consideration payment		—		(348)		(5,200)		(9,464)
Purchase of treasury stock		(25,000)		—		(25,000)		(16,999)
Other financing activities		(414)		(2,133)		(757)		(3,516)
Net cash provided by financing activities		23,877		45,780
Net cash (used in) provided by financing activities						(6,416)		141,221
Effect of exchange rate changes on cash and cash equivalents		377		1,262		(667)		(2,261)
Decrease in cash and cash equivalents		(46,664)		(10,255)
(Decrease) Increase in cash and cash equivalents						(52,560)		62,727
Cash and cash equivalents at beginning of period		104,301		63,551		104,301		63,551
Cash and cash equivalents at end of period	$	57,637	$	53,296	$	51,741	$	126,278
Cash paid during the period for:
Interest	$	8,232	$	7,314	$	25,475	$	24,857
Income taxes	$	3,940	$	4,575	$	12,845	$	17,577

See accompanying notes to condensed consolidated financial statements.

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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, 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 ~~March 31,~~September 30, 2019, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, 2019.

2. Recent Accounting Pronouncements

Recently Adopted Accounting Standards

On January 1, 2019, we adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2016-02, Leases: (Topic 842), using the new transition method under ASU 2018-11, Targeted Improvements.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. ASU 2018-11 provided 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.

We elected the package of practical expedients permitted under the transition guidance, which allowed us to ~~carryforward~~carry forward 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~~existed 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~~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, 2019. Other than this impact, the adoption of ASU 2016-02 did not have a material impact on our remaining consolidated financial statements.

On January 1, 2019, we adopted FASB 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 Income (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~~resulting from 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.

On April 1, 2019, we adopted FASB 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

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current goodwill impairment test. The Company updated its goodwill impairment test in accordance with the standard updates on a prospective basis.

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, 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 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.

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

3. Revenue

Revenues disaggregated by geography and reportable segment for the three months ended ~~March 31,~~September 30, 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	$	113,426	$	11,691	$	22,865	$	22,365	$	170,347	$	104,217	$	8,964	$	26,184	$	23,026	$	162,391
Performance Colors and Glass		57,448		40,288		16,570		6,539		120,845		50,670		37,694		19,123		5,255		112,742
Color Solutions		35,567		43,599		8,825		8,365		96,356		33,350		38,759		10,411		8,075		90,595
Total net sales	$	206,441	$	95,578	$	48,260	$	37,269	$	387,548	$	188,237	$	85,417	$	55,718	$	36,356	$	365,728

Revenues disaggregated by geography and reportable segment for the three months ended ~~March 31,~~September 30, 2018, 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	$	119,116	$	12,819	$	25,947	$	26,766	$	184,648	$	110,261	$	12,170	$	27,914	$	25,594	$	175,939
Performance Colors and Glass		61,344		37,091		16,515		5,555		120,505		55,782		43,087		18,564		5,844		123,277
Color Solutions		40,483		41,626		9,938		8,332		100,379		33,276		43,699		10,136		8,836		95,947
Total net sales	$	220,943	$	91,536	$	52,400	$	40,653	$	405,532	$	199,319	$	98,956	$	56,614	$	40,274	$	395,163

Revenues disaggregated by geography and reportable segment for the nine months ended September 30, 2019, follow:


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	336,631	$	30,448	$	74,974	$	68,917	$	510,970
Performance Colors and Glass		161,850		119,126		53,288		17,727		351,991
Color Solutions		105,960		125,499		28,248		24,510		284,217
Total net sales	$	604,441	$	275,073	$	156,510	$	111,154	$	1,147,178

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


	EMEA		United States		Asia Pacific		Latin America		Total
	(Dollars in thousands)
Performance Coatings	$	355,510	$	36,704	$	82,990	$	78,832	$	554,036
Performance Colors and Glass		180,801		118,682		53,142		17,184		369,809
Color Solutions		109,985		126,598		30,606		25,900		293,089
Total net sales	$	646,296	$	281,984	$	166,738	$	121,916	$	1,216,934

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4. Acquisitions

Quimicer, S.A.

On October 1, 2018, the Company acquired 100% of the equity interests of Quimicer, S.A. (“Quimicer”), for ~~€32.~~2€32.2 million (approximately ~~$37.~~4$37.4 million), including the assumption of debt of €5.2€5.2 million (approximately $6.1 million). Its products include frits, varnishes, silk-screen printing pastes, crushed frits, pellets, atomized varnishes, and ceramic colors, as well as pigmented inks for digital printing on ceramic tiles within the Performance Coatings segment. The information included herein has been prepared based on the ~~preliminary~~ allocation of the purchase price using 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 $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 sheets. During the third quarter of 2019, the Company recorded a goodwill impairment charge of $3.0 million as a result of the finalization of purchase accounting.

UWiZ Technology Co., Ltd.

On September 25, 2018, the Company acquired 100% of the equity interests of UWiZ Technology Co., Ltd. (“UWiZ”) for NTD 823.4 million (approximately $26.9 million) in cash. Its products include a range of slurry-based polishing products for the semiconductor and optoelectronics industry within the Color Solutions segment. The information included herein has been prepared based on the allocation of the purchase price using 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 $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 sheets.

Ernst Diegel GmbH

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. Its products include decorative coatings for glass and high-performance plastics coatings, primarily in automotive applications within the Performance Colors and Glass segment. 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. ~~As of March 31, 2019, the purchase price allocation is subject to further adjustment until all information is fully evaluated by the Company.~~ The Company

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~~preliminarily~~ recorded ~~$21.5~~$7.0 million of personal and real property, ~~$15.9~~$4.8 million of net working capital, ~~$3.0~~$2.0 million of amortizable intangible assets, $1.7 million of goodwill and ~~$3.0~~$1.5 million of deferred tax liability on the condensed consolidated balance ~~sheet.~~ sheets.

~~UWiZ Technology Co., Ltd.~~MRA Laboratories, Inc.

On ~~September 25,~~July 12, 2018, the Company acquired 100% of the equity interests of ~~UWiZ Technology Co., Ltd.~~MRA Laboratories, Inc. (“~~UWiZ”~~MRA”) for ~~NTD823~~.4$16.0 million ~~(approximately $26.9 million)~~ in ~~cash~~.cash. Its products include dielectrics and electronic ink products for passive component applications within the Performance Colors and Glass segment. 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 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.

~~Ernst Diegel GmbH~~

~~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 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, $2.0 million of amortizable intangible assets, $1.7 million of goodwill and $1.5 million of deferred tax liability on the condensed consolidated balance sheet.

~~MRA Laboratories, Inc.~~

~~On July 12, 2018, the Company acquired 100% of the equity interests of MRA Laboratories, Inc. (“MRA”) for $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 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 $7.2 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.~~ sheets.

PT Ferro Materials Utama

On June 29, 2018, the Company acquired the remaining 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%. Its products include additives and ceramics color products within the Performance Coatings segment. 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

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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.~~investment during the second quarter of 2018.

Gardenia Quimica S.A.

On August 3, 2017, the Company acquired a majority interest of Gardenia Quimica S.A. (“Gardenia”) for $3.0 ~~million~~.million. Its products include mediums, additives, binders, and other auxiliary products for the tile coatings industry within the Performance Coatings segment. 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. On March 1, 2018, the Company acquired the remaining equity interest in Gardenia for $1.4 million.

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5. Inventories



	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Raw materials	$	118,651	$	116,219	$	117,080	$	116,219
Work in process		60,297		55,884		58,143		55,884
Finished goods		187,680		184,895		183,078		184,895
Total inventories	$	366,628	$	356,998	$	358,301	$	356,998

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 ~~$1.1 million and $0.4~~$0.5 million for the three months ended ~~March 31,~~September 30, 2019 and 2018 and were $2.2 million and $1.3 million for the nine months ended September 30, 2019, and 2018, respectively. We had on-hand precious metals owned by participants in our precious metals consignment program of ~~$53.6~~$65.9 million at ~~March 31,~~September 30, 2019, and $55.2 million at December 31, 2018, measured at fair value based on market prices for identical assets.

6. Property, Plant and Equipment

Property, plant and equipment is reported net of accumulated depreciation of ~~$527.3~~$537.9 million at ~~March 31,~~September 30, 2019 and $523.4 million at December 31, 2018. Unpaid capital expenditure liabilities, which are non-cash investing activities, were ~~$8.4~~$4.0 million at ~~March 31,~~September 30, 2019 and ~~$4.8~~$7.7 million at ~~March 31,~~September 30, 2018.

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7. Goodwill and Other Intangible Assets

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


					Performance								Performance
	Performance		Color		Colors and				Performance		Color		Colors and
	Coatings		Solutions		Glass		Total		Coatings		Solutions		Glass		Total
	(Dollars in thousands)								(Dollars in thousands)
Goodwill, net at December 31, 2018	$	44,352	$	50,545	$	121,567	$	216,464	$	44,352	$	50,545	$	121,567	$	216,464
Impairments										(9,020)		—		—		(9,020)
Foreign currency adjustments		(855)		(319)		(475)		(1,649)		(1,926)		(809)		(1,114)		(3,849)
Goodwill, net at March 31, 2019	$	43,497	$	50,226	$	121,092	$	214,815
Goodwill, net at September 30, 2019									$	33,406	$	49,736	$	120,453	$	203,595


	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Goodwill, gross	$	273,282	$	274,931	$	271,082	$	274,931
Accumulated impairment		(58,467)		(58,467)		(67,487)		(58,467)
Goodwill, net	$	214,815	$	216,464	$	203,595	$	216,464

~~Goodwill is tested for~~For the nine months ended September 30, 2019, the Company recorded a $9.0 million goodwill impairment atcharge within our Tile Coating Systems reporting unit, a component of the Performance Coatings reportable segment, against Restructuring and impairment charges. The goodwill impairment charge recorded was a result of the finalization of purchase accounting of the recent Quimicer, FMU, and Gardenia acquisitions that changed the carrying amount of net assets attributable to the reporting unit ~~level on~~that represented 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 March 31, 2019, the Company is not aware of any events or circumstances that occurred which would require a goodwill impairment ~~test.~~indicator.

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Amortizable intangible assets consisted of the following:


	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Gross amortizable intangible assets:
Patents	$	5,430	$	5,462	$	5,371	$	5,462
Land rights		4,846		4,773		4,663		4,773
Technology/know-how and other		131,515		132,084		132,038		132,084
Customer relationships		99,217		100,368		97,268		100,368
Total gross amortizable intangible assets		241,008		242,687		239,340		242,687
Accumulated amortization:
Patents		(5,409)		(5,440)		(5,351)		(5,440)
Land rights		(2,966)		(2,909)		(2,932)		(2,909)
Technology/know-how and other		(51,384)		(48,898)		(56,419)		(48,898)
Customer relationships		(18,635)		(17,306)		(21,036)		(17,306)
Total accumulated amortization		(78,394)		(74,553)		(85,738)		(74,553)
Amortizable intangible assets, net	$	162,614	$	168,134	$	153,602	$	168,134

Indefinite-lived intangible assets consisted of the following:


	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Indefinite-lived intangibles assets:
Trade names and trademarks	$	16,735	$	16,819	$	16,345	$	16,819

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8. Debt

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



	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Loans payable	$	—	$	50	$	8,270	$	50
Current portion of long-term debt		10,156		10,210		9,866		10,210
Loans payable and current portion of long-term debt	$	10,156	$	10,260	$	18,136	$	10,260

Long-term debt consisted of the following:



	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)

Term loan facility, net of unamortized issuance costs, maturing 2024(1)	$	807,208	$	809,022	$	803,579	$	809,022
Revolving credit facility		51,308		—		22,471		—
Capital lease obligations		3,972		3,963		3,664		3,963
Other notes		8,109		8,362		7,943		8,362
Total long-term debt		870,597		821,347		837,657		821,347
Current portion of long-term debt		(10,156)		(10,210)		(9,866)		(10,210)
Long-term debt, less current portion	$	860,441	$	811,137	$	827,791	$	811,137

(1) The carrying value of the term loan facility, maturing 2024, is net of unamortized debt issuance costs of ~~$4.6~~$4.1 million at ~~March 31,~~September 30, 2019, and $4.8 million at December 31, 2018.

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Amended Credit Facility

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”), and (c) provided new tranches of term loans (“Tranche B-2 Loans” and “Tranche B-3 Loans”) denominated in U.S. ~~dollars and~~dollars. The Amended Credit Facility will be used for ongoing working capital requirements and general corporate purposes. The Tranche B-2 Loans are borrowed by the Company and the Tranche B-3 Loans are borrowed on 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 14, 2023, a $355 million secured term loan facility with a maturity of February 14, 2024, a $235 million secured term loan facility with a maturity of February 14, 2024 and a $230 million secured term loan facility with a maturity of February 14, 2024. The term loans are payable in equal quarterly installments in an amount equal to 0.25% of the original principal amount of the term loans, with the remaining balance due on the maturity date thereof. In addition, the Company is required, on an annual basis, to make a prepayment in an amount equal to a portion of the Company’s excess cash flow, as calculated pursuant to the Amended Credit Facility, which prepayment will be applied first to the term loans until they are paid in full, and then to the revolving loans.

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.

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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.

The base rate for term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans is 1.25%.

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

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

The base rate for term loans will be the highest of (i) the federal funds rate plus 0.50%, (ii) the syndication agent’s prime rate, (iii) the daily LIBOR rate plus 1.00% or (iv) 0.00%. The applicable margin for base rate loans is 1.25%.

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

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

At ~~March 31,~~September 30, 2019, the Company had borrowed ~~$351.5~~$349.7 million under the Tranche B-1 Loans at an interest rate of ~~4.85%~~4.35%, ~~$232.7~~$231.5 million under the Tranche B-2 Loans at an interest rate of ~~4.85%~~4.35%, and ~~$227.7~~$226.6 million under the Tranche B-3 Loans at an interest rate of ~~4.85%~~4.35%. At ~~March 31,~~September 30, 2019, there were no0 additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans, ~~and~~or Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At ~~March 31,~~September 30, 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%~~5.12%, ~~3.33%~~3.03%, and 2.48%, respectively.

Interest Rate – Revolving Credit Line: The interest rates applicable to loans under the 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.

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

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

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

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

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

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

At ~~March 31,~~September 30, 2019, there were ~~$51.3~~$22.5 million borrowings under the 2018 Revolving Credit Facility at an interest rate of ~~4.49%~~4.27%. After reductions for outstanding letters of credit secured by these facilities, we had ~~$444.0~~$472.9 million of additional borrowings available under the revolving credit facilities at ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2019, we were in compliance with the covenants of the Amended Credit Facility.

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Credit Facility

On February 14, 2017, the Company entered into ~~The~~the Credit Facility with a group of lenders to refinance its then outstanding credit facility debt and to provide liquidity for ongoing working capital requirements and general corporate purposes. The Credit Facility consisted of a $400 million secured revolving line of credit with a term of five years, a $357.5 million secured term loan facility with a term of seven years and a €250 million secured Euro term loan facility with a term of seven years. For further discussion of the Company’s Credit Facility, refer to Note 9 in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

In conjunction with the refinancing of the Credit Facility, we recorded a charge of $3.2 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, 2018.

International Receivable Sales Programs

We have several international programs to sell without recourse trade accounts receivable to financial institutions. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. The Company continues to service the receivables sold in exchange for a fee. The servicing fee for the three and nine months ended ~~March 31,~~September 30, 2019, was immaterial. The program, whose maximum capacity is €100 million, is scheduled to expire in December 31, 2023. Generally, at the transfer date, the Company ~~received~~receives cash equal to approximately 65% of the value of the sold receivable. Cash proceeds at the transfer date from these arrangements are reflected in operating activities in our consolidated statement of cash flows. The proceeds from the deferred purchase price are reflected in investing activities.

The outstanding principal amount of receivables sold under this program was ~~$63.9~~$61.4 million at ~~March 31,~~September 30, 2019 and $71.3 million at December 31, 2018. The carrying amount of deferred purchase price was ~~$23.1~~$22.5 million at ~~March 31,~~September 30, 2019 and $23.0 million at December 31, 2018, and is recorded in Other receivables.

March 31,

December 31,

2019

2018

(Dollars in thousands)
Trade accounts receivable sold to financial institutions

$
54,873

$
89,894
Cash proceeds from financial institutions

36,497

57,316
Trade accounts receivable collected to be remitted(1)

17,012

11,552

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~~(1)~~ ~~Included~~ Trade accounts receivable collected to be remitted were $14.3 million at September 30, 2019 and $11.6 million at December 31, 2018, and is recorded in Accrued ~~expense~~expenses and other current ~~liabilities~~liabilities.

Activity from these programs for the nine months ended September 30, 2019 is detailed below:


	September 30,
	2019
	(Dollars in thousands)
Trade accounts receivable sold to financial institutions	$	58,861
Cash proceeds from financial institutions		39,364

Other Financing Arrangements

We maintain other lines of credit to provide global flexibility for our short-term liquidity requirements. These facilities are uncommitted lines for our international operations and totaled ~~$40.9~~$33.9 million and $41.4 million at ~~March 31,~~September 30, 2019, and December 31, 2018, respectively. The unused portions of these lines provided additional liquidity of ~~$28.1~~$20.1 million at ~~March 31,~~September 30, 2019, and $30.3 million at December 31, 2018.

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9. Financial Instruments

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



	March 31, 2019										September 30, 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	$	57,637	$	57,637	$	57,637	$	—	$	—	$	51,741	$	51,741	$	51,741	$	—	$	—
Loans payable												(8,270)		(8,270)		—		(8,270)		—
Term loan facility - Amended Credit Facility(1)		(807,208)		(794,728)		—		(794,728)		—		(803,579)		(801,424)		—		(801,424)		—
Revolving credit facility		(51,308)		(50,709)		—		(50,709)		—		(22,471)		(22,757)		—		(22,757)		—
Other long-term notes payable		(8,109)		(5,385)		—		(5,385)		—		(7,943)		(5,441)		—		(5,441)		—
Cross currency swaps		23,000		23,000		—		23,000		—		28,662		28,662		—		28,662		—
Interest rate swaps		(9,227)		(9,227)		—		(9,227)		—		(17,577)		(17,577)		—		(17,577)		—
Foreign currency forward contracts, net		1,021		1,021		—		1,021		—		(265)		(265)		—		(265)		—



	December 31, 2018
	Carrying		Fair Value
	Amount		Total		Level 1		Level 2		Level 3
	(Dollars in thousands)
Cash and cash equivalents	$	104,301	$	104,301	$	104,301	$	—	$	—
Loans payable		(50)		(50)		—		(50)		—
Term loan facility - Amended Credit Facility⁽¹⁾		(809,022)		(796,796)		—		(796,796)		—
Other long-term notes payable		(8,362)		(5,258)		—		(5,258)		—
Cross currency swaps		17,104		17,104		—		17,104		—
Interest rate swaps		(5,244)		(5,244)		—		(5,244)		—
Foreign currency forward contracts, net		(270)		(270)		—		(270)		—

(1) The carrying ~~values~~value of the term loan facility ~~are~~is net of unamortized debt issuance costs of ~~$4.6~~$4.1 million and $4.8 million for the period ended ~~March 31,~~September 30, 2019, and December 31, 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.

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Derivative Instruments

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

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Derivatives Designated as Hedging Instruments

Cash Flow Hedges. For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative is recorded inas a component of 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. These interest rate swap 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 14, 2024. The notional amount is ~~$316.~~8$315.2 million at ~~March 31,~~September 30, 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 ~~March 31,~~September 30, 2019, the Company expects it will reclassify net losses of approximately ~~$1.~~4 $3.6million, 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 USU.S. dollar denominated, variable rate debt obligation into a Euro fixed rate obligation using a receive-float, ~~pay fixed~~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~~27.7~~$226.6 million at ~~March 31,~~September 30, 2019, with a maturity date of February 14, 2024. As of ~~March 31,~~September 30, 2019, the Company expects it will reclassify net gains of approximately ~~$5.~~6$4.3 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 (loss) gain ~~(loss)~~ reclassified into earnings for the three months ended ~~March 31,~~September 30, 2019 and 2018, follow:


					Amount of Gain (Loss)									Amount of (Loss) Gain
	Amount of (Loss) Gain				Reclassified from				Location of Gain (Loss)	Amount of (Loss) Gain				Reclassified from				Location of (Loss) Gain
	Recognized in AOCL				AOCL into Income				Reclassified from	Recognized in AOCL				AOCL into Income				Reclassified from
	2019			2018	2019		2018		AOCL into Income	2019			2018	2019		2018		AOCL into Income
	(Dollars in thousands)									(Dollars in thousands)
Interest rate swaps	$	(4,107)	$	1,709	$	178	$	(136)	Interest expense	$	(2,328)	$	2,135	$	(363)	$	(186)	Interest expense
Cross currency swaps		5,080		—		1,632		—	Interest expense		10,750		3,237		1,419		1,327	Interest expense
					$	1,810	$	(136)	Total Interest expense					$	1,056	$	1,141	Total Interest expense
Cross currency swaps						4,944		—	Foreign currency losses, net						9,497		1,549	Foreign currency losses, net
					$	4,944	$	—	Total Foreign currency losses, net					$	9,497	$	1,549	Total Foreign currency losses, net

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


					Amount of (Loss) Gain
	Amount of (Loss) Gain				Reclassified from				Location of (Loss) Gain
	Recognized in AOCL				AOCL into Income				Reclassified from
	2019			2018	2019		2018		AOCL into Income
	(Dollars in thousands)
Interest rate swaps	$	(13,248)	$	1,761	$	(149)	$	(197)	Interest expense
Cross currency swaps		11,122		12,666		4,579		2,215	Interest expense
					$	4,430	$	2,018	Total Interest expense
Cross currency swap						11,275		11,864	Foreign currency losses, net
					$	11,275	$	11,864	Total Foreign currency losses, net

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The total amounts of expense and the respective line items in which the effect of cash flow hedges is presented in the condensed consolidated statement of operations for the three months ended September 30, 2019 and 2018, are as follows:


	September 30,		September 30,
	2019		2018

	(Dollars in thousands)
Interest expense	$	8,138	$	8,553
Foreign currency losses, net		3,497		2,554

The total amounts of expense and the respective line items in which the effect of cash flow hedges ~~follow:~~is presented in the condensed consolidated statement of operations for the nine months ended September 30, 2019 and 2018, are as follows:


	March 31,		March 31,		September 30,		September 30,
	2019		2018		2019		2018

	(Dollars in thousands)				(Dollars in thousands)
Interest expense	$	8,545	$	7,962	$	25,198	$	24,715
Foreign currency losses, net		738		1,840		5,615		7,054

~~Table of Contents~~

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

In the second quarter of 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 under which we pay variable rate interest in Euros and receive variable rate interest in USU.S. dollars. The notional amount is ~~€97.0~~€96.5 million at ~~March 31,~~September 30, 2019, with a maturity date of February 14, 2024. These swaps are hedging risk associated with the net investment in Euro denominated operations due to fluctuating exchange rates and are designated as net investment hedges. The changes in the fair value of these designated cross-currency swaps will be recognized in AOCL.

The amount of gain ~~(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 ~~March 31,~~September 30, 2019 and 2018, follow:

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

2019

2018

2019

2018

2019

2018

(Loss) in Earnings

(Dollars in thousands)

Cross currency swaps

$
3,737

$
—

$
—

$
—

$
1,001

$
—

Interest expense
Net investment hedge

—

(860)

—

—

—

—

Foreign currency losses, net


					Amount of Gain				Amount of Gain Recognized in
	Amount of Gain				Reclassified from				Income on Derivative (Amount
	Recognized in AOCL				AOCL into Income				Excluded from Effectiveness Testing)				Location of Gain
	2019		2018		2019			2018	2019			2018	in Earnings
	(Dollars in thousands)
Cross currency swaps	$	5,977	$	1,272	$	—	$	—	$	897	$	858	Interest expense

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The amount of gain 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 nine months ended September 30, 2019 and 2018, follow:


					Amount of Gain				Amount of Gain Recognized in
	Amount of Gain				Reclassified from				Income on Derivative (Amount
	Recognized in AOCL				AOCL into Income				Excluded from Effectiveness Testing)				Location of Gain
	2019			2018	2019			2018	2019			2018	in Earnings
	(Dollars in thousands)
Cross currency swaps	$	8,454	$	4,046	$	—	$	—	$	2,847	$	1,353	Interest expense

Derivatives Not Designated as Hedging Instruments

Foreign ~~currency forward contracts.~~Currency Forward Contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not formally designated as hedges. Gains and losses on these foreign currency forward contracts are netted with gains and losses from currency fluctuations on transactions arising from international trade and reported as Foreign currency losses, net in the condensed consolidated statements of operations. We recognized net ~~gains~~losses of ~~$1.5~~$1.6 million in the three and nine months ended ~~March 31,~~September 30, 2019 and net gains of ~~$0.4~~$1.3 million and $2.7 million in the three and nine months ended ~~March 31,~~September 30, 2018, respectively, arising from the change in fair value of our financial instruments, which partially offset the related net gains and losses on international trade transactions. The notional amount of foreign currency forward contracts was $~~410.1~~606.1 million at ~~March 31,~~September 30, 2019 and $387.2 million at December 31, 2018.

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

Amount of Gain

Recognized in Earnings

Three Months Ended

March 31,

2019

2018

Location of Gain in Earnings

(Dollars in thousands)

Foreign currency forward contracts

$
1,524

$
391

Foreign currency losses, net



	Amount of (Loss) Gain
	Recognized in Earnings
	Three Months Ended
	September 30,
	2019		2018		Location of (Loss) Gain in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	(1,642)	$	1,339	Foreign currency losses, net



	Amount of (Loss) Gain
	Recognized in Earnings

	Nine Months Ended
	September 30,

	2019		2018		Location of (Loss) Gain in Earnings

	(Dollars in thousands)
Foreign currency forward contracts	$	(1,615)	$	2,728	Foreign currency losses, net

1720

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Location and Fair Value Amount of Derivative Instruments

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



	March 31,		December 31,			September 30,		December 31,
	2019		2018		Balance Sheet Location	2019		2018		Balance Sheet Location
	(Dollars in thousands)					(Dollars in thousands)
Asset derivatives:
Cross currency swaps	$	9,164	$	9,606	Other current assets	$	7,298	$	9,606	Other current assets
Cross currency swaps		13,836		7,498	Other non-current assets		21,364		7,498	Other non-current assets
Foreign currency forward contracts		2,291		626	Other current assets		2,025		626	Other current assets
Liability derivatives:
Interest rate swaps		(1,396)		(755)	Accrued expenses and other current liabilities		(3,556)		(755)	Accrued expenses and other current liabilities
Interest rate swaps		(7,831)		(4,489)	Other non-current liabilities		(14,021)		(4,489)	Other non-current liabilities
Foreign currency forward contracts	$	(1,270)	$	(896)	Accrued expenses and other current liabilities	$	(2,290)	$	(896)	Accrued expenses and other current liabilities

10. Income Taxes

Income tax expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 was ~~$4.3~~$13.2 million, or ~~23.7%~~25.6% of pre-tax income. Income tax expense for the ~~three~~nine months ended ~~March 31,~~September 30, 2018 was ~~$7.5~~$29.2 million, or ~~24.2%~~29.6% of pre-tax income. The tax expense induring the ~~first quarter~~nine months ended September 30, 2019, as a percentage of ~~2019 and~~pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for the nine months ended September 30, 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.~~differences and discrete items recorded in the third quarter. The discrete items recorded in the third quarter of 2018 primarily include a reduction to the tax expense related to provision to return adjustments and an increase from the impact of resolving a foreign tax audit.

11. Contingent Liabilities

We have recorded environmental liabilities of ~~$6.6~~$6.0 million at ~~March 31,~~September 30, 2019 and $8.5 million at December 31, 2018, for costs associated with the environmental remediation of certain of our current or former properties ~~that have been contaminated. The liability at March 31, 2019,~~within and ~~December 31, 2018, was primarily comprised of liabilities related to a non-operating facility in Brazil, and for retained environmental obligations related to a site in~~outside the United ~~States that was part of the sale of our North American and Asian metal powders product lines in 2013.~~States. These costs include, but are not limited to, legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring, and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring, the ultimate cost of required remediation, and other circumstances.

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 the liability for the plaintiff’s claims, and is vigorously defending this proceeding. Since December 2018, additional complaints have been filed in the same court by 1525 other New York water suppliers and in New York State Supreme Court by one water supplier against the Company and others making substantially similar allegations regarding the contamination of their respective water supplies with 1,4 dioxane. The Company is likewise vigorously defending these additional actions. The Company currently does not expect the outcome of these proceedings to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of these proceedings due to the unpredictable nature of litigation.

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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

~~Table of Contents~~

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.

12. Retirement Benefits

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 ~~March 31,~~September 30, 2019 and 2018, respectively, follow:



	U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans				U.S. Pension Plans				Non-U.S. Pension Plans				Other Benefit Plans
	Three Months Ended March 31,												Three Months Ended September 30,
	2019		2018		2019		2018		2019		2018		2019		2018		2019		2018		2019		2018
	(Dollars in thousands)												(Dollars in thousands)
Service cost	$	3	$	3	$	433	$	461	$	1	$	1	$	3	$	3	$	445	$	436	$	1	$	1
Interest cost		2,963		2,788		702		689		175		183		2,963		2,788		682		653		175		183
Expected return on plan assets		(3,153)		(3,995)		(210)		(233)		—		—		(3,153)		(3,995)		(204)		(222)		—		—
Amortization of prior service cost		—		—		20		11		—		—		—		—		9		10		—		—
Net periodic benefit (credit) cost	$	(187)	$	(1,204)	$	945	$	928	$	176	$	184	$	(187)	$	(1,204)	$	932	$	877	$	176	$	184

Net periodic benefit (credit) cost for the nine months ended September 30, 2019 and 2018, respectively, follow:



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

	Nine Months Ended September 30,

	2019		2018		2019		2018		2019		2018

	(Dollars in thousands)
Service cost	$	8	$	9	$	1,337	$	1,344	$	2	$	2
Interest cost		8,889		8,363		2,091		2,009		526		549
Expected return on plan assets		(9,458)		(11,984)		(626)		(681)		—		—
Amortization of prior service cost		—		—		39		32		—		—
Net periodic benefit (credit) cost	$	(561)	$	(3,612)	$	2,841	$	2,704	$	528	$	551

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.

13. Stock-Based Compensation

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

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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 ~~three~~nine months ended ~~March 31,~~September 30, 2019:



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

The weighted average grant date fair value of our performance share units granted in the ~~three~~nine months ended ~~March 31,~~September 30, 2019, was $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.

~~Table of Contents~~

The weighted-average grant date fair value of our restricted share units granted in the ~~three~~nine months ended ~~March 31,~~September 30, 2019, was ~~$17.61.~~$17.18. 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 ~~$2.8~~$0.3 million and $5.9 million for the three and nine months ended ~~March 31,~~September 30, 2019, respectively, and ~~$2.4~~$1.4 million and $5.2 million for the three and nine months ended ~~March 31, 2018.~~September 30, 2018 respectively. At ~~March 31,~~September 30, 2019, unearned compensation cost related to the unvested portion of all stock-based compensation awards was approximately ~~$13.8~~$8.8 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2022.

14. Restructuring and Optimization Programs

Total restructuring and impairment charges were ~~$2.1~~$6.2 million and ~~$4.1~~$18.6 million for the three and nine months ended ~~March 31,~~September 30, 2019 and ~~March 31,~~$2.6 million and $10.4 million for the three and nine months ended September 30, 2018, respectively.

In the second quarter of 2019, we developed and initiated a program across the organization with the objective of realigning the business and lowering our cost structure. The ~~charges primarily relate~~program involves our global operations and certain functions and initiatives to ~~costs~~increase operational efficiencies, some of which is associated with integration of our recent ~~acquisitions~~acquisitions. As a result of the actions, the Company expects to incur total charges of approximately $7.0 million, substantially all of which will be for severance costs. Charges associated with these programs were $2.0 million and ~~optimization programs,~~$5.5 million for the three and nine months ended September 30, 2019.

The charges associated with the program are further summarized below.



	Employee		Other
	Severance		Costs		Total
	(Dollars in thousands)
Balances at December 31, 2018	$	1,151	$	1,288	$	2,439
Restructuring charges		6,782		2,811		9,593
Cash payments		(6,998)		(1,772)		(8,770)
Non-cash items		(40)		(1,453)		(1,493)
Balances at September 30, 2019	$	895	$	874	$	1,769

Employee

Other

Severance

Costs

Total

(Dollars in thousands)
Balances at December 31, 2018

$
1,151

$
1,288

$
2,439
Restructuring charges

1,155

972

2,127
Cash payments

(1,460)

(488)

(1,948)
Non-cash items

(7)

(721)

(728)
Balances at March 31, 2019

$
839

$
1,051

$
1,890

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.

15. Leases

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.

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The ~~right of use~~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~~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.

~~Table of Contents~~

The components of lease cost are shown below:


	~~Three Months Ended~~
	~~March 31,~~
	~~2019~~		~~Income Statement Location~~
	~~(Dollars in thousands)~~
~~Lease Cost~~
~~Operating lease cost(1)~~	$	~~1,751~~	~~Selling, general and administrative expenses~~
~~Operating lease cost(2)~~		~~2,406~~	~~Cost of sales~~
~~Finance lease cost~~
~~Amortization of right-of-use assets~~		~~237~~	~~Cost of sales~~
~~Interest of lease liabilities~~		13	~~Interest expense~~
~~Net lease cost~~	$	~~4,407~~


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019		Income Statement Location
	(Dollars in thousands)
Lease Cost
Operating lease cost⁽¹⁾	$	1,628	$	5,069	Selling, general and administrative expenses
Operating lease cost⁽²⁾		2,497		7,718	Cost of sales
Finance lease cost
Amortization of right-of-use assets		233		716	Cost of sales
Interest of lease liabilities		12		38	Interest expense
Net lease cost	$	4,370	$	13,541

(1) Included in operating lease cost is ~~$0.3~~$0.2 million and $0.8 million of short-term lease costs for the three and nine months ended September 30, 2019, respectively, and $0.1 million and $0.3 million of variable lease ~~costs.~~costs for the three and nine months ended September 30, 2019, respectively.

(2) Included in operating lease cost is ~~$0.7~~$0.8 million and $2.3 million of short-term lease costs for the three and ~~$0.3~~nine months ended September 30, 2019, respectively, and $0.2 million and $0.9 million of variable lease ~~costs.~~costs for the three and nine months ended September 30, 2019, respectively.

Supplemental balance sheet information related to leases are shown below:


	September 30,
	~~March 31,~~2019		Balance Sheet Location
	~~2019~~(Dollars in thousands)		~~Balance Sheet Location~~
Assets	~~(Dollars in thousands)~~
~~Assets~~Operating leased assets	$	23,206	Operating leased assets
~~Operating leased assets~~	$	~~27,110~~	~~Operating leased assets~~
Finance leased assets⁽³⁾		~~2,290~~	1,943	Property, plant and equipment, net
Total leased assets	$	~~29,400~~	25,149
Liabilities
Current
Operating	$	~~9,509~~	8,264	Accrued expenses and other current liabilities
Finance		~~795~~	692	Loans payable and current portion of long-term debt
Noncurrent
Operating		~~17,562~~	14,905	Operating lease non-current liabilities
Finance		~~3,177~~	2,972	Long-term debt, less current portion
Total lease liabilities	$	~~31,043~~	26,833

(3) Finance leases are net of accumulated depreciation of ~~$5.8~~$6.1 million for ~~March 31,~~September 30, 2019.

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Supplemental cash flow information related to leases are shown below:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2019		2019
	(Dollars in thousands)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	$	12	$	38
Operating cash flows from operating leases		2,779		8,541
Financing cash flows from finance leases		202		615
Leased assets obtained in exchange for new finance lease liabilities		127		345
Leased assets obtained in exchange for new operating lease liabilities		805		31,128


	~~Three Months Ended~~	September 30,
	~~March 31,~~	2019
	~~2019~~
	~~(Dollars in thousands)~~
~~Cash paid for amounts included in the measurement of lease liabilities~~
~~Operating cash flows from finance leases~~	$	13
~~Operating cash flows from operating leases~~		~~2,903~~
~~Financing cash flows from finance leases~~		~~197~~
~~Leased assets obtained in exchange for new finance lease liabilities~~		~~129~~
~~Lease assets obtained in exchange for new operating lease liabilities~~		~~29,641~~


	~~Three Months Ended~~
	~~March 31,~~
	~~2019~~
Weighted-average remaining lease term (years)
Operating leases		~~4.0~~	3.8
Finance leases		~~5.0~~	4.8
Weighted-average discount rate
Operating leases		~~3.7~~	%3.9%
Finance leases		~~4.2~~	%
			4.3%

Maturities of lease liabilities are shown below as of ~~March 31,~~September 30, 2019:



	Finance		Operating		Finance		Operating
	Leases		Leases		Leases		Leases
	(Dollars in thousands)				(Dollars in thousands)
Remaining in 2019	$	809	$	8,411	$	275	$	2,704
2020		786		7,844		860		8,098
2021		546		5,781		593		6,123
2022		1,335		3,512		1,363		3,684
2023		323		1,888		368		2,163
2024		285		850		298		945
Thereafter		696		1,563		697		1,586
Net minimum lease payments	$	4,780	$	29,849	$	4,454	$	25,303
Less: interest		808		2,778		790		2,134
Present value of lease liabilities	$	3,972	$	27,071	$	3,664	$	23,169

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


	Capital		Operating
	Leases		Leases
	(Dollars in thousands)
2019	$	1,048	$	11,419
2020		755		7,314
2021		477		5,302
2022		1,287		3,301
2023		279		1,971
Thereafter		992		2,401
Net minimum lease payments	$	4,838	$	31,708
Less: interest		875
Present value of lease liabilities	$	3,963
Less: current portion		679
Long-term obligations	$	3,284

16. Earnings Per Share

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



	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2019		2018		2019		2018		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	$	13,604	$	23,391	$	12,820	$	16,058	$	37,295	$	69,117
Weighted-average common shares outstanding		82,480		84,228		81,942		83,893		82,118		84,154
Basic earnings per share attributable to Ferro Corporation common shareholders	$	0.16	$	0.28	$	0.16	$	0.19	$	0.45	$	0.82
Diluted earnings per share computation:
Net income attributable to Ferro Corporation common shareholders	$	13,604	$	23,391	$	12,820	$	16,058	$	37,295	$	69,117
Weighted-average common shares outstanding		82,480		84,228		81,942		83,893		82,118		84,154
Assumed exercise of stock options		596		839		319		788		470		811
Assumed satisfaction of restricted stock unit conditions		145		279		143		289		232		281
Assumed satisfaction of performance share unit conditions		80		164		91		192		136		182
Weighted-average diluted shares outstanding		83,301		85,510		82,495		85,162		82,956		85,428
Diluted earnings per share attributable to Ferro Corporation common shareholders	$	0.16	$	0.27	$	0.16	$	0.19	$	0.45	$	0.81

The number of anti-dilutive ~~or unearned~~ shares ~~was~~were 2.5 million and 2.2 million for the three and nine months ended ~~March 31,~~September 30, 2019, respectively, and 1.7 million for the three and nine months ended ~~March 31,~~September 30, 2018. These shares ~~were~~are excluded from the calculation of diluted earnings per share due to their anti-dilutive impact.

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17. Share Repurchase Program

The Company’s Board of Directors has approved 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 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.

~~Table of Contents~~

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019, the Company repurchased 1,440,678 shares of common stock at an average price of ~~$17.~~35$17.35 per share for a total cost of $25.0 million. For the nine months ended September 30, 2018, the Company repurchased 807,816 shares of common stock at an average price of $21.04 per share for a total cost of $17.0 million. As of ~~March 31,~~September 30, 2019, ~~$46.~~2$46.2 million remains authorized under the program for the ~~purchase~~repurchase of common stock.

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18. Accumulated Other Comprehensive Loss

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

Three Months Ended March 31,

Postretirement

Net Gain

Benefit Liability

Translation

on Cash

Adjustments

Adjustments

Flow Hedges

Total

(Dollars in thousands)
Balances at December 31, 2017

$
1,165

$
(77,578)

$
945

$
(75,468)
Other comprehensive income before reclassifications, before tax

—

5,461

1,845

7,306
Reclassification to earnings:

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

(198)

395

206
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, 2018

$
1,126

$
(103,190)

$
(3,297)

$
(105,361)
Other comprehensive income before reclassifications, before tax

—

4,036

973

5,009
Reclassification to earnings:

Cash flow hedge loss, before tax

—

—

(6,754)

(6,754)
Current period other comprehensive income (loss), before tax

—

4,036

(5,781)

(1,745)
Tax effect

—

634

(1,467)

(833)
Current period other comprehensive income (loss), net of tax

—

3,402

(4,314)

(912)
Balances at March 31, 2019

$
1,126

$
(99,788)

$
(7,611)

$
(106,273)



	Three Months Ended September 30,
		Postretirement		Foreign			Net Gain
		Benefit Liability		Currency			on Cash
		Adjustments		Items			Flow Hedges	Total
		(Dollars in thousands)
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 income (loss), before tax			—		(5,086)		3,096		(1,990)
Tax effect			—		94		(514)		(420)
Current period other comprehensive income (loss), net of tax			—		(5,180)		3,610		(1,570)
Balances at September 30, 2018		$	1,182	$	(107,107)	$	4,533	$	(101,392)

Balances at June 30, 2019		$	1,126	$	(95,799)	$	(14,960)	$	(109,633)
Other comprehensive income (loss) before reclassifications, before tax			—		(9,547)		8,422		(1,125)
Reclassification to earnings:
Cash flow hedge loss, before tax			—		—		(10,553)		(10,553)
Current period other comprehensive loss, before tax			—		(9,547)		(2,131)		(11,678)
Tax effect			—		1,175		(487)		688
Current period other comprehensive loss, net of tax			—		(10,722)		(1,644)		(12,366)
Balances at September 30, 2019		$	1,126	$	(106,521)	$	(16,604)	$	(121,999)



	Nine Months Ended September 30,
		Postretirement		Foreign			Net Gain
		Benefit Liability		Currency			on Cash
		Adjustments		Items			Flow Hedges	Total

		(Dollars in thousands)
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)
Reclassification to earnings:
Postretirement benefit liabilities income, before tax			22		—		—		22
Cash flow hedge loss, before tax			—		—		(15,235)		(15,235)
Current period other comprehensive income (loss), before tax			22		(29,107)		3,238		(25,847)
Tax effect			5		422		(350)		77
Current period other comprehensive income (loss), net of tax			17		(29,529)		3,588		(25,924)
Balances at September 30, 2018		$	1,182	$	(107,107)	$	4,533	$	(101,392)

Balances at December 31, 2018		$	1,126	$	(103,190)	$	(3,297)	$	(105,361)
Other comprehensive loss before reclassifications, before tax			—		(2,033)		(2,126)		(4,159)
Reclassification to earnings:
Cash flow hedge loss, before tax			—		—		(15,705)		(15,705)
Current period other comprehensive loss, before tax			—		(2,033)		(17,831)		(19,864)
Tax effect			—		1,298		(4,524)		(3,226)
Current period other comprehensive loss, net of tax			—		(3,331)		(13,307)		(16,638)
Balances at September 30, 2019		$	1,126	$	(106,521)	$	(16,604)	$	(121,999)

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19. Reporting for Segments

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



	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Performance Coatings	$	170,347	$	184,648	$	162,391	$	175,939	$	510,970	$	554,036
Performance Colors and Glass		120,845		120,505		112,742		123,277		351,991		369,809
Color Solutions		96,356		100,379		90,595		95,947		284,217		293,089
Total net sales	$	387,548	$	405,532	$	365,728	$	395,163	$	1,147,178	$	1,216,934

~~Table of Contents~~

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



	Three Months Ended				Three Months Ended				Nine Months Ended
	March 31,				September 30,				September 30,
	2019		2018		2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Performance Coatings	$	33,645	$	43,765	$	35,436	$	36,257	$	108,903	$	130,319
Performance Colors and Glass		39,467		43,328		36,829		40,095		115,672		128,785
Color Solutions		28,396		32,149		29,122		30,174		87,220		93,864
Other cost of sales		348		(556)		(1,096)		(1,039)		(1,390)		(2,150)
Total gross profit		101,856		118,686		100,291		105,487		310,405		350,818
Selling, general and administrative expenses		72,080		73,092		67,723		64,344		211,448		207,560
Restructuring and impairment charges		2,127		4,106		6,226		2,561		18,613		10,435
Other expense, net		9,471		10,376		9,403		11,071		28,979		33,975
Income before income taxes	$	18,178	$	31,112	$	16,939	$	27,511	$	51,365	$	98,848

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

Overview

Net sales for the three months ended ~~March 31,~~September 30, 2019, decreased by ~~$18.0~~$29.4 million, or ~~4.4%~~7.4%, compared with the prior-year same period. ~~The decrease in net~~Net sales ~~was driven~~decreased by ~~lower sales~~$13.5 million, $10.5 million, and $5.4 million 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, ~~of $0.3 million.~~and Color Solutions, respectively. During the three months ended ~~March 31,~~September 30, 2019, gross profit decreased ~~$16.8~~$5.2 million, or ~~14.2%~~4.9%, compared with the prior-year same period; as a percentage of net sales, it ~~decreased~~increased approximately ~~300~~70 basis points to ~~26.3%~~27.4%. Our total gross profit for the ~~first~~third quarter of 2019 was ~~$101.9~~$100.3 million, compared with ~~$118.7~~$105.5 million for the three months ended ~~March 31,~~September 30, 2018. The decrease in gross profit was attributable to ~~decreases~~lower gross profit in ~~Performance Coatings,~~ Performance Colors and Glass, ~~and~~ Color Solutions, and Performance Coatings, of ~~$10.1~~$3.3 million, ~~$3.9~~$1.1 million, and ~~$3.8~~$0.8 million, respectively.

For the three months ended ~~March 31,~~September 30, 2019, selling, general and administrative (“SG&A”) expenses ~~decreased $1.0~~increased $3.4 million, or ~~1.4%~~5.3%, compared with the prior-year same period. As a percentage of net sales, it increased approximately 60220 basis points to ~~18.6%~~18.5%.

For the three months ended ~~March 31,~~September 30, 2019, net income was ~~$13.9~~$13.2 million, compared with net income of ~~$23.6~~$16.1 million for the prior-year same period, and net income attributable to common shareholders was ~~$13.6~~$12.8 million, compared with net income attributable to common shareholders of ~~$23.4~~$16.1 million for the prior-year same period.

Outlook

~~Throughout~~In 2019, we ~~will~~ continue to execute the dynamic innovation and optimization phase of the Company’s value creation strategy, which includes organic and inorganic growth and optimization initiatives. We expect organic growth from new products and positioning our portfolio to continue transitioning to the higher end of our target markets. We also intend to advance the business through acquisitions, and investments in technology, facilities and equipment. We will continue to 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, which may include acquisitions, share repurchases and debt retirement, and remain mindful of our overall leverage.

We believe that ~~2019 gross margins~~global macro-economic uncertainties will ~~compare favorably to~~continue through the ~~prior year due in part to stabilizing raw materials costs after a period of price inflation.~~

~~In the first half~~remainder of 2019 ~~we expect that uncertainty throughout the global macro-economic landscape~~and into 2020, which could result in continued slower growth across several industries and geographic regions, particularly ~~Europe and Asia.~~outside North America. We expect ~~demand will continue~~this macro-landscape to impact our customers’ visibility and cause them to be more conservative in their order patterns. Some of the specialized markets for our ~~technology-driven~~ functional coatings and color solutions ~~in the niche markets on~~products are subject to ramp-up and mature cycles, which ~~we focus,~~also affects demand. The diversity of our customer base, industries served and ~~that~~global operations reduces any one market’s impact. However, we ~~will continue to develop innovative new products relevant to the megatrends our customers are addressing with their products. We~~ are actively ~~implementing~~advancing on optimization initiatives throughout our global footprint to increase productivity and ~~efficiency.~~efficiency and contribute to long-term, sustainable value creation. In addition, we expect to see continued favorable margin benefit from raw material costs lower than in 2018.

Foreign currency rates may continue to be volatile through 2019, and changes in interest rates could adversely impact reported results. We expect cash flow from operating activities to continue to be ~~available~~positive for ~~debt pay down and other strategic investments.~~2019, 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 ~~this~~the Annual Report on Form 10-K for the year ended December 31, 2018.

‎

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Results of Operations - Consolidated

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

For the three months ended ~~March 31,~~September 30, 2019, net income was ~~$13.9~~$13.2 million, compared with net income of ~~$23.6~~$16.1 million for the three months ended ~~March 31,~~September 30, 2018. For the three months ended ~~March 31,~~September 30, 2019, net income attributable to common shareholders was ~~$13.6~~$12.8 million, or earnings per share of $0.16, compared with net income attributable to common shareholders of ~~$23.4~~$16.1 million, or earnings per share of ~~$0.28,~~$0.19, for the three months ended ~~March 31,~~September 30, 2018.

Net Sales



	Three Months Ended										Three Months Ended
	March 31,										September 30,
	2019			2018			$ Change		% Change		2019			2018			$ Change		% Change
	(Dollars in thousands)										(Dollars in thousands)
Net sales	$	387,548		$	405,532		$	(17,984)	(4.4)	%	$	365,728		$	395,163		$	(29,435)	(7.4)	%
Cost of sales		285,692			286,846			(1,154)	(0.4)	%		265,437			289,676			(24,239)	(8.4)	%
Gross profit	$	101,856		$	118,686		$	(16,830)	(14.2)	%	$	100,291		$	105,487		$	(5,196)	(4.9)	%
Gross profit as a % of net sales		26.3	%		29.3	%						27.4	%		26.7	%

Net sales decreased by ~~$18.0~~$29.4 million, or ~~4.4%~~7.4%, for the three months ended ~~March 31,~~September 30, 2019, compared with the prior-year same period, driven by lower sales in Performance Coatings, Performance Colors and Glass, and Color Solutions of ~~$14.3~~$13.5 million, $10.5 million, and ~~$4.0~~$5.4 million, ~~respectively, partially mitigated by an increase in sales in Performance Colors and Glass of $0.3 million.~~respectively. The decrease in net sales was driven by lower volume and mix of $29.7 million, unfavorable foreign currency impacts of ~~$20.7~~$7.1 million, and ~~lower volume and mix~~unfavorable product pricing of ~~$19.0~~$3.4 million, partially mitigated by sales from recent acquisitions of ~~$15.7 million and higher product pricing of $6.0~~$10.8 million.

Gross Profit

Gross profit decreased ~~$16.8~~$5.2 million, or ~~14.2%~~4.9%, for the three months ended ~~March 31,~~September 30, 2019, compared with the prior-year same period, and as a percentage of net sales, it ~~decreased 300~~increased 70 basis points to ~~26.3%~~27.4%. The decrease in gross profit was attributable to ~~decreases~~lower gross profit in ~~Performance Coatings,~~ Performance Colors and Glass, ~~and~~ Color Solutions, and Performance Coatings of ~~$10.1~~$3.3 million, ~~$3.9~~$1.1 million, and ~~$3.8~~$0.8 million, respectively. The decrease in gross profit was primarily driven by lower sales ~~volumes~~volume and mix of ~~$9.3~~$10.7 million, unfavorable product pricing of $3.4 million, higher manufacturing costs of ~~$7.8~~$1.4 million, and unfavorable foreign currency impacts of ~~$5.9~~$1.9 million, ~~and higher~~partially mitigated by lower raw material costs of ~~$5.1 million, partially mitigated by favorable product pricing of $6.0~~$9.7 million and ~~gross profit from~~recent acquisitions of ~~$4.4~~$2.6 million.

Geographic Revenues

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



	Three Months Ended								Three Months Ended
	March 31,								September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Geographic Revenues on a sales origination basis
EMEA	$	206,441	$	220,943	$	(14,502)	(6.6)	%	$	188,237	$	199,319	$	(11,082)	(5.6)	%
United States		95,578		91,536		4,042	4.4	%		85,417		98,956		(13,539)	(13.7)	%
Asia Pacific		48,260		52,400		(4,140)	(7.9)	%		55,718		56,614		(896)	(1.6)	%
Latin America		37,269		40,653		(3,384)	(8.3)	%		36,356		40,274		(3,918)	(9.7)	%
Net sales	$	387,548	$	405,532	$	(17,984)	(4.4)	%	$	365,728	$	395,163	$	(29,435)	(7.4)	%

The decline in net sales of ~~$18.0~~$29.4 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~~all regions. The decrease in sales from the United ~~States.~~States was attributable to lower sales in Performance Colors and Glass, Color Solutions, and Performance Coatings, of $5.4 million, $4.9 million, and $3.2 million, respectively. The decrease in sales from EMEA was attributable to lower sales in Performance Coatings and Performance Colors and Glass of $6.0 million and $5.1 million, respectively. The decrease in sales from Latin America was attributable to lower sales in Performance Coatings, Color Solutions, and Performance Colors and Glass of ~~$5.7~~$2.6 million, ~~$4.9~~$0.8 million, and ~~$3.9~~$0.6 million, respectively. The decrease in sales from Asia Pacific ~~was attributable to 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~~

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~~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~~$1.7 million, ~~partially~~ mitigated by an increase in sales from Performance Colors and Glass ~~of $1.0 million. The increase in sales from the United States was attributable to higher sales in Performance Colors and Glass~~ and Color Solutions of ~~$3.2~~$0.6 million and ~~$2.0~~$0.3 million, ~~respectively, partially offset by a decrease in sales in Performance Coatings of $1.1 million.~~respectively.

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


	Three Months Ended
	September 30,
	2019		2018		$ Change		% Change
	(Dollars in thousands)
Geographic Revenues on a shipped-to basis
EMEA	$	171,410	$	188,112	$	(16,702)	(8.9)	%
Asia Pacific		81,757		88,991		(7,234)	(8.1)	%
United States		69,808		71,333		(1,525)	(2.1)	%
Latin America		42,753		46,727		(3,974)	(8.5)	%
Net sales	$	365,728	$	395,163	$	(29,435)	(7.4)	%

Three Months Ended

March 31,

2019

2018

$ Change

% Change

(Dollars in thousands)

Geographic Revenues on a shipped-to basis

EMEA

$
193,829

$
210,331

$
(16,502)

(7.8)
%
Asia Pacific

86,743

76,260

10,483

13.7
%
United States

67,015

71,365

(4,350)

(6.1)
%
Latin America

39,961

47,576

(7,615)

(16.0)
%
Net sales

$
387,548

$
405,532

$
(17,984)

(4.4)
%

Selling, General and Administrative Expenses

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



	Three Months Ended								Three Months Ended
	March 31,								September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Personnel expenses (excluding R&D personnel expenses)	$	34,411	$	33,757		654	1.9	%	$	29,081	$	30,570		(1,489)	(4.9)	%
Research and development expenses		10,998		10,841		157	1.4	%		9,905		9,159		746	8.1	%
Business development		2,475		2,423		52	2.1	%		8,866		4,261		4,605	108.1	%
Incentive compensation		1,375		2,966		(1,591)	(53.6)	%		607		(489)		1,096	(224.1)	%
Stock-based compensation		2,769		2,430		339	14.0	%		300		1,361		(1,061)	(78.0)	%
Intangible asset amortization		2,343		2,073		270	13.0	%		2,054		2,042		12	0.6	%
Pension and other postretirement benefits		323		342		(19)	(5.6)	%		335		328		7	2.3	%
Bad debt		230		105		125	119.0	%		(43)		(64)		21	(32.8)	%
All other expenses		17,156		18,155		(999)	(5.5)	%		16,618		17,176		(558)	(3.3)	%
Selling, general and administrative expenses	$	72,080	$	73,092	$	(1,012)	(1.4)	%	$	67,723	$	64,344	$	3,379	5.3	%

SG&A expenses were ~~$1.0~~$3.4 million ~~lower~~higher in the three months ended ~~March 31,~~September 30, 2019, compared with the prior-year same period. The ~~lower~~higher SG&A expenses compared to the prior-year same period are primarily driven by ~~lower~~higher business development expenses and incentive compensation, partially mitigated by lower personnel costs and ~~an adjustment to an environmental reserve, partially offset by greater expenses associated with businesses acquired within the last year.~~stock-based compensation 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.


	Three Months Ended								Three Months Ended
	March 31,								September 30,

	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Strategic services	$	40,325	$	41,178	$	(853)	(2.1)	%	$	35,686	$	37,084	$	(1,398)	(3.8)	%
Functional services		27,611		26,518		1,093	4.1	%		31,130		26,388		4,742	18.0	%
Incentive compensation		1,375		2,966		(1,591)	(53.6)	%		607		(489)		1,096	(224.1)	%
Stock-based compensation		2,769		2,430		339	14.0	%		300		1,361		(1,061)	(78.0)	%
Selling, general and administrative expenses	$	72,080	$	73,092	$	(1,012)	(1.4)	%	$	67,723	$	64,344	$	3,379	5.3	%

2832

Table of Contents

Restructuring and Impairment Charges



	Three Months Ended								Three Months Ended
	March 31,								September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Employee severance	$	1,155	$	657	$	498	75.8	%	$	2,754	$	1,278	$	1,476	115.5	%
Goodwill impairment										3,100		—		3,100	NM
Other restructuring costs		972		3,449		(2,477)	(71.8)	%		372		1,283		(911)	(71.0)	%
Restructuring and impairment charges	$	2,127	$	4,106	$	(1,979)	(48.2)	%	$	6,226	$	2,561	$	3,665	143.1	%

Restructuring and impairment charges ~~decreased~~increased in the ~~first~~third quarter of 2019 compared with the prior-year same period. The ~~decrease~~increase primarily relates to ~~lower~~goodwill impairment charges within the Tile Coating Systems reporting unit and higher costs associated with integration of our recent acquisitions and optimization programs in the ~~first~~third quarter of 2019, compared with the prior-year same ~~period, partially offset by an increase in employee severance costs.~~period.

Interest Expense



	Three Months Ended								Three Months Ended
	March 31,								September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Interest expense	$	8,597	$	7,251	$	1,346	18.6	%	$	8,396	$	8,632	$	(236)	(2.7)	%
Amortization of bank fees		900		870		30	3.4	%		968		911		57	6.3	%
Interest swap amortization		(316)		—		(316)	—	%		(315)		(316)		1	(0.3)	%
Interest capitalization		(636)		(159)		(477)	300.0	%		(911)		(674)		(237)	35.2	%
Interest expense	$	8,545	$	7,962	$	583	7.3	%	$	8,138	$	8,553	$	(415)	(4.9)	%

Interest expense ~~increased~~decreased in the ~~first~~third quarter of 2019 compared with the prior-year same period. The ~~increase~~decrease in interest expense was due to ~~an increase~~a decrease in the average long-term debt balance ~~during the three months ended March 31, 2019,~~and an increase in capitalized interest compared with the prior-year same period, offset by an increase in ~~capitalized interest.~~the average interest rate during the three months ended September 30, 2019.

Income Tax Expense

During the ~~first~~third quarter of 2019, income tax expense was ~~$4.3~~$3.7 million, or ~~23.7%~~22.0% of pre-tax income. In the ~~first~~third quarter of 2018, ~~we recorded~~income tax expense ~~of $7.5~~was $11.4 million, or ~~24.2%~~41.3% of pre-tax income. The tax expense in the ~~first~~third quarter of 2019, ~~and~~as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for 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.~~differences and discrete items recorded in the period. The discrete items recorded in the third quarter of 2018 primarily include a reduction to the tax expense related to provision to return adjustments and an increase from the impact of resolving a foreign tax audit.

Table of Contents

Results of Operations - Segment Information

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

Performance Coatings



	Three Months Ended											Change due to									Three Months Ended											Change due to
	March 31,												Volume /								September 30,												Volume /
	2019			2018			$ 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	$	170,347		$	184,648		$	(14,301)	(7.7)	%	$	2,764	$	(15,088)	$	(10,734)	$	8,757	$	—	$	162,391		$	175,939		$	(13,548)	(7.7)	%	$	(4,135)	$	(13,575)	$	(3,104)	$	7,263	$	3
Segment gross profit		33,645			43,765			(10,120)	(23.1)	%		2,764		(5,693)		(2,637)		1,466		(6,020)		35,436			36,257			(821)	(2.3)	%		(4,135)		(660)		(695)		971		3,698
Gross profit as a % of segment net sales		19.8	%		23.7	%																21.8	%		20.6	%

Net sales decreased in Performance Coatings compared with the prior-year same period, primarily driven by decreases in sales of frits and glazes, colors, opacifiers, and ~~colors~~porcelain enamel of ~~$9.9~~$7.1 million, $4.9 million, $4.2 million, and ~~$6.0~~$3.7 million, ~~respectively.~~respectively, partially mitigated by increased sales from acquisitions. The decrease in net sales was driven by unfavorable volume

~~Table of Contents~~

and mix of ~~$15.1~~$13.6 million, ~~unfavorable~~product pricing of $4.1 million, and foreign currency impacts of ~~$10.7~~$3.1 million, partially mitigated by sales from acquisitions of ~~$8.8 million and higher product pricing of $2.8~~$7.3 million. Gross profit decreased ~~$10.1~~$0.8 million from the prior-year same period, primarily driven by unfavorable product pricing of $4.1 million, higher manufacturing costs of $1.8 million, unfavorable foreign currency impacts of $0.7 million, and lower sales volume and mix of ~~$5.7~~$0.7 million, ~~higher~~partially mitigated by lower 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~~$5.5 million and gross profit from acquisitions of ~~$1.5~~$1.0 million.



	Three Months Ended								Three Months Ended
	March 31,								September 30,
	2019		2018		$ Change		% Change		2019		2018		$ Change		% Change
	(Dollars in thousands)								(Dollars in thousands)
Segment net sales by Region
EMEA	$	113,426	$	119,116	$	(5,690)	(4.8)	%	$	104,217	$	110,261	$	(6,044)	(5.5)	%
Latin America		22,365		26,766		(4,401)	(16.4)	%		23,026		25,594		(2,568)	(10.0)	%
Asia Pacific		22,865		25,947		(3,082)	(11.9)	%		26,184		27,914		(1,730)	(6.2)	%
United States		11,691		12,819		(1,128)	(8.8)	%		8,964		12,170		(3,206)	(26.3)	%
Total	$	170,347	$	184,648	$	(14,301)	(7.7)	%	$	162,391	$	175,939	$	(13,548)	(7.7)	%

The net sales decrease of ~~$14.3~~$13.5 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~~$4.7 million, colors of $4.2 million, opacifiers of $2.8 million, and ~~opacifiers~~FAS of ~~$3.4~~$1.1 million, partially mitigated by an increase in sales from Quimicer of ~~$7.8~~$7.3 million. The decrease in sales from the United States was fully attributable to lower sales of porcelain enamel. The decrease in sales from Latin America was primarily driven by lower sales of opacifiers of $1.5 million and frits and glazes of $1.3 million. The decrease in sales from Asia Pacific was driven by lower sales of frits and glazes of $1.1 million, colors of $0.4 million, and FAS of $0.4 million.

Performance Colors and Glass



	Three Months Ended											Change due to
	September 30,												Volume /
	2019			2018			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)
Segment net sales	$	112,742		$	123,277		$	(10,535)	(8.5)	%	$	966	$	(9,811)	$	(2,347)	$	656	$	1
Segment gross profit		36,829			40,095			(3,266)	(8.1)	%		966		(5,210)		(760)		172		1,566
Gross profit as a % of segment net sales		32.7	%		32.5	%

Table of Contents

Net sales decreased compared with the prior-year same period primarily due to lower sales in decoration, electronic, industrial, and automotive products of $5.0 million, $2.7 million, $2.0 million, and $1.9 million, respectively, partially mitigated by net sales from acquisitions of $0.7 million. The decrease in net sales was driven by unfavorable volume and mix of $9.8 million and foreign currency impacts of $2.3 million, partially mitigated by favorable product pricing of $1.0 million and sales from acquisitions of $0.7 million. Gross profit decreased from the prior-year same period primarily due to unfavorable volume and mix of $5.2 million and foreign currency impacts of $0.8 million, partially mitigated by favorable product pricing of $1.0 million, manufacturing costs of $0.9 million, and raw material costs of $0.7 million.



	Three Months Ended
	September 30,
	2019		2018		$ Change		% Change
	(Dollars in thousands)
Segment net sales by Region
EMEA	$	50,670	$	55,782	$	(5,112)	(9.2)	%
United States		37,694		43,087		(5,393)	(12.5)	%
Asia Pacific		19,123		18,564		559	3.0	%
Latin America		5,255		5,844		(589)	(10.1)	%
Total	$	112,742	$	123,277	$	(10,535)	(8.5)	%

The net sales decrease of $10.5 million was driven by lower sales from EMEA, the United States, and Latin America, partially mitigated by an increase in sales from Asia Pacific. The decrease in sales from the United States was primarily attributable to lower sales in electronic, decoration, industrial, and automotive products of $1.8 million, $1.8 million, $1.5 million, and $0.8 million, respectively. The decrease in sales from EMEA was primarily attributable to lower sales of decoration, automotive, and electronic products of $2.9 million, $1.0 million, and $0.9 million, respectively. The decrease in sales from Latin America was primarily attributable to a decrease in sales of decoration products of $0.5 million. The increase in sales in Asia Pacific was primarily attributable to increases in decoration products of $0.2 million and industrial products of $0.3 million.

Color Solutions



	Three Months Ended											Change due to
	September 30,												Volume /
	2019			2018			$ Change		% Change		Price		Mix		Currency		Acquisitions		Other
	(Dollars in thousands)
Segment net sales	$	90,595		$	95,947		$	(5,352)	(5.6)	%	$	(271)	$	(6,285)	$	(1,659)	$	2,864	$	(1)
Segment gross profit		29,122			30,174			(1,052)	(3.5)	%		(271)		(4,878)		(453)		1,485		3,065
Gross profit as a % of segment net sales		32.1	%		31.4	%

Net sales decreased compared with the prior-year same period, primarily due to decreased sales in surface technology products and pigment products of $4.6 million and $3.5 million, respectively, partially mitigated from increased sales from UWiZ and Diegel of $1.8 million and $1.0 million, respectively. The decrease in net sales was driven by lower volume and mix of $6.3 million and unfavorable foreign currency impacts of $1.7 million, partially offset by net sales from acquisitions of $2.9 million. Gross profit decreased from the prior-year same period, primarily due to unfavorable volume and mix of $4.9 million, unfavorable foreign currency impacts of $0.5 million, and higher manufacturing costs of $0.4 million, partially mitigated by gross profit from lower raw material costs of $3.5 million and acquisitions of $1.5 million.



	Three Months Ended
	September 30,
	2019		2018		$ Change		% Change
	(Dollars in thousands)
Segment net sales by Region
United States	$	38,759	$	43,699	$	(4,940)	(11.3)	%
EMEA		33,350		33,276		74	0.2	%
Asia Pacific		10,411		10,136		275	2.7	%
Latin America		8,075		8,836		(761)	(8.6)	%
Total	$	90,595	$	95,947	$	(5,352)	(5.6)	%

Table of Contents

The net sales decrease of $5.4 million was primarily driven by lower sales from the United States and Latin America. The decrease in sales from the United States was primarily driven by lower sales in surface technology and pigment products of $4.4 million and $0.4 million, respectively. The decrease in sales from Latin America was primarily attributable to sales from pigment products of $0.9 million.

Comparison of the nine months ended September 30, 2019 and 2018

For the nine months ended September 30, 2019, net income was $38.2 million, compared with net income of $69.6 million for the nine months ended September 30, 2018. For the nine months ended September 30, 2019, net income attributable to common shareholders was $37.3 million, or earnings per share of $0.45, compared with net income attributable to common shareholders of $69.1 million, or earnings per share of $0.82, for the nine months ended September 30, 2018.

Net Sales



	Nine Months Ended
	September 30,
	2019			2018			$ Change		% Change

	(Dollars in thousands)
Net sales	$	1,147,178		$	1,216,934		$	(69,756)	(5.7)	%
Cost of sales		836,773			866,116			(29,343)	(3.4)	%
Gross profit	$	310,405		$	350,818		$	(40,413)	(11.5)	%
Gross profit as a % of net sales		27.1	%		28.8	%

Net sales decreased by $69.8 million, or 5.7%, for the nine months ended September 30, 2019, compared with the prior-year same period, driven by lower sales in Performance Coatings, Performance Colors and Glass, and Color Solutions of $43.1 million, $17.8 million, and $8.9 million, respectively. The decrease in net sales was driven by lower volume and mix of $71.4 million and unfavorable foreign currency impacts of $26.3 million, partially mitigated by sales from acquisitions of $22.5 million and higher product pricing of $5.4 million.

Gross Profit

Gross profit decreased $40.4 million, or 11.5%, for the nine months ended September 30, 2019, compared with the prior-year same period, and as a percentage of net sales, it decreased approximately 170 basis points to 27.1%. The decrease in gross profit was primarily attributable to decreases in Performance Coatings, Performance Colors and Glass, and Color Solutions of $21.4 million, $13.1 million, and $6.6 million, respectively. The decrease in gross profit was primarily driven by lower sales volume and mix of $32.0 million, higher manufacturing costs of $21.7 million, and unfavorable foreign currency impacts of $12.1 million, partially mitigated by gross profit from lower raw material costs of $11.0 million, acquisitions of $10.7 million, and favorable product pricing of $2.9 million.

Geographic Revenues

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



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Geographic Revenues on a sales origination basis
EMEA	$	604,441	$	646,296	$	(41,855)	(6.5)	%
United States		275,073		281,984		(6,911)	(2.5)	%
Asia Pacific		156,510		166,738		(10,228)	(6.1)	%
Latin America		111,154		121,916		(10,762)	(8.8)	%
Net sales	$	1,147,178	$	1,216,934	$	(69,756)	(5.7)	%

Table of Contents

The decline in net sales of $69.8 million, compared with the prior-year same period, was driven by a decrease in sales from all regions. The decrease in sales from EMEA was attributable to lower sales in Performance Colors and Glass, Performance Coatings, and Color Solutions of $19.0 million, $18.9 million, and $4.0 million, respectively. The decrease in sales from Latin America was attributable to lower sales in Performance Coatings and Color Solutions of $9.9 million and $1.4 million, respectively, partially mitigated by an increase in sales from Performance Colors and Glass of $0.5 million. The decrease in sales from Asia Pacific was attributable to lower sales in Performance Coating and Color Solutions of $8.0 million and $2.4 million, respectively, slightly offset by an increase in net sales in Performance Colors and Glass of $0.1 million. The decrease in sales from the United States was attributable to lower sales in Performance Coatings and Color Solutions of $6.3 million and $1.1 million, respectively, partially offset by an increase in sales in Performance Colors and Glass of $0.4 million.

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


	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Geographic Revenues on a shipped-to basis
EMEA	$	561,379	$	611,532	$	(50,153)	(8.2)	%
Asia Pacific		251,729		253,975		(2,246)	(0.9)	%
United States		210,721		209,707		1,014	0.5	%
Latin America		123,349		141,720		(18,371)	(13.0)	%
Net sales	$	1,147,178	$	1,216,934	$	(69,756)	(5.7)	%

Selling, General and Administrative Expenses

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



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Personnel expenses (excluding R&D personnel expenses)	$	94,462	$	97,477	$	(3,015)	(3.1)	%
Research and development expenses		31,132		30,263		869	2.9	%
Business development		16,826		9,897		6,929	70.0	%
Incentive compensation		2,161		5,008		(2,847)	(56.8)	%
Stock-based compensation		5,945		5,217		728	14.0	%
Intangible asset amortization		6,611		6,126		485	7.9	%
Pension and other postretirement benefits		1,007		1,009		(2)	(0.2)	%
Bad debt		725		430		295	68.6	%
All other expenses		52,579		52,133		446	0.9	%
Selling, general and administrative expenses	$	211,448	$	207,560	$	3,888	1.9	%

SG&A expenses were $3.9 million higher in the nine months ended September 30, 2019, compared with the prior-year same period. The higher SG&A expenses compared to the prior-year same period are primarily driven by higher business development expenses, research and development expenses, and stock-based compensation, partially mitigated by lower personnel expenses and incentive compensation.

Table of Contents

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


	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change
	(Dollars in thousands)
Strategic services	$	114,507	$	117,905	$	(3,398)	(2.9)	%
Functional services		88,835		79,430		9,405	11.8	%
Incentive compensation		2,161		5,008		(2,847)	(56.8)	%
Stock-based compensation		5,945		5,217		728	14.0	%
Selling, general and administrative expenses	$	211,448	$	207,560	$	3,888	1.9	%

Restructuring and Impairment Charges



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Employee severance	$	6,782	$	4,710	$	2,072	44.0	%
Goodwill impairment		9,020		—		9,020	NM
Other restructuring costs		2,811		5,725		(2,914)	(50.9)	%
Restructuring and impairment charges	$	18,613	$	10,435	$	8,178	78.4	%

Restructuring and impairment charges increased in the nine months ended September 30, 2019, compared with the prior-year same period. The increase primarily relates to goodwill impairment charges within the Tile Coating Systems reporting unit, partially mitigated by lower costs associated with integration of our recent acquisitions and optimization programs in the first nine months of 2019.

Interest Expense



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Interest expense	$	25,624	$	23,582	$	2,042	8.7	%
Amortization of bank fees		2,780		2,684		96	3.6	%
Interest swap amortization		(947)		(447)		(500)	111.9	%
Interest capitalization		(2,259)		(1,104)		(1,155)	104.6	%
Interest expense	$	25,198	$	24,715	$	483	2.0	%

Interest expense increased in the nine months ended September 30, 2019, compared with the prior-year same period. The increase in interest expense was due to increases in the average long-term debt balance and the average interest rate, offset by an increase in capitalized interest during the nine months ended September 30, 2019, compared with the prior-year same period.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2019 was $13.2 million, or 25.6% of pre-tax income. Income tax expense for the nine months ended September 30, 2018 was $29.2 million, or 29.6% of pre-tax income. The tax expense for the nine months ended September 30, 2019, as a percentage of pre-tax income, is higher than the U.S. federal statutory income tax rate of 21% primarily as a result of foreign statutory rate differences. The tax expense for the nine months ended September 20, 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 of 2018 primarily include a reduction to the tax expense related to provision to return adjustments and an increase from the impact of resolving a foreign tax audit.

Table of Contents

Results of Operations - Segment Information

Comparison of the nine months ended September 30, 2019 and 2018

Performance Coatings



	Nine Months Ended											Change due to
	September 30,												Volume /
	2019			2018			$ Change		% Change		Price		Mix		Currency			Acquisitions	Other
	(Dollars in thousands)
Segment net sales	$	510,970		$	554,036		$	(43,066)	(7.8)	%	$	(2,494)	$	(44,584)	$	(20,760)	$	24,769	$	3
Segment gross profit		108,903			130,319			(21,416)	(16.4)	%		(2,494)		(13,350)		(5,294)		4,111		(4,389)
Gross profit as a % of segment net sales		21.3	%		23.5	%

Net sales decreased in Performance Coatings compared with the prior-year same period, primarily driven by decreases in sales of frits and glazes, colors, opacifiers, and porcelain enamel of $27.9 million, $13.6 million, $12.5 million, and $10.3 million, respectively, partially mitigated by sales of $24.8 million from acquisitions. The decrease in net sales was driven by unfavorable volume and mix of $44.6 million, foreign currency impacts of $20.8 million, and product pricing of $2.5 million, partially mitigated by sales from acquisitions of $24.8 million. Gross profit decreased $21.4 million from the prior-year same period, primarily driven by lower volume and mix of $13.4 million, higher manufacturing costs of $11.0 million, unfavorable foreign currency impacts of $5.3 million, and product pricing of $2.5 million, partially mitigated by gross profit from favorable raw material costs of $6.7 million and acquisitions of $4.1 million.



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Segment net sales by Region
EMEA	$	336,631	$	355,510	$	(18,879)	(5.3)	%
Latin America		68,917		78,832		(9,915)	(12.6)	%
Asia Pacific		74,974		82,990		(8,016)	(9.7)	%
United States		30,448		36,704		(6,256)	(17.0)	%
Total	$	510,970	$	554,036	$	(43,066)	(7.8)	%

The net sales decrease of $43.1 million was driven by lower sales from all regions. The decrease in sales from EMEA was primarily attributable to lower sales of frits and glazes of $15.1 million, colors of $11.6 million, opacifiers of $8.7 million, and FAS of $2.9 million, partially mitigated by an increase in sales from Quimicer of $22.7 million. The decrease in sales from Latin America was primarily driven by lower sales of frits and glazes and opacifiers of ~~$2.7~~$5.7 million and ~~$0.7~~$3.8 million, respectively. The decrease in sales from Asia Pacific was driven by lower sales of frits and glazes and colors of ~~$3.2~~$7.1 million and ~~$0.5~~$1.6 million, ~~respectively, partially mitigated by sales from FMU, which contributed $1.0 million.~~respectively. The decrease in sales from the United States was fully attributable to lower sales of porcelain enamel.

Performance Colors and Glass



	Three Months Ended											Change due to									Nine Months Ended											Change due to
	March 31,												Volume /								September 30,												Volume /
	2019			2018			$ 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	$	120,845		$	120,505		$	340	0.3	%	$	841	$	2,612	$	(5,787)	$	2,674	$	—	$	351,991		$	369,809		$	(17,818)	(4.8)	%	$	3,222	$	(14,192)	$	(12,556)	$	5,707	$	1
Segment gross profit		39,467			43,328			(3,861)	(8.9)	%		841		(2,440)		(2,090)		1,156		(1,328)		115,672			128,785			(13,113)	(10.2)	%		3,222		(12,086)		(4,394)		2,121		(1,976)
Gross profit as a % of segment net sales		32.7	%		36.0	%																32.9	%		34.8	%

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Net sales ~~increased~~decreased compared with the prior-year same period, primarily driven by ~~sales from acquisitions and increased~~lower sales in ~~electronics of $3.0 million~~decoration, automotive, and industrial products of ~~$0.8~~$13.6 million, $8.8 million, and $3.4 million, respectively, partially ~~offset~~mitigated by ~~lower~~net sales from acquisitions of $5.7 million and higher sales in ~~decoration and automotive~~electronic products of ~~$3.5 million and $2.6 million, respectively.~~$1.9 million. The ~~increase~~decrease in net sales was driven by unfavorable volume and mix of $14.2 million and foreign currency impacts of $12.6 million, partially mitigated by net sales from acquisitions of ~~$2.7 million, favorable volume and mix of $2.6~~$5.7 million and higher product pricing of ~~$0.8 million, partially offset by unfavorable foreign currency impacts of $5.8~~$3.2 million. Gross profit decreased from the prior-year same period primarily due to unfavorable volume and mix of ~~$2.4~~$12.1 million, ~~unfavorable~~ foreign currency impacts of ~~$2.1~~$4.4 million, and ~~unfavorable~~ manufacturing costs of ~~$1.7~~$4.0 million, partially mitigated by higher product pricing of $3.2 million, gross profit from acquisitions of ~~$1.2 million, higher product pricing of $0.8~~$2.1 million, and favorable raw material costs of ~~$0.3~~$2.1 million.

~~Table of Contents~~



	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change

	(Dollars in thousands)
Segment net sales by Region
EMEA	$	161,850	$	180,801	$	(18,951)	(10.5)	%
United States		119,126		118,682		444	0.4	%
Asia Pacific		53,288		53,142		146	0.3	%
Latin America		17,727		17,184		543	3.2	%
Total	$	351,991	$	369,809	$	(17,818)	(4.8)	%

Three Months Ended

March 31,

2019

2018

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

EMEA

$
57,448

$
61,344

$
(3,896)

(6.4)
%
United States

40,288

37,091

3,197

8.6
%
Asia Pacific

16,570

16,515

55

0.3
%
Latin America

6,539

5,555

984

17.7
%
Total

$
120,845

$
120,505

$
340

0.3
%

The net sales ~~increase~~decrease of ~~$0.3~~$17.8 million was primarily driven by lower sales from EMEA, partially mitigated by higher sales ~~from~~in the United States, Latin America, and Asia ~~Pacific,~~Pacific. The decrease in sales from EMEA was primarily attributable to lower sales of decoration, electronic, industrial, and automotive products of $9.8 million, $4.1 million, $3.9 million, and $3.8 million, respectively, partially offset by ~~lower~~a $2.6 million increase in sales from ~~EMEA.~~Diegel. The increase in sales from Latin America was attributable to an increase in sales of industrial products of $1.1 million, partially offset by a decrease in sales of automotive products of $0.7 million. The increase in sales from the United States was primarily attributable to an increase in sales of ~~electronics~~electronic products of ~~$4.1~~$5.8 million and sales from MRA of ~~$1.5~~$3.4 million, partially offset by lower sales of automotive, decoration, and ~~automotive~~industrial products of ~~$1.3~~$3.5 million, $3.1 million, and ~~$1.0~~$2.1 million, respectively. The increase in sales from ~~Latin America~~Asia Pacific was primarily attributable to ~~an increase in~~increased sales of ~~decoration and~~ industrial products of ~~$0.6~~$1.5 million and ~~$0.6 million, respectively, partially offset by a decrease in sales of automotive products~~electronics of $0.2 ~~million. Sales from Asia Pacific remained relatively flat. The decrease in sales from EMEA was primarily attributable to~~million, offset by lower sales of decoration products of $0.8 million and ~~electronic~~automotive products of ~~$3.0 million and $1.2 million, respectively, partially offset by sales from Diegel.~~$0.8 million.

Color Solutions



	Three Months Ended											Change due to									Nine Months Ended											Change due to
	March 31,												Volume /								September 30,												Volume /
	2019			2018			$ 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	$	96,356		$	100,379		$	(4,023)	(4.0)	%	$	2,371	$	(6,523)	$	(4,152)	$	4,281	$	—	$	284,217		$	293,089		$	(8,872)	(3.0)	%	$	2,172	$	(12,647)	$	(8,716)	$	10,320	$	(1)
Segment gross profit		28,396			32,149			(3,753)	(11.7)	%		2,371		(1,206)		(1,143)		1,751		(5,526)		87,220			93,864			(6,644)	(7.1)	%		2,172		(6,569)		(2,417)		4,507		(4,337)
Gross profit as a % of segment net sales		29.5	%		32.0	%																30.7	%		32.0	%

Net sales decreased compared with the prior-year same period, primarily due to lower sales of ~~pigments~~pigment products of $21.0 million, partially mitigated by increased sales in Diegel of $5.3 million, UWiZ of $5.0 million, and surface technology products ~~and sales from Diegel and UWiZ~~ of ~~$2.2 million and $2.1 million, respectively.~~$1.4 million. The decrease in net sales was driven by ~~lower~~unfavorable volume and mix of ~~$6.5~~$12.6 million and ~~unfavorable~~ foreign currency impacts of ~~$4.2~~$8.7 million, partially mitigated by sales from acquisitions of ~~$4.3~~$10.3 million and ~~higher~~favorable product pricing of ~~$2.4~~$2.2 million. Gross profit decreased from the prior-year same period, primarily due ~~higher manufacturing costs of $3.9 million, higher raw material costs of $1.6 million, unfavorable~~to lower sales volume and mix of ~~$1.2~~$6.6 million, unfavorable manufacturing costs of $6.5 million, and ~~unfavorable~~ foreign currency impacts of ~~$1.1~~$2.4 million, partially mitigated by ~~higher product pricing of $2.4 million and~~ gross profit from acquisitions of ~~$1.8~~$4.5 million, higher product pricing of $2.2 million, and favorable raw material costs of $2.2 million.

Three Months Ended

March 31,

2019

2018

$ Change

% Change

(Dollars in thousands)

Segment net sales by Region

United States

$
43,599

$
41,626

$
1,973

4.7
%
EMEA

35,567

40,483

(4,916)

(12.1)
%
Asia Pacific

8,825

9,938

(1,113)

(11.2)
%
Latin America

8,365

8,332

33

0.4
%
Total

$
96,356

$
100,379

$
(4,023)

(4.0)
%

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	Nine Months Ended
	September 30,

	2019		2018		$ Change		% Change
	(Dollars in thousands)
Segment net sales by Region
United States	$	125,499	$	126,598	$	(1,099)	(0.9)	%
EMEA		105,960		109,985		(4,025)	(3.7)	%
Asia Pacific		28,248		30,606		(2,358)	(7.7)	%
Latin America		24,510		25,900		(1,390)	(5.4)	%
Total	$	284,217	$	293,089	$	(8,872)	(3.0)	%

The net sales decrease of ~~$4.0~~$8.9 million was driven by lower sales from ~~EMEA and Asia Pacific, partially mitigated by higher sales from the United States.~~all regions. The decrease in sales from EMEA was primarily attributable to lower sales of pigment products of ~~$7.0~~$9.1 million, partially mitigated by sales from Diegel of ~~$2.1~~$5.0 million. The decrease in sales from Asia Pacific was primarily attributable to lower sales of pigment products of ~~$3.3~~$7.4 million, partially mitigated by increased sales from UWiZ of ~~$2.1~~$5.0 million. ~~Sales~~The decrease in sales from Latin America

~~Table~~ was primarily attributable to lower sales of ~~Contents~~

~~remained relatively flat.~~pigment products of $1.6 million. The ~~increase~~decrease in sales from the United States was primarily driven by ~~higher sales of surface technology of $4.2 million, partially offset by~~ lower sales of pigment products of ~~$2.6~~$2.9 million, partially offset by higher sales of surface technology products of $1.4 million.

Summary of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018

Three Months Ended

March 31,

2019

2018

$ Change

(Dollars in thousands)
Net cash used in operating activities

$
(67,527)

$
(34,285)

$
(33,242)
Net cash used in investing activities

(3,391)
��

(23,012)

19,621
Net cash provided by financing activities

23,877

45,780

(21,903)
Effect of exchange rate changes on cash and cash equivalents

377

1,262

(885)
(Decrease) in cash and cash equivalents

$
(46,664)

$
(10,255)

$
(36,409)



	Nine Months Ended
	September 30,
	2019		2018		$ Change
	(Dollars in thousands)
Net cash (used in) provided by operating activities	$	(67,240)	$	35,686	$	(102,926)
Net cash provided by (used in) investing activities		21,763		(111,919)		133,682
Net cash (used in) provided by financing activities		(6,416)		141,221		(147,637)
Effect of exchange rate changes on cash and cash equivalents		(667)		(2,261)		1,594
(Decrease) Increase in cash and cash equivalents	$	(52,560)	$	62,727	$	(115,287)

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



	Three Months Ended						Nine Months Ended
	March 31,						September 30,
	2019		2018		$ Change		2019		2018		$ Change
	(Dollars in thousands)						(Dollars in thousands)
Cash flows from operating activities:
Net income	$	13,878	$	23,598	$	(9,720)	$	38,197	$	69,602	$	(31,405)
Loss on sale of assets		164		229		(65)
(Gain) loss on sale of assets								(947)		485		(1,432)
Depreciation and amortization		14,264		13,392		872		42,041		40,238		1,803
Interest amortization		900		870		30		2,780		2,684		96
Restructuring and impairment		179		2,429		(2,250)		9,837		4,277		5,560
Loss on extinguishment of debt								—		3,226		(3,226)
Accounts receivable		(43,733)		(32,657)		(11,076)		(78,082)		(36,439)		(41,643)
Inventories		(12,652)		(28,820)		16,168		(9,182)		(58,833)		49,651
Accounts payable		(43,680)		(7,139)		(36,541)		(63,452)		11,103		(74,555)
Other current assets and liabilities, net		(819)		(6,735)		5,916		3,735		(17,331)		21,066
Other adjustments, net		3,972		548		3,424		(12,167)		16,674		(28,841)
Net cash used in operating activities	$	(67,527)	$	(34,285)	$	(33,242)
Net cash (used in) provided by operating activities							$	(67,240)	$	35,686	$	(102,926)

Cash flows from operating activities. Cash flows ~~provided by~~from operating activities decreased ~~$33.2~~$102.9 million induring the ~~first three~~nine months ofended September 30, 2019 compared with the prior-year same period. The decrease in cash from operating activities was primarily due to a decrease in net income of ~~$9.7~~$31.4 million, ~~and~~ higher cash outflows for net working capital of ~~$31.4~~$66.5 million ~~partially offset by an increase in~~and net other current assets, ~~and~~ liabilities and other adjustments of ~~$9.3~~$7.8 million.

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Cash flows used in investing activities. Cash flows ~~used in~~from investing activities ~~decreased $19.6~~increased $133.7 million induring the ~~first three~~nine months ofended September 30, 2019 compared with the prior-year same period. The increase in cash from investing activities was primarily due to collections of financing receivables from the international receivable sales program (Note 8) of ~~$20.2~~$60.9 million ~~in the first quarter of 2019~~ and lower cash outflows for business acquisitions ~~net~~and capital expenditures of ~~cash acquired of $2.1~~$47.6 million and $23.3 million, respectively, in the ~~three~~nine months ended ~~March 31,~~September 30, 2019, compared to the prior-year same period.

Cash flows from financing activities. Cash flows ~~provided by~~from financing activities decreased ~~$21.9~~$147.6 million induring the ~~first three~~nine months ofended September 30, 2019 compared with the prior-year same period. ~~The decrease was primarily due~~During 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, compared to the prior-year same period, the purchase of treasury stock increased $8.0 million which was mitigated by an increase in cash flows of ~~$25.0~~$25.4 million infrom proceeds from loans payables as compared to the ~~three months ended March 31, 2019.~~prior year borrowings.

~~Table of Contents~~

Capital Resources and Liquidity

Amended Credit Facility

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~~dollars. The Amended Credit Facility will be used for ongoing working capital requirements and general corporate purposes. The Tranche B-2 Loans are borrowed by the Company and the Tranche B-3 Loans are borrowed on 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.

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

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

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At ~~March 31,~~September 30, 2019, the Company had borrowed ~~$351.5~~$349.7 million under the Tranche B-1 Loans at an interest rate of ~~4.85%~~4.35%, ~~$232.7~~$231.5 million under the Tranche B-2 Loans at an interest rate of ~~4.85%~~4.35%, and ~~$227.7~~$226.6 million under the Tranche B-3 Loans at an interest rate of ~~4.85%~~4.35%. At ~~March 31,~~September 30, 2019, there were no additional borrowings available under the Tranche B-1 Loans, Tranche B-2 Loans ~~and~~or Tranche B-3 Loans. In connection with these borrowings, we entered into swap agreements in the second quarter of 2018. At ~~March 31,~~September 30, 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%~~5.12%, ~~3.33%~~3.03%, and 2.48%, respectively.

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

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

Off Balance Sheet Arrangements

Consignment and Customer Arrangements for Precious Metals. We use precious metals, primarily silver, in the production of some of our products. We obtain precious metals from financial institutions under consignment agreements. The financial institutions retain ownership of the precious metals and charge us fees based on the amounts we consign and the period of consignment. These fees were ~~$1.1~~$0.5 million ~~and $0.4 million~~for the three months ended ~~March 31,~~September 30, 2019 and 2018 and were $2.2 million and $1.3 million for the nine months ended September 30, 2019 and 2018, respectively. We had on hand precious metals owned by participants in our precious metals program of ~~$53.6~~$65.9 million at ~~March 31,~~September 30, 2019, and $55.2 million at December 31, 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 ~~March 31,~~September 30, 2019, or December 31, 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.

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International Receivable Sales Programs

We have several international programs to sell without recourse trade accounts receivable to financial institutions. These transactions are treated as a sale and are accounted for as a reduction in accounts receivable because the agreements transfer effective control over and risk related to the receivables to the buyers. The Company continues to service the receivables sold in exchange for a fee. The program, whose maximum capacity is €100 million, is scheduled to expire in December 2023. The outstanding principal amount of receivables sold under this program was ~~$63.9~~$61.4 million at ~~March 31,~~September 30, 2019 and $71.3 million at December 31, 2018. The carrying amount

~~Table of Contents~~

of deferred purchase price was ~~$23.1~~$22.5 million at ~~March 31,~~September 30, 2019 and $23.0 million at December 31, 2018, and is recorded in Other ~~Receivables.~~receivables.

Bank Guarantees and Standby Letters of Credit.

At ~~March 31,~~September 30, 2019, the Company and its subsidiaries had bank guarantees and standby letters of credit issued by financial institutions that totaled $~~7.4~~6.0 million. These agreements primarily relate to Ferro’s insurance programs, foreign energy purchase contracts and foreign tax payments.

Liquidity Requirements

Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under the revolving credit facility, and cash flows from operating activities. As of ~~March 31,~~September 30, 2019, we had ~~$57.7~~$51.7 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 ~~$472.1~~$493.0 million at ~~March 31,~~September 30, 2019, and $525.6 million at December 31, 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 ~~March 31,~~September 30, 2019, we were in compliance with our maximum leverage ratio covenant of 4.00x as our actual ratio was ~~2.95x,~~2.98x, providing ~~$78.4~~$72.9 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 ~~$219~~$214 million for rolling four quarters, based on reasonably consistent net debt levels with those as of ~~March 31,~~September 30, 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

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publicly announce divestiture and acquisition transactions only when we have entered into a material definitive agreement or closed on those transactions.

Critical Accounting Policies and Their Application

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

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Impact of Newly Issued Accounting Pronouncements

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

Risk Factors

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

3645

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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-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 debt, we have entered into interest rate swap agreements. These swaps effectively convert a portion of our 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.



	March 31,		December 31,		September 30,		December 31,
	2019		2018		2019		2018
	(Dollars in thousands)				(Dollars in thousands)
Variable-rate debt:
Carrying amount(1)	$	858,516	$	809,072	$	834,320	$	809,072
Fair value~~(1)~~		845,437		796,846		832,451		796,846
Increase in annual interest expense from 1% increase in interest rates		3,186		2,680		2,967		2,680
Decrease in annual interest expense from 1% decrease in interest rates		(3,186)		(2,680)		(2,967)		(2,680)
Fixed-rate debt:
Carrying amount		8,109		8,362		7,943		8,362
Fair value		5,385		5,258		5,441		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		316,806		317,604		315,210		317,604
Carrying amount and fair value		(9,227)		(5,244)		(17,577)		(5,244)
Change in fair value from 1% increase in interest rates		13,404		13,945		11,959		13,945
Change in fair value from 1% decrease in interest rates		(12,923)		(13,508)		(10,829)		(13,508)
Cross currency swaps:
Notional amount		344,025		344,894		342,288		344,894
Carrying amount and fair value		23,000		17,104		28,662		17,104
Change in fair value from 10% increase		(34,908)		(35,455)
Change in fair value from 10% decrease		39,988		40,575
Change in fair value from 10% appreciation of U.S. dollar						(34,182)		(35,455)
Change in fair value from 10% depreciation of U.S. dollar						39,201		40,575
Foreign currency forward contracts:
Notional amount		410,061		387,190		606,065		387,190
Carrying amount and fair value		1,021		(270)		(265)		(270)
Change in fair value from 10% appreciation of U.S. dollar		10,691		8,070		5,401		8,070
Change in fair value from 10% depreciation of U.S. dollar		(13,490)		(9,863)		(5,941)		(9,863)

(1) The carrying ~~values~~value of the term loan ~~facilitates are~~facility is net of unamortized debt issuance costs of ~~$4.6~~$4.1 million and $4.8 million for the period ended ~~March 31,~~September 30, 2019 and December 31, 2018, respectively.

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Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

As required by Rule 13a-15(b) of the Exchange Act, Ferro has carried out an evaluation, under the supervision and with the participation of its management, including its Chief Executive Officer and its Chief Financial Officer, of the effectiveness of the design and operation of its disclosure controls and procedures. The evaluation examined those disclosure controls and procedures as of ~~March 31,~~September 30, 2019, the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that the disclosure controls and procedures were effective as of ~~March 31,~~September 30, 2019.

Changes in Internal Control over Financial Reporting

During the ~~first~~third quarter of 2019, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

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. Since December 2018, additional complaints have been filed in the same court by 1525 other New York water suppliers against the Company and others making substantially similar allegations regarding the contamination of their respective water supplies with 1,4 dioxane. An additional complaint has also been filed by the Hicksville Water District against the Company and others in New York State Supreme Court making substantially similar allegations and seeking damages of $900 million. The Company is likewise vigorously defending these additional actions. The Company currently does not expect the outcome of these proceedings to have a material adverse impact on its consolidated financial condition, results of operations, or cash flows, net of any insurance coverage. However, it is not possible to predict the ultimate outcome of these proceedings due to the unpredictable nature of litigation.

In addition to the proceedings described above, the Company and its consolidated subsidiaries 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, 2018.

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

Our Board of Directors has not declared any dividends on common stock 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 relevant factors.

The following table summarizes purchases of our common stock by the Company and affiliated purchasers during the three months ~~ended:~~ended September 30, 2019:

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



					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 ⁽¹⁾	Paid per Share			or Programs		or Programs
	(Dollars in thousands, except for per share amounts)
July 1, 2019 to July 31, 2019	—	$	—	$	—	$	46,192,535
August 1, 2019 to August 31, 2019	336	$	10.05	$	—	$	46,192,535
September 1, 2019 to September 30, 2019	—	$	—	$	—	$	46,192,535
Total	336			$	—

~~__________________________~~

(1) Includes the surrender of the Company’s common shares in connection with the vesting of restricted awards.

__________________________

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Item 3. Defaults Upon Senior Securities

Not applicable.

~~Table of Contents~~

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

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

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~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities 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:	~~April 30,~~November 12, 2019
		/s/ Peter T. Thomas
		Peter T. Thomas
		Chairman, President and Chief Executive Officer (Principal Executive Officer)

Date:	~~April 30,~~November 12, 2019
		/s/ Benjamin J. Schlater
		Benjamin J. Schlater
		Group Vice President and Chief Financial Officer (Principal Financial Officer)

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EXHIBIT INDEX

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

Exhibit:


3	Articles of incorporation and by-laws:
3.1	Eleventh Amended Articles of Incorporation of Ferro Corporation (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.2	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed December 29, 1994 (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.3	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on June 23, 1998 (incorporated by reference to Exhibit 4.3 to Ferro Corporation’s Registration Statement on Form S‑3, filed March 5, 2008).
3.4	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on October 17, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).
3.5	Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed on April 25, 2014 (incorporated by reference to Exhibit 3.5 to Ferro’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2014).
3.6	Ferro Corporation Amended and Restated Code of Regulations (incorporated by reference to Exhibit 3.1 to Ferro Corporation's current Report on Form 8-K filed December 12, ~~2016.)~~2016).
31	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.Certifications:
~~10.1~~31.1	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).
~~10.3~~	~~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).

~~Table of Contents~~

~~Exhibit:~~


31	~~Certifications:~~
~~31.1~~	Certification of Principal Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a).
31.2	Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a).
32.1	Certification of Principal Executive Officer Pursuant to 18 U.S.C. 1350.
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. 1350.
101		Inline XBRL Documents:
101.INS		Inline XBRL Instance Document
101.SCH		Inline XBRL Schema Document
101.CAL		Inline XBRL Calculation Linkbase Document
101.LAB		Inline XBRL Labels Linkbase Document
101.PRE		Inline XBRL Presentation Linkbase Document
101.DEF		Inline XBRL Definition Linkbase Document
104		The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in Inline XBRL and contained in Exhibit 101.

~~__________________________~~

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

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

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