1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED JUNE 30, 2001 [ ] 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) AN OHIO CORPORATION, IRS NO. 34-0217820 1000 LAKESIDE AVENUE CLEVELAND, OH 44114 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE: 216/641-8580 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 [ ] At July 31, 2001 there were 34,236,980 shares of Ferro common stock, par value $1.00, outstanding. 2 CONDENSED CONSOLIDATED STATEMENTS OF INCOME FERRO CORPORATION AND SUBSIDIARIES Three Months Ended Six Months Ended June 30 June 30 (Unaudited) (Unaudited) (Unaudited) (Unaudited) 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Sales from Ongoing Operations $ 355,189 $ 358,124 $ 725,882 $ 711,093 Sales from Businesses Sold -- 7,702 -- 15,345 ------------ ------------ ------------ ------------ Total Net Sales $ 355,189 $ 365,826 $ 725,882 $ 726,438 Cost of Sales 269,914 264,416 543,106 524,959 Selling, Administrative and General Expenses 66,715 64,017 133,168 127,965 Other Charges (Credits): Interest Expense 7,431 5,709 15,279 11,334 Net Foreign Currency (Gain) Loss (166) (464) (349) (832) Other Expense - Net 301 (1,006) 1,806 389 ------------ ------------ ------------ ------------ Income Before Taxes 10,994 33,154 32,872 62,623 Income Tax Expense 3,981 13,002 11,894 24,071 ------------ ------------ ------------ ------------ Net Income 7,013 20,152 20,978 38,552 Dividend on Preferred Stock, Net of Tax 775 875 1,570 1,781 ------------ ------------ ------------ ------------ Net Income Available to Common Shareholders $ 6,238 $ 19,277 $ 19,408 $ 36,771 ============ ============ ============ ============ Per Common Share Data: Basic Earnings $ 0.18 $ 0.56 $ 0.57 $ 1.06 Diluted Earnings 0.18 0.53 0.56 1.01 Shares Outstanding: Average Outstanding 34,221,922 34,634,937 34,200,352 34,774,715 Average Diluted 34,475,450 37,928,410 37,086,023 37,975,491 Actual End of Period 34,225,699 34,632,263 34,225,699 34,632,263 See Accompanying Notes to Condensed Consolidated Financial Statements 2 3 CONDENSED CONSOLIDATED BALANCE SHEET FERRO CORPORATION AND SUBSIDIARIES JUNE 30, 2001 AND DECEMBER 31, 2000 (Dollars in Thousands) (Unaudited) (Audited) 2001 2000 ---------- ---------- ASSETS Current Assets: Cash and Cash Equivalents $ 13,721 $ 777 Net Receivables 154,960 189,014 Inventories 170,990 189,639 Other Current Assets 64,481 63,798 ---------- ---------- Total Current Assets 404,152 443,228 Net Property, Plant & Equipment 418,532 425,728 Unamortized Intangible Assets 194,263 196,279 Other Assets 58,176 61,770 ---------- ---------- $1,075,123 $1,127,005 ========== ========== LIABILITIES Current Liabilities: Notes and Loans Payable $ 34,149 $ 65,865 Accounts Payable, Trade 135,434 155,244 Other Current Liabilities 141,598 143,986 ========== ========== Total Current Liabilities 311,181 365,095 Long - Term Debt 361,377 350,781 Other Liabilities 99,612 101,971 Shareholders' Equity 302,953 309,158 ---------- ---------- $1,075,123 $1,127,005 ========== ========== See Accompanying Notes to Condensed Consolidated Financial Statements 3 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FERRO CORPORATION AND SUBSIDIARIES SIX MONTHS ENDED JUNE 30 (UNAUDITED) (UNAUDITED) (DOLLARS IN THOUSANDS) 2001 2000 --------- ---------- Net Cash Provided from Operating Activities ................ $ 44,840 $ 47,966 Cash Flow from Investing Activities: Capital Expenditures for Plant and Equipment ............ (23,906) (23,241) Other ................................................... (751) 14,370 -------- -------- Net Cash Used for Investing Activities ..................... (24,657) (8,871) Cash Flow from Financing Activities: Net Borrowings (Payments) Under Short-Term Lines ........ (31,244) (16,959) Asset Securitization .................................... 30,274 -- Proceeds from long-term debt ............................ 10,228 19,963 Purchase of Treasury Stock .............................. (5,753) (17,582) Cash Dividend Paid ...................................... (11,490) (11,878) Other Financing Activities .............................. 1,455 1,956 -------- -------- Net Cash (Used for) Provided by Financing Activities ....... (6,530) (24,500) Effect of Exchange Rate Changes on Cash .................... (709) (55) -------- -------- Increase in Cash and Cash Equivalents ...................... 12,944 14,539 Cash and Cash Equivalents at Beginning of Period ........... 777 7,114 -------- -------- Cash and Cash Equivalents at End of Period ................. $ 13,721 $ 21,653 ======== ======== Cash Paid During the Period for: Interest, net of amounts capitalized .................... $ 13,819 $ 10,249 Income Taxes ............................................ $ 5,925 $ 10,162 -------- -------- See Accompanying Notes to Condensed Consolidated Financial Statements 4 5 FERRO CORPORATION AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION The condensed consolidated interim financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000. The information furnished herein reflects all adjustments (consisting of normal recurring adjustments) which are, in the opinion of management, necessary for fair presentation of the results of operations for the interim periods. The results of the six months ended June 30, 2001 are not necessarily indicative of the results expected in subsequent quarters or for the full year. 2. COMPREHENSIVE INCOME Comprehensive income represents net income adjusted for foreign currency translation adjustments and pension liability adjustments. Comprehensive income was $2.5 million and $21.5 million for the three months ended June 30, 2001 and 2000, respectively and $9.1 million and $35.6 million for the six months ended June 30, 2001 and 2000 respectively. Accumulated other comprehensive income (loss) at June 30, 2001 and December 31, 2000 was ($97.5) million and ($85.7) million, respectively. 3. EARNINGS PER SHARE COMPUTATION THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 -------------------------- -------------------------- 2001 2000 2001 2000 ---------- ---------- ---------- ---------- Average Basic Shares Outstanding 34,221,922 34,634,937 34,200,352 34,774,715 Adjustments for Assumed Conversion of Convertible Preferred Stock and Common Stock Options 253,528 3,293,473 2,885,671 3,200,776 ---------- ---------- ---------- ---------- AVERAGE DILUTED SHARES 34,475,450 37,928,410 37,086,023 37,975,491 Basic earnings per share is computed as net income available to common shareholders divided by average basic shares outstanding. Diluted earnings per share is computed as net income adjusted for the tax effect associated with assumed conversion of preferred stock to common stock divided by average diluted shares outstanding. For the three months ended June 30, 2001, the assumed conversion of convertible preferred stock was anti-dilutive, and, accordingly, those shares were excluded from the diluted earnings per share computation. 4. CONTINGENT LIABILITIES On May 4, 1999, and December 16, 1999, the United States Environmental Protection Agency (U.S. EPA) issued Notices of Violation (NOVs) alleging that the Company violated various requirements of the Clean Air Act and related state laws in modifying and operating the Pyro-Chek process. The U.S. EPA has also submitted requests seeking information from the Company related to the alleged violations. The Company completed the sale of assets relating to the Pyro-Chek process and ceased production of Pyro-Chek in June 2000. The Company has been meeting with the U.S. EPA, the State of Indiana and local authorities and is engaged in negotiations intended to resolve the issues raised in the NOVs. The Company believes that it will resolve this matter in a manner that will not have a material adverse effect on the Company's financial position or results of operations. 5 6 In 2000, a wrongful death lawsuit was filed against Keil Chemical, a division of the Company, and is now pending in federal court in Indiana. Three negligence suits were filed against Keil Chemical, also in federal court in Indiana. These complaints generally allege that the Company was negligent and/or reckless in failing to control emissions, misrepresenting emissions levels to regulatory agencies, failing to warn nearby residents of the hazards posed by its emissions, and in emitting carcinogenic chemicals without a permit. The Company believes it has valid defenses to the allegations made in these suits and is vigorously defending its position. There are also pending against the Company and its consolidated subsidiaries various other lawsuits and claims. In the opinion of management, the ultimate liabilities resulting from such other lawsuits and claims will not materially affect the consolidated financial position or results of operations or liquidity of the Company. 5. REPORTING FOR SEGMENTS The Company's reportable segments are Coatings and Performance Chemicals. Coatings products include ceramics and color, industrial coatings and electronic materials. Performance Chemicals consists of polymer additives, performance and fine chemicals, plastic compounds and plastic colorants. The Company measures segment profit for internal reporting purposes as net operating profit before interest and tax. Excluded from net operating profit are certain unallocated corporate expenses. A complete reconciliation of segment income to consolidated income before tax is presented below. Sales to external customers are presented in the following chart. Inter-segment sales are not material. 6 7 FERRO CORPORATION AND SUBSIDIARIES SEGMENT DATA (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------- ------------------------- (Dollars in Thousands) 2001 2000 2001 2000 --------- --------- --------- --------- SEGMENT SALES Coatings $ 205,480 $ 225,902 $ 421,670 $ 445,237 Performance Chemicals 149,709 139,924 304,212 281,201 --------- --------- --------- --------- Total (1) $ 355,189 $ 365,826 $ 725,882 $ 726,438 ========= ========= ========= ========= SEGMENT INCOME Coatings $ 17,650 $ 25,039 $ 39,575 $ 50,753 Performance Chemicals 9,986 15,370 23,243 30,343 --------- --------- --------- --------- Total 27,636 40,409 62,818 81,096 Unallocated expenses 9,076 3,016 13,210 7,582 Interest expense 7,431 5,709 15,279 11,334 Foreign currency (gain) loss (166) (464) (349) (832) Other (income) expense 301 (1,006) 1,806 389 --------- --------- --------- --------- Income before taxes $ 10,994 $ 33,154 $ 32,872 $ 62,623 ========= ========= ========= ========= GEOGRAPHIC SALES United States $ 202,996 $ 214,175 $ 417,653 $ 423,388 International 152,193 151,651 308,229 303,050 --------- --------- --------- --------- Total (1) $ 355,189 $ 365,826 $ 725,882 $ 726,438 ========= ========= ========= ========= (1) Sales for the three and six months ended June 30, 2000, include sales from businesses sold of $7,702 and $15,345, respectively. Unallocated expenses consist primarily of corporate costs and charges associated with an employment cost reduction program implemented in the second quarter 2001. 6. ACQUISITIONS AND DIVESTITURES On April 24th, 2001 the Company signed an agreement to acquire certain businesses of dmc(2) Degussa Metals Catalysts Cerdec AG of Hanau, Germany (dmc(2)) from OM Group, Inc. of Cleveland, Ohio. Under the terms of the agreement, the Company would purchase the electronic materials, performance pigments, glass systems and Cerdec ceramics businesses of dmc(2) for 600 million euros (approximately $535 million) in cash. Annual sales for these businesses were approximately $517 million (unaudited) in 2000. The Company expects to finance the transaction with a new bank credit facility. 7 8 On July 30, 2001, the 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvement Act expired, allowing Ferro to proceed with the acquisition, subject to regulatory approval in a select number of European countries. The transaction is expected to close in the third quarter. 7. COST REDUCTION PROGRAM In the second quarter of 2001, the Company implemented an employment cost reduction program as an element of an overall cost reduction program in response to a general economic slowdown. The program included the elimination of approximately 200 manufacturing and general overhead positions and the closure of two small manufacturing operations whose production was transferred to more efficient locations. Pursuant to the program, the Company incurred a non-recurring pre-tax charge of $6.9 million, which included $6.2 million for severance, $0.4 million for asset impairment and $0.3 million of other costs. Severance costs were included in both cost of sales and selling, administrative and general expenses for $2.0 million and $4.2 million, respectively. Through June 30, 2001, the amount of severance costs actually paid was $2.0 million and 100 people had actually been terminated. 8. ACCOUNTING PRONOUNCEMENTS Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities," (FAS 133) and as amended by Statements 137 and 138. The standards require that derivatives be measured at fair value and be recorded as assets or liabilities on the balance sheet. Gains or losses resulting from changes in fair values are accounted for dependent upon the use of the derivative and whether it qualifies for hedge accounting. The adoption of FAS 133 did not have a material effect on the Company's financial position or results of operations. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Comparison of the Three Months Ended June 30, 2001 and 2000. Second quarter 2001 total net sales of $355.2 million were 2.9% lower than the $365.8 million of sales for the comparable 2000 period. Sales declined 9.0% in the Coatings segment and increased 7.0% in the Performance Chemicals segment. Sales from ongoing operations for the quarter declined 0.8% compared with sales for the second quarter of 2000, excluding sales from businesses sold in 2000. Overall volume increased approximately 4.4% in the quarter, including the contribution of acquisitions. Core volumes were down in most US markets due to broad economic weakness, particularly in durable goods markets such as plastics, PVC, appliance and automotive. Weaker foreign currencies together with divestitures negatively impacted sales by approximately $17.2 million. Gross margins were 24.0% of sales compared to 27.7% for the comparable 2000 period. The lower margins were driven by a decline in core volumes, which led to lower capacity utilization. In addition, the company reduced inventories by approximately 10% during the quarter -- also contributing to the lower capacity utilization. A charge for a payroll cost reduction program also reduced gross margins by 0.6 %. Selling, administrative and general expenses were $66.7 million in the second quarter 2001, compared to $64.0 million in the second quarter 2000. Charges for the aforementioned payroll cost reduction program added $4.2 million to SG&A for the quarter. Excluding this charge, SG&A was reduced by $1.5 million compared to the prior year. Earnings per share were $0.31, before charges of $6.9 million or $0.13 per share after-tax for a previously mentioned employment cost reduction program, compared with $0.53 in the prior year period. Diluted earnings per share, including the charges related to the cost reduction program, were $0.18 in the current quarter. 8 9 QUARTERLY SEGMENT RESULTS Sales in the Coatings segment were $205.5 million compared with $225.9 million in the second quarter of 2000. Negative foreign currency translation and lower volume in the United States led to the decline in sales. Markets such as appliance and automotive were weak during the quarter, particularly in the United States. Additionally, key markets for electronic materials trended lower throughout the quarter. Segment income was $17.7 million compared with $25.0 million in the second quarter of 2000. Coatings profitability declined due to negative foreign currency translation, lower sales volume and higher costs for energy and dollar-based raw materials in Europe. The previously mentioned inventory reduction programs lowered capacity utilization also contributing to the lower profitability in the segment. Performance Chemicals sales increased 7.0 % to $149.7 million compared to $139.9 million in the second quarter of 2000. Sales increased primarily due to two key acquisitions made within the past year. This was partially offset by lower volume in polymer additives and plastics. Performance Chemicals segment income for the quarter was $10.0 million compared to $15.4 million in the second quarter of 2000. Margins declined primarily as a result of lower volume, which led to lower capacity utilization, as markets such as plastics, PVC, appliance and automotive reflected the general slowdown in the U.S. economy. GEOGRAPHIC SALES Sales in the United States were $203.0 million for the three months ended June 30, 2001 compared to $214.2 million for the three months ended June 30, 2000. Sales declined in the region as a result of weakness in the U.S. durable goods markets. International sales were $152.2 million for the three months ended June 30, 2001, compared to $151.7 million in the three months ended June 30, 2000. Foreign currency translation had a significant negative impact on sales reported for international operations. Comparison of the Six Months Ended June 30, 2001 and 2000 Net sales for the six months ended June 30, 2001 of $725.9 million were essentially the same as sales of $726.4 million for the comparable 2000 period. Weak U.S. durable goods markets and a lower euro combined to reduce sales in the 2001 period. Gross margin as a percent of sales was 25.2% compared to 27.7% for the comparable 2000 period. Lower gross margins were a result of sales declines in the United States, inventory reductions that reduced capacity utilization, higher energy costs and severance charges related to a payroll cost reduction program. Selling, administrative and general expenses were $133.2 million compared to $128.0 million for the first half of 2000. SG&A costs associated with acquisitions made during the past year and $4.2 million for severance charges related to a payroll cost reduction program resulted in higher costs during the 2001 period. Diluted earnings per share were $0.56 after the $0.13 after tax charge taken during the second quarter, down from $1.01 for the 2000 first half. SIX-MONTH SEGMENT RESULTS For the first six months of 2000, sales in the Coatings segment decreased 5.3% to $421.7 million, compared to sales of $445.2 million in the 2000 period. Sales decreased as a result of lower volumes in the United States and continuing weakness of the euro. Foreign currency translation reduced segment sales by $15.0 million in the 2001 period. Segment income was $39.6 million compared with $50.8 million recorded in the first six months of 2000. Lower segment earnings were a result of lower volumes in the United States, weakening of the euro and reduced capacity utilization in connection with the Company's inventory reduction programs. Performance Chemicals' sales were $304.2 million, up 8.2% from sales of $281.2 million for the first six months of 2000. Acquisitions completed in 2000 were the primary driver of the higher sales in the 2001 period. Segment income was $23.2 million compared to $30.3 million in the first half of 2000. Continuing weakness in the U.S. plastics and PVC markets resulted in lower earnings in the 2001 period. 9 10 GEOGRAPHIC SALES Sales in the United States were $417.7 million for the six months ended June 30, 2001 compared to $423.4 million for the six months ended June 30, 2000. Sales in the region were driven lower by a slowing in the U.S. economy. International sales edged slightly higher to $308.2 million for the six months ended June 30, 2001, compared to $303.1 million in the six months ended June 30, 2000. Although sales growth was better than in the 2000 period, negative foreign currency translation had an $18.2 million negative impact on sales. OUTLOOK Given current market trends, the Company does not anticipate that the economic picture will improve in the near future but remains cautiously optimistic that it will see some improvement late in the second half of the year. The Company has implemented cost control measures and a program to reduce working capital to mitigate, in part, the impact of economic conditions on results. LIQUIDITY AND CAPITAL RESOURCES The Company's liquidity requirements include capital investments, working capital requirements, interest service and acquisitions. The Company expects to be able to meet its working capital, interest service and capital investment needs from cash and cash equivalents, cash flow from operations and, if necessary, use of its revolving credit facility or long-term borrowings. The Company has available a $300.0 million five-year revolving credit facility with seven domestic banks. The Company had borrowed $206.0 million under this facility as of June 30, 2001. The Company is actively pursuing its acquisition strategy, and may from time to time use its revolving credit facility or alternate financing arrangements, including divestitures, to fund acquisitions. The Company also has $245.0 million available under a universal shelf registration pursuant to which various types of public securities may be issued. On April 24th, 2001, the Company signed an agreement to acquire certain businesses of Degussa Metals Catalysts Cerdec AG of Hanau, Germany (dmc2) from OM Group, Inc. of Cleveland, Ohio. Under the terms of the agreement, the Company would purchase the electronic materials, performance pigments, glass systems and Cerdec ceramics businesses of dmc2 for 600 million euros (approximately $535 million) in cash. Annual sales for these businesses were approximately $517 million (unaudited) in 2000. The Company expects to finance the transaction with a new bank credit facility and issuance of debt securities in the long-term capital markets. Net cash provided by operating activities for the six months ended June 30, 2001 was $44.8 million, compared to the $48.0 million recorded in the first six months of 2000. Cash used for investing activities was $24.7 million in 2001 and $8.9 million in 2000. The 2000 period reflects proceeds from the sale of a business in the second quarter of 2000. Net cash used for financing activities was $6.5 million in the 2001 period compared to $24.5 million in 2000 due to higher volume of share repurchase in the 2000 period. ENVIRONMENTAL Refer to Note 4, the Condensed Consolidated Financial Statements included herein for a description of the status of environmental matters. IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board issued Statement No. 141, "Business Combinations," and Statement No. 142, "Goodwill and Other Intangible Assets." Statement 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001, as well as all purchase method business combinations completed after June 30, 2001. Statement 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized but, instead, tested for impairment at least annually in accordance with the provisions of Statement 142. The Company is required to adopt the provisions of Statement 141 immediately, and Statement 142 effective January 1, 2002. 10 11 As of the date of adoption, the Company expects to have unamortized goodwill in the amount of approximately $189 million, which will be subject to the transition provisions of Statement 141 and 142. Amortization expense related to goodwill was approximately $5.6 million and $3.9 million for the year ended December 31, 2000, and the six months ended June 30, 2001, respectively. The Company is currently studying the effects of adopting the new rules, including whether any transitional impairment losses will be required. FORWARD-LOOKING STATEMENTS Certain statements contained in this Management's Discussion and Analysis and elsewhere in this quarterly report on Form 10-Q reflect the Company's current expectations with respect to the future performance of the Company and may constitute "forward-looking statements" within the meaning of the federal securities laws. These statements are subject to a variety of uncertainties, unknown risks and other factors concerning the Company's operations and business environment, and actual events or results may differ materially from the events or results discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to: the successful closing and integration of the transaction to acquire certain dmc(2) businesses from OM Group, Inc.; the success of the Company's acquisition program; market acceptance of new product introductions; changes in customer requirements, markets or industries served; changing economic conditions; changes in foreign exchange rates; changes in the prices of major raw materials; significant technological or competitive developments; and the impact of environmental proceedings. ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FACTORS. There have been no material changes in market risk exposures during the first three months of 2001 that affect the disclosures presented on pages 21-22 of the company's annual report to shareholders for the year ended December 31, 2000, which disclosure is incorporated here by reference. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. Legal proceedings were reported in the Company's Form 10-Q for the quarter ended March 31, 2000. ITEM 2 - CHANGE IN SECURITIES. No change. ITEM 3 - DEFAULT UPON SENIOR SECURITIES. None. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5 - OTHER INFORMATION. None. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. (a) The exhibits listed in the attached Exhibit Index are filed pursuant to Item 6(a) of the Form 10-Q. (b) The Company has not filed any reports on Form 8-K for the quarter ended June 30, 2001. 11 12 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FERRO CORPORATION (Registrant) Date: August 14, 2001 /s/ HECTOR R. ORTINO ------------------------------------------- Hector R. Ortino Chairman and Chief Executive Officer Date: August 14, 2001 /s/ BRET W. WISE ------------------------------------------- Bret W. Wise Senior Vice President and Chief Financial Officer 12 13 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. (Asterisk denotes exhibits filed with this report). EXHIBIT: (3) Articles of Incorporation and by-laws (a) Eleventh Amended Articles of Incorporation. (Reference is made to Exhibit (3)(a) to Ferro Corporation's Quarterly Report on Form 10-Q for the three months ended June 30, 1998, which Exhibit is incorporated here by reference.) (b) Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed December 28, 1994. (Reference is made to Exhibit (3)(b) to Ferro Corporation's Quarterly Report on Form 10-Q for the three months ended June 30, 1998, which Exhibit is incorporated here by reference.) (c) Certificate of Amendment to the Eleventh Amended Articles of Incorporation of Ferro Corporation filed January 19, 1998. (Reference is made to Exhibit (3)(c) to Ferro Corporation's Quarterly Report on Form 10-Q for the three months ended June 30, 1998, which Exhibit is incorporated here by reference.) (d) Amended Code of Regulations. (Reference is made to Exhibit (3)(d) to Ferro Corporation's Quarterly Report on Form 10-Q for the three months ended June 30, 1998, which Exhibit is incorporated here by reference.) (4) Instruments defining rights of security holders, including indentures (a) Revolving Credit Agreement by and between Ferro Corporation and seven commercial banks dated May 9, 2000. (Reference is made to Exhibit 4(a) to Ferro Corporation's quarterly report on Form 10-Q for the three months ended March 31, 2000, which Exhibit is incorporated here by reference.) (b) Amended and Restated Shareholder Rights Agreement between Ferro Corporation and National City Bank, Cleveland, Ohio, as Rights Agent, dated as of December 10, 1999. (Reference is made to Exhibit 4(k) to Ferro Corporation's Form 10-K for the year ended December 31, 1999, which Exhibit is incorporated here by reference.) (c) The rights of the holders of Ferro's Debt Securities issued and to be issued pursuant to an Indenture between Ferro Corporation and Society National Bank, as Trustee, are described in the form of Indenture dated May 1, 1993. (Reference is made to Exhibit 4(j) to Ferro Corporation's Form 10-Q for the three months ended June 30, 1993, which Exhibit is incorporated here by reference.) (d) The rights of the holders of Ferro's Debt Securities issued and to be issued pursuant to a Senior Indenture between Ferro Corporation and Chase Manhattan Trust Company, National Association, as Trustee, are described in the Senior Indenture, dated March 25, 1998. (Reference is made to Exhibit 4 (c) to Ferro Corporation's Quarterly Report on Form 10-Q for the three months ended March 31, 1998, which Exhibit is incorporated here by reference.) (e) Form of Security (7 1/8% Debentures due 2028). (Reference is made to Exhibit 4(a-1) to Ferro Corporation's Form 8-K filed March 31, 1998, which Exhibit is incorporated here by reference.) 13 14 (10) Material Agreements (a) Change of Control Agreements The Company has entered into change in control agreements with the following officers of the Company, which are substantially identical in all material respects to the form of change in control agreement filed as Exhibit 10(j) to the Company's Form 10-K for the year ended December 31, 1999. James C. Bays David G. Campopiano *(b) Heads of Agreement Ferro Corporation and OM Group Inc. entered into a Heads of Agreement dated as of April 23, 2001, pursuant to which Ferro Corporation has agreed to purchase and OM Group Inc. has agreed to sell certain businesses and operations which OM Group Inc. acquired from dmc(2) Degussa Metals Catalysts Cerdec AG pursuant to an agreement among OM Group Inc. and dmc(2) Degussa Metals Catalysts Cerdec AG and its parent company, Degussa AG. *(11) Computation of Earnings Per Share *(12) Ratio of Earnings to Fixed Charges 14