10-Q

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 June 30, 2012

or

¨ 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	34-0217820
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
6060 Parkland Boulevard Mayfield Heights, OH	44124
(Address of principal executive offices)	(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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨ (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

At June 30, 2012, there were 86,569,612 shares of Ferro Common Stock, par value $1.00, outstanding.

TABLE OF CONTENTS

	Page
PART I
Item 1. Financial Sta`tements (Unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
Item 3. Quantitative and Qualitative Disclosures about Market Risk		28
Item 4. Controls and Procedures		29
PART II
Item 1. Legal Proceedings		30
Item 1A. Risk Factors		30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		30
Item 3. Defaults Upon Senior Securities		30
Item 4. Mine Safety Disclosures		30
Item 5. Other Information		31
Item 6. Exhibits		31
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2
EX-101 Instance Document
EX-101 Schema Document
EX-101 Calculation Linkbase Document
EX-101 Labels Linkbase Document
EX-101 Presentation Linkbase Document
EX-101 Definition Linkbase Document

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

	Three months ended June 30,						Six months ended June 30,
	2012			2011			2012			2011
	(Dollars in thousands, except per share amounts)
Net sales	$	481,505		$	593,974		$	947,895		$	1,166,983
Cost of sales		393,660			479,627			771,727			932,310
Gross profit		87,845			114,347			176,168			234,673
Selling, general and administrative expenses		74,645			73,548			152,330			150,366
Restructuring and impairment charges		4,728			1,545			5,039			3,175
Other expense (income):
Interest expense		6,848			7,352			13,588			14,178
Interest earned		(51	)		(69	)		(135	)		(143	)
Foreign currency (gains) losses, net		(221	)		1,013			(77	)		2,323
Miscellaneous expense (income), net		1,841			(124	)		2,235			394
Income before income taxes		55			31,082			3,188			64,380
Income tax expense		2,573			11,461			4,292			21,568
Net (loss) income		(2,518	)		19,621			(1,104	)		42,812
Less: Net income attributable to noncontrolling interests		330			232			454			533
Net (loss) income attributable to Ferro Corporation		(2,848	)		19,389			(1,558	)		42,279
Dividends on preferred stock		—			—			—			(165	)
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389		$	(1,558	)	$	42,114
(Loss) earnings per share attributable to Ferro Corporation common shareholders:
Basic (loss) earnings per share	$	(0.03	)	$	0.23		$	(0.02	)	$	0.49
Diluted (loss) earnings per share		(0.03	)		0.22			(0.02	)		0.48

See accompanying notes to condensed consolidated financial statements.

3

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Comprehensive (Loss) Income

	Three months ended June 30,					Six months ended June 30,
	2012			2011		2012			2011
	(Dollars in thousands)
Net (loss) income	$	(2,518	)	$	19,621	$	(1,104	)	$	42,812
Other comprehensive (loss) income, net of tax:
Foreign currency translation		(6,285	)		4,872		(6,261	)		10,451
Postretirement benefit liabilities		4,033			3,459		5,925			2,968
Total comprehensive (loss) income		(4,770	)		27,952		(1,440	)		56,231
Less: Comprehensive income attributable to noncontrolling interests		281			301		403			649
Comprehensive (loss) income attributable to Ferro Corporation	$	(5,051	)	$	27,651	$	(1,843	)	$	55,582

See accompanying notes to condensed consolidated financial statements.

4

Ferro Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
ASSETS
Current assets
Cash and cash equivalents	$	25,367		$	22,991
Accounts receivable, net		353,076			306,775
Inventories		217,300			228,813
Deferred income taxes		17,277			17,395
Other receivables		32,437			37,839
Other current assets		13,715			17,086
Total current assets		659,172			630,899
Other assets
Property, plant and equipment, net		367,184			379,336
Goodwill		215,693			215,601
Amortizable intangible assets, net		13,651			11,056
Deferred income taxes		114,789			117,658
Other non-current assets		87,128			86,101
Total assets	$	1,457,617		$	1,440,651
LIABILITIES AND EQUITY
Current liabilities
Loans payable and current portion of long-term debt	$	45,868		$	11,241
Accounts payable		214,195			214,460
Accrued payrolls		34,659			31,055
Accrued expenses and other current liabilities		68,246			67,878
Total current liabilities		362,968			324,634
Other liabilities
Long-term debt, less current portion		295,844			298,082
Postretirement and pension liabilities		195,366			215,732
Other non-current liabilities		19,493			19,709
Total liabilities		873,671			858,157
Equity
Ferro Corporation shareholders’ equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 86.6 million shares outstanding in 2012 and 2011		93,436			93,436
Paid-in capital		323,441			320,882
Retained earnings		392,078			393,636
Accumulated other comprehensive loss		(82,360	)		(82,075	)
Common shares in treasury, at cost		(152,904	)		(153,617	)
Total Ferro Corporation shareholders’ equity		573,691			572,262
Noncontrolling interests		10,255			10,232
Total equity		583,946			582,494
Total liabilities and equity	$	1,457,617		$	1,440,651

See accompanying notes to condensed consolidated financial statements.

5

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Equity

	Ferro Corporation Shareholders
	Common Shares in Treasury						Common		Paid-in			Retained			Accumulated Other Comprehensive			Non-controlling			Total
	Shares			Amount			Stock		Capital			Earnings			(Loss) Income			Interests			Equity
	(In thousands)
Balances at December 31, 2010		7,242		$	(164,257	)	$	93,436	$	323,015		$	362,164		$	(50,949	)	$	10,771		$	574,180
Net income													42,279						533			42,812
Other comprehensive income																13,303			116			13,419
Cash dividends on preferred stock													(165	)								(165	)
Stock-based compensation transactions		(376	)		10,583					(5,493	)											5,090
Distributions to noncontrolling interests																			(688	)		(688	)
Balances at June 30, 2011		6,866		$	(153,674	)	$	93,436	$	317,522		$	404,278		$	(37,646	)	$	10,732		$	634,648
Balances at December 31, 2011		6,865		$	(153,617	)	$	93,436	$	320,882		$	393,636		$	(82,075	)	$	10,232		$	582,494
Net (loss) income													(1,558	)					454			(1,104	)
Other comprehensive loss																(285	)		(51	)		(336	)
Stock-based compensation transactions		1			713					2,559												3,272
Distributions to noncontrolling interests																			(380	)		(380	)
Balances at June 30, 2012		6,866		$	(152,904	)	$	93,436	$	323,441		$	392,078		$	(82,360	)	$	10,255		$	583,946

See accompanying notes to condensed consolidated financial statements.

6

Ferro Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

	Six months ended June 30,
	2012			2011
	(Dollars in thousands)
Cash flows from operating activities
Net cash provided by (used for) operating activities	$	5,178		$	(20,758	)
Cash flows from investing activities
Capital expenditures for property, plant and equipment		(35,508	)		(31,817	)
Proceeds from sale of assets		1,192			2,374
Other investing activities		436			193
Net cash used for investing activities		(33,880	)		(29,250	)
Cash flows from financing activities
Net borrowings under loans payable		34,906			57,570
Proceeds from long-term debt		212,996			382,219
Principal payments on long-term debt		(215,174	)		(381,771	)
Redemption of convertible preferred stock		—			(9,427	)
Cash dividends paid		—			(165	)
Other financing activities		(1,060	)		(856	)
Net cash provided by financing activities		31,668			47,570
Effect of exchange rate changes on cash and cash equivalents		(590	)		771
Increase (decrease) in cash and cash equivalents		2,376			(1,667	)
Cash and cash equivalents at beginning of period		22,991			29,035
Cash and cash equivalents at end of period	$	25,367		$	27,368
Cash paid during the period for:
Interest	$	13,196		$	12,575
Income taxes		2,098			14,715

See accompanying notes to condensed consolidated financial statements.

7

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, 2011.

Operating results for the three and six months ended June 30, 2012, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, 2012.

2. Recent Accounting Pronouncements

Accounting Standards Adopted in the Six Months Ended June 30, 2012

On January 1, 2012, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, (“ASU 2011-04”), which is codified in ASC Topic 820, Fair Value Measurement. This pronouncement changes certain fair value measurement guidance and expands certain disclosure requirements. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-05, Presentation of Comprehensive Income, (“ASU 2011-05”) and ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, (“ASU 2011-12”), which are codified in ASC Topic 220, Comprehensive Income. ASU 2011-05 requires companies to present items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or two separate but consecutive statements. ASU 2011-12 indefinitely defers certain provision of ASU 2011-05 that required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. Adoption of these pronouncements did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-08, Testing Goodwill for Impairment, (“ASU 2011-08”), which is codified in ASC Topic 350, Intangibles—Goodwill and Other. This pronouncement permits companies testing goodwill for impairment to first assess qualitative factors to determine whether the two-step impairment test is required. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, (“ASU 2011-11”), which is codified in ASC Topic 210, Balance Sheet. This pronouncement contains new disclosure requirements about a company’s right of setoff and related arrangements associated with its financial and derivative instruments. ASU 2011-11 will be effective for our fiscal year that begins January 1, 2013, and is to be applied retrospectively. We do not expect that adoption of this pronouncement will have a material effect on our consolidated financial statements.

8

3. Inventories

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Raw materials	$	78,489	$	78,199
Work in process		41,736		42,111
Finished goods		97,075		108,503
Total inventories	$	217,300	$	228,813

In the production of some of our products, we use precious metals, some of 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 $1.7 million and $2.7 million for the three months ended June 30, 2012 and 2011, respectively, and were $3.6 million and $4.7 million for the six months ended June 30, 2012 and 2011, respectively. We had on hand precious metals owned by participants in our precious metals consignment program of $178.1 million at June 30, 2012, and $195.0 million at December 31, 2011, measured at fair value based on market prices for identical assets.

4. Property, Plant and Equipment

Property, plant and equipment is reported net of accumulated depreciation of $600.6 million at June 30, 2012, and $599.1 million at December 31, 2011. Unpaid capital expenditure liabilities, which are noncash investing activities, were $6.2 million at June 30, 2012, and $7.3 million at June 30, 2011.

5. Debt

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

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Loans payable to banks	$	7,239	$	404
Domestic accounts receivable asset securitization program		30,000		—
International accounts receivable sales programs		6,486		8,150
Current portion of long-term debt		2,143		2,687
Loans payable and current portion of long-term debt	$	45,868	$	11,241

Long-term debt consisted of the following:

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
7.875% Senior Notes	$	250,000		$	250,000
6.50% Convertible Senior Notes, net of unamortized discounts		33,942			33,537
Revolving credit facility		5,529			7,706
Capital lease obligations		3,736			4,459
Other notes		4,780			5,067
Total long-term debt		297,987			300,769
Current portion of long-term debt		(2,143	)		(2,687	)
Long-term debt, less current portion	$	295,844		$	298,082

9

Receivable Sales Programs

We have an asset securitization program for Ferro’s U.S. trade accounts receivable. We sell interests in our domestic receivables to various purchasers, and we may obtain up to $50.0 million in the form of cash or letters of credit. Advances received under this program are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. In the second quarter of 2012, we extended the maturity of this credit facility through May 2013. At June 30, 2012, advances received of $30.0 million were secured by $110.2 million of accounts receivable, and based on available and qualifying receivables, $20.0 million of additional borrowings were available under the program. The interest rate under this program is the sum of (A) either (1) commercial paper rates, (2) LIBOR rates, or (3) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At June 30, 2012, the interest rate was 0.6%.

We also have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At June 30, 2012, the commitments supporting these programs totaled $17.7 million, the advances received of $6.5 million were secured by $14.4 million of accounts receivable, and based on available and qualifying receivables, $5.7 million of additional borrowings were available under the programs. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At June 30, 2012, the weighted-average interest rate was 2.1%.

7.875% Senior Notes

The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.

The Senior Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The Senior Notes contain certain affirmative and negative covenants customary for high-yield debt securities, including, but not limited to, restrictions on our ability to incur additional debt, create liens, pay dividends or make other distributions or repurchase our common stock and sell assets outside the ordinary course of business. At June 30, 2012, we were in compliance with the covenants under the Senior Notes’ indenture.

6.50% Convertible Senior Notes

The 6.50% Convertible Senior Notes (the “Convertible Notes”) were issued in 2008, bear interest at a rate of 6.5% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2013. We separately account for the liability and equity components of the Convertible Notes in a manner that, when interest cost is recognized in subsequent periods, will reflect our nonconvertible debt borrowing rate at the time the Convertible Notes were issued. The effective interest rate on the liability component is 9.5%. Under certain circumstances, holders of the Convertible Notes may convert their notes prior to maturity. The Convertible Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The principal amount outstanding was $35.1 million at June 30, 2012, and $35.1 million at December 31, 2011. At June 30, 2012, we were in compliance with the covenants under the Convertible Notes’ indenture.

10

Revolving Credit Facility

In 2010, we entered into the Third Amended and Restated Credit Agreement with a group of lenders for a five-year, $350 million multi-currency senior revolving credit facility (the “2010 Credit Facility”). In June 2012, we amended the 2010 Credit Facility (the “2012 Amended Credit Facility”) primarily to provide additional operating flexibility. The primary effects of the 2012 Amended Credit Facility were to:

• Increase the maximum permitted leverage ratio (as discussed in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011) from 3.50 to 4.25 for the third and fourth quarters of 2012;

• Eliminate the fixed charge coverage covenant;

• Include a quarterly interest coverage covenant (defined as the ratio of EBITDA to cash paid for interest expense and certain other financing expenses), which requires the Company to maintain an interest coverage ratio of not less than (i) 2.50 for the second and third quarters of 2012, (ii) 2.75 for the fourth quarter of 2012, and (iii) 3.00 thereafter;

• Include a maximum capital expenditures covenant limiting the capital expenditures of the Company to (i) $20.0 million for the three months ended June 30, 2012, (ii) $35.0 million for the six months ended September 30, 2012, (iii) $50.0 million for the nine months ended December 31, 2012, (iv) $65.0 million for the twelve months ended March 31, 2013, and (v) $65.0 million for the 2013 fiscal year and each fiscal year thereafter. Certain unused capital expenditures will be permitted to be carried forward to the following fiscal year; and

• Maintain limitations on our ability to make restricted payments, including common stock dividends (as discussed under the 2010 Credit Facility in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011).

The 2012 Amended Credit Facility matures on August 24, 2015, and is secured by substantially all of Ferro’s assets. After reductions for outstanding letters of credit, we had $340.5 million of additional borrowings available at June 30, 2012. The interest rate under the 2010 Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage. At June 30, 2012, the interest rate was 3.2%. At June 30, 2012, we were in compliance with the covenants of the 2012 Amended Credit Facility.

6. Financial Instruments

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

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

	June 30, 2012													December 31, 2011
	Carrying			Fair Value										Carrying
	Amount			Total			Level 1		Level 2			Level 3		Amount			Fair Value
	(Dollars in thousands)
Cash and cash equivalents	$	25,367		$	25,367		$	25,367	$	—		$	—	$	22,991		$	22,991
Other receivables		32,437			32,437			—		32,437			—		37,839			37,839
Short-term loans payable		(43,725	)		(43,725	)		—		(43,725	)		—		(8,554	)		(8,554	)
7.875% Senior Notes		(250,000	)		(248,750	)		—		(248,750	)		—		(250,000	)		(253,750	)
6.50% Convertible Senior Notes, net of unamortized discounts		(33,942	)		(35,241	)		—		(35,241	)		—		(33,537	)		(34,589	)
Revolving credit facility		(5,529	)		(5,388	)		—		(5,388	)		—		(7,706	)		(7,973	)
Other long-term notes payable		(4,780	)		(3,947	)		—		(3,947	)		—		(5,067	)		(4,184	)
Foreign currency forward contracts, net		4,075			4,075			—		4,075			—		6,225			6,225

11

The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair value of other receivables and short-term 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 values of the Senior Notes and the Convertible Notes are based on third-party estimated bid prices. The fair values of the revolving credit facility and the other long-term notes are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the debt.

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not designated as hedging instruments. 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 (gains) losses, net in the condensed consolidated statements of operations. The fair value of these contracts is based on market prices for comparable contracts. We had foreign currency forward contracts with notional amounts of $271.3 million at June 30, 2012, and $249.3 million at December 31, 2011.

The following table presents the effect on our consolidated statements of operations for the six months ended June 30th of foreign currency forward contracts:

	Amount of Gain (Loss) Recognized in Earnings
	2012			2011			Location of Gain (Loss) in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	9,533		$	(13,422	)	Foreign currency (gains) losses, net
The following table presents the fair value on our consolidated balance sheets of these foreign currency forward contracts:
	June 30, 2012			December 31, 2011			Balance Sheet Location
	(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts	$	5,068		$	6,491		Other current assets
Liability derivatives:
Foreign currency forward contracts	$	(993	)	$	(266	)	Other current assets

7. Income Taxes

Income tax expense for the six months ended June 30, 2012, was $4.3 million, or 134.6% of pre-tax income. In the first six months of 2011, we recorded income tax expense of $21.6 million, or 33.5% of pre-tax income. The increase in the effective tax rate was primarily due to an increase in pre-tax losses in jurisdictions with full valuation allowances for which no tax benefit is recognized.

8. Contingent Liabilities

We have recorded environmental liabilities of $11.5 million at June 30, 2012, and $11.6 million at December 31, 2011, for costs associated with the remediation of certain of our properties that have been contaminated, primarily a non-operating facility in Brazil. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring and the ultimate cost of required remediation.

There are various lawsuits and claims pending against the Company and its subsidiaries. We do not currently expect the ultimate liabilities, if any, and expenses related to such lawsuits and claims to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

12

9. Retirement Benefits

Information concerning net periodic benefit costs 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 June 30th follows:

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	4		$	8		$	426		$	562		$	—		$	—
Interest cost		4,866			5,120			1,302			1,492			397			483
Expected return on plan assets		(5,219	)		(5,165	)		(752	)		(837	)		—			—
Amortization of prior service cost (credit)		12			19			34			(34	)		(32	)		(101	)
Amortization of net loss (gain)		6,290			2,739			173			164			(231	)		(160	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	5,953		$	2,721		$	(289	)	$	1,347		$	134		$	222

Information concerning net periodic benefit costs 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 six months ended June 30th follows:

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	8		$	8		$	1,003		$	1,101		$	—		$	—
Interest cost		9,735			10,234			2,677			2,924			793			965
Expected return on plan assets		(10,315	)		(10,301	)		(1,505	)		(1,647	)		—			—
Amortization of prior service cost (credit)		24			37			1			(67	)		(65	)		(201	)
Amortization of net loss (gain)		10,304			5,974			368			325			(461	)		(320	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	9,756		$	5,952		$	1,072		$	2,636		$	267		$	444

Net periodic benefit cost for our U.S. pension plans increased from the effects of shorter amortization periods for the net losses of certain plans, lower discount rates, lower expected returns on plan assets, and worse than expected asset performance in 2011. Net periodic benefit cost for our non-U.S. pension plans decreased due to the curtailment of retirement benefit accumulations in the Netherlands. The effected employees in the Netherlands now receive benefits through a defined contribution plan.

10. Stock-Based Compensation

Our Board of Directors granted 0.7 million stock options, 0.6 million performance share units and 0.4 million deferred stock units during the first half of 2012 under our 2010 Long Term Incentive Plan. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock options and performance share units for grants made during the six months ended June 30, 2012:

	Stock Options		Performance Share Units
Weighted-average grant-date fair value	$	4.63	$	9.63
Expected life, in years		6.0		3.0
Risk-free interest rate		1.2% - 1.6%		0.4%
Expected volatility		81.1% - 82.4%		63.0%

We measure the fair value of deferred stock units based on the closing market price of our common stock on the date of the grant. The weighted-average fair value per unit for grants made during the six months ended June 30, 2012, was $6.79.

We recognized stock-based compensation expense of $3.8 million for the six months ended June 30, 2012, and $4.4 million for the six months ended June 30, 2011. At June 30, 2012, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $14.3 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2015.

13

11. Restructuring and Cost Reduction Programs

In the second quarter of 2012, we developed and initiated restructuring programs related to our Performance Coatings business in Europe. As a result of these programs, the Company expects to eliminate positions within the Performance Coatings sales, technical service, product development, manufacturing, supply chain and general administration organizations throughout Europe. The programs are subject to required consultations with employee representatives at the affected sites and other local legal requirements. The Company expects to record pre-tax charges of approximately $6 million, primarily related to employee severance. Charges associated with these programs were $4.6 million for the six months ended June 30, 2012.

The activities and accruals related to our restructuring and cost reduction programs are summarized below:

	Employee Severance			Other Costs			Asset Impairment			Total
	(Dollars in thousands)
Balance at December 31, 2011	$	218		$	3,419		$	—		$	3,637
Restructuring charges		4,888			87			64			5,039
Cash payments		(321	)		(502	)		—			(823	)
Non-cash items		42			(71	)		(64	)		(93	)
Balance at June 30, 2012	$	4,827		$	2,933		$	—		$	7,760

We expect to make cash payments to settle the remaining liability for employee termination benefits and other costs over the next twelve months, except where legal or contractual restrictions prevent us from doing so.

12. (Loss) Earnings Per Share

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

	Three months ended June 30,					Six months ended June 30,
	2012			2011		2012			2011
	(In thousands, except per share amounts)
Basic (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Basic (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.23	$	(0.02	)	$	0.49
Diluted (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Plus: Convertible preferred stock dividends, net of tax		—			—		—			103
Total	$	(2,848	)	$	19,389	$	(1,558	)	$	42,217
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Assumed exercise of stock options		—			268		—			293
Assumed satisfaction of stock unit award conditions		—			38		—			51
Assumed satisfaction of restricted share conditions		—			403		—			383
Assumed conversion of convertible preferred stock		—			—		—			264
Weighted-average diluted shares outstanding		86,294			86,868		86,263			87,058
Diluted (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.22	$	(0.02	)	$	0.48

The number of anti-dilutive or unearned shares, including shares related to contingently convertible debt, was 7.6 million for the three and six months ended June 30, 2012, and 5.3 million for the three and six months ended June 30, 2011.

14

13. Reporting for Segments

The Company has six reportable segments: Performance Coatings, Electronic Materials, Color and Glass Performance Materials, Polymer Additives, Specialty Plastics, and Pharmaceuticals. We have aggregated our Tile Coating Systems and Porcelain Enamel operating segments into one reportable segment, Performance Coatings, and aggregated our Glass Systems and Performance Pigments and Colors operating segments into one reportable segment, Color and Glass Performance Materials, based on their similar economic and operating characteristics.

We measure segment income for internal reporting purposes by excluding unallocated corporate expenses, restructuring and impairment charges, other expenses (income) and income taxes. During the first quarter of 2012, we refined the allocation of certain corporate expenses to the Company’s reportable segments, which aligns segment reporting to the current manner in which performance is evaluated, strategic decisions are made and resources are allocated. Unallocated corporate expenses consist primarily of executive employment costs, legacy pension and other benefit costs, certain professional fees, and costs associated with our global headquarters facility.

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

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)
Electronic Materials	$	90,741	$	180,362	$	162,437	$	382,709
Performance Coatings		157,315		163,481		309,829		300,181
Color and Glass Performance Materials		99,889		106,476		201,324		206,281
Polymer Additives		83,450		91,271		171,174		177,133
Specialty Plastics		44,151		46,510		91,207		89,139
Pharmaceuticals		5,959		5,874		11,924		11,540
Total net sales	$	481,505	$	593,974	$	947,895	$	1,166,983

Each segment’s income (loss) and reconciliations to income before income taxes follow. As a result of applying the refined allocations to prior periods, each segment’s income for the three and six months ended June 30, 2011, has been impacted as presented below.

	Three months ended June 30,						Six months ended June 30,
			2011							2011
	2012		Adjusted		As reported		2012			Adjusted		As reported
	(Dollars in thousands)
Electronic Materials	$	33	$	22,406	$	23,914	$	(4,657	)	$	53,154	$	56,503
Performance Coatings		9,699		10,497		11,329		17,758			16,844		18,734
Color and Glass Performance Materials		10,009		10,670		11,201		18,466			19,768		21,031
Polymer Additives		1,878		4,515		4,331		8,505			11,095		10,782
Specialty Plastics		3,806		2,827		2,810		8,454			4,699		4,719
Pharmaceuticals		620		945		759		1,807			2,271		1,915
Total segment income		26,045		51,860		54,344		50,333			107,831		113,684
Unallocated corporate expenses		12,845		11,061		13,545		26,495			23,524		29,377
Restructuring and impairment charges		4,728		1,545		1,545		5,039			3,175		3,175
Other expense, net		8,417		8,172		8,172		15,611			16,752		16,752
Income before income taxes	$	55	$	31,082	$	31,082	$	3,188		$	64,380	$	64,380

15

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

Overview

Market conditions and customer demand were mixed in our key markets during the second quarter of 2012. Demand for our conductive pastes used in solar cells improved from the first quarter of 2012, but remained lower than the prior-year quarter. Lower sales of our metal pastes, metal powders and surface finishing materials reduced overall sales in our Electronic Materials business and resulted in lower segment income. We also experienced a weakening of demand from customers in Europe as a result of sovereign debt issues and deteriorating macroeconomic conditions in the region. Demand from customers in the United States was generally stronger than in Europe, but the level of customer demand varied by application market.

Net sales declined by 19% compared with the second quarter of 2011, driven by a decline in sales of Electronic Materials products. In aggregate, changes in product pricing and mix reduced our overall sales by approximately 9 percentage points. Lower sales volume reduced sales by an additional 7 percentage points, and changes in foreign currency exchange rates reduced sales by 3 percentage points. The lower sales in Electronic Materials, including reduced sales of precious metals, was the primary contributor to both the price/mix and volume declines in the quarter. Sales volume was a positive contributor and price/mix was a negative contributor to the change in sales for the total of our businesses other than Electronic Materials, compared with the second quarter of 2011.

Gross profit declined in the 2012 second quarter compared with the prior-year quarter, primarily driven by the decline in sales of high-margin metal pastes, metal powders and surface finishing materials. Raw material costs increased compared with the prior-year quarter, but these changes had little net impact on gross profit as the added costs were offset by product price increases, in aggregate, across the Company.

Selling, general and administrative (“SG&A”) expenses during the 2012 second quarter increased relative to the 2011 second quarter primarily due to higher pension expense, healthcare benefit expense and costs related to an initiative to standardize and streamline our business processes and improve management information systems tools. Partially offsetting these SG&A expense increases were reductions in other SG&A expense categories including depreciation, business travel expenses and professional fees.

Restructuring and impairment charges increased during the quarter compared with the prior-year quarter as a result of restructuring initiatives in our Performance Coatings business in Europe. These new initiatives include consolidation of certain manufacturing and administrative activities within the region in order to reduce future costs.

Interest expense declined during the 2012 second quarter compared with the prior-year quarter. The decline in interest expense was primarily due to an increase in the amount of interest expense that was capitalized.

We recorded a net loss for the second quarter compared with net income in the 2011 second quarter as a result of lower net sales and the resulting decline in gross profit. Increased restructuring and impairment charges also contributed to the decline in profitability compared with the prior-year quarter.

Outlook

Our ability to forecast future financial performance is limited because of uncertainty surrounding customer demand and economic conditions in a number of key markets and regions around the world. Customer demand for our conductive solar pastes is difficult to forecast because of uncertainty in end-market demand and uncertainty in the customer adoption rate of our new products. Our visibility to future customer orders is limited. We expect demand for solar pastes and metal powders to improve during the second half of 2012, compared with the first half of the year, but the timing and strength of the improvement in customer demand is not known at this time.

Economic conditions in Europe are expected to be generally weaker in the coming quarters due to sovereign debt issues and other macroeconomic drivers. The growth in economic activity in Asia-Pacific, including China, appears to be slowing from the rate experienced earlier in 2012. Weakening economic conditions in Europe and slower growth in Asia may affect demand for our products sold to customers serving these regions, although the magnitude of these effects is difficult to estimate.

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, 2011.

If the timing and strength of the projected improvement in customer demand for our conductive solar pastes and other electronic materials are not achieved or the economic conditions in Europe continue to worsen, impairment of intangible assets, including goodwill, and our long-lived assets, particularly as they relate to our Electronic Materials segment, could result. At October 31, 2011, the date of our most recent goodwill impairment test, the fair value exceeded the carrying value of our Electronic Materials reporting unit by 51% on a goodwill balance of $152 million. The determination of fair value was based upon the average of the income approach and the market approach. Our estimate of fair value assumed a recovery of the demand for our electronic materials starting in the second half of 2012 and throughout 2013.

16

Results of Operations

Comparison of the three months ended June 30, 2012 and 2011

	Three months ended June 30,
	2012			2011			$ Change			% Change
	(Dollars in thousands, except per share amounts)
Net sales	$	481,505		$	593,974		$	(112,469	)		(18.9	)%
Cost of sales		393,660			479,627			(85,967	)		(17.9	)%
Gross profit		87,845			114,347			(26,502	)		(23.2	)%
Gross profit percentage		18.2	%		19.3	%
Selling, general and administrative expenses		74,645			73,548			1,097			1.5	%
Restructuring and impairment charges		4,728			1,545			3,183
Other expense (income):
Interest expense		6,848			7,352			(504	)
Interest earned		(51	)		(69	)		18
Foreign currency (gains) losses, net		(221	)		1,013			(1,234	)
Miscellaneous expense (income), net		1,841			(124	)		1,965
Income before income taxes		55			31,082			(31,027	)
Income tax expense		2,573			11,461			(8,888	)
Net (loss) income	$	(2,518	)	$	19,621		$	(22,139	)
Diluted earnings per share	$	(0.03	)	$	0.22		$	(0.25	)

Net sales declined by 18.9% for the three months ended June 30, 2012, compared with the second quarter of 2011. The primary driver of the sales decline was reduced customer demand for our Electronic Materials products, including our metal pastes, metal powders and surface finishing materials. Lower sales of precious metals accounted for approximately 57% of the overall sales decline, driven by reduced sales volume and lower prices for silver. In aggregate, changes in product pricing and mix reduced overall net sales by approximately 9 percentage points. Lower sales volume contributed an additional 7 percentage points to the sales decline. Changes in foreign currency exchange rates reduced sales by approximately 3 percentage points.

Gross profit declined during the 2012 second quarter as a result of lower net sales and changes in product mix. Gross profit percentage declined to 18.2% of net sales from 19.3% in the prior-year quarter. In aggregate, raw material costs increased by approximately $4 million compared with the second quarter of 2012 and these increased costs were offset by increased product prices. Charges, primarily related to residual costs at closed manufacturing sites involved in earlier restructuring initiatives, reduced gross profit by $0.7 million during the second quarter. Gross profit was reduced by $1.3 million during the second quarter of 2011, also due to residual costs at closed manufacturing sites.

Selling, general and administrative (“SG&A”) expenses increased by $1.1 million compared with the 2011 second quarter. Due primarily to reduced sales, SG&A expenses increased to 15.5% of net sales from 12.4% of net sales in the prior-year quarter. Increased pension expenses, healthcare benefit expenses for U.S. employees and expenses related to an initiative to streamline and standardize business processes and improve management information systems tools contributed to the higher SG&A expenses for the quarter. Partially offsetting these increases were declines in other SG&A expenses including depreciation expense, business travel costs and professional fees. SG&A expenses during the 2012 second quarter included charges of $1.0 million that were primarily related to residual expenses at sites that were closed during earlier restructuring initiatives and severance costs. SG&A expenses in the 2011 second quarter included charges of $1.4 million, primarily related to expenses at sites closed by earlier restructuring initiatives.

Restructuring and impairment charges increased to $4.7 million during the 2012 second quarter. The charges were primarily related to new restructuring initiatives in our Performance Coatings business in Europe.

Interest expense declined in the 2012 second quarter compared with the 2011 second quarter. Interest expense declined primarily as a result of an increase in the amount of interest expense that was capitalized.

17

We are exposed to the impact of exchange rate fluctuations on foreign currency positions arising from our international sales and operations. We manage these currency risks principally by entering into forward contracts. The carrying value of the open contracts at each quarter-end are adjusted to fair value and the resulting gains or losses are charged to income or expense during the period, partially offsetting the effect of changes in foreign currency exchange rates on the underlying positions.

We recorded miscellaneous expense, net, of $1.8 million during the 2012 second quarter. Included in miscellaneous expense during the 2012 second quarter was a loss of $0.8 million related to the sale of a mining operation in Argentina.

During the 2012 second quarter, we recognized tax expense of $2.6 million. We recorded income tax expense of $11.5 million in the second quarter of 2011. The effective tax rate for the 2012 second quarter is significantly higher than the rate in the second quarter of 2011 due to pre-tax losses in jurisdictions with full valuation allowances for which no tax benefit is recognized.

We recorded a net loss of $2.5 million in the quarter, compared with net income of $19.6 million in the prior-year quarter. The change was driven by reduced gross profit resulting from lower sales and higher restructuring charges.

	Three months ended June 30,
	2012		2011		$ Change			% Change
	(Dollars in thousands)
Segment Sales
Electronic Materials	$	90,741	$	180,362	$	(89,621	)		(49.7	)%
Performance Coatings		157,315		163,481		(6,166	)		(3.8	)%
Color and Glass Performance Materials		99,889		106,476		(6,587	)		(6.2	)%
Polymer Additives		83,450		91,271		(7,821	)		(8.6	)%
Specialty Plastics		44,151		46,510		(2,359	)		(5.1	)%
Pharmaceuticals		5,959		5,874		85			1.4	%
Total segment sales	$	481,505	$	593,974	$	(112,469	)		(18.9	)%
Segment Income
Electronic Materials	$	33	$	22,406	$	(22,373	)		(99.9	)%
Performance Coatings		9,699		10,497		(798	)		(7.6	)%
Color and Glass Performance Materials		10,009		10,670		(661	)		(6.2	)%
Polymer Additives		1,878		4,515		(2,637	)		(58.4	)%
Specialty Plastics		3,806		2,827		979			34.6	%
Pharmaceuticals		620		945		(325	)		(34.4	)%
Total segment income	$	26,045	$	51,860	$	(25,815	)		(49.8	)%

Electronic Materials Segment Results. Sales declined in Electronic Materials primarily as a result of reduced demand for our conductive pastes used in solar cell manufacturing and metal powders used in other electronics applications. Changes in volume reduced sales by $50 million, compared with the second quarter of 2011. Changes in product pricing and mix lowered sales by an additional $39 million. Sales of precious metals declined by $63 million due to lower sales volume of solar pastes and precious metal powders and as a result of lower precious metal prices. The costs of precious metals are passed through to our customers as an element of our product prices. Reduced sales of products produced in the United States and in Asia-Pacific accounted for most of the overall sales decline. Segment income declined due to a $23 million reduction in gross profit that was primarily the result of lower sales volume. SG&A expense declined by $0.3 million compared with the second quarter of 2011.

Performance Coatings Segment Results. Sales in Performance Coatings declined, driven by changes in exchange rates and changes in product pricing and mix. Increased sales volume offset a portion of the decline. Changes in foreign currency exchange rates reduced sales by $10 million while changes in product pricing and mix contributed an additional $8 million to the lower sales. Sales increased by $12 million due to increased sales volume. Sales declined primarily in Europe-Middle East-Africa and increased in the United States and Latin America. Segment income declined primarily as a result of a $1.3 million decline in gross profit that was partially offset by a $0.5 million decline in SG&A expense.

18

Color and Glass Performance Materials Segment Results. Sales declined in Color and Glass Performance Materials primarily as a result of changes in product pricing and mix as well as changes in exchange rates. These changes were partially offset by the effects of higher sales volume. Changes in product pricing and mix reduced sales by $10 million during the quarter. Changes in foreign currency exchange rates reduced sales by an additional $5 million. Higher sales volume offset approximately $9 million of the overall sales decline. Reduced sales in Europe-Middle East-Africa were the primary driver of the overall decline in sales as a result of lower demand for our pigments products. Segment income declined by $0.7 million compared with the prior-year quarter due to a $1.2 million increase in gross profit that was partially offset by a $0.5 million decline in SG&A expense.

Polymer Additives Segment Results. Sales declined in Polymer Additives driven by reduced volume. Reduced volume lowered sales by $8 million and changes in foreign currency exchange rates reduced sales by an additional $2 million. Changes in product prices and mix increased sales by $2 million. Sales declined in Europe-Middle East-Africa and in the United States compared with the prior-year quarter. The decline in Europe-Middle East-Africa reflected reduced market demand resulting from a weak macroeconomic environment in the region and reduced demand for certain plasticizer products due to changing environmental regulations. Segment income declined primarily due to reduced gross profit that resulted from lower sales and costs associated with planned maintenance shutdowns at two manufacturing locations.

Specialty Plastics Segment Results. Sales declined in Specialty Plastics primarily as a result of reduced sales volume and changes in exchange rates, partially offset by improved product pricing and mix. Reduced sales volume lowered sales by $3.8 million and changes in foreign currency exchange rates contributed an additional $1.5 million to the sales decline. Changes in product pricing and mix increased sales by $3 million. Reduced sales in Europe-Middle East-Africa were the primary driver of the sales decline, reflecting the weakening macroeconomic environment in the region. Segment income increased, primarily driven by higher gross profit that resulted from changes in product pricing.

Pharmaceuticals Segment Results. Sales increased slightly in Pharmaceuticals due to changes in product pricing and mix. Segment income declined primarily due to reduced gross profit.

	Three months ended June 30,
	2012		2011		$ Change			% Change
	(Dollars in thousands)
Geographic Revenues
United States	$	214,732	$	277,294	$	(62,562	)		(22.6	)%
International		266,773		316,680		(49,907	)		(15.8	)%
Total	$	481,505	$	593,974	$	(112,469	)		(18.9	)%

Net sales declined in both the United States and international regions compared with the prior-year quarter. In the 2012 second quarter, sales originating in the United States were 45% of total sales, compared with 47% of sales in the second quarter of 2011. The decline in U.S. sales was largely due to the reduced sales of our Electronic Materials products. Sales originating in the Asia-Pacific region declined, also primarily as a result of lower Electronic Materials sales. Sales in Europe-Middle East-Africa declined as a result of reduced customer demand resulting from a weakened macroeconomic environment in the region.

19

Comparison of the six months ended June 30, 2012 and 2011

	Six months ended June 30,
	2012			2011			$ Change			% Change
	(Dollars in thousands, except per share amounts)
Net sales	$	947,895		$	1,166,983		$	(219,088	)		(18.8	)%
Cost of sales		771,727			932,310			(160,583	)		(17.2	)%
Gross profit		176,168			234,673			(58,505	)		(24.9	)%
Gross profit percentage		18.6	%		20.1	%
Selling, general and administrative expenses		152,330			150,366			1,964			1.3	%
Restructuring and impairment charges		5,039			3,175			1,864
Other expense (income):
Interest expense		13,588			14,178			(590	)
Interest earned		(135	)		(143	)		8
Foreign currency (gains) losses, net		(77	)		2,323			(2,400	)
Miscellaneous expense, net		2,235			394			1,841
Income before income taxes		3,188			64,380			(61,192	)
Income tax expense		4,292			21,568			(17,276	)
Net (loss) income	$	(1,104	)	$	42,812		$	(43,916	)
Diluted earnings per share	$	(0.02	)	$	0.48		$	(0.50	)

Net sales declined by 18.8% for the six months ended June 30, 2012, compared with the first six months of 2011. The primary reason for the decline was reduced customer demand for our Electronic Materials products, including our metal pastes and powders. Lower sales of precious metals accounted for approximately 69% of the overall sales decline, driven by reduced sales volume and lower prices for silver. Net sales, in total, for all segments other than Electronic Materials were largely unchanged from the first six months of 2011. In aggregate, changes in product pricing and mix reduced overall net sales by approximately 9 percentage points. Lower sales volume accounted for an additional 8 percentage points of the sales decline. Changes in foreign currency exchange rates reduced sales by approximately 2 percentage point during the first six months of 2012.

Gross profit declined as a result of reduced sales and a change in product mix due to the decline in Electronic Materials sales. Gross profit percentage declined to 18.6% of net sales from 20.1% of net sales in the first six months of 2011. In aggregate, raw material costs increased by approximately $14 million compared with the first two quarters of 2011 and these costs were offset by increased product prices. Charges primarily related to residual costs at closed manufacturing sites involved in earlier restructuring initiatives reduced gross profit by $1.4 million during the first six months of 2012. Gross profit was reduced by charges of $2.9 million in the first six months of 2011. These charges were also primarily due to residual costs at closed manufacturing sites involved in prior-period restructuring initiatives.

Selling, general and administrative (“SG&A”) expenses increased by $2 million compared with the first six months of 2011. Due primarily to reduced sales, SG&A expenses increased to 16.1% of net sales compared with 12.9% of net sales in the prior-year period. Increased pension expenses, healthcare benefit expenses for U.S. employees and expenses related to an initiative to streamline and standardize business processes and improve management information systems tools contributed to higher SG&A expenses during the first six months of 2012. Partially offsetting these increases were declines in other SG&A expenses including depreciation expense, business travel costs and professional fees. SG&A expenses in the first six months of 2012 included charges of $2.7 million that were primarily related to residual expenses at sites that were closed during earlier restructuring initiatives and severance costs. SG&A expenses in the first six months of 2011 included charges of $2.5 million, primarily related to expenses at closed sites impacted by previous restructuring initiatives.

Restructuring and impairment charges increased to $5.0 million during the first six months of 2012. The charges were primarily related to a restructuring initiative in our Performance Coatings business in Europe.

Interest expense declined in the first six months of 2012 compared with the prior-year period. The lower expense primarily was a result of increased capitalized interest and lower average borrowings.

20

We are exposed to the impact of exchange rate fluctuations on foreign currency positions arising from our international sales and operations. We manage these currency risks principally by entering into forward contracts. The carrying value of the open contracts at each quarter-end are adjusted to fair value and the resulting gains or losses are charged to income or expense during the period, partially offsetting the effect of changes in foreign currency exchange rates on the underlying positions.

We recorded miscellaneous expense, net, of $2.2 million during the first six months of 2012. Included in miscellaneous expense was a loss of $0.8 million related to the sale of a mining operation in Argentina.

During the first six months of 2012, income tax expense was $4.3 million, or 135% of pre-tax income. In the first six months of 2011, we recorded tax expense of $21.6 million, or 33.5% of pre-tax income. The increase in the effective tax rate was primarily due to an increase in pre-tax losses in jurisdictions with full valuation allowances for which no tax benefit is recognized.

We recorded a net loss of $1.1 million in the first six months of 2012 compared with net income of $42.8 million in the prior-year period, primarily driven by lower sales and the resulting decline in gross profit.

	Six months ended June 30,
	2012			2011		$ Change			% Change
	(Dollars in thousands)
Segment Sales
Electronic Materials	$	162,437		$	382,709	$	(220,272	)		(57.6	)%
Performance Coatings		309,829			300,181		9,648			3.2	%
Color and Glass Performance Materials		201,324			206,281		(4,957	)		(2.4	)%
Polymer Additives		171,174			177,133		(5,959	)		(3.4	)%
Specialty Plastics		91,207			89,139		2,068			2.3	%
Pharmaceuticals		11,924			11,540		384			3.3	%
Total segment sales	$	947,895		$	1,166,983	$	(219,088	)		(18.8	)%
Segment Income (Loss)
Electronic Materials	$	(4,657	)	$	53,154	$	(57,811	)		NM
Performance Coatings		17,758			16,844		914			5.4	%
Color and Glass Performance Materials		18,466			19,768		(1,302	)		(6.6	)%
Polymer Additives		8,505			11,095		(2,590	)		(23.3	)%
Specialty Plastics		8,454			4,699		3,755			79.9	%
Pharmaceuticals		1,807			2,271		(464	)		(20.4	)%
Total segment income	$	50,333		$	107,831	$	(57,498	)		(53.3	)%

NM — Not meaningful

Electronic Materials Segment Results. Sales declined in Electronic Materials primarily as a result of reduced demand for our conductive pastes used in solar cells and metal powders used in other electronics applications. Changes in product pricing and mix reduced sales by approximately $116 million compared with the first six months of 2011. Changes in sales volume reduced sales by an additional $104 million. Sales of precious metals declined by $151 million due to lower sales volume of solar pastes and precious metal powders and as a result of lower precious metal prices. The costs of precious metals are passed through to our customers as an element of our product prices. The decline in sales was driven primarily by reduced sales of products produced in the United States and in Asia-Pacific. Segment income declined due to a $59 million decline in gross profit resulting from lower sales volume and reduced product pricing. SG&A expense declined by $1 million compared with the first six months of 2011.

Performance Coatings Segment Results. Sales increased in Performance Coatings primarily due to increased sales volume, which accounted for $26 million of the sales increase during the period. Partially offsetting this growth was a sales decline of $13 million due to changes in foreign currency exchange rates and a further decline of $3 million due to changes in product pricing and mix. Sales in the United States, Latin America and Asia-Pacific increased compared with the first six months of 2011. Sales in Europe-Middle East-Africa were largely unchanged as increased sales from our tile coatings plant in Egypt were offset by reduced demand in Europe resulting from a weaker macroeconomic environment. Segment income increased, driven by improved gross profit.

21

Color and Glass Performance Materials Segment Results. Sales declined in Color and Glass Performance Materials primarily due to changes in exchange rates, which reduced sales by approximately $7 million compared with the first six months of 2011. Changes in product pricing and mix increased sales by $2 million. Reduced sales of our pigments products in Europe-Middle East-Africa was the primary driver of the sales decline. Segment income declined as a result of a $3 million decline in gross profit that was partially offset by a $1 million reduction in SG&A expense. The decline in gross profit was driven by changes in product mix.

Polymer Additives Segment Results. Sales declined in Polymer Additives primarily due to reduced volume and changes in exchange rates that were only partially offset by changes in product pricing and mix. Reduced sales volume lowered sales by approximately $5 million and changes in foreign currency exchange rates contributed an additional $3 million to the lower overall sales. Changes in product pricing and mix increased sales by $2 million. The sales decline was primarily the result of lower sales in Europe-Middle East-Africa, reflecting reduced demand due to a weak macroeconomic environment in the region. Segment income declined primarily as a result of lower gross profit resulting from reduced sales volume.

Specialty Plastics Segment Results. Sales increased in Specialty Plastics primarily due to changes in product pricing and mix. Changes in product pricing and mix increased sales by $6 million compared with the first six months of 2011. Partially offsetting the increase was a sales decline of $2 million due to reduced sales volume and a further $2 million due to changes in foreign currency exchange rates. Sales increased in the United States and declined in Europe-Middle East-Africa. Segment income increased as a result of a $3 million improvement in gross profit driven by product pricing and a $1 million decline in SG&A expense.

Pharmaceuticals Segment Results. Sales increased in Pharmaceuticals primarily due to changes in product pricing and mix. Segment income declined due to a reduction in gross profit related to product mix.

	Six months ended June 30,
	2012		2011		$ Change			% Change
	(Dollars in thousands)
Geographic Revenues
United States	$	424,468	$	565,803	$	(141,335	)		(25.0	)%
International		523,427		601,180		(77,753	)		(12.9	)%
Total	$	947,895	$	1,166,983	$	(219,088	)		(18.8	)%

Net sales declined in the United States and international regions compared with the first six months of 2011. In the first two quarters of 2012, sales originating in the United States were 45% of total sales, compared with 48% in the first six months of 2011. The decline in U.S. sales was due to reduced sales of our Electronic Materials products. Sales originating in the Asia-Pacific region declined, also as a result of lower Electronic Materials sales. Sales in Europe-Middle East-Africa declined primarily as a result of reduced customer demand resulting from a weakening macroeconomic environment in the region.

Summary of Cash Flows for the six months ended June 30, 2012 and 2011

	Six months ended June 30,
	2012			2011			$ Change
	(Dollars in thousands)
Net cash provided by (used for) operating activities	$	5,178		$	(20,758	)	$	25,936
Net cash used for investing activities		(33,880	)		(29,250	)		(4,630	)
Net cash provided by financing activities		31,668			47,570			(15,902	)
Effect of exchange rate changes on cash and cash equivalents		(590	)		771			(1,361	)
Increase (decrease) in cash and cash equivalents	$	2,376		$	(1,667	)	$	4,043

22

Details of net cash provided by (used for) operating activities were as follows:

	Six months ended June 30,
	2012			2011			$ Change
	(Dollars in thousands)
Cash flows from operating activities:
Net (loss) income	$	(1,104	)	$	42,812		$	(43,916	)
Depreciation and amortization		28,007			32,849			(4,842	)
Precious metals deposits		—			28,086			(28,086	)
Accounts receivable		(50,623	)		(68,540	)		17,917
Inventories		8,577			(43,094	)		51,671
Accounts payable		15,251			27,356			(12,105	)
Other changes in current assets and liabilities, net		8,131			(14,121	)		22,252
Other adjustments, net		(3,061	)		(26,106	)		23,045
Net cash provided by (used for) operating activities	$	5,178		$	(20,758	)	$	25,936

Cash flows from operating activities increased by $25.9 million in the first six months of 2012 compared with the prior-year period. Year-over-year cash flows from operating activities increased $51.7 million due to changes in inventories, $23.0 million due to changes in other adjustments to reconcile net income to net cash used for operating activities, $22.3 million due to other changes in current assets and liabilities, and $17.9 million due to changes in accounts receivable. Partially offsetting these effects, year-over-year cash flows from operating activities decreased $43.9 million due to changes in net income, $28.1 million due to changes in precious metals deposits, and $12.1 million due to changes in accounts payable. Accounts receivable and accounts payable excluding unpaid capital expenditures increased in the first six months of 2012 and 2011 as a result of improved customer demand over the final months of the respective prior years. While in the first half of 2011 inventory also increased, in the first half of 2012 we successfully lowered inventory levels in response to weakening demand. Other adjustments to reconcile net income to net cash provided by (used for) operating activities include noncash foreign currency gains and losses, restructuring charges, retirement benefits, stock-based compensation, and deferred taxes, as well as changes to other non-current assets and liabilities. In the first six months of 2012, other adjustments used $3.1 million of cash, primarily for retirement benefit payments in excess of expenses recognized, partially offset by noncash restructuring charges and stock-based compensation. In the first six months of 2011, other adjustments used $26.1 million of cash, primarily related to noncash foreign currency gains and payments toward retirement benefits and restructuring activities greater than the expenses recognized. Other changes in current assets and liabilities provided $8.1 million of cash in the first half of 2012, primarily from net receipts of other receivables. Other changes in current assets and liabilities used $14.1 million of cash in the first half of 2011, primarily from the payment of 2010 year-end incentive compensation. Net income declined $43.9 million in the first six months of 2012 compared with the prior-year period primarily as a result of lower net sales and the resulting decline in gross profit. The return of precious metal deposits provided $28.1 million of cash in the first six months of 2011 due to additional credit lines not requiring collateral.

Cash flows from investing activities decreased $4.6 million in the first six months of 2012 compared with the prior-year period. Capital expenditures increased to $35.5 million in the first half of 2012 from $31.8 million in the first quarter of 2011.

Cash flows from financing activities decreased $15.9 million in the first six months of 2012 compared with the prior-year period. In the first three months of 2012, we borrowed $30.0 million through our domestic accounts receivable asset securitization program. In the same period of 2011, we borrowed $45.0 million through our domestic accounts receivable asset securitization program and $11.0 million through our international accounts receivable sales program, and we redeemed in cash all outstanding 7% Series A ESOP Convertible Preferred Stock for $9.4 million plus earned but unpaid dividends.

Capital Resources and Liquidity

7.875% Senior Notes

The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. The principal amount outstanding was $250.0 million at June 30, 2012, and December 31, 2011. Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.

23

The Senior Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The Senior Notes contain certain affirmative and negative covenants customary for high-yield debt securities, including, but not limited to, restrictions on our ability to incur additional debt, create liens, pay dividends or make other distributions or repurchase our common stock and sell assets outside the ordinary course of business. At June 30, 2012, we were in compliance with the covenants under the Senior Notes’ indenture.

6.50% Convertible Senior Notes

The 6.50% Convertible Notes (the “Convertible Notes”) were issued in 2008, bear interest at a rate of 6.5% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2013. We separately account for the liability and equity components of the Convertible Notes in a manner that, when interest cost is recognized in subsequent periods, will reflect our nonconvertible debt borrowing rate at the time the Convertible Notes were issued. The effective interest rate on the liability component is 9.5%. Under certain circumstances, holders of the Convertible Notes may convert their notes prior to maturity. The Convertible Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The principal amount outstanding was $35.1 million at June 30, 2012, and $35.1 million at December 31, 2011. At June 30, 2012, we were in compliance with the covenants under the Convertible Notes’ indenture.

Revolving Credit Facility

In 2010, we entered into the Third Amended and Restated Credit Agreement with a group of lenders for a five-year, $350 million multi-currency senior revolving credit facility (the “2010 Credit Facility”). In June 2012, we amended the 2010 Credit Facility (the “2012 Amended Credit Facility”) primarily to provide additional operating flexibility. The primary effects of the 2012 Amended Credit Facility were to:

• Increase the maximum permitted leverage ratio (as discussed in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011) from 3.50 to 4.25 for the third and fourth quarters of 2012;

• Eliminate the fixed charge coverage covenant;

• Include a quarterly interest coverage covenant (defined as the ratio of EBITDA to cash paid for interest expense and certain other financing expenses), which requires the Company to maintain an interest coverage ratio of not less than (i) 2.50 for the second and third quarters of 2012, (ii) 2.75 for the fourth quarter of 2012, and (iii) 3.00 thereafter;

• Include a maximum capital expenditures covenant limiting the capital expenditures of the Company to (i) $20.0 million for the three months ended June 30, 2012, (ii) $35.0 million for the six months ended September 30, 2012, (iii) $50.0 million for the nine months ended December 31, 2012, (iv) $65.0 million for the twelve months ended March 31, 2013, and (v) $65.0 million for the 2013 fiscal year and each fiscal year thereafter. Certain unused capital expenditures will be permitted to be carried forward to the following fiscal year; and

• Maintain limitations on our ability to make restricted payments, including common stock dividends (as discussed under the 2010 Credit Facility in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011).

The 2012 Amended Credit Facility matures on August 24, 2015, and is secured by substantially all of Ferro’s assets. After reductions for outstanding letters of credit, we had $340.5 million of additional borrowings available at June 30, 2012. The interest rate under the 2010 Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage. At June 30, 2012, the interest rate was 3.2%. At June 30, 2012, we were in compliance with the covenants of the 2012 Amended Credit Facility.

24

Domestic Receivable Sales Programs

We have an asset securitization program for Ferro’s U.S. trade accounts receivable. We sell interests in our domestic receivables to various purchasers, and we may obtain up to $50.0 million in the form of cash or letters of credit. Advances received under this program are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. In the second quarter of 2012, we extended the maturity of this credit facility through May 2013. At June 30, 2012, advances received of $30.0 million were secured by $110.2 million of accounts receivable, and based on available and qualifying receivables, $20.0 million of additional borrowings were available under the program. The interest rate under this program is the sum of (A) either (1) commercial paper rates, (2) LIBOR rates, or (3) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At June 30, 2012, the interest rate was 0.6%. We had no borrowings under this program at December 31, 2011.

International Receivable Sales Programs

We have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At June 30, 2012, commitments supporting these programs totaled $17.7 million, advances received of $6.5 million were secured by $14.4 million of accounts receivable, and based on available and qualifying receivables, $5.7 million of additional borrowings were available under the programs. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At June 30, 2012, the weighted-average interest rate was 2.1%.

Off Balance Sheet Arrangements

Consignment Arrangements for Precious Metals. In the production of some of our products, we use precious metals, some of 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. We had on hand precious metals owned by participants in our precious metals program of $178.1 million at June 30, 2012, and $195.0 million at December 31, 2011, measured at fair value based on market prices for identical assets. On occasion, we have delivered cash collateral as a result of the market value of the precious metals under consignment exceeding the lines provided by some of the financial institutions. While no deposits were outstanding at June 30, 2012, or December 31, 2011, we may be required to furnish additional cash collateral in the future based on the quantity and market value of the precious metals under consignment.

Liquidity Requirements

Our liquidity requirements primarily include debt service, purchase commitments, labor costs, working capital requirements, capital investments, and postretirement obligations. We expect to meet these requirements in the long term through cash provided by operating activities and availability under existing credit facilities or other financing arrangements. Cash flows from operating activities are primarily driven by earnings before noncash charges and changes in working capital needs. In the first half of 2012, cash flows from financing and operating activities were used to fund our investing activities. We had additional borrowing capacity of $373.3 million at June 30, 2012, and $397.5 million at December 31, 2011, available under various credit facilities, primarily our revolving credit facility. We have taken a variety of actions to enhance liquidity, including restructuring activities and suspension of dividend payments on our common stock.

Our level of debt, debt service requirements, and ability to access credit markets could have important consequences to our business operations and uses of cash flows. The Company has recently accessed credit markets for the following transactions. In 2010, we issued 7.875% Senior Notes, which mature in 2018, and entered into the 2010 Credit Facility, which matures in 2015. In 2011, we entered into several international accounts receivable sales programs. In 2012, we extended our domestic asset securitization facility and amended the 2010 Credit Facility to provide additional operating flexibility.

We may from time to time seek to retire or repurchase our outstanding debt through open market purchases, privately negotiated transactions, or otherwise. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved may be material.

Difficulties experienced in global capital markets could affect the ability or willingness of counterparties to perform under our various lines of credit, receivable sales programs, forward contracts, and precious metals program. These counterparties are major, reputable, multinational institutions, all having investment-grade credit ratings, except for one, which is not rated. 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. We also evaluate and pursue acquisition opportunities that we believe will enhance our strategic position. Generally, we publicly announce divestiture and acquisition transactions only when we have entered into definitive agreements relating to those transactions.

25

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 the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

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, 2011.

26

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. 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 offset these gains and losses.

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

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Variable-rate debt and utilization of accounts receivable sales programs:
Change in annual interest expense from 1% change in interest rates	$	493		$	163
Fixed-rate debt:
Carrying amount		288,722			288,604
Fair value		287,938			292,523
Change in fair value from 1% increase in interest rates		(11,930	)		(13,071	)
Change in fair value from 1% decrease in interest rates		12,639			13,902
Foreign currency forward contracts:
Notional amount		271,294			249,337
Carrying amount and fair value		4,075			6,225
Change in fair value from 10% appreciation of U.S. dollar		13,097			12,216
Change in fair value from 10% depreciation of U.S. dollar		(16,008	)		(14,930	)

27

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 June 30, 2012, 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 June 30, 2012.

Changes in Internal Control over Financial Reporting

During the second quarter of 2012, 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.

28

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On May 30, 2012, we concluded settlement negotiations with the United States Environmental Protection Agency (“USEPA”) for corrective actions and for a settlement of $171,078 in relation to the laws and regulations of the Clean Air Act at our Bridgeport, New Jersey, facility.

There are various lawsuits and claims pending against the Company and its consolidated subsidiaries. We do not currently expect the ultimate liabilities, if any, and expenses related to such lawsuits and claims 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, 2011.

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

Our ability to pay common stock dividends is limited by certain covenants in our 2012 Amended Credit Facility, which amended our 2010 Credit Facility, and the bond indenture governing the Senior Notes. The covenant in our 2012 Amended Credit Facility is the more limiting of the two covenants and is described under the 2010 Credit Facility in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

The following table summarizes purchases of our common stock by the Company and affiliated purchasers during the three months ended June 30, 2012:

	Total Number of Shares Purchased (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs
	(In thousands, except for per share amounts)
April 1, 2012 to April 30, 2012		—	$	—		—		—
May 1, 2012 to May 31, 2012		—		—		—		—
June 1, 2012 to June 30, 2012		—		—		—		—
Total		—				—

(1) During the quarter, no shares were repurchased or surrendered by employees to meet minimum tax withholding obligations under current and previous long-term incentive plans.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. Mine Safety Disclosures

Not applicable.

29

Item 5. Other Information

In the second quarter of 2012, we developed and initiated restructuring programs related to our Performance Coatings business in Europe. As a result of these programs, the Company expects to eliminate positions within the Performance Coatings sales, technical service, product development, manufacturing, supply chain and general administration organizations throughout Europe. The programs are subject to required consultations with employee representatives at the affected sites and other local legal requirements. The Company expects to record pre-tax charges of approximately $6 million, primarily related to employee severance. Charges associated with these programs were $4.6 million for the six months ended June 30, 2012.

Item 6. Exhibits

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

30

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
Date: July 25, 2012	(Registrant)
	/s/ James F. Kirsch
	James F. Kirsch
	Chairman, President and Chief Executive Officer (Principal Executive Officer)
Date: July 25, 2012
	/s/ Jeffrey L. Rutherford
	Jeffrey L. Rutherford
	Vice President and Chief Financial Officer (Principal Financial Officer)

31

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 14, 2011 (incorporated by reference to Exhibit 3.1 to Ferro Corporation’s Current Report on Form 8-K, filed October 17, 2011).
3.5	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 14, 2011).
4	Instruments defining rights of security holders, including indentures:
4.1	Senior Indenture, dated as of March 5, 2008, by and between Ferro Corporation and U.S. Bank National Association (incorporated by reference to Exhibit 4.5 to Ferro Corporation’s Registration Statement on Form S-3, filed March 5, 2008).
4.2	First Supplemental Indenture, dated August 19, 2008, by and between Ferro Corporation and U.S. Bank National Association (with Form of 6.50% Convertible Senior Note due 2013) (incorporated by reference to Exhibit 4.2 to Ferro Corporation’s Current Report on Form 8-K, filed August 19, 2008).
4.3	Form of Indenture, by and between Ferro Corporation and Wilmington Trust FSB (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Registration Statement on Form S-3ASR, filed July 27, 2010).
4.4	First Supplemental Indenture, dated August 24, 2010, by and between Ferro Corporation and Wilmington Trust FSB (with Form of 7.875% Senior Notes due 2018) (incorporated by reference to Exhibit 4.1 to Ferro Corporation’s Current Report on Form 8-K, filed August 24, 2010).
	The Company agrees, upon request, to furnish to the U.S. Securities and Exchange Commission a copy of any instrument authorizing long-term debt that does not authorize debt in excess of 10% of the total assets of the Company and its subsidiaries on a consolidated basis.
10	Material Contracts:
10.1	First Amendment to Amended and Restated Receivables Purchase Agreement, dated May 29, 2012, among Ferro Finance Corporation, Ferro Corporation, Market Street Funding LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s Current Report on Form 8-K, filed May 31, 2012).
10.2	Second Amendment to Third Amended and Restated Credit Agreement, dated June 15, 2012, by and among Ferro Corporation, certain of Ferro Corporation’s subsidiaries, PNC Bank, National Association, as the Administrative Agent and the Collateral Agent, and various financial institutions as Lenders (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s Current Report on Form 8-K, filed June 19, 2012).
10.3	Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 to Ferro Corporation’s Current Report on Form 8-K, filed June 27, 2012).*
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.

32

Exhibit:
101	XBRL Documents:
101.INS	XBRL Instance Document**
101.SCH	XBRL Schema Document**
101.CAL	XBRL Calculation Linkbase Document**
101.LAB	XBRL Labels Linkbase Document**
101.PRE	XBRL Presentation Linkbase Document**
101.DEF	XBRL Definition Linkbase Document**

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

** In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing.

33

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(a)/15D-14(a)

I, James F. Kirsch, certify that:

1. I have reviewed this report on Form 10-Q of Ferro Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ James F. Kirsch

James F. Kirsch

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

Date: July 25, 2012

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13A-14(a)/15D-14(a)

I, Jeffrey L. Rutherford, certify that:

1. I have reviewed this report on Form 10-Q of Ferro Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jeffrey L. Rutherford

Jeffrey L. Rutherford

Vice President and Chief Financial Officer

(Principal Financial Officer)

Date: July 25, 2012

EX-32.1

EXHIBIT 32.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. 1350

In connection with the Form 10-Q (the “Report”) of Ferro Corporation (the “Company”) for the period ending June 30, 2012, I, James F. Kirsch, Chairman, President and Chief Executive Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James F. Kirsch

James F. Kirsch

Chairman, President and Chief Executive Officer

Date: July 25, 2012

EX-32.2

EXHIBIT 32.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. 1350

In connection with the Form 10-Q (the “Report”) of Ferro Corporation (the “Company”) for the period ending June 30, 2012, I, Jeffrey L. Rutherford, Vice President and Chief Financial Officer of the Company, certify that:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Jeffrey L. Rutherford

Jeffrey L. Rutherford

Vice President and Chief Financial Officer

Date: July 25, 2012

XML

Financial Instruments (Details 2) (Foreign currency forward contracts [Member], Other current assets [Member], Not Designated as Hedging Instrument [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Foreign currency forward contracts [Member] | Other current assets [Member] | Not Designated as Hedging Instrument [Member]
Fair value of derivative instruments on consolidated balance sheets
Derivative Asset, Fair Value, Gross Asset	$ 5,068	$ 6,491
Derivative Liability, Fair Value, Gross Liability	$ (993)	$ (266)

XML

(Loss) Earnings Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basic (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$ (2,848)	$ 19,389	$ (1,558)	$ 42,114
Weighted-average common shares outstanding	86,294	86,159	86,263	86,067
Basic (loss) earnings per share attributable to Ferro Corporation common shareholders	$ (0.03)	$ 0.23	$ (0.02)	$ 0.49
Diluted (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	(2,848)	19,389	(1,558)	42,114
Plus: Convertible preferred stock dividends, net of tax				103
Total	$ (2,848)	$ 19,389	$ (1,558)	$ 42,217
Weighted-average common shares outstanding	86,294	86,159	86,263	86,067
Assumed exercise of stock options		268		293
Assumed satisfaction of stock unit award conditions		38		51
Assumed satisfaction of restricted share conditions		403		383
Assumed conversion of convertible preferred stock				264
Weighted-average diluted shares outstanding	86,294	86,868	86,263	87,058
Diluted (loss) earnings per share attributable to Ferro Corporation common shareholders	$ (0.03)	$ 0.22	$ (0.02)	$ 0.48

XML

Restructuring and Cost Reduction Programs (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Summary of accruals related to restructuring and cost reduction programs
Balance at December 31, 2011	$ 3,637
Restructuring charges	5,039
Cash payments	(823)
Non-cash items	93
Balance at June 30, 2012	7,760
Employee Severance [Member]
Summary of accruals related to restructuring and cost reduction programs
Balance at December 31, 2011	218
Restructuring charges	4,888
Cash payments	(321)
Non-cash items	42
Balance at June 30, 2012	4,827
Asset Impairment [Member]
Summary of accruals related to restructuring and cost reduction programs
Restructuring charges	64
Non-cash items	64
Other Costs [Member]
Summary of accruals related to restructuring and cost reduction programs
Balance at December 31, 2011	3,419
Restructuring charges	87
Cash payments	(502)
Non-cash items	71
Balance at June 30, 2012	$ 2,933

XML

Debt (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Loans payable and current portion of long-term debt
Loans payable and current portion of long-term debt	$ 45,868	$ 11,241
Loans payable to banks [Member]
Loans payable and current portion of long-term debt
Loans payable and current portion of long-term debt	7,239	404
Domestic accounts receivable asset securitization program [Member]
Loans payable and current portion of long-term debt
Loans payable and current portion of long-term debt	30,000
International accounts receivable sales programs [Member]
Loans payable and current portion of long-term debt
Loans payable and current portion of long-term debt	6,486	8,150
Current portion of long-term debt [Member]
Loans payable and current portion of long-term debt
Loans payable and current portion of long-term debt	$ 2,143	$ 2,687

XML

Retirement Benefits (Tables)

6 Months Ended

Jun. 30, 2012

Retirement Benefits [Abstract]

Net Periodic Benefit Costs

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	4		$	8		$	426		$	562		$	—		$	—
Interest cost		4,866			5,120			1,302			1,492			397			483
Expected return on plan assets		(5,219	)		(5,165	)		(752	)		(837	)		—			—
Amortization of prior service cost (credit)		12			19			34			(34	)		(32	)		(101	)
Amortization of net loss (gain)		6,290			2,739			173			164			(231	)		(160	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	5,953		$	2,721		$	(289	)	$	1,347		$	134		$	222

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	8		$	8		$	1,003		$	1,101		$	—		$	—
Interest cost		9,735			10,234			2,677			2,924			793			965
Expected return on plan assets		(10,315	)		(10,301	)		(1,505	)		(1,647	)		—			—
Amortization of prior service cost (credit)		24			37			1			(67	)		(65	)		(201	)
Amortization of net loss (gain)		10,304			5,974			368			325			(461	)		(320	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	9,756		$	5,952		$	1,072		$	2,636		$	267		$	444

XML

Reporting for Segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Net sales to external customers by segment
Total net sales	$ 481,505	$ 593,974	$ 947,895	$ 1,166,983
Electronic Materials [Member]
Net sales to external customers by segment
Total net sales	90,741	180,362	162,437	382,709
Performance Coatings [Member]
Net sales to external customers by segment
Total net sales	157,315	163,481	309,829	300,181
Color and Glass Performance Materials [Member]
Net sales to external customers by segment
Total net sales	99,889	106,476	201,324	206,281
Polymer Additives [Member]
Net sales to external customers by segment
Total net sales	83,450	91,271	171,174	177,133
Specialty Plastics [Member]
Net sales to external customers by segment
Total net sales	44,151	46,510	91,207	89,139
Pharmaceuticals [Member]
Net sales to external customers by segment
Total net sales	$ 5,959	$ 5,874	$ 11,924	$ 11,540

XML

Contingent Liabilities (Details Textual) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contingent Liabilities (Textual) [Abstract]
Undiscounted remediation liability associated with environmentally contaminated non-operating facility	$ 11.5	$ 11.6

XML

Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011	Dec. 31, 2010
Financial instruments measured at fair value
Cash and cash equivalents	$ 25,367	$ 22,991	$ 27,368	$ 29,035
Cash and cash equivalents, Fair Value	25,367	22,991
Other receivables	32,437	37,839
Other receivables, Fair Value	32,437	37,839
Short-term loans payable	(43,725)	(8,554)
Short-term loans payable, Fair Value	(43,725)	(8,554)
Carrying Amount	(297,987)	(300,769)
Foreign currency forward contracts, net	4,075	6,225
Foreign currency forward contracts, net, Fair Value	4,075	6,225
Level 1 [Member]
Financial instruments measured at fair value
Cash and cash equivalents, Fair Value	25,367
Level 2 [Member]
Financial instruments measured at fair value
Other receivables, Fair Value	32,437
Short-term loans payable, Fair Value	(43,725)
Foreign currency forward contracts, net, Fair Value	4,075
Level 3 [Member]
Financial instruments measured at fair value
Cash and cash equivalents, Fair Value
Other receivables, Fair Value
Short-term loans payable, Fair Value
Fair Value
Foreign currency forward contracts, net, Fair Value
7.875% Senior Notes [Member]
Financial instruments measured at fair value
Carrying Amount	(250,000)	(250,000)
Fair Value	(248,750)	(253,750)
7.875% Senior Notes [Member] | Level 2 [Member]
Financial instruments measured at fair value
Fair Value	(248,750)
6.50% Convertible Senior Notes, net of unamortized discounts [Member]
Financial instruments measured at fair value
Carrying Amount	(33,942)	(33,537)
Fair Value	(35,241)	(34,589)
6.50% Convertible Senior Notes, net of unamortized discounts [Member] | Level 2 [Member]
Financial instruments measured at fair value
Fair Value	(35,241)
Revolving Credit Facility [Member]
Financial instruments measured at fair value
Carrying Amount	(5,529)	(7,706)
Fair Value	(5,388)	(7,973)
Revolving Credit Facility [Member] | Level 2 [Member]
Financial instruments measured at fair value
Fair Value	(5,388)
Other long-term notes payable [Member]
Financial instruments measured at fair value
Carrying Amount	(4,780)	(5,067)
Fair Value	(3,947)	(4,184)
Other long-term notes payable [Member] | Level 2 [Member]
Financial instruments measured at fair value
Fair Value	$ (3,947)

XML

Reporting for Segments (Details Textual)	6 Months Ended
	Jun. 30, 2012 Segment
Reporting for Segments (Textual) [Abstract]
Number of reportable segments	6

XML

Restructuring and Cost Reduction Programs (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Restructuring and Related Cost (Textual) [Abstract]
Period expected for cash payments for employee benefits and other costs	next twelve months
Restructuring and related costs expected new programs pretax	$ 6
Restructuring charges on new programs	$ 4.6

XML

Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2012

Recent Accounting Pronouncements [Abstract]

Recent Accounting Pronouncements

2. Recent Accounting Pronouncements

Accounting Standards Adopted in the Six Months Ended June 30, 2012

On January 1, 2012, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, (“ASU 2011-04”), which is codified in ASC Topic 820, Fair Value Measurement. This pronouncement changes certain fair value measurement guidance and expands certain disclosure requirements. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-05, Presentation of Comprehensive Income, (“ASU 2011-05”) and ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, (“ASU 2011-12”), which are codified in ASC Topic 220, Comprehensive Income. ASU 2011-05 requires companies to present items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or two separate but consecutive statements. ASU 2011-12 indefinitely defers certain provision of ASU 2011-05 that required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. Adoption of these pronouncements did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-08, Testing Goodwill for Impairment, (“ASU 2011-08”), which is codified in ASC Topic 350, Intangibles—Goodwill and Other. This pronouncement permits companies testing goodwill for impairment to first assess qualitative factors to determine whether the two-step impairment test is required. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

New Accounting Pronouncements Not Yet Adopted

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, (“ASU 2011-11”), which is codified in ASC Topic 210, Balance Sheet. This pronouncement contains new disclosure requirements about a company’s right of setoff and related arrangements associated with its financial and derivative instruments. ASU 2011-11 will be effective for our fiscal year that begins January 1, 2013, and is to be applied retrospectively. We do not expect that adoption of this pronouncement will have a material effect on our consolidated financial statements.

XML

Retirement Benefits (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
U.S. Pension Plans [Member]
Net periodic benefit cost:
Service cost	$ 4	$ 8	$ 8	$ 8
Interest cost	4,866	5,120	9,735	10,234
Expected return on plan assets	(5,219)	(5,165)	(10,315)	(10,301)
Amortization of prior service cost (credit)	12	19	24	37
Amortization of net loss (gain)	6,290	2,739	10,304	5,974
DefinedBenefitPlanRecognizedNetGainLossDueToSettlementsAndCurtailments1
Net periodic benefit cost	5,953	2,721	9,756	5,952
Non-U.S. Pension Plans [Member]
Net periodic benefit cost:
Service cost	426	562	1,003	1,101
Interest cost	1,302	1,492	2,677	2,924
Expected return on plan assets	(752)	(837)	(1,505)	(1,647)
Amortization of prior service cost (credit)	34	(34)	1	(67)
Amortization of net loss (gain)	173	164	368	325
DefinedBenefitPlanRecognizedNetGainLossDueToSettlementsAndCurtailments1	(1,472)		(1,472)
Net periodic benefit cost	(289)	1,347	1,072	2,636
Other Benefit Plans [Member]
Net periodic benefit cost:
Service cost
Interest cost	397	483	793	965
Expected return on plan assets	0
Amortization of prior service cost (credit)	(32)	(101)	(65)	(201)
Amortization of net loss (gain)	(231)	(160)	(461)	(320)
DefinedBenefitPlanRecognizedNetGainLossDueToSettlementsAndCurtailments1
Net periodic benefit cost	$ 134	$ 222	$ 267	$ 444

XML

Reporting For Segment (Tables)

6 Months Ended

Jun. 30, 2012

Reporting for Segments [Abstract]

Net sales to external customers by segment

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)
Electronic Materials	$	90,741	$	180,362	$	162,437	$	382,709
Performance Coatings		157,315		163,481		309,829		300,181
Color and Glass Performance Materials		99,889		106,476		201,324		206,281
Polymer Additives		83,450		91,271		171,174		177,133
Specialty Plastics		44,151		46,510		91,207		89,139
Pharmaceuticals		5,959		5,874		11,924		11,540
Total net sales	$	481,505	$	593,974	$	947,895	$	1,166,983

Each segment's income and reconciliations to income (loss) before taxes

	Three months ended June 30,						Six months ended June 30,
			2011							2011
	2012		Adjusted		As reported		2012			Adjusted		As reported
	(Dollars in thousands)
Electronic Materials	$	33	$	22,406	$	23,914	$	(4,657	)	$	53,154	$	56,503
Performance Coatings		9,699		10,497		11,329		17,758			16,844		18,734
Color and Glass Performance Materials		10,009		10,670		11,201		18,466			19,768		21,031
Polymer Additives		1,878		4,515		4,331		8,505			11,095		10,782
Specialty Plastics		3,806		2,827		2,810		8,454			4,699		4,719
Pharmaceuticals		620		945		759		1,807			2,271		1,915
Total segment income		26,045		51,860		54,344		50,333			107,831		113,684
Unallocated corporate expenses		12,845		11,061		13,545		26,495			23,524		29,377
Restructuring and impairment charges		4,728		1,545		1,545		5,039			3,175		3,175
Other expense, net		8,417		8,172		8,172		15,611			16,752		16,752
Income before income taxes	$	55	$	31,082	$	31,082	$	3,188		$	64,380	$	64,380

XML

(Loss) Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

(Loss) Earnings Per Share [Abstract]

Calculations of basic and diluted earnings (loss) per share

	Three months ended June 30,					Six months ended June 30,
	2012			2011		2012			2011
	(In thousands, except per share amounts)
Basic (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Basic (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.23	$	(0.02	)	$	0.49
Diluted (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Plus: Convertible preferred stock dividends, net of tax		—			—		—			103
Total	$	(2,848	)	$	19,389	$	(1,558	)	$	42,217
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Assumed exercise of stock options		—			268		—			293
Assumed satisfaction of stock unit award conditions		—			38		—			51
Assumed satisfaction of restricted share conditions		—			403		—			383
Assumed conversion of convertible preferred stock		—			—		—			264
Weighted-average diluted shares outstanding		86,294			86,868		86,263			87,058
Diluted (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.22	$	(0.02	)	$	0.48

XML

Stock - Based Compensation (Details) (USD $)	6 Months Ended
	Jun. 30, 2012
Stock Options [Member]
Share Based Compensation Arrangement by Share Based Payment Award Weighted Average Grant Date Fair Values and Assumptions Used For Estimating Fair Value
Weighted-average grant-date fair value, Stock Options	$ 4.63
Expected life, in years	6 years
Risk-free interest rate, minimum	1.20%
Risk-free interest rate, maximum	1.60%
Expected volatility, minimum	81.10%
Expected volatility, maximum	82.40%
Performance Units [Member]
Share Based Compensation Arrangement by Share Based Payment Award Weighted Average Grant Date Fair Values and Assumptions Used For Estimating Fair Value
Weighted-average grant-date fair value, Performance Units	$ 9.63
Expected life, in years	3 years
Risk-free interest rate, performance stock units	0.40%
Expected volatility performance stock units	63.00%

XML

Inventories (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Inventories
Raw materials	$ 78,489	$ 78,199
Work in process	41,736	42,111
Finished goods	97,075	108,503
Total inventories	$ 217,300	$ 228,813

XML

Inventories (Details Textual) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Inventories (Textual) [Abstract]
Terms of precious metals consignment agreements, maximum			1 year
Fees under precious metals consignment agreements	$ 1.7	$ 2.7	$ 3.6	$ 4.7
Fair value of precious metals on hand under consignment agreements	$ 178.1		$ 178.1		$ 195.0

XML

Basis of Presentation

6 Months Ended

Jun. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

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, 2011.

Operating results for the three and six months ended June 30, 2012, are not necessarily indicative of the results expected in subsequent quarters or for the full year ending December 31, 2012.

XML

Property Plant and Equipment (Details Textual) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Property Plant and Equipment (Textual) [Abstract]
Property, Plant and equipment net of accumulated depreciation	$ 600.6		$ 599.1
Unpaid capital expenditure liabilities	$ 6.2	$ 7.3

XML

Financial Instruments (Details Textual) (USD $) In Millions, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Financial Instruments (Textual) [Abstract]
Notional amount of foreign currency forward contract	$ 271.3	$ 249.3

XML

Condensed Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statements of Operations [Abstract]
Net sales	$ 481,505	$ 593,974	$ 947,895	$ 1,166,983
Cost of sales	393,660	479,627	771,727	932,310
Gross profit	87,845	114,347	176,168	234,673
Selling, general and administrative expenses	74,645	73,548	152,330	150,366
Restructuring and impairment charges	4,728	1,545	5,039	3,175
Other expense (income):
Interest expense	6,848	7,352	13,588	14,178
Interest earned	(51)	(69)	(135)	(143)
Foreign currency (gains) losses, net	(221)	1,013	(77)	2,323
Miscellaneous expense (income), net	1,841	(124)	2,235	394
Income before income taxes	55	31,082	3,188	64,380
Income tax expense	2,573	11,461	4,292	21,568
Net (loss) income	(2,518)	19,621	(1,104)	42,812
Less: Net income attributable to noncontrolling interests	330	232	454	533
Net (loss) income attributable to Ferro Corporation	(2,848)	19,389	(1,558)	42,279
Dividends on preferred stock				(165)
Net (loss) income attributable to Ferro Corporation common shareholders	$ (2,848)	$ 19,389	$ (1,558)	$ 42,114
(Loss) earnings per share attributable to Ferro Corporation common shareholders:
Basic (loss) earnings per share	$ (0.03)	$ 0.23	$ (0.02)	$ 0.49
Diluted (loss) earnings per share	$ (0.03)	$ 0.22	$ (0.02)	$ 0.48

XML

Stock - Based Compensation (Details Textual) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Stock Based Compensation (Textual) [Abstract]
Recognized stock-based compensation expense	$ 3.8	$ 4.4
Unearned compensation cost related to the unvested portion of all stock-based awards	$ 14.3
Stock Options [Member]
Stock Based Compensation (Textual) [Abstract]
Number of share based compensation units granted	0.7
Performance Units [Member]
Stock Based Compensation (Textual) [Abstract]
Number of share based compensation units granted	0.6
Deferred Stock Units [Member]
Stock Based Compensation (Textual) [Abstract]
Number of share based compensation units granted	0.4
Weighted-average fair value per unit for grants made	$ 6.79

XML

Condensed Consolidated Statements of Equity (Unaudited) (USD $) In Thousands	Total	Common shares in Treasury	Common Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive (Loss) Income	Non-controlling Interests
Beginning Balance at Dec. 31, 2010	$ 574,180	$ (164,257)	$ 93,436	$ 323,015	$ 362,164	$ (50,949)	$ 10,771
Beginning Balance, Shares at Dec. 31, 2010		7,242
Net (loss) income	42,812				42,279		533
Other comprehensive (loss) income	13,419					13,303	116
Cash dividends on preferred stock	(165)				(165)
Stock-based compensation transactions	5,090	10,583		(5,493)
Stock-based compensation transactions, Shares		(376)
Distributions to noncontrolling interests	(688)						(688)
Ending Balances at Jun. 30, 2011	634,648	(153,674)	93,436	317,522	404,278	(37,646)	10,732
Ending Balances, Shares at Jun. 30, 2011		6,866
Beginning Balance at Dec. 31, 2011	582,494	(153,617)	93,436	320,882	393,636	(82,075)	10,232
Beginning Balance, Shares at Dec. 31, 2011		6,865
Net (loss) income	(1,104)				(1,558)		454
Other comprehensive (loss) income	(336)					(285)	(51)
Stock-based compensation transactions	3,272	713		2,559
Stock-based compensation transactions, Shares		1
Distributions to noncontrolling interests	(380)						(380)
Ending Balances at Jun. 30, 2012	$ 583,946	$ (152,904)	$ 93,436	$ 323,441	$ 392,078	$ (82,360)	$ 10,255
Ending Balances, Shares at Jun. 30, 2012		6,866

XML

Debt (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Short-term Debt [Line Items]
Loans payable and current portion of long-term debt	$ 45,868,000	$ 11,241,000
Domestic accounts receivable asset securitization program [Member]
Short-term Debt [Line Items]
Maximum available in form of cash or letter of credit	50,000,000
Loans payable and current portion of long-term debt	30,000,000
Accounts receivable securing advances	110,200,000
Debt instrument, basis spread on variable Federal Funds Rate	0.50%
Additional availability under programs	20,000,000
Interest rate	0.60%
International accounts receivable sales with recourse programs [Member]
Short-term Debt [Line Items]
Loans payable and current portion of long-term debt	6,486,000	8,150,000
Accounts receivable securing advances	14,400,000
Commitments supporting international programs	17,700,000
Additional availability under programs	$ 5,700,000
Interest rate terms, basis	EURIBOR
Interest rate terms, rate	1.75%
Weighted-average interest rate	2.10%

XML

Inventories (Tables)

6 Months Ended

Jun. 30, 2012

Inventories [Abstract]

Inventories

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Raw materials	$	78,489	$	78,199
Work in process		41,736		42,111
Finished goods		97,075		108,503
Total inventories	$	217,300	$	228,813

XML

Debt (Details Textual 1) (USD $) In Millions, unless otherwise specified	6 Months Ended						6 Months Ended	12 Months Ended
	Jun. 30, 2012 7.875% Senior Notes [Member]	Jun. 30, 2012 7.875% Senior Notes [Member] Beginning August 14, 2014 [Member]	Jun. 30, 2012 7.875% Senior Notes [Member] Thru August 15, 2013 [Member]	Jun. 30, 2012 7.875% Senior Notes [Member] Prior to August 15, 2014 [Member]	Jun. 30, 2012 6.50% Convertible Senior Notes, net of unamortized discounts [Member]	Dec. 31, 2011 6.50% Convertible Senior Notes, net of unamortized discounts [Member]	Jun. 30, 2012 Revolving Credit Facility [Member]	Dec. 31, 2010 Revolving Credit Facility [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Third and fourth quarters 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Second and Third Quarters 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Fourth Quarter 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] 2013 and Thereafter [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Three months ended June 30 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Six months ended September 30 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Nine months ended December 31 2012 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Twelve months ended March 31 2013 [Member]	Jun. 30, 2012 Revolving Credit Facility [Member] Fiscal Year 2013 and Thereafter [Member]
Debt Instrument [Line Items]
Debt stated interest rate	7.875%				6.50%
Debt instrument, frequency of periodic payment	Interest payable semi-annually in arrears on February 15th and August 15th				Interest payable semi-annually in arrears on February 15th and August 15th
Maturity date	Aug. 15, 2018				Aug. 15, 2013
Redemption Terms	Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1.0% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.
Redeemable percentage of senior notes, maximum			35.00%
Redemption price as percentage of principal amount			107.875%
Minimum premium percentage of principal amount				1.00%
Debt instrument, basis spread on variable Treasury Rate				0.50%
Percentage of principal amount redemption price, minimum		100.00%
Percentage of principal amount redemption price, maximum		103.938%
Effective interest rate					9.50%
Principal amount outstanding					$ 35.1	$ 35.1
Debt facility amount								350
Term of credit facility								5 years
Maturity date							Aug. 24, 2015
Interest rate terms							The interest rate under the 2010 Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage
Debt instrument, basis spread on variable Federal Funds Rate							0.50%
Debt instrument, basis spread on variable LIBOR Rate							1.00%
Interest rate							3.20%
Additional availability under programs							340.5
Former maximum leverage ratio									3.50
Current maximum leverage ratio									4.25
Quarterly interest coverage ratio										2.50	2.75	3.00
Maximum capital expenditures													$ 20.0	$ 35.0	$ 50.0	$ 65.0	$ 65.0

XML

Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Financial Instruments [Abstract]

Financial instruments measured at fair value

	June 30, 2012													December 31, 2011
	Carrying			Fair Value										Carrying
	Amount			Total			Level 1		Level 2			Level 3		Amount			Fair Value
	(Dollars in thousands)
Cash and cash equivalents	$	25,367		$	25,367		$	25,367	$	—		$	—	$	22,991		$	22,991
Other receivables		32,437			32,437			—		32,437			—		37,839			37,839
Short-term loans payable		(43,725	)		(43,725	)		—		(43,725	)		—		(8,554	)		(8,554	)
7.875% Senior Notes		(250,000	)		(248,750	)		—		(248,750	)		—		(250,000	)		(253,750	)
6.50% Convertible Senior Notes, net of unamortized discounts		(33,942	)		(35,241	)		—		(35,241	)		—		(33,537	)		(34,589	)
Revolving credit facility		(5,529	)		(5,388	)		—		(5,388	)		—		(7,706	)		(7,973	)
Other long-term notes payable		(4,780	)		(3,947	)		—		(3,947	)		—		(5,067	)		(4,184	)
Foreign currency forward contracts, net		4,075			4,075			—		4,075			—		6,225			6,225

Effect of derivative instruments on consolidated financial performance

	Amount of Gain (Loss) Recognized in Earnings
	2012		2011			Location of Gain (Loss) in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	9,533	$	(13,422	)	Foreign currency (gains) losses, net

Fair value of derivative instruments on consolidated balance sheets

	June 30, 2012			December 31, 2011			Balance Sheet Location
	(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts	$	5,068		$	6,491		Other current assets
Liability derivatives:
Foreign currency forward contracts	$	(993	)	$	(266	)	Other current assets

XML

Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Cash flows from operating activities
Net cash provided by (used for) operating activities	$ 5,178	$ (20,758)
Cash flows from investing activities
Capital expenditures for property, plant and equipment	(35,508)	(31,817)
Proceeds from sale of assets	1,192	2,374
Other investing activities	436	193
Net cash used for investing activities	(33,880)	(29,250)
Cash flows from financing activities
Net borrowings under loans payable	34,906	57,570
Proceeds from long-term debt	212,996	382,219
Principal payments on long-term debt	(215,174)	(381,771)
Redemption of convertible preferred stock		(9,427)
Cash dividends paid		(165)
Other financing activities	(1,060)	(856)
Net cash provided by financing activities	31,668	47,570
Effect of exchange rate changes on cash and cash equivalents	(590)	771
Increase (decrease) in cash and cash equivalents	2,376	(1,667)
Cash and cash equivalents at beginning of period	22,991	29,035
Cash and cash equivalents at end of period	25,367	27,368
Cash paid during the period for:
Interest	13,196	12,575
Income taxes	$ 2,098	$ 14,715

XML

Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Condensed Consolidated Statements of Comprehensive (Loss) Income [Abstract]
Net (loss) income	$ (2,518)	$ 19,621	$ (1,104)	$ 42,812
Other comprehensive (loss) income, net of tax:
Foreign currency translation	(6,285)	4,872	(6,261)	10,451
Postretirement benefit liabilities	4,033	3,459	5,925	2,968
Total comprehensive (loss) income	(4,770)	27,952	(1,440)	56,231
Less: Comprehensive income attributable to noncontrolling interests	281	301	403	649
Comprehensive (loss) income attributable to Ferro Corporation	$ (5,051)	$ 27,651	$ (1,843)	$ 55,582

XML

Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

Our Board of Directors granted 0.7 million stock options, 0.6 million performance share units and 0.4 million deferred stock units during the first half of 2012 under our 2010 Long Term Incentive Plan. The following table details the weighted-average grant-date fair values and the assumptions used for estimating the fair values of stock options and performance share units for grants made during the six months ended June 30, 2012:

	Stock Options		Performance Share Units
Weighted-average grant-date fair value	$	4.63	$	9.63
Expected life, in years		6.0		3.0
Risk-free interest rate		1.2% - 1.6%		0.4%
Expected volatility		81.1% - 82.4%		63.0%

We measure the fair value of deferred stock units based on the closing market price of our common stock on the date of the grant. The weighted-average fair value per unit for grants made during the six months ended June 30, 2012, was $6.79.

We recognized stock-based compensation expense of $3.8 million for the six months ended June 30, 2012, and $4.4 million for the six months ended June 30, 2011. At June 30, 2012, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $14.3 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2015.

XML

Document and Entity Information	6 Months Ended
	Jun. 30, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	FERRO CORP
Entity Central Index Key	0000035214
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding	86,569,612

XML

Restructuring and Cost Reduction Programs

6 Months Ended

Jun. 30, 2012

Restructuring and Cost Reduction Programs [Abstract]

Restructuring and Cost Reduction Programs

11. Restructuring and Cost Reduction Programs

In the second quarter of 2012, we developed and initiated restructuring programs related to our Performance Coatings business in Europe. As a result of these programs, the Company expects to eliminate positions within the Performance Coatings sales, technical service, product development, manufacturing, supply chain and general administration organizations throughout Europe. The programs are subject to required consultations with employee representatives at the affected sites and other local legal requirements. The Company expects to record pre-tax charges of approximately $6 million, primarily related to employee severance. Charges associated with these programs were $4.6 million for the six months ended June 30, 2012.

The activities and accruals related to our restructuring and cost reduction programs are summarized below:

	Employee Severance			Other Costs			Asset Impairment			Total
	(Dollars in thousands)
Balance at December 31, 2011	$	218		$	3,419		$	—		$	3,637
Restructuring charges		4,888			87			64			5,039
Cash payments		(321	)		(502	)		—			(823	)
Non-cash items		42			(71	)		(64	)		(93	)
Balance at June 30, 2012	$	4,827		$	2,933		$	—		$	7,760

We expect to make cash payments to settle the remaining liability for employee termination benefits and other costs over the next twelve months, except where legal or contractual restrictions prevent us from doing so.

XML

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Current assets
Cash and cash equivalents	$ 25,367	$ 22,991
Accounts receivable, net	353,076	306,775
Inventories	217,300	228,813
Deferred income taxes	17,277	17,395
Other receivables	32,437	37,839
Other current assets	13,715	17,086
Total current assets	659,172	630,899
Other assets
Property, plant and equipment, net	367,184	379,336
Goodwill	215,693	215,601
Amortizable intangible assets, net	13,651	11,056
Deferred income taxes	114,789	117,658
Other non-current assets	87,128	86,101
Total assets	1,457,617	1,440,651
Current liabilities
Loans payable and current portion of long-term debt	45,868	11,241
Accounts payable	214,195	214,460
Accrued payrolls	34,659	31,055
Accrued expenses and other current liabilities	68,246	67,878
Total current liabilities	362,968	324,634
Other liabilities
Long-term debt, less current portion	295,844	298,082
Postretirement and pension liabilities	195,366	215,732
Other non-current liabilities	19,493	19,709
Total liabilities	873,671	858,157
Ferro Corporation shareholders' equity:
Common stock, par value $1 per share; 300.0 million shares authorized; 93.4 million shares issued; 86.6 million shares outstanding in 2012 and 2011	93,436	93,436
Paid-in capital	323,441	320,882
Retained earnings	392,078	393,636
Accumulated other comprehensive loss	(82,360)	(82,075)
Common shares in treasury, at cost	(152,904)	(153,617)
Total Ferro Corporation shareholders' equity	573,691	572,262
Noncontrolling interests	10,255	10,232
Total equity	583,946	582,494
Total liabilities and equity	$ 1,457,617	$ 1,440,651

XML

Debt

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Debt

5. Debt

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

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Loans payable to banks	$	7,239	$	404
Domestic accounts receivable asset securitization program		30,000		—
International accounts receivable sales programs		6,486		8,150
Current portion of long-term debt		2,143		2,687
Loans payable and current portion of long-term debt	$	45,868	$	11,241

Long-term debt consisted of the following:

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
7.875% Senior Notes	$	250,000		$	250,000
6.50% Convertible Senior Notes, net of unamortized discounts		33,942			33,537
Revolving credit facility		5,529			7,706
Capital lease obligations		3,736			4,459
Other notes		4,780			5,067
Total long-term debt		297,987			300,769
Current portion of long-term debt		(2,143	)		(2,687	)
Long-term debt, less current portion	$	295,844		$	298,082

Receivable Sales Programs

We have an asset securitization program for Ferro’s U.S. trade accounts receivable. We sell interests in our domestic receivables to various purchasers, and we may obtain up to $50.0 million in the form of cash or letters of credit. Advances received under this program are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. In the second quarter of 2012, we extended the maturity of this credit facility through May 2013. At June 30, 2012, advances received of $30.0 million were secured by $110.2 million of accounts receivable, and based on available and qualifying receivables, $20.0 million of additional borrowings were available under the program. The interest rate under this program is the sum of (A) either (1) commercial paper rates, (2) LIBOR rates, or (3) the federal funds rate plus 0.5% or the prime rate and (B) a fixed margin. At June 30, 2012, the interest rate was 0.6%.

We also have several international programs to sell with recourse trade accounts receivable to financial institutions. Advances received under these programs are accounted for as borrowings secured by the receivables and included in net cash provided by financing activities. At June 30, 2012, the commitments supporting these programs totaled $17.7 million, the advances received of $6.5 million were secured by $14.4 million of accounts receivable, and based on available and qualifying receivables, $5.7 million of additional borrowings were available under the programs. The interest rates under these programs are based on EURIBOR rates plus 1.75%. At June 30, 2012, the weighted-average interest rate was 2.1%.

7.875% Senior Notes

The 7.875% Senior Notes (the “Senior Notes”) were issued in 2010 at par, bear interest at a rate of 7.875% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2018. Through August 15, 2013, we may redeem up to 35% of the Senior Notes at a price equal to 107.875% of the principal amount using proceeds of certain equity offerings. We may also redeem some or all of the Senior Notes prior to August 15, 2014, at a price equal to the principal amount plus a defined applicable premium. The applicable premium on any redemption date is the greater of 1% of the principal amount of the note or the excess of (1) the present value at such redemption date of the redemption price of the note at August 15, 2014, plus all required interest payments due on the note through August 15, 2014, computed using a discount rate equal to the Treasury Rate as of the redemption date plus 50 basis points; over (2) the principal amount of the note. In addition, we may redeem some or all of the Senior Notes beginning August 15, 2014, at prices ranging from 100% to 103.938% of the principal amount.

The Senior Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The Senior Notes contain certain affirmative and negative covenants customary for high-yield debt securities, including, but not limited to, restrictions on our ability to incur additional debt, create liens, pay dividends or make other distributions or repurchase our common stock and sell assets outside the ordinary course of business. At June 30, 2012, we were in compliance with the covenants under the Senior Notes’ indenture.

6.50% Convertible Senior Notes

The 6.50% Convertible Senior Notes (the “Convertible Notes”) were issued in 2008, bear interest at a rate of 6.5% per year, payable semi-annually in arrears on February 15th and August 15th, and mature on August 15, 2013. We separately account for the liability and equity components of the Convertible Notes in a manner that, when interest cost is recognized in subsequent periods, will reflect our nonconvertible debt borrowing rate at the time the Convertible Notes were issued. The effective interest rate on the liability component is 9.5%. Under certain circumstances, holders of the Convertible Notes may convert their notes prior to maturity. The Convertible Notes are unsecured obligations and rank equally in right of payment with any other unsecured, unsubordinated obligations. The principal amount outstanding was $35.1 million at June 30, 2012, and $35.1 million at December 31, 2011. At June 30, 2012, we were in compliance with the covenants under the Convertible Notes’ indenture.

Revolving Credit Facility

In 2010, we entered into the Third Amended and Restated Credit Agreement with a group of lenders for a five-year, $350 million multi-currency senior revolving credit facility (the “2010 Credit Facility”). In June 2012, we amended the 2010 Credit Facility (the “2012 Amended Credit Facility”) primarily to provide additional operating flexibility. The primary effects of the 2012 Amended Credit Facility were to:

• Increase the maximum permitted leverage ratio (as discussed in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011) from 3.50 to 4.25 for the third and fourth quarters of 2012;

• Eliminate the fixed charge coverage covenant;

• Include a quarterly interest coverage covenant (defined as the ratio of EBITDA to cash paid for interest expense and certain other financing expenses), which requires the Company to maintain an interest coverage ratio of not less than (i) 2.50 for the second and third quarters of 2012, (ii) 2.75 for the fourth quarter of 2012, and (iii) 3.00 thereafter;

• Include a maximum capital expenditures covenant limiting the capital expenditures of the Company to (i) $20.0 million for the three months ended June 30, 2012, (ii) $35.0 million for the six months ended September 30, 2012, (iii) $50.0 million for the nine months ended December 31, 2012, (iv) $65.0 million for the twelve months ended March 31, 2013, and (v) $65.0 million for the 2013 fiscal year and each fiscal year thereafter. Certain unused capital expenditures will be permitted to be carried forward to the following fiscal year; and

• Maintain limitations on our ability to make restricted payments, including common stock dividends (as discussed under the 2010 Credit Facility in Note 6 within Item 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011).

The 2012 Amended Credit Facility matures on August 24, 2015, and is secured by substantially all of Ferro’s assets. After reductions for outstanding letters of credit, we had $340.5 million of additional borrowings available at June 30, 2012. The interest rate under the 2010 Credit Facility is the sum of (A) either (1) LIBOR or (2) the higher of the Federal Funds Rate plus 0.5%, the Prime Rate, or LIBOR plus 1.0% and (B) a variable margin based on the Company’s leverage. At June 30, 2012, the interest rate was 3.2%. At June 30, 2012, we were in compliance with the covenants of the 2012 Amended Credit Facility.

XML

Property, Plant and Equipment

6 Months Ended

Jun. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

4. Property, Plant and Equipment

Property, plant and equipment is reported net of accumulated depreciation of $600.6 million at June 30, 2012, and $599.1 million at December 31, 2011. Unpaid capital expenditure liabilities, which are noncash investing activities, were $6.2 million at June 30, 2012, and $7.3 million at June 30, 2011.

XML

Debt (Tables)

6 Months Ended

Jun. 30, 2012

Debt [Abstract]

Loans payable and current portion of long-term debt

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Loans payable to banks	$	7,239	$	404
Domestic accounts receivable asset securitization program		30,000		—
International accounts receivable sales programs		6,486		8,150
Current portion of long-term debt		2,143		2,687
Loans payable and current portion of long-term debt	$	45,868	$	11,241

Long-term debt

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
7.875% Senior Notes	$	250,000		$	250,000
6.50% Convertible Senior Notes, net of unamortized discounts		33,942			33,537
Revolving credit facility		5,529			7,706
Capital lease obligations		3,736			4,459
Other notes		4,780			5,067
Total long-term debt		297,987			300,769
Current portion of long-term debt		(2,143	)		(2,687	)
Long-term debt, less current portion	$	295,844		$	298,082

XML

(Loss) Earnings Per Share

6 Months Ended

Jun. 30, 2012

(Loss) Earnings Per Share [Abstract]

(Loss) Earnings Per Share

12. (Loss) Earnings Per Share

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

	Three months ended June 30,					Six months ended June 30,
	2012			2011		2012			2011
	(In thousands, except per share amounts)
Basic (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Basic (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.23	$	(0.02	)	$	0.49
Diluted (loss) earnings per share computation:
Net (loss) income attributable to Ferro Corporation common shareholders	$	(2,848	)	$	19,389	$	(1,558	)	$	42,114
Plus: Convertible preferred stock dividends, net of tax		—			—		—			103
Total	$	(2,848	)	$	19,389	$	(1,558	)	$	42,217
Weighted-average common shares outstanding		86,294			86,159		86,263			86,067
Assumed exercise of stock options		—			268		—			293
Assumed satisfaction of stock unit award conditions		—			38		—			51
Assumed satisfaction of restricted share conditions		—			403		—			383
Assumed conversion of convertible preferred stock		—			—		—			264
Weighted-average diluted shares outstanding		86,294			86,868		86,263			87,058
Diluted (loss) earnings per share attributable to Ferro Corporation common shareholders	$	(0.03	)	$	0.22	$	(0.02	)	$	0.48

The number of anti-dilutive or unearned shares, including shares related to contingently convertible debt, was 7.6 million for the three and six months ended June 30, 2012, and 5.3 million for the three and six months ended June 30, 2011.

XML

Contingent Liabilities

6 Months Ended

Jun. 30, 2012

Contingent Liabilities [Abstract]

Contingent Liabilities

8. Contingent Liabilities

We have recorded environmental liabilities of $11.5 million at June 30, 2012, and $11.6 million at December 31, 2011, for costs associated with the remediation of certain of our properties that have been contaminated, primarily a non-operating facility in Brazil. The costs include legal and consulting fees, site studies, the design and implementation of remediation plans, post-remediation monitoring and related activities. The ultimate liability could be affected by numerous uncertainties, including the extent of contamination found, the required period of monitoring and the ultimate cost of required remediation.

There are various lawsuits and claims pending against the Company and its subsidiaries. We do not currently expect the ultimate liabilities, if any, and expenses related to such lawsuits and claims to materially affect the consolidated financial position, results of operations, or cash flows of the Company.

XML

Financial Instruments

6 Months Ended

Jun. 30, 2012

Financial Instruments [Abstract]

Financial Instruments

6. Financial Instruments

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

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

	June 30, 2012													December 31, 2011
	Carrying			Fair Value										Carrying
	Amount			Total			Level 1		Level 2			Level 3		Amount			Fair Value
	(Dollars in thousands)
Cash and cash equivalents	$	25,367		$	25,367		$	25,367	$	—		$	—	$	22,991		$	22,991
Other receivables		32,437			32,437			—		32,437			—		37,839			37,839
Short-term loans payable		(43,725	)		(43,725	)		—		(43,725	)		—		(8,554	)		(8,554	)
7.875% Senior Notes		(250,000	)		(248,750	)		—		(248,750	)		—		(250,000	)		(253,750	)
6.50% Convertible Senior Notes, net of unamortized discounts		(33,942	)		(35,241	)		—		(35,241	)		—		(33,537	)		(34,589	)
Revolving credit facility		(5,529	)		(5,388	)		—		(5,388	)		—		(7,706	)		(7,973	)
Other long-term notes payable		(4,780	)		(3,947	)		—		(3,947	)		—		(5,067	)		(4,184	)
Foreign currency forward contracts, net		4,075			4,075			—		4,075			—		6,225			6,225

The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair value of other receivables and short-term 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 values of the Senior Notes and the Convertible Notes are based on third-party estimated bid prices. The fair values of the revolving credit facility and the other long-term notes are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the debt.

Foreign currency forward contracts. We manage foreign currency risks principally by entering into forward contracts to mitigate the impact of currency fluctuations on transactions. These forward contracts are not designated as hedging instruments. 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 (gains) losses, net in the condensed consolidated statements of operations. The fair value of these contracts is based on market prices for comparable contracts. We had foreign currency forward contracts with notional amounts of $271.3 million at June 30, 2012, and $249.3 million at December 31, 2011.

The following table presents the effect on our consolidated statements of operations for the six months ended June 30th of foreign currency forward contracts:

	Amount of Gain (Loss) Recognized in Earnings
	2012			2011			Location of Gain (Loss) in Earnings
	(Dollars in thousands)
Foreign currency forward contracts	$	9,533		$	(13,422	)	Foreign currency (gains) losses, net
The following table presents the fair value on our consolidated balance sheets of these foreign currency forward contracts:
	June 30, 2012			December 31, 2011			Balance Sheet Location
	(Dollars in thousands)
Asset derivatives:
Foreign currency forward contracts	$	5,068		$	6,491		Other current assets
Liability derivatives:
Foreign currency forward contracts	$	(993	)	$	(266	)	Other current assets

XML

Income Taxes

6 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

7. Income Taxes

Income tax expense for the six months ended June 30, 2012, was $4.3 million, or 134.6% of pre-tax income. In the first six months of 2011, we recorded income tax expense of $21.6 million, or 33.5% of pre-tax income. The increase in the effective tax rate was primarily due to an increase in pre-tax losses in jurisdictions with full valuation allowances for which no tax benefit is recognized.

XML

Retirement Benefits

6 Months Ended

Jun. 30, 2012

Retirement Benefits [Abstract]

Retirement Benefits

9. Retirement Benefits

Information concerning net periodic benefit costs 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 June 30th follows:

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	4		$	8		$	426		$	562		$	—		$	—
Interest cost		4,866			5,120			1,302			1,492			397			483
Expected return on plan assets		(5,219	)		(5,165	)		(752	)		(837	)		—			—
Amortization of prior service cost (credit)		12			19			34			(34	)		(32	)		(101	)
Amortization of net loss (gain)		6,290			2,739			173			164			(231	)		(160	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	5,953		$	2,721		$	(289	)	$	1,347		$	134		$	222

Information concerning net periodic benefit costs 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 six months ended June 30th follows:

	U.S. Pension Plans						Non-U.S. Pension Plans						Other Benefit Plans
	2012			2011			2012			2011			2012			2011
	(Dollars in thousands)
Service cost	$	8		$	8		$	1,003		$	1,101		$	—		$	—
Interest cost		9,735			10,234			2,677			2,924			793			965
Expected return on plan assets		(10,315	)		(10,301	)		(1,505	)		(1,647	)		—			—
Amortization of prior service cost (credit)		24			37			1			(67	)		(65	)		(201	)
Amortization of net loss (gain)		10,304			5,974			368			325			(461	)		(320	)
Curtailment and settlement effects		—			—			(1,472	)		—			—			—
Net periodic benefit cost	$	9,756		$	5,952		$	1,072		$	2,636		$	267		$	444

Net periodic benefit cost for our U.S. pension plans increased from the effects of shorter amortization periods for the net losses of certain plans, lower discount rates, lower expected returns on plan assets, and worse than expected asset performance in 2011. Net periodic benefit cost for our non-U.S. pension plans decreased due to the curtailment of retirement benefit accumulations in the Netherlands. The effected employees in the Netherlands now receive benefits through a defined contribution plan.

XML

Debt (Details1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Long-term debt
Total long-term debt	$ 297,987	$ 300,769
Current portion of long-term debt	(2,143)	(2,687)
Long-term debt, less current portion	295,844	298,082
7.875% Senior Notes [Member]
Long-term debt
Total long-term debt	250,000	250,000
6.50% Convertible Senior Notes, net of unamortized discounts [Member]
Long-term debt
Total long-term debt	33,942	33,537
Revolving credit facility [Member]
Long-term debt
Total long-term debt	5,529	7,706
Capital lease obligations [Member]
Long-term debt
Total long-term debt	3,736	4,459
Other long-term notes payable [Member]
Long-term debt
Total long-term debt	$ 4,780	$ 5,067

XML

Reporting for Segments (Details1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	$ 26,045	$ 51,860	$ 50,333	$ 107,831
Unallocated corporate expenses	12,845	11,061	26,495	23,524
Restructuring and impairment charges	4,728	1,545	5,039	3,175
Other expense, net	8,417	8,172	15,611	16,752
Income before income taxes	55	31,082	3,188	64,380
Total segment income as reported		54,344		113,684
Unallocated corporate expenses as reported		13,545		29,377
Restructuring and impairment charges as reported		1,545		3,175
Other expense, net as reported		8,172		16,752
Income (loss) before income taxes as reported		31,082		64,380
Electronic Materials [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	33	22,406	(4,657)	53,154
Total segment income as reported		23,914		56,503
Performance Coatings [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	9,699	10,497	17,758	16,844
Total segment income as reported		11,329		18,734
Color and Glass Performance Materials [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	10,009	10,670	18,466	19,768
Total segment income as reported		11,201		21,031
Polymer Additives [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	1,878	4,515	8,505	11,095
Total segment income as reported		4,331		10,782
Specialty Plastics [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	3,806	2,827	8,454	4,699
Total segment income as reported		2,810		4,719
Pharmaceuticals [Member]
Each segment's income and reconciliations to income (loss) before taxes
Total segment income	620	945	1,807	2,271
Total segment income as reported		$ 759		$ 1,915

XML

Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Accounting Policies [Abstract]

Accounting standards adopted

Accounting Standards Adopted in the Six Months Ended June 30, 2012

On January 1, 2012, we adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs, (“ASU 2011-04”), which is codified in ASC Topic 820, Fair Value Measurement. This pronouncement changes certain fair value measurement guidance and expands certain disclosure requirements. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-05, Presentation of Comprehensive Income, (“ASU 2011-05”) and ASU 2011-12, Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, (“ASU 2011-12”), which are codified in ASC Topic 220, Comprehensive Income. ASU 2011-05 requires companies to present items of net income, items of other comprehensive income and total comprehensive income in one continuous statement or two separate but consecutive statements. ASU 2011-12 indefinitely defers certain provision of ASU 2011-05 that required companies to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented. Adoption of these pronouncements did not have a material effect on our consolidated financial statements.

On January 1, 2012, we adopted ASU 2011-08, Testing Goodwill for Impairment, (“ASU 2011-08”), which is codified in ASC Topic 350, Intangibles—Goodwill and Other. This pronouncement permits companies testing goodwill for impairment to first assess qualitative factors to determine whether the two-step impairment test is required. Adoption of this pronouncement did not have a material effect on our consolidated financial statements.

New accounting pronouncements not yet adopted

New Accounting Pronouncements Not Yet Adopted

In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities, (“ASU 2011-11”), which is codified in ASC Topic 210, Balance Sheet. This pronouncement contains new disclosure requirements about a company’s right of setoff and related arrangements associated with its financial and derivative instruments. ASU 2011-11 will be effective for our fiscal year that begins January 1, 2013, and is to be applied retrospectively. We do not expect that adoption of this pronouncement will have a material effect on our consolidated financial statements.

Fair value of financial instruments

The inputs to the valuation techniques used to measure fair value are classified into the following categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

The fair values of cash and cash equivalents are based on the fair values of identical assets. The fair value of other receivables and short-term 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 values of the Senior Notes and the Convertible Notes are based on third-party estimated bid prices. The fair values of the revolving credit facility and the other long-term notes are based on the present value of expected future cash flows and assumptions about current interest rates and the creditworthiness of the Company that market participants would use in pricing the debt.

Segment reporting

We measure segment income for internal reporting purposes by excluding unallocated corporate expenses, restructuring and impairment charges, other expenses (income) and income taxes. During the first quarter of 2012, we refined the allocation of certain corporate expenses to the Company’s reportable segments, which aligns segment reporting to the current manner in which performance is evaluated, strategic decisions are made and resources are allocated. Unallocated corporate expenses consist primarily of executive employment costs, legacy pension and other benefit costs, certain professional fees, and costs associated with our global headquarters facility.

XML

Stock - Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation [Abstract]

Details of weighted-average grant-date fair value per option assumptions used for estimating fair value

	Stock Options		Performance Share Units
Weighted-average grant-date fair value	$	4.63	$	9.63
Expected life, in years		6.0		3.0
Risk-free interest rate		1.2% - 1.6%		0.4%
Expected volatility		81.1% - 82.4%		63.0%

XML

(Loss) Earnings Per Share (Details Textual) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Earnings Per Share (Textual) [Abstract]
Antidilutive securities excluded from computation of earnings per share	7.6	5.3	7.6	5.3

XML

Income Taxes (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Income Taxes (Textual) [Abstract]
Income tax expense	$ 2,573	$ 11,461	$ 4,292	$ 21,568
Effective income tax rate			134.60%	33.50%

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $) In Millions, except Per Share data, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Condensed Consolidated Balance Sheets [Abstract]
Common stock, par value	$ 1	$ 1
Common stock, authorized	300.0	300.0
Common stock, issued	93.4	93.4
Common stock, outstanding	86.6	86.6

XML

Inventories

6 Months Ended

Jun. 30, 2012

Inventories [Abstract]

Inventories

3. Inventories

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Raw materials	$	78,489	$	78,199
Work in process		41,736		42,111
Finished goods		97,075		108,503
Total inventories	$	217,300	$	228,813

In the production of some of our products, we use precious metals, some of 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 $1.7 million and $2.7 million for the three months ended June 30, 2012 and 2011, respectively, and were $3.6 million and $4.7 million for the six months ended June 30, 2012 and 2011, respectively. We had on hand precious metals owned by participants in our precious metals consignment program of $178.1 million at June 30, 2012, and $195.0 million at December 31, 2011, measured at fair value based on market prices for identical assets.

XML

Restructuring and Cost Reduction Programs (Tables)

6 Months Ended

Jun. 30, 2012

Restructuring and Cost Reduction Programs [Abstract]

Summary of accruals related to restructuring and cost reduction programs

	Employee Severance			Other Costs			Asset Impairment			Total
	(Dollars in thousands)
Balance at December 31, 2011	$	218		$	3,419		$	—		$	3,637
Restructuring charges		4,888			87			64			5,039
Cash payments		(321	)		(502	)		—			(823	)
Non-cash items		42			(71	)		(64	)		(93	)
Balance at June 30, 2012	$	4,827		$	2,933		$	—		$	7,760

XML

Financial Instruments (Details 1) (Not Designated as Hedging Instrument [Member], Foreign Currency Gain (Loss) [Member], Foreign currency forward contracts [Member], USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Not Designated as Hedging Instrument [Member] | Foreign Currency Gain (Loss) [Member] | Foreign currency forward contracts [Member]
Effect of derivative instruments on consolidated financial performance
Amount of Gain (Loss) Recognized in Income	$ 9,533	$ (13,422)

XML

Reporting for Segments

6 Months Ended

Jun. 30, 2012

Reporting for Segments [Abstract]

Reporting for Segments

13. Reporting for Segments

The Company has six reportable segments: Performance Coatings, Electronic Materials, Color and Glass Performance Materials, Polymer Additives, Specialty Plastics, and Pharmaceuticals. We have aggregated our Tile Coating Systems and Porcelain Enamel operating segments into one reportable segment, Performance Coatings, and aggregated our Glass Systems and Performance Pigments and Colors operating segments into one reportable segment, Color and Glass Performance Materials, based on their similar economic and operating characteristics.

We measure segment income for internal reporting purposes by excluding unallocated corporate expenses, restructuring and impairment charges, other expenses (income) and income taxes. During the first quarter of 2012, we refined the allocation of certain corporate expenses to the Company’s reportable segments, which aligns segment reporting to the current manner in which performance is evaluated, strategic decisions are made and resources are allocated. Unallocated corporate expenses consist primarily of executive employment costs, legacy pension and other benefit costs, certain professional fees, and costs associated with our global headquarters facility.

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

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)
Electronic Materials	$	90,741	$	180,362	$	162,437	$	382,709
Performance Coatings		157,315		163,481		309,829		300,181
Color and Glass Performance Materials		99,889		106,476		201,324		206,281
Polymer Additives		83,450		91,271		171,174		177,133
Specialty Plastics		44,151		46,510		91,207		89,139
Pharmaceuticals		5,959		5,874		11,924		11,540
Total net sales	$	481,505	$	593,974	$	947,895	$	1,166,983

Each segment’s income (loss) and reconciliations to income before income taxes follow. As a result of applying the refined allocations to prior periods, each segment’s income for the three and six months ended June 30, 2011, has been impacted as presented below.

	Three months ended June 30,						Six months ended June 30,
			2011							2011
	2012		Adjusted		As reported		2012			Adjusted		As reported
	(Dollars in thousands)
Electronic Materials	$	33	$	22,406	$	23,914	$	(4,657	)	$	53,154	$	56,503
Performance Coatings		9,699		10,497		11,329		17,758			16,844		18,734
Color and Glass Performance Materials		10,009		10,670		11,201		18,466			19,768		21,031
Polymer Additives		1,878		4,515		4,331		8,505			11,095		10,782
Specialty Plastics		3,806		2,827		2,810		8,454			4,699		4,719
Pharmaceuticals		620		945		759		1,807			2,271		1,915
Total segment income		26,045		51,860		54,344		50,333			107,831		113,684
Unallocated corporate expenses		12,845		11,061		13,545		26,495			23,524		29,377
Restructuring and impairment charges		4,728		1,545		1,545		5,039			3,175		3,175
Other expense, net		8,417		8,172		8,172		15,611			16,752		16,752
Income before income taxes	$	55	$	31,082	$	31,082	$	3,188		$	64,380	$	64,380