Notes to Consolidated Financial Statements
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1.
|
Description of the Business
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Libbey is a leading global manufacturer and marketer of glass tableware products. We produce glass tableware in
five
countries and sell to customers in over
100
countries. We design and market, under our Libbey
®
, Libbey Signature
®
, Master's Reserve
®
, Crisa
®
, Royal Leerdam
®
, World
®
Tableware, Syracuse
®
China and Crisal Glass
®
brand names (among others), an extensive line of high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware items for sale primarily in the foodservice, retail and business-to-business channels of distribution. Our sales force presents our tabletop products to the global marketplace in a coordinated fashion. We own and operate
two
glass tableware manufacturing plants in the United States as well as glass tableware manufacturing plants in Mexico (Libbey Mexico), the Netherlands (Libbey Holland), Portugal (Libbey Portugal) and China (Libbey China). In addition, we import tabletop products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tabletop market by offering an extensive product line at competitive prices.
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2.
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Significant Accounting Policies
|
Basis of Presentation
The Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31
st
. The preparation of financial statements and related disclosures in conformity with United States generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.
Revenue Recognition
Our customer contracts generally include a single performance obligation, the shipment of specified products, and are recognized at a point in time when control of the product has transferred to the customer. Transfer of control primarily takes place when risk of loss transfers in accordance with applicable shipping terms. Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which we expect to be entitled in exchange for transferring goods or providing services. When applicable, the transaction price includes estimates of variable consideration. We estimate provisions for rebates, customer incentives, allowances, returns and discounts based on the terms of the contracts, historical experience and anticipated customer purchases during the rebate period as sales occur. We continually evaluate the adequacy of these methods used, adjusting our estimates when the amount of consideration to which we expect to be entitled changes. Refund liabilities are included in accrued liabilities on the Consolidated Balance Sheet. Our payment terms are based on customary business practices and can vary by region and customer type, but are generally
0
-
90
days. Since the term between invoicing and expected payment is less than a year, we do not adjust the transaction price for the effects of a financing component. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate governmental agencies. For contracts with a duration of less than one year, we follow an allowable practical expedient and expense contract acquisition costs when incurred. We do not have any costs to obtain or fulfill a contract that are capitalized under ASC Topic 340-40. For further disclosure on revenue see
New Accounting Standards - Adopted
below and
note 18
.
Cost of Sales
Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs. Shipping and delivery costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales. In addition, reimbursement of certain pre-production costs is considered a development activity and is included in cost of sales.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.
Accounts Receivable and Allowance for Doubtful Accounts
We record trade receivables when revenue is recorded in accordance with our revenue recognition policy and relieve accounts receivable when payments are received from customers. The allowance for doubtful accounts is established through charges to the provision for bad debts. We regularly evaluate the adequacy of the allowance for doubtful accounts based on historical trends in collections and write-offs, our judgment as to the probability of collecting accounts and our evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Accounts are determined to be uncollectible when the debt is deemed to be worthless or only recoverable in part and are written off at that time through a charge against the allowance. Generally, we do not require collateral on our accounts receivable.
Inventory Valuation
Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method is used for our U.S. glass inventories, which represented
34.9 percent
and
32.2 percent
of our total inventories in
2018
and
2017
, respectively. The remaining inventories are valued using either the first-in, first-out (FIFO) or average cost method. For those inventories valued on the LIFO method, the excess of FIFO cost over LIFO, was
$15.9 million
and
$13.4 million
in
2018
and
2017
, respectively. Cost includes the cost of materials, direct labor, in-bound freight and the applicable share of manufacturing overhead.
Purchased Intangible Assets and Goodwill
Financial Accounting Standards Board Accounting Standards Codification™ ("FASB ASC") Topic 350 - "Intangibles-Goodwill and other" ("FASB ASC 350") requires goodwill and purchased indefinite life intangible assets to be reviewed for impairment annually, or more frequently if impairment indicators arise. Intangible assets with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. As of October 1
st
of each year, we update our separate impairment evaluations for both goodwill and indefinite life intangible assets. For further disclosure on goodwill and intangibles, see
note 4
.
Software
We account for software in accordance with FASB ASC 350. Software represents the costs of internally developed and/or purchased software for internal use. Capitalized costs include software packages, installation and internal labor costs of employees devoted to the software development project. Costs incurred to modify existing software, providing significant enhancements and creating additional functionality are also capitalized. Once a project is complete, we estimate the useful life of the internal-use software, generally amortizing these costs over a
five
-year period.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally
3
to
14
years for equipment and furnishings and
10
to
40
years for buildings and improvements. Maintenance and repairs are expensed as incurred.
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. See
note 5
for further disclosure.
Self-Insurance Reserves
Self-insurance reserves reflect the estimated liability for group health and workers' compensation claims not covered by third-party insurance. We accrue estimated losses based on actuarial models and assumptions as well as our historical loss experience. Workers' compensation accruals are recorded at the estimated ultimate payout amounts based on individual case estimates. In addition, we record estimates of incurred-but-not-reported losses based on actuarial models.
Pension and Non-pension Post-retirement Benefits
We account for pension and non-pension post-retirement benefits in accordance with FASB ASC Topic 715 - "Compensation-Retirement Benefits" ("FASB ASC 715"). FASB ASC 715 requires recognition of the over-funded or under-funded status of pension and other post-retirement benefit plans on the balance sheet. Under FASB ASC 715, gains and losses, prior service costs and credits and any remaining prior transaction amounts that have not yet been recognized through net periodic benefit cost are recognized in accumulated other comprehensive loss, net of tax effect where appropriate. The service cost component of pension and post-retirement benefit costs is reported within income from operations while the non-service cost components of net benefit cost (interest costs, expected return on assets, amortization of prior service costs, settlement charges and other costs) are recorded in other income (expense).
The U.S. pension plans cover most hourly U.S.-based employees (excluding new hires at Shreveport after December 15, 2008 and at Toledo after September 30, 2010) and those salaried U.S.-based employees hired before January 1, 2006. Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly-owned subsidiary in Mexico. For further discussion see
note 8
.
We also provide certain post-retirement healthcare and life insurance benefits covering substantially all U.S. and Canadian salaried employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after December 15, 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon reaching a certain age and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. Under a cross-indemnity agreement, Owens-Illinois, Inc. assumed liability for the non-pension, post-retirement benefit of our retirees who had retired as of June 24, 1993. Therefore, the benefits related to these retirees are not included in our liability. For further discussion see
note 9
.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases and tax attribute carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are determined separately for each tax paying component in which we conduct our operations or otherwise incur taxable income or losses.
We are subject to income taxes in the U.S. and various foreign jurisdictions. Management judgment is required in evaluating our tax positions and determining our provision for income taxes. Throughout the course of business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. When management believes uncertain tax positions may be challenged despite our belief that the tax return positions are supportable, we record unrecognized tax benefits as liabilities in accordance with the requirements of ASC 740. When our judgment with respect to these uncertain tax positions changes as a result of a change in facts and circumstances, such as the outcome of a tax audit, we adjust these liabilities through increases or decreases to the income tax provision. For further discussion see
note 7
.
Derivatives
We account for derivatives in accordance with FASB ASC Topic 815 "Derivatives and Hedging" ("FASB ASC 815"). We hold derivative financial instruments to hedge certain of our interest rate risks associated with long-term debt and commodity price risks associated with forecasted future natural gas requirements. These derivatives qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. Cash flows from hedges of debt, interest rate swaps and natural gas contracts are classified as operating activities. For further discussion see
note 12
.
Environmental
In accordance with U.S. GAAP, we recognize environmental clean-up liabilities on an undiscounted basis when loss is probable and can be reasonably estimated. The cost of the clean-up is estimated by financial and legal specialists based on current law. Such estimates are based primarily upon the estimated cost of investigation and remediation required, and the likelihood that, where applicable, other potentially responsible parties will not be able to fulfill their commitments at the sites where the Company may be jointly and severally liable.
Foreign Currency Translation
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. The effect of exchange rate changes on transactions denominated in currencies other than the functional currency is recorded in other income (expense). For further detail see
note 16
.
Stock-Based Compensation Expense
We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation — Stock Compensation,” ("FASB ASC 718") and FASB ASC Topic 505-50, “Equity-Based Payments to Non-Employees” ("FASB ASC 505-50"). Stock-based compensation cost is measured based on the fair value of the equity instruments issued. FASB ASC 718 and 505-50 apply to all of our outstanding, unvested, stock-based payment awards.
Treasury Stock
Treasury Stock purchases are recorded at cost. During 2018 and 2017, we did not purchase treasury stock. At December 31, 2018, we had
941,250
shares of common stock available for repurchase, as authorized by our Board of Directors.
Research and Development
Research and development costs are charged to selling, general and administrative expense in the Consolidated Statements of Operations when incurred. Expenses for
2018
and
2017
were
$3.6 million
and
$3.0 million
, respectively.
Advertising Costs
We expense all advertising costs as incurred. Expenses for
2018
and
2017
were
$6.1 million
and
$5.3 million
, respectively.
Computation of Earnings (Loss) Per Share of Common Stock
Basic earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding plus the dilutive effects of equity-based compensation outstanding during the period using the treasury stock method.
Reclassifications
In connection with our adoption of ASU 2017-07, certain pension and non-pension expense amounts in the prior year's financial statements have been reclassified to conform with the current year presentation. See
New Accounting Standards - Adopted
below.
New Accounting Standards - Adopted
Each change to U.S. GAAP is established by the Financial Accounting Standards Board (FASB) in the form of an accounting standards update (ASU) to the FASB’s Accounting Standards Codification (ASC). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and either were determined to be not applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements.
On January 1, 2018, we adopted ASU 2014-09,
Revenue From Contracts With Customers
and all related amendments, also known as ASC Topic 606, using the modified retrospective method. There was no cumulative effect adjustment required as a result of initially applying the new standard to existing contracts at adoption on January 1, 2018, and we expect the impact of adopting the new standard to be immaterial to our Consolidated Statement of Operations on an ongoing basis. Additionally, there was no impact to our Consolidated Balance Sheets. The enhanced disclosure requirements are included in
note 18, Revenue
. Results for reporting periods beginning on or after January 1, 2018, are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our previous accounting under ASC Topic 605.
On January 1, 2018, we adopted ASU 2017-07,
Compensation - Retirement Benefits
(Topic 715):
Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost
. ASU 2017-07 improves the presentation of net periodic pension and post-retirement benefit costs. We retrospectively adopted the presentation requirement that the service cost component of pension and post-retirement benefit costs be reported within income from operations. The other components of net benefit cost (interest costs, expected return on assets, amortization of prior service costs, settlement charges and other costs) have been reclassified from cost of sales and selling, general and administrative expenses to other income (expense). On a prospective basis, only the service cost component will be capitalized in inventory or property, plant and equipment, when applicable. The effect of the retrospective presentation change related to the net periodic pension and non-pension benefit costs (credits) on our Consolidated Statement of Operations was as follows:
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Year ended December 31, 2017
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(dollars in thousands)
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Previously Reported
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Reclassification
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As Revised
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Cost of sales
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|
$
|
634,185
|
|
|
$
|
(3,070
|
)
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|
$
|
631,115
|
|
|
Selling, general and administrative expenses
|
|
124,926
|
|
|
1,279
|
|
|
126,205
|
|
|
Other income (expense)
|
|
(3,515
|
)
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(1,791
|
)
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(5,306
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)
|
On January 1, 2018, we early adopted ASU 2017-12,
Derivatives and Hedging
(Topic 815):
Targeted Improvements to Accounting for Hedging Activities
. ASU 2017-12 amended the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. As of January 1, 2018, we recorded a
$0.3 million
reduction to our retained deficit and an increase in accumulated other comprehensive loss related to our natural gas swap contracts in Mexico that were previously not designated as hedging instruments. On a prospective basis, the change in fair value of these derivatives will be recognized in other comprehensive income (loss) rather than other income (expense) within the Consolidated Statement of Operations. Results and disclosures for reporting periods beginning on or after January 1, 2018, are presented under the new guidance within ASU 2017-12, while prior period amounts and disclosures are not adjusted and continue to be reported in accordance with our previous accounting. See
note 12, Derivatives
, for further details and disclosures.
On December 31, 2018, we early adopted ASU 2018-14,
Compensation - Retirement Benefits - Defined Benefit Plans - General
(Subtopic 715-20):
Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans
. This update modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. ASU 2018-14 removes disclosures that are no longer deemed cost beneficial and adds the following disclosure requirements: 1) weighted-average interest crediting rates for cash balance plans; and 2) an explanation of the reasons for significant gains/losses related to changes in the benefit obligation during the period. The update also clarifies the requirements when entities aggregate disclosures for two or more plans. The new disclosure requirements were applied on a retrospective basis and are included in
note 8, Pension,
and
note 9, Non-pension Post-retirement Benefits
.
On December 31, 2018, we early adopted ASU 2018-02,
Income Statement - Reporting Comprehensive Income
(Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income
. This standard allows an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the
Tax Cuts and Jobs Act. Consequently, the stranded tax effects resulting from the Tax Cuts and Jobs Act will be eliminated, resulting in the reporting of more useful information to financial statement users. ASU 2018-02 relates to only the reclassification of the income tax effects of the Tax Cuts and Jobs Act. The underlying guidance requiring that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. We elected not to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act. The adoption did not have an impact on our Consolidated Financial Statements.
New Accounting Standards - Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02,
Leases
(Topic 842), which requires a lessee to recognize on the balance sheet right-of-use assets and corresponding liabilities for leases with lease terms of more than 12 months. Leases will be classified as either finance or operating leases, with classification affecting the pattern of expense recognition in the income statement. The new guidance also clarifies the definition of a lease and disclosure requirements. ASU 2016-02 is effective for us in the first quarter of 2019. ASU 2016-02 requires lessees and lessors to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach does not require any transition accounting for leases that expired before the earliest comparative period presented. In the third quarter of 2018, the FASB approved an optional transition method permitting an entity to apply the transition provisions of ASU 2016-02 at its adoption date instead of at the earliest comparative period presented in the financial statements. Since this optional adoption method eases the transition burden, we plan to elect it and record a cumulative effect adjustment as of January 1, 2019, without restatement of the previously reported comparative periods. We anticipate recording additional assets and liabilities on the balance sheet similar to the amount of the total present value of our future undiscounted minimum operating lease payments as shown in
note 15
of these Consolidated Financial Statements. Additionally, the adoption of this ASU is not expected to have a material impact on our consolidated results of operations or cash flows. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits us to carry forward our prior conclusions for lease identification and lease classification on existing contracts. We also made an accounting policy election to keep short-term leases off of the balance sheet for all classes of underlying assets. We continue to evaluate the related disclosures in the new lease guidance. We utilized a comprehensive approach to review our lease portfolio, selected a system for managing our leases, completed system implementation, updated our internal controls and conducted training on our new process.
In June 2016, the FASB issued ASU 2016-13,
Financial Instruments - Credit Losses
(Topic 326):
Measurement of Credit Losses on Financial Instruments
. This standard introduces a new approach to estimating credit losses on certain types of financial instruments, including trade receivables, and modifies the impairment model for available-for-sale debt securities. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
In August 2018, the FASB issued ASU 2018-15,
Intangibles - Goodwill and Other - Internal-Use Software
(Subtopic 350-40):
Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
. This standard aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for internal-use software. The new guidance also prescribes the balance sheet, income statement and cash flow classification of the capitalized implementation costs and related amortization expense, and requires additional quantitative and qualitative disclosures. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
The following table provides detail of selected balance sheet items:
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|
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December 31,
(dollars in thousands)
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|
2018
|
|
2017
|
|
Accounts receivable:
|
|
|
|
|
|
Trade receivables
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|
$
|
82,521
|
|
|
$
|
88,786
|
|
|
Other receivables
|
|
1,456
|
|
|
1,211
|
|
|
Total accounts receivable, less allowances of $8,538 and $9,051
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|
$
|
83,977
|
|
|
$
|
89,997
|
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
Finished goods
|
|
$
|
175,074
|
|
|
$
|
170,774
|
|
|
Work in process
|
|
1,363
|
|
|
1,485
|
|
|
Raw materials
|
|
4,026
|
|
|
3,906
|
|
|
Repair parts
|
|
10,116
|
|
|
10,240
|
|
|
Operating supplies
|
|
1,524
|
|
|
1,481
|
|
|
Total inventories, less loss provisions of $9,453 and $10,308
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|
$
|
192,103
|
|
|
$
|
187,886
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
Accrued incentives
|
|
$
|
19,359
|
|
|
$
|
19,728
|
|
|
Other accrued liabilities
|
|
24,369
|
|
|
24,192
|
|
|
Total accrued liabilities
|
|
$
|
43,728
|
|
|
$
|
43,920
|
|
|
|
|
|
|
|
|
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4.
|
Purchased Intangible Assets and Goodwill
|
Purchased Intangibles
Changes in purchased intangibles balances are as follows:
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|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Beginning balance
|
|
$
|
14,565
|
|
|
$
|
15,225
|
|
|
Amortization
|
|
(1,049
|
)
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|
(1,073
|
)
|
|
Foreign currency impact
|
|
(131
|
)
|
|
413
|
|
|
Ending balance
|
|
$
|
13,385
|
|
|
$
|
14,565
|
|
Purchased intangible assets are composed of the following:
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|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Indefinite life intangible assets
|
|
$
|
12,035
|
|
|
$
|
12,120
|
|
|
Definite life intangible assets, net of accumulated amortization of $20,006 and $19,093
|
|
1,350
|
|
|
2,445
|
|
|
Total
|
|
$
|
13,385
|
|
|
$
|
14,565
|
|
Amortization expense for definite life intangible assets was
$1.0 million
and
$1.1 million
for years
2018
and
2017
, respectively.
Indefinite life intangible assets are composed of trade names and trademarks that have an indefinite life and are therefore individually tested for impairment on an annual basis, or more frequently in certain circumstances where impairment indicators arise, in accordance with FASB ASC 350. Our measurement date for impairment testing is October 1
st
of each year. When performing our test for impairment of individual indefinite life intangible assets, we use a relief from royalty method to determine the fair market value that is compared to the carrying value of the indefinite life intangible asset. The inputs used for
this analysis are considered Level 3 inputs in the fair value hierarchy. See
note 14
for further discussion of the fair value hierarchy. Our October 1
st
review for
2018
and
2017
did not indicate impairment of our indefinite life intangible assets.
The remaining definite life intangible assets at December 31,
2018
consist of customer relationships that are amortized over a period ranging from
13
to
20
years. The weighted average remaining life on the definite life intangible assets is
4.3
years at December 31,
2018
.
Future estimated amortization expense of definite life intangible assets is as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
2019
|
2020
|
2021
|
2022
|
2023
|
|
|
$564
|
$157
|
$157
|
$157
|
$157
|
|
Goodwill
Changes in goodwill balances are as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
2017
|
|
(dollars in thousands)
|
|
U.S. & Canada
|
|
Latin America
|
|
Total
|
|
U.S. & Canada
|
|
Latin America
|
|
Total
|
|
Beginning balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
43,872
|
|
|
$
|
125,681
|
|
|
$
|
169,553
|
|
|
$
|
43,872
|
|
|
$
|
125,681
|
|
|
$
|
169,553
|
|
|
Accumulated impairment losses
|
|
(5,441
|
)
|
|
(79,700
|
)
|
|
(85,141
|
)
|
|
(5,441
|
)
|
|
—
|
|
|
(5,441
|
)
|
|
Net beginning balance
|
|
38,431
|
|
|
45,981
|
|
|
84,412
|
|
|
38,431
|
|
|
125,681
|
|
|
164,112
|
|
|
Impairment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(79,700
|
)
|
|
(79,700
|
)
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
43,872
|
|
|
125,681
|
|
|
169,553
|
|
|
43,872
|
|
|
125,681
|
|
|
169,553
|
|
|
Accumulated impairment losses
|
|
(5,441
|
)
|
|
(79,700
|
)
|
|
(85,141
|
)
|
|
(5,441
|
)
|
|
(79,700
|
)
|
|
(85,141
|
)
|
|
Net ending balance
|
|
$
|
38,431
|
|
|
$
|
45,981
|
|
|
$
|
84,412
|
|
|
$
|
38,431
|
|
|
$
|
45,981
|
|
|
$
|
84,412
|
|
Goodwill impairment tests are completed for each reporting unit on an annual basis, or more frequently in certain circumstances where impairment indicators arise. The inputs used for this analysis are considered Level 2 and Level 3 inputs in the fair value hierarchy. See
note 14
for further discussion of the fair value hierarchy.
When performing our test for impairment, we measure each reporting unit's fair value using a combination of "income" and "market" approaches on a shipping point basis. The income approach calculates the fair value of the reporting unit based on a discounted cash flow analysis, incorporating the weighted average cost of capital of a hypothetical third-party buyer. Significant estimates in the income approach include the following: discount rate; expected financial outlook and profitability of the reporting unit's business; and foreign currency impacts (Level 3 inputs). Discount rates use the weighted average cost of capital for companies within our peer group, adjusted for specific company risk premium factors. The market approach uses the "Guideline Company" method, which calculates the fair value of the reporting unit based on a comparison of the reporting unit to comparable publicly traded companies. Significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, assessing comparable multiples, as well as consideration of control premiums (Level 2 inputs). The blended approach assigns a
70 percent
weighting to the income approach and
30 percent
to the market approach (Level 3 input). The higher weighting is given to the income approach due to some limitations of publicly available peer information used in the market approach. The blended fair value of both approaches is then compared to the carrying value, and to the extent that fair value exceeds the carrying value, no impairment exists. However, to the extent the carrying value exceeds the fair value, an impairment is recorded.
The results of our October 1, 2018 annual impairment test indicated the estimated fair values of all reporting units that have goodwill were in excess of their carrying values, with the Mexico reporting unit's excess fair value exceeding carrying value by approximately
15 percent
. The reporting unit within the U.S. and Canada reporting segment, which consists of two aggregated components, had an estimated fair value over carrying value of greater than
50 percent
.
As part of our on-going assessment of goodwill at September 30, 2017, we noted that third quarter 2017 sales, profitability and cash flow of our Mexico reporting unit (within the Latin America reporting segment) significantly underperformed in comparison to the forecast, and expectations for the fourth quarter of 2017 were lowered as well. These factors, as well as
continuing competitive pressures, long-term weakness of the Mexican peso relative to the U.S. dollar, and an increase in the discount rate of
70
basis points from December 31, 2016 to September 30, 2017, contributed to increased pressure on the outlook of the reporting unit. As a result, we determined a triggering event had occurred for our Mexico reporting unit. Accordingly, an interim impairment test was performed, indicating that the carrying value exceeded its fair value, and in accordance with the early adoption of ASU 2017-04, we recorded a non-cash impairment charge of
$79.7 million
during the third quarter of 2017.
As the impairment assessment performed at September 30, 2017 resulted in the fair value of the Mexico reporting unit equaling its carrying value, there was no further impairment as of October 1, 2017. The results of our review performed as of October 1,
2017
also did not indicate an impairment for our other reporting unit with goodwill.
|
|
|
|
5.
|
Property, Plant and Equipment
|
Property, plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Land
|
|
$
|
20,374
|
|
|
$
|
20,859
|
|
|
Buildings
|
|
109,470
|
|
|
107,659
|
|
|
Machinery and equipment
|
|
531,838
|
|
|
505,978
|
|
|
Furniture and fixtures
|
|
15,668
|
|
|
15,391
|
|
|
Software
|
|
25,218
|
|
|
24,464
|
|
|
Construction in progress
|
|
24,945
|
|
|
12,933
|
|
|
Gross property, plant and equipment
|
|
727,513
|
|
|
687,284
|
|
|
Less accumulated depreciation
|
|
462,553
|
|
|
421,609
|
|
|
Net property, plant and equipment
|
|
$
|
264,960
|
|
|
$
|
265,675
|
|
Depreciation expense was
$43.2 million
and
$44.4 million
for the years
2018
and
2017
, respectively.
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
Interest Rate
|
|
Maturity Date
|
|
2018
|
|
2017
|
|
Borrowings under ABL Facility
|
|
floating
|
(2)
|
December 7, 2022
(1)
|
|
$
|
19,868
|
|
|
$
|
—
|
|
|
Term Loan B
|
|
floating
|
(3)
|
April 9, 2021
|
|
380,200
|
|
|
384,600
|
|
|
AICEP Loan
|
|
0.00%
|
|
July 30, 2018
|
|
—
|
|
|
3,085
|
|
|
Total borrowings
|
|
400,068
|
|
|
387,685
|
|
|
Less — unamortized discount and finance fees
|
|
2,368
|
|
|
3,295
|
|
|
Total borrowings — net
|
|
397,700
|
|
|
384,390
|
|
|
Less — long term debt due within one year
|
|
4,400
|
|
|
7,485
|
|
|
Total long-term portion of borrowings — net
|
|
$
|
393,300
|
|
|
$
|
376,905
|
|
___________________________
(1)
Maturity date will be January 9, 2021, if Term Loan B is not refinanced by this date.
(2)
The interest rate for the ABL Facility is comprised of several different borrowings at various rates. The weighted average rate of all ABL Facility borrowings was
1.94 percent
at
December 31, 2018
.
(3)
See interest rate swaps under "Term Loan B" below and
note 12
.
Annual maturities for all of our total borrowings for the next five years and beyond are as follows:
|
|
|
|
|
|
|
|
|
|
|
2019
|
2020
|
2021
|
2022
|
2023
|
Thereafter
|
|
|
$4,400
|
$4,400
|
$391,268
|
$—
|
$—
|
$—
|
|
Amended and Restated ABL Credit Agreement
Libbey Glass and Libbey Europe entered into an Amended and Restated Credit Agreement, dated as of February 8, 2010 and amended as of April 29, 2011, May 18, 2012, April 9, 2014 and December 7, 2017 (as amended, the ABL Facility), with a group of
four
financial institutions. The ABL Facility provides for borrowings of up to
$100.0 million
, subject to certain borrowing base limitations, reserves and outstanding letters of credit.
All borrowings under the ABL Facility are secured by:
|
|
|
|
•
|
a first-priority security interest in substantially all of the existing and future personal property of Libbey Glass and its domestic subsidiaries (ABL Priority Collateral);
|
|
|
|
|
•
|
a first-priority security interest in:
|
|
|
|
|
•
|
100 percent
of the stock of Libbey Glass and
100 percent
of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries;
|
|
|
|
|
•
|
100 percent
of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries; and
|
|
|
|
|
•
|
65 percent
of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries;
|
|
|
|
|
•
|
a first-priority security interest in substantially all proceeds and products of the property and assets described above; and
|
|
|
|
|
•
|
a second-priority security interest in substantially all of the owned real property, equipment and fixtures in the United States of Libbey Glass and its domestic subsidiaries, subject to certain exceptions and permitted liens (Term Priority Collateral).
|
Additionally, borrowings by Libbey Europe under the ABL Facility are secured by:
|
|
|
|
•
|
a first-priority lien on substantially all of the existing and future real and personal property of Libbey Europe and its Dutch subsidiaries; and
|
|
|
|
|
•
|
a first-priority security interest in:
|
|
|
|
|
•
|
100 percent
of the stock of Libbey Europe and
100 percent
of the stock of substantially all of the Dutch subsidiaries; and
|
|
|
|
|
•
|
100 percent
(or a lesser percentage in certain circumstances) of the outstanding stock issued by the first-tier foreign subsidiaries of Libbey Europe and its Dutch subsidiaries.
|
Swingline borrowings are limited to
$10.0 million
, with swingline borrowings for Libbey Europe being limited to the U.S. equivalent of
$5.0 million
. Loans comprising each CBFR (CB Floating Rate) Borrowing, including each Swingline Loan, bear interest at the CB Floating Rate plus the Applicable Rate, and euro-denominated swingline borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swingline rate, as defined in the ABL Facility, subject to a LIBOR floor of
0.0 percent
. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and Eurocurrency Loans were
0.50 percent
and
1.50 percent
, respectively, at December 31,
2018
. Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the total credit provided under the ABL Facility. The Commitment Fee was
0.25 percent
at December 31,
2018
. No compensating balances are required by the ABL Facility. The ABL Facility does not require compliance with a fixed charge coverage ratio covenant, unless aggregate unused availability falls below
$10.0 million
. If our aggregate unused ABL availability were to fall below
$10.0 million
, the fixed charge coverage ratio requirement would be
1
:00 to 1:00. Libbey Glass and Libbey Europe have the option to increase the ABL Facility by
$25.0 million
. At
December 31, 2018
, Libbey Glass and Libbey Europe had outstanding borrowings under the ABL Facility of
$3.5 million
and
$16.4 million
, respectively. There were
no
Libbey Glass or Libbey Europe borrowings under the facility at December 31,
2017
. Interest is payable on the last day of the interest period, which can range from
one month
to
six months
depending on the maturity of each individual borrowing on the ABL facility.
The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable and inventory. The borrowing base is the sum of (a)
85 percent
of eligible accounts receivable and (b) the lesser of (i)
85 percent
of the net orderly liquidation value (NOLV) of eligible inventory, (ii)
65 percent
of eligible inventory, or (iii)
$75.0 million
.
At
December 31, 2018
, the available borrowing base under the ABL Facility was offset by a
$0.5 million
rent reserve. The ABL Facility also provides for the issuance of up to
$15.0 million
of letters of credit that, when outstanding, are applied against the
$100.0 million
limit. At December 31,
2018
,
$8.0 million
in letters of credit were outstanding. Remaining unused availability under the ABL Facility was
$71.6 million
at December 31,
2018
, compared to
$91.9 million
under the ABL Facility at December 31,
2017
.
Term Loan B
On April 9, 2014, Libbey Glass consummated its
$440.0 million
Senior Secured Term Loan B of Libbey Glass due 2021 (Term Loan B). The net proceeds of the Term Loan B were
$438.9 million
, after the
0.25 percent
original issue discount of
$1.1 million
. The Term Loan B had related fees of approximately
$6.7 million
that will be amortized to interest expense over the life of the loan.
The Term Loan B is evidenced by a Senior Secured Credit Agreement, dated April 9, 2014 (Credit Agreement), between Libbey Glass, the Company, the domestic subsidiaries of Libbey Glass listed as guarantors therein (Subsidiary Guarantors and together with the Company, Guarantors), and the lenders. Under the terms of the Credit Agreement, aggregate principal of
$1.1 million
is due on the last business day of each quarter. The Term Loan B bears interest at the rate of LIBOR plus
3.0 percent
, subject to a LIBOR floor of
0.75 percent
. The interest rate was
5.39 percent
per year at
December 31, 2018
and
4.43
percent at
December 31, 2017
, and will mature on
April 9, 2021
. Although the Credit Agreement does not contain financial covenants, the Credit Agreement contains other covenants that restrict the ability of Libbey Glass and the Guarantors to, among other things:
|
|
|
|
•
|
incur, assume or guarantee additional indebtedness;
|
|
|
|
|
•
|
pay dividends, make certain investments or other restricted payments;
|
|
|
|
|
•
|
enter into affiliate transactions;
|
|
|
|
|
•
|
merge or consolidate, or otherwise dispose of all or substantially all the assets of Libbey Glass and the Guarantors; and
|
|
|
|
|
•
|
transfer or sell assets.
|
We may voluntarily prepay, in whole or in part, the Term Loan B without premium or penalty but with accrued interest. Beginning with the year-ended December 31, 2015, the Credit Agreement requires us to make an annual mandatory prepayment offer to lenders of
0.0
to
50.0
percent of our excess cash flow, depending on our excess cash flow and leverage ratios as defined in the Credit Agreement. The calculation is made at the end of each year and the mandatory prepayment offer to lenders is made no later than
ten
business days after the filing of our annual compliance certificate to the lenders. The amount of any required mandatory prepayment offer is reduced by the amounts of any optional prepayments we made during the applicable year or prior to the prepayment offer in the year the offer is required to be made.
The Credit Agreement provides for customary events of default. In the case of an event of default as defined in the Credit Agreement, all of the outstanding Term Loan B will become due and payable immediately without further action or notice. The Term Loan B and the related guarantees under the Credit Agreement are secured by (i) first priority liens on the Term Priority Collateral and (ii) second priority liens on the ABL Collateral.
On April 1, 2015 and September 24, 2018, we executed interest rate swaps on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swaps effectively convert a portion of our Term Loan B debt from a variable interest rate to a fixed interest rate, thus reducing the impact of interest rate changes on future income. See
note 12
for further discussion on the interest rate swaps.
AICEP Loan
From time to time since July 2012, Libbey Portugal has entered into loan agreements with Agencia para Investmento Comercio Externo de Portugal, EPE (AICEP), the Portuguese Agency for investment and external trade. This loan was fully repaid in July 2018, and the interest rate was
0.0 percent
.
Notes Payable
We have an overdraft line of credit for a maximum of
€0.8 million
. At December 31,
2018
and
2017
, there were
no
borrowings under the facility, which had an interest rate of
1.50 percent
. Interest with respect to the note is paid monthly.
The provisions for income taxes were calculated based on the following components of income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
United States
|
|
$
|
(12,682
|
)
|
|
$
|
(65,224
|
)
|
|
Non-U.S.
|
|
14,979
|
|
|
(12,346
|
)
|
|
Total income (loss) before income taxes
|
|
$
|
2,297
|
|
|
$
|
(77,570
|
)
|
The current and deferred provisions (benefit) for income taxes were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Current:
|
|
|
|
|
|
U.S. federal
|
|
$
|
1,945
|
|
|
$
|
(183
|
)
|
|
Non-U.S.
|
|
6,780
|
|
|
4,517
|
|
|
U.S. state and local
|
|
694
|
|
|
834
|
|
|
Total current income tax provision
|
|
9,419
|
|
|
5,168
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
U.S. federal
|
|
687
|
|
|
9,950
|
|
|
Non-U.S.
|
|
310
|
|
|
1,190
|
|
|
U.S. state and local
|
|
(163
|
)
|
|
(510
|
)
|
|
Total deferred income tax provision
|
|
834
|
|
|
10,630
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
U.S. federal
|
|
2,632
|
|
|
9,767
|
|
|
Non-U.S.
|
|
7,090
|
|
|
5,707
|
|
|
U.S. state and local
|
|
531
|
|
|
324
|
|
|
Total income tax provision
|
|
$
|
10,253
|
|
|
$
|
15,798
|
|
U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside of the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such temporary differences totaled
$14.6 million
and
$11.4 million
as of December 31, 2018 and 2017, respectively. The amount of unrecognized deferred income tax liability on this temporary difference is
$3.0 million
and
$2.4 million
as of December 31, 2018 and 2017, respectively.
Reconciliation from the statutory U.S. federal income tax rate to the consolidated effective income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2018
|
|
2017
|
|
Statutory U.S. federal income tax rate
|
|
21.0
|
|
%
|
|
35.0
|
|
%
|
|
Increase (decrease) in rate due to:
|
|
|
|
|
|
|
|
Non-U.S. income tax differential
|
|
19.9
|
|
|
|
1.2
|
|
|
|
U.S. state and local income taxes, net of related U.S. federal income taxes
|
|
22.6
|
|
|
|
0.1
|
|
|
|
U.S. federal credits
|
|
(9.8
|
)
|
|
|
0.3
|
|
|
|
Permanent adjustments
|
|
27.7
|
|
|
|
0.6
|
|
|
|
Foreign withholding taxes
|
|
75.9
|
|
|
|
(2.0
|
)
|
|
|
Valuation allowances
|
|
143.5
|
|
|
|
(4.4
|
)
|
|
|
Unrecognized tax benefits
|
|
48.4
|
|
|
|
(3.9
|
)
|
|
|
Impact of foreign exchange
|
|
71.6
|
|
|
|
(1.6
|
)
|
|
|
Impact of legislative changes
|
|
—
|
|
|
|
(8.7
|
)
|
|
|
Goodwill impairment
|
|
—
|
|
|
|
(36.0
|
)
|
|
|
Other
|
|
25.6
|
|
|
|
(1.0
|
)
|
|
|
Consolidated effective income tax rate
|
|
446.4
|
|
%
|
|
(20.4
|
)
|
%
|
Deferred income tax assets and liabilities:
Deferred income tax assets and liabilities result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and from income tax carryovers and credits. The significant components of our deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Deferred income tax assets:
|
|
|
|
|
|
Pension
|
|
$
|
9,722
|
|
|
$
|
8,108
|
|
|
Non-pension post-retirement benefits
|
|
11,712
|
|
|
13,385
|
|
|
Other accrued liabilities
|
|
16,477
|
|
|
13,213
|
|
|
Receivables
|
|
1,994
|
|
|
2,118
|
|
|
Net operating loss and charitable contribution carryforwards
|
|
14,143
|
|
(a)
|
16,599
|
|
|
Tax credits
|
|
13,373
|
|
(b)
|
13,288
|
|
|
Total deferred income tax assets
|
|
67,421
|
|
(c)
|
66,711
|
|
|
Valuation allowances
|
|
(22,068
|
)
|
|
(19,076
|
)
|
|
Net deferred income tax assets
|
|
45,353
|
|
|
47,635
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
Property, plant and equipment
|
|
15,332
|
|
|
18,246
|
|
|
Inventories
|
|
1,699
|
|
|
1,639
|
|
|
Intangibles and other
|
|
4,987
|
|
|
4,708
|
|
|
Total deferred income tax liabilities
|
|
22,018
|
|
|
24,593
|
|
|
Net deferred income tax asset
|
|
$
|
23,335
|
|
|
$
|
23,042
|
|
___________________________
|
|
|
|
(a)
|
At December 31, 2018, U.S. operating loss carryforwards of
$3.9 million
expire between 2019 and 2038, and non-U.S. operating loss carryforwards of
$10.2 million
expire between 2021 and 2027.
|
|
|
|
|
(b)
|
At December 31, 2018, U.S. general business credit carryforwards of
$3.0 million
expire between 2024 and 2038. U.S. AMT credits of
$1.3 million
and the foreign credits of
$9.0 million
do not expire.
|
|
|
|
|
(c)
|
In order to fully realize our U.S. deferred tax assets as of December 31, 2018, the Company needs to generate approximately
$151.9 million
of future taxable income.
|
Valuation Allowances:
We currently have a valuation allowance in place on our deferred income tax assets in the Netherlands. We intend to maintain this allowance until a period of sustainable income is achieved and management concludes it is more likely than not that those deferred income tax assets will be realized.
A valuation allowance has been recorded against the deferred tax asset related to the limitation on the U.S. deduction for interest expense. Management concluded that it is not more likely than not that the disallowed interest expense for 2018 can be utilized in future years, due to IRS guidance that was issued in the fourth quarter of 2018. In addition, partial valuation allowances have been recorded against state operating loss carryforwards.
Uncertain Tax Positions:
The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. In August 2016, one of our Mexican subsidiaries received a tax assessment from the Mexican tax authority (SAT) related to the audit of its 2010 tax year. The amount assessed was approximately
3 billion
Mexican pesos, which was equivalent to approximately
$157 million
U.S. dollars as of the date of the assessment. The Company has filed an administrative appeal with SAT requesting that the assessment be fully nullified. We are awaiting the outcome of the appeal. Management, in consultation with external legal counsel, believes that if contested in the Mexican court system, it is more likely than not that the Company would prevail on all significant components of the assessment. Management intends to continue to vigorously contest all significant components of the assessment in the Mexican courts if they are not nullified at the administrative appeal level. We believe that our tax reserves related to uncertain tax positions are adequate at this time.
A reconciliation of the beginning and ending gross unrecognized tax benefits, excluding interest and penalties, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Beginning balance
|
|
$
|
5,007
|
|
|
$
|
3,521
|
|
|
Additions based on tax positions related to the current year
|
|
438
|
|
|
435
|
|
|
Additions for tax positions of prior years
|
|
9
|
|
|
1,735
|
|
|
Reductions for tax positions of prior years
|
|
(1,698
|
)
|
|
(468
|
)
|
|
Changes due to lapse of statute of limitations
|
|
513
|
|
|
279
|
|
|
Reductions due to settlements with tax authorities
|
|
(57
|
)
|
|
(495
|
)
|
|
Ending balance
|
|
$
|
4,212
|
|
|
$
|
5,007
|
|
We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes. Other disclosures relating to unrecognized tax benefits are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate
|
|
$
|
5,283
|
|
|
$
|
4,107
|
|
|
Interest, net of tax benefit, accrued in the Consolidated Balance Sheets
|
|
$
|
1,027
|
|
|
$
|
572
|
|
|
Penalties, accrued in the Consolidated Balance Sheets
|
|
$
|
43
|
|
|
$
|
38
|
|
|
Interest expense recognized in the Consolidated Statements of Operations
|
|
$
|
523
|
|
|
$
|
506
|
|
|
Penalties expense (benefit) recognized in the Consolidated Statements of Operations
|
|
$
|
5
|
|
|
$
|
(67
|
)
|
Based upon the outcome of tax examinations, judicial proceedings, other settlements with taxing jurisdictions, or expiration of statutes of limitations, it is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that is materially different from the current estimate of the tax liabilities. It is also reasonably possible that gross unrecognized tax benefits may decrease within the next twelve months by approximately
$4.1 million
due to settlements with tax authorities.
Other Matters:
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. As of December 31,
2018
, the tax years that remained subject to examination by major tax jurisdictions were as follows:
|
|
|
|
|
|
|
|
|
Jurisdiction
|
|
Open Years
|
|
Canada
|
|
2015
|
–
|
2018
|
|
China
|
|
2008
|
–
|
2018
|
|
Mexico (excluding 2011 which is closed)
|
|
2010
|
–
|
2018
|
|
Netherlands
|
|
2016
|
–
|
2018
|
|
Portugal
|
|
2008
|
–
|
2018
|
|
United States (excluding 2013 which is closed)
|
|
2011
|
–
|
2018
|
United States Tax Reform: The Tax Cuts and Jobs Act (the Act), signed into law on December 22, 2017, changed many aspects of the U.S. tax code, by reducing the corporate income tax rate from
35 percent
to
21 percent
, shifting to a territorial tax system with a related one-time transition tax on accumulated, unremitted earnings of foreign subsidiaries, limiting interest deductions, allowing the current expensing of certain capital expenditures, and numerous other changes that applied prospectively beginning in 2018. We recorded a charge of
$6.7 million
in the fourth quarter of 2017, principally related to re-measurement of the net U.S. deferred income tax assets at the
21 percent
tax rate. We applied the guidance in SAB 118 when accounting for the enactment date effects of the Act in 2017 and throughout 2018. As of December 31, 2018, we completed our accounting for all the enactment date income tax effects of the Act. There were no material revisions to the taxes recorded at December 31, 2017.
The Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign entities. The FASB Staff Q&A Topic 740, No. 5 "Accounting for Global Low-Taxed Income", states that an entity may make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax expense is incurred as a period expense. We have elected to account for GILTI as a period expense when incurred.
We have pension plans covering the majority of our employees. Benefits generally are based on compensation and length of service for salaried employees and job grade and length of service for hourly employees. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006, and most hourly U.S.-based employees (excluding employees hired at Shreveport after December 15, 2008, and at Toledo after September 30, 2010). Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly owned subsidiary in Mexico and are unfunded.
Effect on Operations
The components of our net pension expense, including the SERP, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Service cost (benefits earned during the period)
|
|
$
|
4,009
|
|
|
$
|
3,916
|
|
|
$
|
1,142
|
|
|
$
|
1,085
|
|
|
$
|
5,151
|
|
|
$
|
5,001
|
|
|
Interest cost on projected benefit obligation
|
|
12,615
|
|
|
13,787
|
|
|
2,984
|
|
|
2,749
|
|
|
15,599
|
|
|
16,536
|
|
|
Expected return on plan assets
|
|
(22,658
|
)
|
|
(22,479
|
)
|
|
—
|
|
|
—
|
|
|
(22,658
|
)
|
|
(22,479
|
)
|
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
1
|
|
|
236
|
|
|
(201
|
)
|
|
(204
|
)
|
|
(200
|
)
|
|
32
|
|
|
Actuarial loss
|
|
6,472
|
|
|
5,232
|
|
|
622
|
|
|
594
|
|
|
7,094
|
|
|
5,826
|
|
|
Settlement charge
|
|
—
|
|
|
245
|
|
|
92
|
|
|
—
|
|
|
92
|
|
|
245
|
|
|
Pension expense
|
|
$
|
439
|
|
|
$
|
937
|
|
|
$
|
4,639
|
|
|
$
|
4,224
|
|
|
$
|
5,078
|
|
|
$
|
5,161
|
|
In 2018 and 2017, the pension settlement charges were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts. The non-service cost components of pension expense are included in other income (expense) on the Consolidated Statements of Operations. See
note 16
for additional information.
Actuarial Assumptions
The assumptions used to determine net periodic pension expense for each year and the benefit obligations at December 31
st
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net periodic pension expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
3.64%
|
to
|
3.69%
|
|
4.18%
|
to
|
4.23%
|
|
9.40%
|
|
9.30%
|
|
Expected long-term rate of return on plan assets
|
|
7.00%
|
|
7.00%
|
|
Not applicable
|
|
Not applicable
|
|
Rate of compensation increase
|
|
Not applicable
|
|
Not applicable
|
|
4.30%
|
|
4.30%
|
|
Cash balance interest crediting rate
|
|
5.50%
|
|
5.50%
|
|
Not applicable
|
|
Not applicable
|
|
Benefit obligations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discount rate
|
|
4.31%
|
to
|
4.33%
|
|
3.64%
|
to
|
3.69%
|
|
10.60%
|
|
9.40%
|
|
Rate of compensation increase
|
|
Not applicable
|
|
Not applicable
|
|
4.30%
|
|
4.30%
|
|
Cash balance interest crediting rate
|
|
5.50%
|
|
5.50%
|
|
Not applicable
|
|
Not applicable
|
The discount rate enables us to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments at our December 31 measurement date. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year. A higher discount rate decreases the present value of benefit obligations and decreases pension expense.
To determine the expected long-term rate of return on plan assets for our funded plans, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. At December 31, 2018, the expected long-term rate of return on plan assets is
6.50 percent
, which will be used to measure the earnings effects for 2019.
The cash balance interest crediting rate, which applies only to the U.S. Salaried Plan, enables us to calculate the benefit obligation through projecting future interest credits on cash balance accounts between the measurement date and a participant’s assumed retirement date. The rate adjusts annually and is the 30-year Treasury rate in effect as of October in the preceding plan year, subject to a minimum of
5 percent
. A lower cash balance interest crediting rate assumption decreases the benefit obligation and decreases pension expense.
Future benefits are assumed to increase in a manner consistent with past experience of the plans except for the Libbey U.S. Salaried Pension Plan and SERP as discussed above, which, to the extent benefits are based on compensation, includes assumed compensation increases as presented above. Amortization included in net pension expense is based on the average remaining service of employees.
We account for our defined benefit pension plans on an expense basis that reflects actuarial funding methods. The actuarial valuations require significant estimates and assumptions to be made by management, primarily with respect to the discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The discount rate is based on a selected settlement portfolio from a universe of high quality bonds. In determining the expected long-term rate of return on plan assets, we consider historical market and portfolio rates of return, asset allocations and expectations of future rates of return. We evaluate these critical assumptions on our annual measurement date of December 31
st
. Other assumptions involving demographic factors such as retirement age, mortality and turnover are evaluated periodically and are updated to reflect our experience. Actual results in any given year often will differ from actuarial assumptions because of demographic, economic and other factors.
For our U.S. pension plans, we use the RP 2014 Sex Distinct Mortality Tables, as released by the Society of Actuaries, to determine our projected benefit obligations. Beginning annually in 2015, the Society of Actuaries has published new generational projection scales reflecting additional years of mortality experience, and we have adopted these updates in each respective year.
Projected Benefit Obligation (PBO) and Fair Value of Assets
The changes in the projected benefit obligations and fair value of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation, beginning of year
|
|
$
|
354,053
|
|
|
$
|
336,648
|
|
|
$
|
31,967
|
|
|
$
|
28,161
|
|
|
$
|
386,020
|
|
|
$
|
364,809
|
|
|
Service cost
|
|
4,009
|
|
|
3,916
|
|
|
1,142
|
|
|
1,085
|
|
|
5,151
|
|
|
5,001
|
|
|
Interest cost
|
|
12,615
|
|
|
13,787
|
|
|
2,984
|
|
|
2,749
|
|
|
15,599
|
|
|
16,536
|
|
|
Exchange rate fluctuations
|
|
—
|
|
|
—
|
|
|
138
|
|
|
1,214
|
|
|
138
|
|
|
1,214
|
|
|
Actuarial (gain) loss
|
|
(28,481
|
)
|
|
22,991
|
|
|
(3,056
|
)
|
|
1,409
|
|
|
(31,537
|
)
|
|
24,400
|
|
|
Settlements paid
|
|
—
|
|
|
(281
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(281
|
)
|
|
Benefits paid
|
|
(19,602
|
)
|
|
(23,008
|
)
|
|
(3,197
|
)
|
|
(2,651
|
)
|
|
(22,799
|
)
|
|
(25,659
|
)
|
|
Projected benefit obligation, end of year
|
|
$
|
322,594
|
|
|
$
|
354,053
|
|
|
$
|
29,978
|
|
|
$
|
31,967
|
|
|
$
|
352,572
|
|
|
$
|
386,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
$
|
343,219
|
|
|
$
|
318,414
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
343,219
|
|
|
$
|
318,414
|
|
|
Actual return on plan assets
|
|
(19,533
|
)
|
|
47,595
|
|
|
—
|
|
|
—
|
|
|
(19,533
|
)
|
|
47,595
|
|
|
Employer contributions
|
|
—
|
|
|
499
|
|
|
3,197
|
|
|
2,651
|
|
|
3,197
|
|
|
3,150
|
|
|
Settlements paid
|
|
—
|
|
|
(281
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(281
|
)
|
|
Benefits paid
|
|
(19,602
|
)
|
|
(23,008
|
)
|
|
(3,197
|
)
|
|
(2,651
|
)
|
|
(22,799
|
)
|
|
(25,659
|
)
|
|
Fair value of plan assets, end of year
|
|
$
|
304,084
|
|
|
$
|
343,219
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
304,084
|
|
|
$
|
343,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded ratio
|
|
94.3
|
%
|
|
96.9
|
%
|
|
—
|
%
|
|
—
|
%
|
|
86.2
|
%
|
|
88.9
|
%
|
|
Funded status and net accrued pension benefit cost
|
|
$
|
(18,510
|
)
|
|
$
|
(10,834
|
)
|
|
$
|
(29,978
|
)
|
|
$
|
(31,967
|
)
|
|
$
|
(48,488
|
)
|
|
$
|
(42,801
|
)
|
The U.S. defined benefit pension plans experienced actuarial (gains) losses of $
(28.5) million
and $
23.0 million
for the years ended December 31, 2018 and 2017, respectively, primarily driven by assumption changes in the discount rate used to determine the benefit obligations.
The non-U.S. defined benefit pension plans experienced actuarial (gains) losses of $
(3.1) million
and $
1.4 million
for the years ended December 31, 2018 and 2017, respectively, primarily driven by assumption changes in the discount rate and demographic experience used to determine the benefit obligations.
The current portion of the pension liability reflects the amount of expected benefit payments that are greater than the plan assets on a plan-by-plan basis. The net accrued pension benefit liability at December 31
st
represents underfunded (including unfunded) pension benefits, and is included in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Pension asset
|
|
$
|
—
|
|
|
$
|
2,939
|
|
|
Pension liability (current portion)
|
|
(3,282
|
)
|
|
(2,185
|
)
|
|
Pension liability
|
|
(45,206
|
)
|
|
(43,555
|
)
|
|
Net accrued pension liability
|
|
$
|
(48,488
|
)
|
|
$
|
(42,801
|
)
|
The cumulative pretax amounts recognized in accumulated other comprehensive loss (AOCI) as of December 31 are as follows
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net actuarial loss
|
|
$
|
105,468
|
|
|
$
|
98,228
|
|
|
$
|
8,732
|
|
|
$
|
12,378
|
|
|
$
|
114,200
|
|
|
$
|
110,606
|
|
|
Prior service cost (credit)
|
|
—
|
|
|
1
|
|
|
(2,447
|
)
|
|
(2,636
|
)
|
|
(2,447
|
)
|
|
(2,635
|
)
|
|
Total cost in AOCI
|
|
$
|
105,468
|
|
|
$
|
98,229
|
|
|
$
|
6,285
|
|
|
$
|
9,742
|
|
|
$
|
111,753
|
|
|
$
|
107,971
|
|
Estimated contributions for 2019, as well as, contributions made in
2018
and
2017
to the pension plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
Estimated contributions in 2019
|
|
$
|
138
|
|
|
$
|
3,310
|
|
|
$
|
3,448
|
|
|
Contributions made in 2018
|
|
$
|
—
|
|
|
$
|
3,197
|
|
|
$
|
3,197
|
|
|
Contributions made in 2017
|
|
$
|
499
|
|
|
$
|
2,651
|
|
|
$
|
3,150
|
|
It is difficult to estimate future cash contributions to the pension plans, as such amounts are a function of actual investment returns, withdrawals from the plans, changes in interest rates and other factors uncertain at this time. It is possible that greater cash contributions may be required in 2019 than the amounts in the above table. Although a decline in market conditions, changes in current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact in future required contributions to our pension plans, we currently do not expect funding requirements to have a material adverse impact on current or future liquidity.
Pension benefit payment amounts are anticipated to be paid from the plans (including the SERP) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2019
|
|
$
|
19,836
|
|
|
$
|
3,310
|
|
|
$
|
23,146
|
|
|
2020
|
|
$
|
20,046
|
|
|
$
|
2,220
|
|
|
$
|
22,266
|
|
|
2021
|
|
$
|
20,211
|
|
|
$
|
2,536
|
|
|
$
|
22,747
|
|
|
2022
|
|
$
|
20,465
|
|
|
$
|
2,549
|
|
|
$
|
23,014
|
|
|
2023
|
|
$
|
20,750
|
|
|
$
|
2,540
|
|
|
$
|
23,290
|
|
|
2024-2028
|
|
$
|
103,988
|
|
|
$
|
14,431
|
|
|
$
|
118,419
|
|
Projected and Accumulated Benefit Obligations in Excess of Plan Assets
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with a projected and accumulated benefit obligation in excess of plan assets at December 31,
2018
and
2017
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Projected benefit obligation
|
|
$
|
322,594
|
|
|
$
|
268,887
|
|
|
$
|
29,978
|
|
|
$
|
31,967
|
|
|
$
|
352,572
|
|
|
$
|
300,854
|
|
|
Accumulated benefit obligation
|
|
$
|
322,594
|
|
|
$
|
268,887
|
|
|
$
|
26,717
|
|
|
$
|
27,055
|
|
|
$
|
349,311
|
|
|
$
|
295,942
|
|
|
Fair value of plan assets
|
|
$
|
304,084
|
|
|
$
|
255,115
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
304,084
|
|
|
$
|
255,115
|
|
Plan Assets
Our investment strategy is to control and manage investment risk through diversification across asset classes and investment styles, within established target asset allocation ranges. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. Assets are diversified among a mix of traditional investments in equity and fixed income instruments, as well as alternative investments including real estate and hedge funds. It would be anticipated that a modest allocation to short-term investments would exist within the plans, since each investment manager is likely to hold some short-term investments in the portfolio with the goal of ensuring that sufficient liquidity will be available to meet expected cash flow requirements.
Our investment valuation policy is to state the investments at fair value. Primarily all investments are valued at their respective net asset value (NAV) as a practical expedient and calculated by the Trustee. The real estate, equity securities and fixed income investments are held in a Group Trust which is valued at the unit prices established by the Trustee and are valued using NAV as a practical expedient. Underlying equity securities (including large and small cap domestic and international equities), for which market quotations are readily available, are valued at the last reported readily available sales price on their principal exchange on the valuation date or official close for certain markets. Fixed income investments are valued on a basis of valuations furnished by a trustee-approved pricing service, which determines valuations for normal institutional-size trading units of such securities which are generally recognized at fair value as determined in good faith by the Trustee. The fair value of investments in real estate funds is based on valuation of the fund as determined by periodic appraisals of the underlying investments owned by the respective fund. Investments in registered investment companies are valued at quoted market prices. Collective pooled funds, if any, are recorded using NAV practical expedients. Short-term investments are valued at their respective NAV and have no redemption restrictions. The hedge fund investments using NAV as a practical expedient are valued by using estimated month-end NAV and performance numbers provided by the fund administrator. The Plan is required to provide a month’s advance written notice to liquidate its entire share in the Group Trust. Certain investments in the hedge funds can only be liquidated on either a quarterly or semi-annual basis, require advance notification and are subject to audit holdback provisions.
Investments measured at NAV as a practical expedient for fair value have been excluded from the fair value hierarchy, in accordance with U.S. GAAP. The table below presents our U.S. pension plan assets at fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
Measured at NAV as a practical expedient
|
|
Target Allocation
|
|
|
2018
|
|
2017
|
|
2019
|
|
Short-term investments
|
|
$
|
9,796
|
|
|
$
|
8,061
|
|
|
3
|
%
|
|
Real estate
|
|
6,198
|
|
|
16,390
|
|
|
2
|
%
|
|
Equity securities
|
|
108,952
|
|
|
156,434
|
|
|
40
|
%
|
|
Debt securities
|
|
146,080
|
|
|
125,671
|
|
|
45
|
%
|
|
Hedge funds
|
|
33,058
|
|
|
36,663
|
|
|
10
|
%
|
|
Total
|
|
$
|
304,084
|
|
|
$
|
343,219
|
|
|
100
|
%
|
Other Retirement Plans
We sponsor the Libbey Inc. Salary and Hourly 401(k) plans (the Plans) to provide retirement benefits for our U.S. employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plans provide for tax-deferred wage contributions for eligible employees. For the Salary Plan, we match
100
percent on the first
6
percent of pretax contributions from eligible earnings on a per pay basis. For the Hourly Plan, we match
50
percent of the first
6
percent of pretax contributions from eligible earnings on a per pay basis. All matching contributions are invested according to the employees' deferral elections and vest immediately. Our matching contributions to all U.S. Plans totaled
$3.8 million
and
$3.6 million
in
2018
and
2017
, respectively.
Libbey Holland makes cash contributions to the Pensioenfonds voor de Grafische Bedrijven (“PGB”), an industry wide pension fund, as participating employees earn pension benefits. These related costs are expensed as incurred and amounted to
$2.0 million
and
$1.9 million
in
2018
and
2017
, respectively.
|
|
|
|
9.
|
Non-pension Post-retirement Benefits
|
We provide certain retiree healthcare and life insurance benefits covering our U.S. and Canadian salaried employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after December 15, 2008, and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension, post-retirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S., non-pension, post-retirement plans cover the retirees and active employees of Libbey who are located in Canada. The post-retirement benefit plans are unfunded.
Effect on Operations
The provision for our non-pension, post-retirement, benefit expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Service cost
|
|
$
|
604
|
|
|
$
|
631
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
605
|
|
|
$
|
632
|
|
|
Interest cost on projected benefit obligation
|
|
1,822
|
|
|
2,104
|
|
|
38
|
|
|
44
|
|
|
1,860
|
|
|
2,148
|
|
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service credit
|
|
(282
|
)
|
|
(201
|
)
|
|
—
|
|
|
—
|
|
|
(282
|
)
|
|
(201
|
)
|
|
Actuarial gain
|
|
(209
|
)
|
|
(257
|
)
|
|
(64
|
)
|
|
(59
|
)
|
|
(273
|
)
|
|
(316
|
)
|
|
Non-pension post-retirement benefit expense (income)
|
|
$
|
1,935
|
|
|
$
|
2,277
|
|
|
$
|
(25
|
)
|
|
$
|
(14
|
)
|
|
$
|
1,910
|
|
|
$
|
2,263
|
|
The non-service cost components of benefit expense above are included in other income (expense) on the Consolidated Statements of Operations. See
note 16
for additional information.
Actuarial Assumptions
The significant assumptions used for each year and at December 31
st
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net periodic benefit expense
|
|
|
|
|
|
|
|
|
Discount rate
|
3.60
|
%
|
|
4.05
|
%
|
|
3.26
|
%
|
|
3.48
|
%
|
|
Non-pension post-retirement benefit obligation
|
|
|
|
|
|
|
|
|
Discount rate
|
4.27
|
%
|
|
3.60
|
%
|
|
3.52
|
%
|
|
3.26
|
%
|
|
Weighted average assumed healthcare cost trend rates
|
|
|
|
|
|
|
|
|
Healthcare cost trend rate assumed for next year
|
6.25
|
%
|
|
6.50
|
%
|
|
6.25
|
%
|
|
6.50
|
%
|
|
Ultimate healthcare trend rate
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
Year the ultimate healthcare trend rate is reached
|
2024
|
|
|
2024
|
|
|
2024
|
|
|
2024
|
|
We use various actuarial assumptions, including the discount rate and the expected trend in healthcare costs, to estimate the costs and benefit obligations for our retiree health plan. The discount rate is determined based on high-quality fixed income investments that match the duration of expected retiree medical benefits at our December 31 measurement date to establish the discount rate. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year. The healthcare cost trend rate represents our expected annual rates of change in the cost of healthcare benefits. The trend rate noted above represents a forward projection of healthcare costs as of the measurement date.
Accumulated Post-retirement Benefit Obligation
The components of our non-pension, post-retirement, benefit obligation are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Change in accumulated non-pension post-retirement benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
52,648
|
|
|
$
|
58,921
|
|
|
$
|
1,295
|
|
|
$
|
1,344
|
|
|
$
|
53,943
|
|
|
$
|
60,265
|
|
|
Service cost
|
|
604
|
|
|
631
|
|
|
1
|
|
|
1
|
|
|
605
|
|
|
632
|
|
|
Interest cost
|
|
1,822
|
|
|
2,104
|
|
|
38
|
|
|
44
|
|
|
1,860
|
|
|
2,148
|
|
|
Plan participants' contributions
|
|
512
|
|
|
525
|
|
|
—
|
|
|
—
|
|
|
512
|
|
|
525
|
|
|
Actuarial gain
|
|
(5,305
|
)
|
|
(5,483
|
)
|
|
(106
|
)
|
|
(108
|
)
|
|
(5,411
|
)
|
|
(5,591
|
)
|
|
Exchange rate fluctuations
|
|
—
|
|
|
—
|
|
|
(96
|
)
|
|
90
|
|
|
(96
|
)
|
|
90
|
|
|
Benefits paid
|
|
(4,382
|
)
|
|
(4,050
|
)
|
|
(65
|
)
|
|
(76
|
)
|
|
(4,447
|
)
|
|
(4,126
|
)
|
|
Benefit obligation, end of year
|
|
$
|
45,899
|
|
|
$
|
52,648
|
|
|
$
|
1,067
|
|
|
$
|
1,295
|
|
|
$
|
46,966
|
|
|
$
|
53,943
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and accrued benefit cost
|
|
$
|
(45,899
|
)
|
|
$
|
(52,648
|
)
|
|
$
|
(1,067
|
)
|
|
$
|
(1,295
|
)
|
|
$
|
(46,966
|
)
|
|
$
|
(53,943
|
)
|
The U.S. non-pension, post-retirement, benefit plans experienced actuarial gains of
$5.3 million
in 2018 primarily due to lower than expected healthcare costs and the updated discount rate. Actuarial gains in the U.S. of
$5.5 million
in 2017 were primarily driven by assumption changes related to lower than expected healthcare costs and demographic gains, partially offset by losses from the updated discount rate.
The total accrued non-pension, post-retirement, benefits liability at December 31
st
represents unfunded post-retirement benefits and is included in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Non-pension post-retirement benefits (current portion)
|
|
$
|
3,951
|
|
|
$
|
4,185
|
|
|
Non-pension post-retirement benefits
|
|
43,015
|
|
|
49,758
|
|
|
Total non-pension post-retirement benefits liability
|
|
$
|
46,966
|
|
|
$
|
53,943
|
|
The cumulative pretax amounts recognized in AOCI as of December 31 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net actuarial gain
|
|
$
|
(5,176
|
)
|
|
$
|
(80
|
)
|
|
$
|
(806
|
)
|
|
$
|
(832
|
)
|
|
$
|
(5,982
|
)
|
|
$
|
(912
|
)
|
|
Prior service credit
|
|
(980
|
)
|
|
(1,262
|
)
|
|
—
|
|
|
—
|
|
|
(980
|
)
|
|
(1,262
|
)
|
|
Total credit in AOCI
|
|
$
|
(6,156
|
)
|
|
$
|
(1,342
|
)
|
|
$
|
(806
|
)
|
|
$
|
(832
|
)
|
|
$
|
(6,962
|
)
|
|
$
|
(2,174
|
)
|
Non-pension, post-retirement, benefit payments, net of estimated future Medicare Part D subsidy payments and future retiree contributions, are anticipated to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2019
|
|
$
|
3,888
|
|
|
$
|
146
|
|
|
$
|
4,034
|
|
|
2020
|
|
$
|
3,879
|
|
|
$
|
141
|
|
|
$
|
4,020
|
|
|
2021
|
|
$
|
3,761
|
|
|
$
|
130
|
|
|
$
|
3,891
|
|
|
2022
|
|
$
|
3,746
|
|
|
$
|
120
|
|
|
$
|
3,866
|
|
|
2023
|
|
$
|
3,593
|
|
|
$
|
108
|
|
|
$
|
3,701
|
|
|
2024-2028
|
|
$
|
15,739
|
|
|
$
|
254
|
|
|
$
|
15,993
|
|
|
|
|
|
10.
|
Net Loss per Share of Common Stock
|
The following table sets forth the computation of basic and diluted loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except earnings per share)
|
|
2018
|
|
2017
|
|
Numerator for loss per share:
|
|
|
|
|
|
Net loss that is available to common shareholders
|
|
$
|
(7,956
|
)
|
|
$
|
(93,368
|
)
|
|
|
|
|
|
|
|
|
|
Denominator for basic loss per share:
|
|
|
|
|
|
Weighted average shares outstanding
|
|
22,180,102
|
|
|
22,030,672
|
|
|
|
|
|
|
|
|
Denominator for diluted loss per share:
|
|
|
|
|
|
Effect of stock options and restricted stock units
|
|
—
|
|
|
—
|
|
|
Adjusted weighted average shares and assumed conversions
|
|
22,180,102
|
|
|
22,030,672
|
|
|
|
|
|
|
|
|
Basic loss per share
|
|
$
|
(0.36
|
)
|
|
$
|
(4.24
|
)
|
|
|
|
|
|
|
|
Diluted loss per share
|
|
$
|
(0.36
|
)
|
|
$
|
(4.24
|
)
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from computation of diluted loss per share
|
|
1,285,307
|
|
|
1,075,175
|
|
When applicable, diluted shares outstanding is calculated using the weighted-average number of common shares outstanding plus the dilutive effects of equity-based compensation outstanding during the period using the treasury stock method.
|
|
|
|
11.
|
Employee Stock Benefit Plans
|
We have
two
equity participation plans, the Amended and Restated Libbey Inc. 2006 Omnibus Incentive Plan and the Libbey Inc. 2016 Omnibus Incentive Plan, which we refer to as the Omnibus Plans. Up to a total of
2,960,000
and
1,200,000
shares of Libbey Inc. common stock are authorized for issuance as equity-based compensation under the 2006 and 2016 Omnibus Plans, respectively. Under the Omnibus Plans, grants of equity-based compensation may take the form of stock, stock options, stock appreciation rights, performance shares or units, restricted stock or restricted stock units (RSUs) or other stock-based awards. Employees and directors are eligible for awards under these plans. The vesting period of stock options and RSUs is generally
four
years with one quarter of the award vesting each year. We grant non-employee members of our Board of Directors shares of stock that vest immediately. Awards are subject to alternate vesting plans for death, disability, retirement eligibility and involuntary termination. All grants of equity-based compensation are amortized using a ratable straight-line method over the vesting period and are recorded in selling, general and administrative expenses in the Consolidated Statements of Operations. Shares of common stock to be issued under the plans are made available through authorized and unissued Libbey common stock. As of December 31, 2018, shares available to be issued under the 2006 and 2016 Omnibus Incentive Plans were
784,139
and
184,093
, respectively. In addition, we have a limited number of outstanding stock appreciation rights and cash-settled RSUs that are immaterial and will be settled in cash.
The Black-Scholes option-pricing model is used to estimate the grant-date fair value for stock options. The exercise price of each stock option equals the closing market price of our common stock on the date of grant. The maximum term is
ten
years. Grant-date fair value for RSUs is measured based on the closing market price of the stock at date of grant less the present value of expected dividends over the vesting period, as dividends are not payable on unvested RSUs.
The following table summarizes award activity for the current fiscal year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Stock and RSUs
|
|
|
|
Shares
|
|
Weighted-average Exercise Price
(per share)
|
|
Shares / Units
|
|
Weighted-average Grant Date Fair Value
(per share)
|
|
Outstanding balance at December 31, 2017
|
|
762,550
|
|
|
$
|
16.91
|
|
|
354,204
|
|
|
$
|
15.30
|
|
|
Granted
|
|
—
|
|
|
|
|
596,688
|
|
|
$
|
5.50
|
|
|
Exercised or vested
|
|
(5,300
|
)
|
|
$
|
1.01
|
|
|
(200,612
|
)
|
|
$
|
13.04
|
|
|
Forfeited or expired
|
|
(166,678
|
)
|
|
$
|
17.74
|
|
|
(57,351
|
)
|
|
$
|
13.53
|
|
|
Outstanding balance at December 31, 2018
|
|
590,572
|
|
|
$
|
16.82
|
|
|
692,929
|
|
|
$
|
7.66
|
|
|
Exercisable at December 31, 2018
|
|
344,233
|
|
|
$
|
18.94
|
|
|
|
|
|
Since all stock options are under water at December 31, 2018, there is
no
intrinsic value for stock options outstanding or exercisable. At December 31, 2018, the weighted-average remaining contractual life for stock options outstanding and stock options exercisable is
6.6 years
and
5.6 years
, respectively. The intrinsic value for share-based instruments is defined as the difference between the current market value and the exercise price.
As of December 31,
2018
, unrecognized compensation expense related to nonvested stock options and nonvested RSUs is
$0.1 million
and
$1.8 million
, respectively, which is expected to be recognized over the weighted average period of
1.3 years
for stock options and
1.7 years
for RSUs.
The following table summarizes award expensing and fair value information for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except grant date fair values and assumptions)
|
|
2018
|
|
2017
|
|
Total stock compensation expense
|
|
$
|
2,827
|
|
|
$
|
3,460
|
|
|
Total fair value of stock, stock options and RSUs vested
|
|
$
|
3,371
|
|
|
$
|
2,643
|
|
|
Weighted average grant date fair value of stock options granted
|
|
Not applicable
|
|
$
|
3.00
|
|
|
Weighted average grant date fair value of stock and RSUs granted
|
|
$
|
5.50
|
|
|
$
|
10.38
|
|
|
Intrinsic value of stock options exercised
|
|
$
|
38
|
|
|
$
|
17
|
|
|
Intrinsic value of stock and RSUs vested
|
|
$
|
1,230
|
|
|
$
|
1,918
|
|
|
|
|
|
|
|
|
Weighted-average assumptions for stock option grants:
|
|
|
|
|
|
Risk-free interest
|
|
Not applicable
|
|
2.07
|
%
|
|
Expected term
|
|
Not applicable
|
|
5.8 years
|
|
|
Expected volatility
|
|
Not applicable
|
|
38.54
|
%
|
|
Dividend yield
|
|
Not applicable
|
|
4.32
|
%
|
The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant and has a term equal to the expected life. The expected term represents the period of time the stock options are expected to be outstanding. We use the actual historical exercise activity for determining the expected term. Expected volatility is calculated based on Libbey's daily stock closing prices for a period equal to the expected life of the award. The dividend yield is calculated as the ratio based on our most recent historical dividend payments per share of common stock at the grant date to the stock price on the date of grant.
We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt and commodity price risks associated with forecasted future natural gas requirements. These derivatives, except for the natural gas contracts used in our Mexican manufacturing facilities prior to 2018, qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings. Our contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce our exposure to credit risk in situations where the Company has gain and loss positions
outstanding with a single counterparty. It is our policy to offset on the Consolidated Balance Sheets the amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement.
Prior to January 1, 2018, our derivatives used to reduce economic volatility of natural gas prices in Mexico were not designated as cash flow hedges. All mark-to-market changes on these derivatives were reflected in other income (expense). On January 1, 2018, we adopted ASU 2017-12 for hedge accounting. Under this new guidance, we apply contractually specified component hedging to all of our natural gas hedges. This allows us to record changes in fair value for outstanding natural gas derivatives to other comprehensive income (loss) beginning January 1, 2018. See
note 2
for additional details on the adoption of ASU 2017-12.
We do not believe we are exposed to more than a nominal amount of credit risk in our natural gas hedges and interest rate swaps as the counterparties are established financial institutions. The counterparties for the derivative agreements are rated BBB+ or better as of
December 31, 2018
, by Standard and Poor’s.
Fair Values
The following table provides the fair values of our derivative financial instruments for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
|
|
Fair Value of Derivative Assets
|
|
|
Balance Sheet Location
|
|
2018
|
|
2017
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Prepaid and other current assets
|
|
$
|
1,425
|
|
|
$
|
—
|
|
|
Interest rate swaps
|
|
Other assets
|
|
—
|
|
|
646
|
|
|
Natural gas contracts
|
|
Prepaid and other current assets
|
|
226
|
|
|
—
|
|
|
Natural gas contracts
|
|
Other assets
|
|
39
|
|
|
—
|
|
|
Total designated
|
|
|
|
1,690
|
|
|
646
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Total undesignated
|
|
|
|
—
|
|
|
—
|
|
|
Total derivative assets
|
|
|
|
$
|
1,690
|
|
|
$
|
646
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
|
|
Fair Value of Derivative Liabilities
|
|
|
Balance Sheet Location
|
|
2018
|
|
2017
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Interest rate swaps
|
|
Accrued liabilities
|
|
$
|
—
|
|
|
$
|
213
|
|
|
Interest rate swaps
|
|
Other long-term liabilities
|
|
5,713
|
|
|
—
|
|
|
Natural gas contracts
|
|
Accrued liabilities
|
|
—
|
|
|
220
|
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
—
|
|
|
7
|
|
|
Total designated
|
|
|
|
5,713
|
|
|
440
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Natural gas contracts
|
|
Accrued liabilities
|
|
—
|
|
|
264
|
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
—
|
|
|
12
|
|
|
Total undesignated
|
|
|
|
—
|
|
|
276
|
|
|
Total derivative liabilities
|
|
|
|
$
|
5,713
|
|
|
$
|
716
|
|
The following table presents cash settlements (paid) received related to the below derivatives:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Natural gas contracts
|
|
$
|
426
|
|
|
$
|
(47
|
)
|
|
Interest rate swaps
|
|
159
|
|
|
(1,836
|
)
|
|
Total
|
|
$
|
585
|
|
|
$
|
(1,883
|
)
|
The following table provides a summary of the impacts of derivative gain (loss) on the Consolidated Statements of Operations and other comprehensive income (OCI):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
Location
|
|
2018
|
|
2017
|
|
Cash flow hedges:
|
|
|
|
|
|
|
|
Effective portion of derivative gain (loss) recognized in OCI:
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
OCI
|
|
$
|
1,194
|
|
|
$
|
(1,019
|
)
|
|
Interest rate swaps
|
|
OCI
|
|
(4,436
|
)
|
|
733
|
|
|
Total
|
|
$
|
(3,242
|
)
|
|
$
|
(286
|
)
|
|
|
|
|
|
|
|
|
|
Effective portion of derivative gain (loss) reclassified from accumulated OCI to current earnings:
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
Cost of Sales
|
|
$
|
426
|
|
|
$
|
(45
|
)
|
|
Interest rate swaps
|
|
Interest expense
|
|
285
|
|
|
(1,735
|
)
|
|
Total
|
|
$
|
711
|
|
|
$
|
(1,780
|
)
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
Gain (loss) recognized in current earnings:
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
Other income (expense)
|
|
—
|
|
|
(1,036
|
)
|
|
Total
|
|
$
|
—
|
|
|
$
|
(1,036
|
)
|
Natural Gas Contracts
We use natural gas swap contracts related to forecasted future North American natural gas requirements. The objective of these commodity contracts is to limit the fluctuations in prices paid due to price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from
40 percent
to
70 percent
of our anticipated requirements,
18
months in the future, or more, depending on market conditions. The fair values of these instruments are determined from market quotes.
The following table presents the notional amount of our natural gas derivatives on the Consolidated Balance Sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notional Amounts
|
|
Derivative Types
|
|
Unit of Measure
|
|
December 31, 2018
|
|
December 31, 2017
|
|
Natural gas contracts
|
|
Millions of British Thermal Units (MMBTUs)
|
|
3,150,000
|
|
|
2,480,000
|
|
Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses would be recorded to earnings immediately. Changes in the fair value of these hedges are recorded in other comprehensive income (loss). As the natural gas contracts mature, the accumulated gains (losses) for the respective contracts are reclassified from accumulated other comprehensive loss to current expense in cost of sales in our Consolidated Statements of Operations.
Based on our current valuation, we estimate that accumulated gains for natural gas currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in
$0.2 million
of gain to our Consolidated Statements of Operations.
Interest Rate Swaps
The table below lists the interest rate swaps we executed as part of our risk management strategy to mitigate the risks associated with the fluctuating interest rates under our Term Loan B. The interest rate swaps effectively convert a portion of our Term Loan B debt from a variable interest rate to a fixed interest rate, thus reducing the impact of interest rate changes on future income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swap execution date
|
|
Effective date
|
|
Expiration date
|
|
Notional amount
|
|
Fixed swap rate
|
|
|
April 1, 2015
|
|
January 11, 2016
|
|
January 9, 2020
|
|
$220.0 million
|
|
4.85
|
%
|
|
|
September 24, 2018
|
|
January 9, 2020
|
|
January 9, 2025
|
|
$200.0 million
|
|
6.19
|
%
|
(1)
|
________________________
|
|
|
|
(1)
|
Upon refinancing our Term Loan B, the fixed interest rate will be
3.19 percent
plus the new refinanced credit spread.
|
Our interest rate swaps are valued using the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves.
Our interest rate swaps qualify and are designated as cash flow hedges at
December 31, 2018
, and are accounted for under FASB ASC 815 "Derivatives and Hedging". Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses are recorded to earnings immediately. Changes in the fair value of these hedges are recorded in other comprehensive income (loss). Based on our current valuation, we estimate that
$1.4 million
will be reclassified into earnings over the next twelve months, resulting in a reduction to interest expense in our Consolidated Statements of Operations.
|
|
|
|
13.
|
Accumulated Other Comprehensive Income (Loss)
|
Accumulated other comprehensive income (loss) (AOCI), net of tax, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Foreign Currency Translation
|
|
Derivative Instruments
|
|
Pension and Other Post-retirement Benefits
|
|
Total
Accumulated
Comprehensive Loss
|
|
Balance on December 31, 2016
|
|
$
|
(27,828
|
)
|
|
$
|
(515
|
)
|
|
$
|
(96,854
|
)
|
|
$
|
(125,197
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized into AOCI
|
|
12,835
|
|
|
(286
|
)
|
|
6,307
|
|
|
18,856
|
|
|
Currency impact
|
|
—
|
|
|
—
|
|
|
(152
|
)
|
|
(152
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
1,780
|
|
(1)
|
5,586
|
|
(2)
|
7,366
|
|
|
Tax effect
|
|
(1,190
|
)
|
|
(628
|
)
|
|
(4,227
|
)
|
|
(6,045
|
)
|
|
Other comprehensive income (loss), net of tax
|
|
11,645
|
|
|
866
|
|
|
7,514
|
|
|
20,025
|
|
|
Balance on December 31, 2017
|
|
(16,183
|
)
|
|
351
|
|
|
(89,340
|
)
|
|
(105,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative-effect adjustment for the adoption of ASU 2017-12
|
|
—
|
|
|
(275
|
)
|
|
—
|
|
|
(275
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Amounts recognized into AOCI
|
|
(7,057
|
)
|
|
(3,242
|
)
|
|
(5,245
|
)
|
|
(15,544
|
)
|
|
Currency impact
|
|
—
|
|
|
—
|
|
|
(164
|
)
|
|
(164
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
(711
|
)
|
(1)
|
6,431
|
|
(2)
|
5,720
|
|
|
Tax effect
|
|
—
|
|
|
1,011
|
|
|
19
|
|
|
1,030
|
|
|
Other comprehensive income (loss), net of tax
|
|
(7,057
|
)
|
|
(2,942
|
)
|
|
1,041
|
|
|
(8,958
|
)
|
|
Balance on December 31, 2018
|
|
$
|
(23,240
|
)
|
|
$
|
(2,866
|
)
|
|
$
|
(88,299
|
)
|
|
$
|
(114,405
|
)
|
_________________________
|
|
|
|
(1)
|
We reclassified natural gas contracts through cost of sales and the interest rate swaps through interest expense on the Consolidated Statements of Operations. See
note 12
for additional information.
|
|
|
|
|
(2)
|
We reclassified the net pension and non-pension post-retirement benefits amortization and settlement charges through other income (expense) on the Consolidated Statements of Operations. See
notes 8
and
9
for additional information.
|
Fair value is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes the inputs used in measuring fair value into three broad levels as follows:
|
|
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities;
|
|
|
|
|
•
|
Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and
|
|
|
|
|
•
|
Level 3 — Unobservable inputs based on our own assumptions.
|
The fair value of our derivative financial instruments by level is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Fair Value at
|
|
Asset / (Liability
(dollars in thousands)
|
|
December 31, 2018
|
|
December 31, 2017
|
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Commodity futures natural gas contracts
|
|
$
|
—
|
|
|
$
|
265
|
|
|
$
|
—
|
|
|
$
|
265
|
|
|
$
|
—
|
|
|
$
|
(503
|
)
|
|
$
|
—
|
|
|
$
|
(503
|
)
|
|
Interest rate swaps
|
|
—
|
|
|
(4,288
|
)
|
|
—
|
|
|
(4,288
|
)
|
|
—
|
|
|
433
|
|
|
—
|
|
|
433
|
|
|
Net derivative asset (liability)
|
|
$
|
—
|
|
|
$
|
(4,023
|
)
|
|
$
|
—
|
|
|
$
|
(4,023
|
)
|
|
$
|
—
|
|
|
$
|
(70
|
)
|
|
$
|
—
|
|
|
$
|
(70
|
)
|
The fair values of our commodity futures natural gas contracts are determined using observable market inputs. The fair value of our interest rate swaps are based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instruments are held, the derivatives are classified as Level 2 in the hierarchy. We also evaluate Company and counterparty risk in determining fair values. The commodity futures natural gas contracts and interest rate swaps are hedges of either recorded assets or liabilities or anticipated transactions. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the above table.
Financial instruments carried at cost on the Consolidated Balance Sheets, as well as the related fair values, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
December 31, 2017
|
|
(dollars in thousands)
|
|
Fair Value
Hierarchy Level
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
|
Term Loan B
|
|
Level 2
|
|
$
|
380,200
|
|
|
$
|
362,141
|
|
|
$
|
384,600
|
|
|
$
|
370,178
|
|
The fair value of our Term Loan B has been calculated based on quoted market prices for the same or similar issues, and the fair value of our ABL Facility approximates carrying value due to variable rates. The fair value of our other immaterial debt approximates carrying value at December 31, 2017. The fair value of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short term nature.
Rental expense for all non-cancelable operating leases was
$18.9 million
and
$17.0 million
in
2018
and
2017
, respectively.
Future minimum rentals under operating leases are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024 and
thereafter
|
|
|
$15,407
|
|
$13,787
|
|
$10,339
|
|
$9,143
|
|
$8,551
|
|
$20,755
|
|
|
|
|
|
16.
|
Other Income (Expense)
|
Items included in other income (expense) in the Consolidated Statements of Operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Gain (loss) on currency transactions
|
|
$
|
(1,454
|
)
|
|
$
|
(2,788
|
)
|
|
(Loss) on mark-to-market natural gas contracts
|
|
—
|
|
|
(1,036
|
)
|
|
Pension and non-pension benefits, excluding service cost
|
|
(1,232
|
)
|
|
(1,791
|
)
|
|
Other non-operating income (expense)
|
|
(78
|
)
|
|
309
|
|
|
Other income (expense)
|
|
$
|
(2,764
|
)
|
|
$
|
(5,306
|
)
|
Legal Proceedings
From time to time, we are identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and/or similar state laws that impose liability without regard to fault for costs and damages relating to the investigation and clean-up of contamination resulting from releases or threatened releases of hazardous substances. We are also subject to similar laws in some of the countries where our facilities are located. Our environmental, health, and safety department monitors compliance with applicable laws on a global basis.
On October 30, 2009, the United States Environmental Protection Agency ("U.S. EPA") designated Syracuse China Company ("Syracuse China"), our wholly-owned subsidiary, as
one
of
eight
PRPs with respect to the Lower Ley Creek sub-site of the Onondaga Lake Superfund site located near the ceramic dinnerware manufacturing facility that Syracuse China operated from 1995 to 2009 in Syracuse, New York. As a PRP, we may be required to pay a share of the costs of investigation and remediation of the Lower Ley Creek sub-site.
U.S. EPA has completed its Remedial Investigation (RI), Feasibility Study (FS), Risk Assessment (RA) and Proposed Remedial Action Plan (PRAP). U.S. EPA issued its Record of Decision (RoD) on September 30, 2014. The RoD indicates that U.S. EPA's estimate of the undiscounted cost of remediation ranges between approximately
$17.0 million
(assuming local disposal of contaminated sediments is feasible) and approximately
$24.8 million
(assuming local disposal is not feasible). However, the RoD acknowledges that the final cost of the cleanup will depend upon the actual volume of contaminated material, the degree to which it is contaminated, and where the excavated soil and sediment is properly disposed. In connection with the General Motors Corporation (“GM”) bankruptcy, U.S. EPA recovered
$22.0 million
from Motors Liquidation Company (MLC), the successor to GM. If the cleanup costs do not exceed the amount recovered by U.S. EPA from MLC, Syracuse China may suffer
no
loss. If and to the extent the cleanup costs exceed the amount recovered by U.S. EPA from MLC, it is not yet known whether other PRPs will be added to the current group of PRPs or how any excess costs may be allocated among the PRPs.
On March 3, 2015, the EPA issued to the PRPs notices and requests to negotiate performance of the remedial design (RD), work. The notices contemplate that any agreement to perform the RD work would be memorialized in an Administrative Order on Consent (AOC). On July 14, 2016, the PRPs entered into an AOC to perform the RD work. The EPA and PRPs anticipate that the RD work will produce additional information from which the feasibility of a local disposal option and the cleanup costs can be better determined. The EPA has declined to advance the GM Settlement Funds for the RD work, instead conditioning use of those funds to reimburse for the RD work upon the successful completion of the RD work and the finalization of an AOC to perform the remedial action work.
In connection with the above proceedings relating to the Lower Ley Creek sub-site, an estimated environmental liability of
$0.7 million
and a recoverable amount of
$0.4 million
in other assets have been recorded in the Consolidated Balance Sheet at December 31,
2018
. An estimated liability of
$0.8 million
and a recoverable amount of
$0.4 million
in other assets have been recorded in the Consolidated Balance Sheet at December 31,
2017
. Immaterial amounts have been recorded in cost of sales in the Consolidated Statements of Operations during
2018
and
2017
. Although we cannot predict the ultimate outcome of these proceedings, we believe that these environmental proceedings will not have a material adverse impact on our financial condition, results of operations or liquidity.
On October 26, 2018, Revitalizing Auto Communities Environmental Response Trust (“RACER Trust”) and RACER Properties LLC filed a complaint in the United States District Court for the Northern District of New York against our wholly-owned subsidiaries Syracuse China Company and Libbey Glass Inc. (collectively, “SCC”) and more than
30
other companies. RACER Properties LLC is the owner of a former GM manufacturing facility located in Onondaga County, New York, and the RACER Trust, established pursuant to a 2010 Environmental Response Trust Consent Decree and Settlement Agreement approved by the U.S. Bankruptcy Court (the "2010 Trust Consent Decree"), was created to clean up and reposition for development certain properties owned by the former GM. The complaint alleges that SCC and the other defendants are jointly and severally liable, along with the plaintiffs, for the remediation of polychlorinated biphenyls (“PCBs”) and certain other hazardous substances in soils and sediments in Upper Ley Creek between Town Line Road and the Route 11 Bridge in Onondaga County, New York (the “Upper Ley Creek sub-site”). The Upper Ley Creek sub-site is located immediately upstream of the Lower Ley Creek sub-site.
Pursuant to a 2015 Consent Order with the New York State Department of Environmental Conservation (“NYSDEC”), the RACER Trust committed to undertake certain remedial work with respect to the Upper Ley Creek sub-site utilizing funds set aside for this purpose by the Bankruptcy Court. According to the complaint, the NYSDEC has directed the RACER Trust to investigate a 22-acre area of land on the north side of Upper Ley Creek that is allegedly outside of the original geographic
scope of the remedial work contemplated by the 2010 Trust Consent Decree. The complaint alleges that if additional remediation in that area becomes necessary, the remediation budget for the Upper Ley Creek sub-site could increase to as much as approximately
$93.5 million
.
If SCC is determined to be a PRP for the Upper Ley Creek sub-site, SCC may be required to pay a share of the costs of investigation and remediation of the Upper Ley Creek sub-site. SCC intends to defend this action vigorously and is currently evaluating its legal options. We cannot predict the ultimate outcome of this proceeding, and the amount that SCC may ultimately be required to pay is currently not reasonably estimable.
To the extent that Syracuse China has a liability with respect to the Lower Ley Creek sub-site, including without limitation costs to fund the RD work, or with respect to the Upper Ley Creek sub-site, and to the extent the liability arose prior to our 1995 acquisition of the Syracuse China assets, the liability would be subject to the indemnification provisions contained in the Asset Purchase Agreement between the Company and The Pfaltzgraff Co. (now known as TPC-York, Inc. ("TPC York")) and certain of its subsidiaries. Accordingly, Syracuse China has notified TPC York of its claims for indemnification under the Asset Purchase Agreement. Such costs will be shared up to an aggregate cost of
$7.5 million
. Of this amount, the Company already has incurred
$0.4 million
and TPC York remains liable for up to an additional
$2.9 million
. TPC York already has reimbursed the Company for
$1.3 million
.
On November 12, 2018, we received notice from the BKK Working Group that Libbey Glass Inc. is a PRP with respect to waste disposal at a former landfill (the "BKK Landfill") in West Covina, California. The BKK Working Group consists of approximately
50
entities who are cooperating with the California Department of Toxic Substances Control to investigate and remediate the BKK Landfill. The BKK Working Group alleges that Libbey Glass Inc., along with over
500
other entities, disposed of manifested waste at the landfill between 1963 and 1984 and therefore may be liable for a portion of the costs incurred. As of the date of this disclosure, Libbey Glass Inc. has not been named a defendant in the related lawsuit. Accordingly, at this time we are evaluating our legal options and have not formed an opinion that an unfavorable outcome is either probable or remote or the range of any potential loss.
Income Taxes
The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. Please refer to
note 7
, Income Taxes, for a detailed discussion on tax contingencies.
Our primary source of revenue is the sale of glass tableware products manufactured within a Libbey facility as well as globally sourced tabletop products, including glassware, ceramicware, metalware and others. For the year ended
December 31, 2018
, bad debt expense was immaterial. Additionally, adjustments related to revenue recognized in prior periods was not material for
2018
. There were no material contract assets, contract liabilities or deferred contract costs recorded on the Consolidated Balance Sheet as of
December 31, 2018
.
Disaggregation of Revenue:
The following table presents our net sales disaggregated by business channel:
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
Foodservice
|
|
$
|
327,550
|
|
|
Retail
|
|
256,646
|
|
|
Business-to-business
|
|
213,662
|
|
|
Consolidated
|
|
$
|
797,858
|
|
Each operating segment has revenues across all our business channels. Each channel has a different marketing strategy, customer base and product composition. Over
75 percent
of each segment's revenue is derived from the following business channels: U.S. and Canada from foodservice and retail; Latin America from retail and business-to-business; and EMEA from retail and business-to-business.
Foodservice
The majority of our tabletop products sold in the foodservice channel are sold through a network of foodservice distributors. Our strong foodservice distributor network and in-house sales force provide broad coverage to a wide variety of foodservice establishments, including restaurants, bars, hotels and other travel and tourism venues. A high percentage of foodservice sales are replacements, driving a relatively predictable revenue stream.
Retail
Our primary customers in the retail channel include mass merchants, department stores, national retail chains, pure play e-commerce retailers or marketers, retail and wholesale distributors, value-oriented retailers, grocers and specialty housewares stores. We also operate outlet stores in the U.S., Mexico and Portugal.
Business-to-business
Our customers for products sold in the diverse business-to-business channel include beverage companies and custom decorators of glass tableware for promotional purposes and resale. In addition, sales of our products in this channel include products for candle and floral applications, craft industries and gourmet food-packing companies. Our Latin America region also sells blender jars and various OEM products in this channel.
|
|
|
|
19.
|
Segments and Geographic Information
|
Our reporting segments align with our regionally focused organizational structure, which we believe enables us to better serve customers across the globe. Under this structure, we report financial results for U.S. and Canada; Latin America; Europe, the Middle East and Africa (EMEA); and Other. Segment results are based primarily on the geographical destination of the sale. Our
three
reportable segments are defined below. Our operating segment that does not meet the criteria to be a reportable segment is disclosed as Other.
U.S. & Canada—includes sales of manufactured and sourced tableware having an end-market destination in the U.S and Canada, excluding glass products for Original Equipment Manufacturers (OEM), which remain in the Latin America segment.
Latin America—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Latin America, as well as glass products for OEMs regardless of end-market destination.
EMEA—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Europe, the Middle East and Africa.
Other—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Asia Pacific.
Our measure of profit for our reportable segments is Segment Earnings before Interest and Taxes (Segment EBIT) and excludes amounts related to certain items we consider not representative of ongoing operations as well as certain retained corporate costs and other allocations that are not considered by management when evaluating performance. Segment EBIT also includes an allocation of manufacturing costs for inventory produced at a Libbey facility that is located in a region other than the end market in which the inventory is sold. This allocation can fluctuate from year to year based on the relative demands for products produced in regions other than the end markets in which they are sold. We use Segment EBIT, along with net sales and selected cash flow information, to evaluate performance and to allocate resources. Segment EBIT for reportable segments includes an allocation of some corporate expenses based on the costs of services performed.
Certain activities not related to any particular reportable segment are reported within retained corporate costs. These costs include certain headquarter, administrative and facility costs, and other costs that are global in nature and are not allocable to the reporting segments.
The accounting policies of the reportable segments are the same as those described in
note 2
. We do not have any customers who represent 10 percent or more of total sales. Inter-segment sales are consummated at arm’s length and are reflected at end-market reporting below. It is impracticable to provide revenue by product categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Net Sales:
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
483,741
|
|
|
$
|
481,797
|
|
|
Latin America
|
|
148,091
|
|
|
144,322
|
|
|
EMEA
|
|
138,399
|
|
|
126,924
|
|
|
Other
|
|
27,627
|
|
|
28,785
|
|
|
Consolidated
|
|
$
|
797,858
|
|
|
$
|
781,828
|
|
|
|
|
|
|
|
|
Segment EBIT:
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
36,805
|
|
|
$
|
48,044
|
|
|
Latin America
|
|
12,599
|
|
|
6,590
|
|
|
EMEA
|
|
7,219
|
|
|
1,321
|
|
|
Other
|
|
1,872
|
|
|
(3,838
|
)
|
|
Total Segment EBIT
|
|
$
|
58,495
|
|
|
$
|
52,117
|
|
|
|
|
|
|
|
|
Reconciliation of Segment EBIT to Net Loss:
|
|
|
|
|
|
Segment EBIT
|
|
$
|
58,495
|
|
|
$
|
52,117
|
|
|
Retained corporate costs
|
|
(31,878
|
)
|
|
(27,099
|
)
|
Goodwill impairment (
note 4
)
|
|
—
|
|
|
(79,700
|
)
|
|
Fees associated with strategic initiative
(1)
|
|
(2,341
|
)
|
|
—
|
|
|
Reorganization charges
|
|
—
|
|
|
(2,488
|
)
|
|
Interest expense
|
|
(21,979
|
)
|
|
(20,400
|
)
|
|
Provision for income taxes
|
|
(10,253
|
)
|
|
(15,798
|
)
|
|
Net loss
|
|
$
|
(7,956
|
)
|
|
$
|
(93,368
|
)
|
|
|
|
|
|
|
|
Depreciation & Amortization:
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
13,358
|
|
|
$
|
12,665
|
|
|
Latin America
|
|
17,457
|
|
|
18,576
|
|
|
EMEA
|
|
7,412
|
|
|
7,377
|
|
|
Other
|
|
4,431
|
|
|
5,088
|
|
|
Corporate
|
|
1,675
|
|
|
1,838
|
|
|
Consolidated
|
|
$
|
44,333
|
|
|
$
|
45,544
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
22,203
|
|
|
$
|
10,056
|
|
|
Latin America
|
|
13,527
|
|
|
18,520
|
|
|
EMEA
|
|
5,051
|
|
|
17,158
|
|
|
Other
|
|
745
|
|
|
1,226
|
|
|
Corporate
|
|
3,561
|
|
|
668
|
|
|
Consolidated
|
|
$
|
45,087
|
|
|
$
|
47,628
|
|
______________________________
(1)
Legal and professional fees associated with a strategic initiative that was terminated during the third quarter of 2018.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2018
|
|
2017
|
|
Segment Assets
(1)
:
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
152,168
|
|
|
$
|
147,809
|
|
|
Latin America
|
|
64,166
|
|
|
63,093
|
|
|
EMEA
|
|
46,576
|
|
|
48,270
|
|
|
Other
|
|
13,170
|
|
|
18,711
|
|
|
Consolidated
|
|
$
|
276,080
|
|
|
$
|
277,883
|
|
______________________________
(1)
Segment assets are defined as net accounts receivable plus net inventory.
Geographic data for the U.S., Mexico and Other countries for
2018
and
2017
is presented below. Net sales are based on the geographical destination of the sale. The long-lived assets include net property, plant and equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
United States
|
|
Mexico
|
|
All Other
|
|
Consolidated
|
|
2018
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
480,868
|
|
|
$
|
101,656
|
|
|
$
|
215,334
|
|
|
$
|
797,858
|
|
|
Long-lived assets
|
|
$
|
99,135
|
|
|
$
|
86,775
|
|
|
$
|
79,050
|
|
|
$
|
264,960
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
479,018
|
|
|
$
|
93,370
|
|
|
$
|
209,440
|
|
|
$
|
781,828
|
|
|
Long-lived assets
|
|
$
|
89,838
|
|
|
$
|
87,836
|
|
|
$
|
88,001
|
|
|
$
|
265,675
|
|
On February 18, 2019, the Board of Directors of Libbey approved a plan to pursue strategic alternatives with respect to our business in the People’s Republic of China (PRC), including the sale or closure of our manufacturing and distribution facility located in Langfang, PRC. The Board’s decision supports our ongoing efforts to optimize our manufacturing and supply network to deliver customer value and achieve our strategic objectives, including deployment of our capital to better drive shareholder value.
Due to the current level of uncertainty surrounding the ultimate course of action, we are unable, at this time, to estimate an amount or range of amounts of any potential asset impairment charges that we may incur or cash expenditures that may be required as a result of the outcome of the planned strategic review. At such time as we have determined an estimate or range of estimates of any cash and non-cash charges resulting from our planned strategic review, we will report the estimate or range of estimates as required pursuant to Item 2.05 of Form 8-K.
