Document and Entity Information

3 Months Ended

Mar. 31, 2017

Apr. 28, 2017

Entity Information [Line Items]

Entity Registrant Name

LIBBEY INC

Entity Central Index Key

0000902274

Current Fiscal Year End Date

--12-31

Entity Filer Category

Accelerated Filer

Document Type

10-Q

Document Period End Date

Mar. 31, 2017

Document Fiscal Year Focus

2017

Document Fiscal Period Focus

Q1

Amendment Flag

false

Entity Common Stock, Shares Outstanding

21,945,476

Condensed Consolidated Statements of Operations (USD $)

In Thousands, except Per Share data, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Mar. 31, 2016

Net sales

$ 172,994

$ 182,807

Freight billed to customers

676

618

Total revenues

173,670

183,425

Cost of sales

143,356

143,451

Gross profit

30,314

39,974

Selling, general and administrative expenses

32,975

34,135

Income (loss) from operations

(2,661)

5,839

Other income (expense)

(2,260)

(15)

Earnings (loss) before interest and income taxes

(4,921)

5,824

Interest expense

4,867

5,244

Income (loss) before income taxes

(9,788)

580

Benefit from income taxes

(3,218)

(138)

Net income (loss)

$ (6,570)

$ 718

Net income (loss) per share:

Basic

$ (0.30)

$ 0.03

Diluted

$ (0.30)

$ 0.03

Dividends declared per share

$ 0.1175

$ 0.115

Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Mar. 31, 2016

Net income (loss)

$ (6,570)

$ 718

Other comprehensive income (loss):

Pension and other postretirement benefit adjustments, net of tax

456

989

Change in fair value of derivative instruments, net of tax

165

(1,858)

Foreign currency translation adjustments, net of tax

1,408

3,205

Other comprehensive income, net of tax

2,029

2,336

Comprehensive income (loss)

$ (4,541)

$ 3,054

Condensed Consolidated Balance Sheets (USD $)

In Thousands, unless otherwise specified

Mar. 31, 2017

Dec. 31, 2016

Assets:

Cash and cash equivalents

$ 33,743

$ 61,011

Accounts receivable - net

83,385

85,113

Inventories - net

174,405

170,009

Prepaid and other current assets

16,642

16,777

Total current assets

308,175

332,910

Purchased intangible assets - net

15,009

15,225

Goodwill

164,112

Deferred income taxes

42,661

40,016

Other assets

9,480

9,514

Property, plant and equipment - net

259,759

256,392

Total assets

799,196

818,169

Liabilities and Shareholders' Equity:

Accounts payable

69,490

71,582

Salaries and wages

22,344

27,018

Accrued liabilities

40,593

41,807

Accrued income taxes

0

1,384

Pension liability (current portion)

2,474

2,461

Non-pension postretirement benefits (current portion)

4,893

4,892

Derivative liability

1,377

1,928

Long-term debt due within one year

6,059

5,009

Total current liabilities

147,230

156,081

Long-term debt

395,885

402,831

Pension liability

45,155

43,934

Non-pension postretirement benefits

55,602

55,373

Deferred income taxes

1,910

1,859

Other long-term liabilities

12,745

12,972

Total liabilities

658,527

673,050

Contingencies (Note 13)

Shareholders' equity:

Common stock, par value $.01 per share, 50,000,000 shares authorized, 21,902,950 shares issued in 2017 (21,864,541 shares issued in 2016)

219

Capital in excess of par value

330,207

329,722

Retained deficit

(66,589)

(59,625)

Accumulated other comprehensive loss

(123,168)

(125,197)

Total shareholders' equity

140,669

145,119

Total liabilities and shareholders' equity

$ 799,196

$ 818,169

Condensed Consolidated Balance Sheets Parenthetical (USD $)

Mar. 31, 2017

Dec. 31, 2016

Common stock, par value

$ 0.01

Common stock, shares authorized

50,000,000

Common stock, shares issued

21,902,950

21,864,541

Condensed Consolidated Statement of Shareholders' Equity Statement (USD $)

In Thousands, except Share data, unless otherwise specified

Total

Common Stock

Capital in Excess of Par Value

Retained Deficit

Accumulated Other Comprehensive Loss

Balance, value at Dec. 31, 2016

$ 145,119

$ 219

$ 329,722

$ (59,625)

$ (125,197)

Balance, shares at Dec. 31, 2016

21,864,541

Increase (Decrease) in Stockholders' Equity [Roll Forward]

Cumulative-effect adjustment for the adoption of ASU 2016-09

2,310

127

2,183

Net income (loss)

(6,570)

Other comprehensive income

2,029

Stock compensation expense

784

Dividends

(2,577)

Stock withheld for employee taxes

(423)

Stock issued, value

(3)

Stock issued, shares

38,409

Balance, value at Mar. 31, 2017

$ 140,669

$ 219

$ 330,207

$ (66,589)

$ (123,168)

Balance, shares at Mar. 31, 2017

21,902,950

Condensed Consolidated Statements of Cash Flows (USD $)

In Thousands, unless otherwise specified

3 Months Ended

Mar. 31, 2017

Mar. 31, 2016

Operating activities:

Net income (loss)

$ (6,570)

$ 718

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Depreciation and amortization

11,155

12,081

Loss on asset sales and disposals

23

61

Change in accounts receivable

1,961

7,217

Change in inventories

(3,827)

(12,467)

Change in accounts payable

(3,921)

(5,589)

Accrued interest and amortization of discounts and finance fees

378

(2,220)

Pension & non-pension postretirement benefits, net

2,116

(101)

Accrued liabilities & prepaid expenses

(4,545)

(1,616)

Income taxes

(4,236)

(2,965)

Share-based compensation expense

832

1,816

Other operating activities

320

(1,436)

Net cash used in operating activities

(6,314)

(4,501)

Investing activities:

Additions to property, plant and equipment

(11,952)

(9,855)

Net cash used in investing activities

(11,952)

(9,855)

Financing activities:

Borrowings on ABL credit facility

0

6,000

Repayments on ABL credit facility

0

(6,000)

Other repayments

(169)

(171)

Repayments on Term Loan B

(6,100)

Stock options exercised

0

1,029

Taxes paid on distribution of equity awards

(423)

(473)

Dividends

(2,577)

(2,515)

Treasury shares purchased

0

(1,197)

Net cash used in financing activities

(9,269)

(9,427)

Effect of exchange rate fluctuations on cash

267

309

Decrease in cash

(27,268)

(23,474)

Cash & cash equivalents at beginning of period

61,011

49,044

Cash & cash equivalents at end of period

33,743

25,570

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

4,504

7,318

Cash paid during the period for income taxes

$ 779

$ 1,544

Description of the Business

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^®, Masters 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 markets. 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.

Our website can be found at www.libbey.com. We make available, free of charge, at this website all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of Securities Exchange Act of 1934, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, as well as amendments to those reports. These reports are made available on our website as soon as reasonably practicable after their filing with, or furnishing to, the Securities and Exchange Commission and can also be found at www.sec.gov.

Our shares are traded on the NYSE MKT exchange under the ticker symbol LBY.

Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The balance sheet at December 31, 2016 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial information included herein should be read in conjunction with our Consolidated Financial Statements in Item 8 of our Form 10-K for the year ended December 31, 2016.

Stock-Based Compensation Expense

Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:



	Three months ended March 31,
(dollars in thousands)	2017		2016
Stock-based compensation expense	$	832	$	1,816

Reclassifications

Certain amounts in prior years' financial statements have been reclassified to conform to the presentation used in the three month period ended March 31, 2017, including the following:


•	On the Condensed Consolidated Statements of Cash Flows, certain activity was reclassified between operating and financing activities pursuant to adoption of Accounting Standards Update No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," effective January 1, 2017.


•	In note 10 Segments, net sales and related costs for certain countries were reclassified between segments to align with changes in business unit responsibilities effective January 1, 2017.


•	In note 10 Segments, the derivative amount included in the Reconciliation of Segment EBIT to Net Income in the prior year financial statements has been included in Segment EBIT to conform to the current year presentation.

New Accounting Standards

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 determined to be either not applicable or are expected to have minimal impact on the Company’s condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, "Revenue From Contracts With Customers", as amended by ASU's 2015-14, 2016-08, 2016-10, 2016-11, 2016-12, 2016-20 and 2017-05, which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This update is effective for interim and annual reporting periods beginning after December 15, 2017. We plan to adopt this standard in the first quarter of 2018 using the modified retrospective method, whereby the cumulative effect of applying the standard is recognized at the date of initial application. We have substantially completed our evaluation of significant contracts and the review of our current accounting policies and practices to identify potential differences that would result from applying the requirements of ASU 2014-09 to our revenue contracts. In addition, we have identified, and are in the process of implementing, appropriate changes to business processes, systems and controls to support recognition and disclosure under the new standard. We do not expect the adoption of ASU 2014-09 to have a material impact on the amount and timing of revenue recognized in our Condensed Consolidated Financial Statements.

In February 2016, the FASB issued ASU 2016-02, "Leases (Topic 842)," which requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet. 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 fiscal years beginning after December 15, 2018, with early application permitted. Lessees and lessors must 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. We are currently evaluating the impact of this standard and anticipate the new guidance will significantly impact our Condensed Consolidated Financial Statements as we have a significant number of leases. See note 16, Operating Leases, in our 2016 Annual Report on Form 10-K for the year ended December 31, 2016 for our minimum lease commitments under non-cancellable operating leases.

In March 2016, the FASB issued ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting." Areas for simplification in this update involve several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016. We adopted the new guidance on January 1, 2017, requiring us to recognize all excess tax benefits and tax deficiencies related to stock compensation as income tax expense or benefit in the income statement. Excess tax benefits will be recognized regardless of whether the benefit reduces taxes payable in the current period, subject to normal valuation allowance considerations. Previous guidance resulted in credits to equity for such tax benefits and delayed recognition until the tax benefits reduced income taxes payable. This provision in the standard was applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the year of adoption. As of January 1, 2017, we recorded a $2.3 million reduction to our retained deficit and an increase in deferred income tax assets. In addition on the modified retrospective basis, we have elected to discontinue estimating forfeitures expected to occur when determining the amount of compensation expense to be recognized in each period, resulting in an immaterial impact to our retained deficit and capital in excess of par. We do not anticipate this change will have a material impact to our future results of operations. The presentation requirements for cash flows under the new standard were adopted on a retrospective basis, resulting in a reclassification on the Condensed Consolidated Statements of Cash Flows that decreased cash used in operating activities and increased cash used in financing activities.

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 Condensed Consolidated Financial Statements.

In October 2016, the FASB issued ASU 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory." ASU 2016-16 clarifies that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. We are currently assessing the impact that this standard will have on our Condensed Consolidated Financial Statements.

In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." ASU 2017-04 simplifies the goodwill impairment testing by eliminating Step 2 from the goodwill impairment testing required, should an impairment be discovered during its annual or interim assessment. ASU 2017-04 is effective for annual or interim impairment tests beginning after December 15, 2019, with early adoption permitted. We plan to early adopt this standard on a prospective basis for our annual, and any interim, goodwill impairment testing performed after January 1, 2017, and this is considered a change in accounting principle. We are early adopting this standard as it will decrease the cost and complexity in applying current GAAP without significantly changing the usefulness of the information provided to users of our condensed consolidated financial statements.

In March 2017, the FASB issued ASU 2017-07, "Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost." ASU 2017-07 requires that only the service cost component of pension and postretirement benefit costs be reported within income from operations. The other components of net benefit cost are required to be presented in the income statement separately outside of income from operations, if presented. In addition, this ASU allows only the service cost component to be eligible for capitalization when applicable. ASU 2017-07 is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. Presentation on the Condensed Consolidated Statements of Operations will be retrospective and any impact to capitalized costs will be prospectively adopted. We plan to adopt this standard in the first quarter of 2018 and expect the impact to be reclassifications of applicable costs and credits from income from operations to other income (expense).

Balance Sheet Details

The following table provides detail of selected balance sheet items:



(dollars in thousands)	March 31, 2017		December 31, 2016
Accounts receivable:
Trade receivables	$	81,379	$	82,851
Other receivables	2,006		2,262
Total accounts receivable, less allowances of $7,464 and $7,832	$	83,385	$	85,113

Inventories:
Finished goods	$	156,415	$	152,261
Work in process	2,006		1,625
Raw materials	4,419		4,432
Repair parts	10,359		10,558
Operating supplies	1,206		1,133
Total inventories, less loss provisions of $9,786 and $9,484	$	174,405	$	170,009

Accrued liabilities:
Accrued incentives	$	18,429	$	19,771
Other accrued liabilities	22,164		22,036
Total accrued liabilities	$	40,593	$	41,807

Borrowings

Borrowings consist of the following:



(dollars in thousands)	Interest Rate		Maturity Date	March 31, 2017		December 31, 2016
Borrowings under ABL Facility	floating		April 9, 2019	$	—	$	—
Term Loan B	floating	⁽¹⁾	April 9, 2021	402,900		409,000
AICEP Loan	0.00%		July 30, 2018	3,200		3,320
Total borrowings				406,100		412,320
Less — unamortized discount and finance fees				4,156		4,480
Total borrowings — net				401,944		407,840
Less — long term debt due within one year				6,059		5,009
Total long-term portion of borrowings — net				$	395,885	$	402,831

________________________


(1)	We have entered into an interest rate swap which effectively fixes a series of our future interest payments on a portion of the Term Loan B debt. See interest rate swap in note 8 for additional details. The Term Loan B floating interest rate was 3.85 percent at March 31, 2017.

At March 31, 2017, 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 $30.0 million of letters of credit which, when outstanding, are applied against the $100.0 million limit. At March 31, 2017, $7.0 million in letters of credit were outstanding. Remaining unused availability under the ABL Facility was $89.0 million at March 31, 2017, compared to $88.4 million at December 31, 2016.

Income Taxes

For interim tax reporting, we estimate our annual effective tax rate and apply it to our year-to-date ordinary income. Tax jurisdictions with a projected or year-to-date loss for which a tax benefit cannot be realized are excluded from the annualized effective tax rate. The tax effects of unusual or infrequently occurring items, including changes in judgment about valuation allowances and effects of changes in tax laws or rates, are reported in the interim period in which they occur.

Our effective tax rate was 32.9 percent for the three months ended March 31, 2017, compared to (23.8) percent for the three months ended March 31, 2016. Our effective tax rate for the three months ended March 31, 2017, which was below the United States statutory rate, was affected by the timing and mix of pretax income earned in jurisdictions with rates lower than the United States statutory rate of (28.9) percent, the impact of foreign exchange of 12.7 percent, and other items including foreign withholding tax and nondeductible expenses of 14.1 percent. Our effective tax rate for the three months ended March 31, 2016, which was below the United States statutory rate, was affected by the timing and mix of pretax income earned in jurisdictions with rates lower than the United States statutory rate of (65.3) percent, the impact of foreign exchange of (3.6) percent, and other items including foreign withholding tax and nondeductible expenses of 10.1 percent.

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 US 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. There were no significant developments affecting this matter for the three months ended March 31, 2017.

See note 2 for details regarding the tax effects of adopting ASU 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting," effective January 1, 2017.

Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and 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 certain 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.

The components of our net pension expense, including the SERP, are as follows:



Three months ended March 31,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2017			2016			2017			2016			2017			2016
Service cost	$	1,075		$	996		$	251		$	317		$	1,326		$	1,313
Interest cost	3,450			3,777			637			672			4,087			4,449
Expected return on plan assets	(5,617		)	(5,755		)	—			—			(5,617		)	(5,755		)
Amortization of unrecognized:
Prior service cost (credit)	59			66			(47		)	(54		)	12			12
Actuarial loss	1,352			1,120			138			202			1,490			1,322
Pension expense	$	319		$	204		$	979		$	1,137		$	1,298		$	1,341

We have contributed $1.3 million of cash into our pension plans for the three months ended March 31, 2017. Pension contributions for the remainder of 2017 are estimated to be $1.3 million.

We provide certain retiree health care 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 postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are unfunded.

The provision for our non-pension postretirement benefit expense consists of the following:



Three months ended March 31,	U.S. Plans					Non-U.S. Plans						Total
(dollars in thousands)	2017			2016		2017			2016			2017			2016
Service cost	$	220		$	199	$	—		$	—		$	220		$	199
Interest cost	581			652		11			12			592			664
Amortization of unrecognized:
Prior service cost (credit)	(50		)	35		—			—			(50		)	35
Actuarial loss / (gain)	25			20		(13		)	(11		)	12			9
Non-pension postretirement benefit expense	$	776		$	906	$	(2	)	$	1		$	774		$	907

Our 2017 estimate of non-pension cash payments is $5.0 million, and we have paid $0.6 million for the three months ended March 31, 2017.

Net Income per Share of Common Stock

Net Income (Loss) per Share of Common Stock

The following table sets forth the computation of basic and diluted earnings (loss) per share:



	Three months ended March 31,
(dollars in thousands, except earnings per share)	2017			2016
Numerator for earnings per share:
Net income (loss) that is available to common shareholders	$	(6,570	)	$	718

Denominator for basic earnings per share:
Weighted average shares outstanding	21,938,735			21,850,171

Denominator for diluted earnings per share:
Effect of stock options and restricted stock units	—			150,847
Adjusted weighted average shares and assumed conversions	21,938,735			22,001,018

Basic earnings (loss) per share	$	(0.30	)	$	0.03

Diluted earnings (loss) per share	$	(0.30	)	$	0.03

Shares excluded from diluted earnings (loss) per share due to:
Net loss position (excluded from denominator)	153,750			—
Inclusion would have been anti-dilutive (excluded from calculation)	615,587			616,642

When applicable, diluted shares outstanding includes the dilutive impact of restricted stock units. Diluted shares also include the impact of eligible employee stock options, which are calculated based on the average share price for each fiscal period using the treasury stock method. As part of the adoption of ASU 2016-09 as of January 1, 2017, anticipated tax windfalls and shortfalls are no longer included in the calculation of assumed proceeds when applying the treasury stock method.

Derivatives

We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt, commodity price risks associated with forecasted future natural gas requirements and foreign exchange rate risks associated with transactions denominated in a currency other than the U.S. dollar. These derivatives, except for the foreign currency contracts and the natural gas contracts used in our Mexican manufacturing facilities, 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.

Fair Values

The following table provides the fair values of our derivative financial instruments for the periods presented:



	Asset Derivatives:
(dollars in thousands)	March 31, 2017			December 31, 2016
Derivatives designated as hedging instruments under FASB ASC 815:	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Natural gas contracts	Prepaid and other current assets	$	239	Prepaid and other current assets	$	702
Natural gas contracts	Other assets	—		Other assets	45
Interest rate contract	Other assets	131		Other assets	—
Total designated		370			747
Derivatives not designated as hedging instruments under FASB ASC 815:
Natural gas contracts	Prepaid and other current assets	230		Prepaid and other current assets	732
Natural gas contracts	Other assets	—		Other assets	29
Total undesignated		230			761
Total		$	600		$	1,508

	Liability Derivatives:
(dollars in thousands)	March 31, 2017			December 31, 2016
Derivatives designated as hedging instruments under FASB ASC 815:	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Natural gas contracts	Other long-term liabilities	$	29	Other long-term liabilities	$	—
Interest rate contract	Derivative liability - current	1,377		Derivative liability - current	1,928
Interest rate contract	Other long-term liabilities	—		Other long-term liabilities	107
Total designated		1,406			2,035
Derivatives not designated as hedging instruments under FASB ASC 815:
Natural gas contracts	Other long-term liabilities	52		Other long-term liabilities	—
Total undesignated		52			—
Total		$	1,458		$	2,035

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, up to eighteen months in the future. The fair values of these instruments are determined from market quotes. As of March 31, 2017, we had commodity contracts for 2,170,000 million British Thermal Units (BTUs) of natural gas. At December 31, 2016, we had commodity contracts for 2,590,000 million BTUs of natural gas.

All of our derivatives for natural gas in the U.S. qualify and are designated as cash flow hedges at March 31, 2017. 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 effective portion of the fair value of these hedges are recorded in other comprehensive income (loss). The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in other income (expense). 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 Condensed Consolidated Statement of Operations.

Since October 1, 2014, our derivatives for natural gas in Mexico have not been designated as cash flow hedges. All mark-to-market changes on these derivatives are reflected in other income (expense).

We (received) paid additional cash related to natural gas derivative settlements of $(0.1) million and $1.2 million in the three months ended March 31, 2017 and 2016, respectively, due to the difference between the fixed unit rate of our natural gas contracts and the variable unit rate of our natural gas cost from suppliers. 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 a $0.2 million gain in our Condensed Consolidated Statements of Operations.

The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss) from our natural gas contracts:



	Three months ended March 31,
(dollars in thousands)	2017			2016
Derivatives in Cash Flow Hedging relationships:
Natural gas contracts	$	(470	)	$	(616	)
Total	$	(470	)	$	(616	)

The following table provides a summary of the effective portion of derivative reclassified from accumulated other comprehensive loss to the Condensed Consolidated Statements of Operations from our natural gas contracts:



		Three months ended March 31,
(dollars in thousands)		2017		2016
Derivative:	Location:
Natural gas contracts	Cost of sales	$	67	$	(540	)
Total impact on net income (loss)		$	67	$	(540	)

The following table provides a summary of the gain (loss) recognized in other income (expense) in the Condensed Consolidated Statements of Operations from our natural gas contracts in Mexico:



	Three months ended March 31,
(dollars in thousands)	2017			2016
Contracts where hedge accounting was not elected	$	(583	)	$	370
Total	$	(583	)	$	370

Interest Rate Swap

On April 1, 2015, we executed an interest rate swap on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swap effectively converts $220.0 million of our Term Loan B debt from a variable interest rate to a 4.85 percent fixed interest rate, thus reducing the impact of interest rate changes on future income. The fixed rate swap became effective in January 2016 and expires in January 2020. This interest rate swap is 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 swap qualifies and is designated as a cash flow hedge at March 31, 2017 and 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 would be recorded to earnings immediately. Changes in the effective portion of the fair value of these hedges are recorded in other comprehensive income (loss). The ineffective portion, if any, of the change in the fair value of a derivative designated as a cash flow hedge is recognized in other income (expense). Based on our current valuation, we estimate that accumulated losses currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in $1.4 million of additional interest expense in our Condensed Consolidated Statements of Operations.

The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss) from our interest rate swap:



	Three months ended March 31,
(dollars in thousands)	2017		2016
Derivatives in Cash Flow Hedging relationships:
Interest rate swap	$	204	$	(3,219	)
Total	$	204	$	(3,219	)

The following table provides a summary of the effective portion of derivative reclassified from accumulated other comprehensive income to the Condensed Consolidated Statements of Operations from our interest rate swap:



		Three months ended March 31,
(dollars in thousands)		2017			2016
Derivative:	Location:
Interest rate swap	Interest expense	$	(585	)	$	(391	)
Total impact on net income (loss)		$	(585	)	$	(391	)

Currency Contracts

Our foreign currency exposure arises from transactions denominated in a currency other than the U.S. dollar and is primarily associated with our Canadian dollar denominated accounts receivable. From time to time, we enter into a series of foreign currency contracts to sell Canadian dollars. At March 31, 2017 and December 31, 2016, we had no foreign currency contracts outstanding. The fair values of these instruments are determined from market quotes. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change.

Gains (losses) on currency derivatives that were not designated as hedging instruments are recorded in other income (expense) as follows:



		Three months ended March 31,
(dollars in thousands)		2017		2016
Derivative:	Location:
Currency contracts	Other income (expense)	$	—	$	(418	)
Total		$	—	$	(418	)

We do not believe we are exposed to more than a nominal amount of credit risk in our natural gas hedges, interest rate swap and currency contracts as the counterparties are established financial institutions. The counterparties for the derivative agreements are rated BBB+ or better as of March 31, 2017, by Standard and Poor’s.

Accumulated Other Comprehensive Income (Loss)

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss, net of tax, is as follows:



Three months ended March 31, 2017 (dollars in thousands)	Foreign Currency Translation			Derivative Instruments			Pension and Other Postretirement Benefits			Accumulated Other Comprehensive Loss
Balance December 31, 2016	$	(27,828	)	$	(515	)	$	(96,854	)	$	(125,197	)

Other comprehensive income (loss)	1,408			(266		)	—			1,142
Currency impact	—			—			(480		)	(480		)

Amounts reclassified from accumulated other comprehensive income (loss):
Amortization of actuarial loss ⁽¹⁾	—			—			1,502			1,502
Amortization of prior service cost ⁽¹⁾	—			—			(38		)	(38		)
Cost of sales	—			(67		)	—			(67		)
Interest expense	—			585			—			585
Current-period other comprehensive income (loss)	1,408			252			984			2,644
Tax effect	—			(87		)	(528		)	(615		)
Balance on March 31, 2017	$	(26,420	)	$	(350	)	$	(96,398	)	$	(123,168	)



Three months ended March 31, 2016 (dollars in thousands)	Foreign Currency Translation			Derivative Instruments			Pension and Other Postretirement Benefits			Accumulated Other Comprehensive Loss
Balance on December 31, 2015	$	(22,913	)	$	(1,860	)	$	(95,459	)	$	(120,232	)

Other comprehensive income (loss)	3,350			(3,835		)	—			(485		)
Currency impact	—			—			103			103

Amounts reclassified from accumulated other comprehensive income (loss):
Amortization of actuarial loss ⁽¹⁾	—			—			1,331			1,331
Amortization of prior service cost ⁽¹⁾	—			—			47			47
Cost of sales	—			540			—			540
Interest Expense	—			391			—			391
Current-period other comprehensive income (loss)	3,350			(2,904		)	1,481			1,927
Tax effect	(145		)	1,046			(492		)	409
Balance on March 31, 2016	$	(19,708	)	$	(3,718	)	$	(94,470	)	$	(117,896	)

___________________________

(1) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost within the cost of sales and selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.

Segments

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. In the first quarter of 2017, net sales and related costs for certain countries were reclassified between segments to align with changes in business unit responsibilities. Accordingly, 2016 segment results have been reclassified to conform with the revised structure. The revised 2016 segment results do not affect any previously reported consolidated financial results. 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 including glass products for OEMs that have an end market destination outside of Latin America.

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. As the gain (loss) on mark-to-market natural gas contracts is considered representative of our ongoing operations, it is included in Segment EBIT in 2017; the prior year derivative amount originally excluded from Segment EBIT in 2016 has been reclassified and included in Segment EBIT to conform to the current year presentation. 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.



	Three months ended March 31,
(dollars in thousands)	2017			2016
Net Sales:
U.S. & Canada	$	109,329		$	112,052
Latin America	30,722			34,203
EMEA	25,331			27,860
Other	7,612			8,692
Consolidated	$	172,994		$	182,807

Segment EBIT:
U.S. & Canada	$	7,501		$	12,840
Latin America	(3,079		)	4,702
EMEA	(837		)	(497		)
Other	(1,215		)	450
Total Segment EBIT	$	2,370		$	17,495

Reconciliation of Segment EBIT to Net Income (Loss):
Segment EBIT	$	2,370		$	17,495
Retained corporate costs	(7,291		)	(6,724		)
Executive terminations	—			(4,947		)
Interest expense	(4,867		)	(5,244		)
Benefit from income taxes	3,218			138
Net income (loss)	$	(6,570	)	$	718

Depreciation & Amortization:
U.S. & Canada	$	3,082		$	3,456
Latin America	4,397			4,542
EMEA	1,844			2,158
Other	1,354			1,428
Corporate	478			497
Consolidated	$	11,155		$	12,081

Capital Expenditures:
U.S. & Canada	$	1,937		$	3,839
Latin America	6,982			2,296
EMEA	2,763			2,218
Other	213			695
Corporate	57			807
Consolidated	$	11,952		$	9,855

Fair Value

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.


•	Level 3 — Unobservable inputs based on our own assumptions.



	Fair Value at										Fair Value at
Asset / (Liability) (dollars in thousands)	March 31, 2017										December 31, 2016
Asset / (Liability) (dollars in thousands)	Level 1		Level 2			Level 3		Total			Level 1		Level 2			Level 3		Total
Commodity futures natural gas contracts	$	—	$	388		$	—	$	388		$	—	$	1,508		$	—	$	1,508
Interest rate swap	—		(1,246		)	—		(1,246		)	—		(2,035		)	—		(2,035		)
Net derivative asset (liability)	$	—	$	(858	)	$	—	$	(858	)	$	—	$	(527	)	$	—	$	(527	)

The fair values of our commodity futures natural gas contracts are determined using observable market inputs. The fair value of our interest rate swap is 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 swap 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 Condensed Consolidated Balance Sheets, as well as the related fair values, are as follows:



		March 31, 2017				December 31, 2016
(dollars in thousands)	Fair Value Hierarchy Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term Loan B	Level 2	$	402,900	$	404,915	$	409,000	$	412,068

The fair value of our Term Loan B has been calculated based on quoted market prices for the same or similar issues. The fair value of our other immaterial debt approximates carrying value at March 31, 2017 and December 31, 2016. The fair value of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short term nature.

Other Income (Expense)

Items included in other income (expense) in the Condensed Consolidated Statements of Operations are as follows:



	Three months ended March 31,
(dollars in thousands)	2017			2016
Gain (loss) on currency transactions	$	(1,544	)	$	(730	)
Gain (loss) on mark-to-market natural gas contracts	(582		)	370
Other non-operating income (expense)	(134		)	345
Other income (expense)	$	(2,260	)	$	(15	)

Contingencies

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 bankruptcy, U.S. EPA recovered $22.0 million from Motors Liquidation Company (MLC), the successor to General Motors Corporation. 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.

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, 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 claim for indemnification under the Asset Purchase Agreement.

In connection with the above proceedings, an estimated environmental liability of $0.9 million has been recorded in other long term liabilities and a recoverable amount of $0.5 million has been recorded in other long term assets in the Condensed Consolidated Balance Sheets at both March 31, 2017 and December 31, 2016. Although we cannot predict the ultimate outcome of this proceeding, we believe that it will not have a material adverse impact on our financial condition, results of operations or liquidity.

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 5, Income Taxes, for a detailed discussion on tax contingencies.

Significant Accounting Policies (Policies)