Table of Contents

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q
 
☑	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
For the quarterly period ended September 30, 2019
 
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
 
Commission file number 1-12084
Libbey Inc.

(Exact name of registrant as specified in its charter)
 	 	 	
Delaware	 	34-1559357	
(State or other jurisdiction of incorporation or organization)	 	(IRS Employer Identification No.)	
 
 	300 Madison Avenue, Toledo, Ohio 43604	 	
(Address of principal executive offices) (Zip Code)	
 	 	 	
 	419-325-2100	 	
(Registrant’s telephone number, including area code)	
 
Securities registered pursuant to Section 12(b) of the Act:	
Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered	
Common Stock, $.01 par value	LBY	NYSE American	
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐
 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
 
Large Accelerated Filer	☐	 	Accelerated Filer	☑	 	Non-Accelerated Filer	☐	 	
Smaller reporting company	☑	 	Emerging growth company	☐	 	 	 	 	
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑
 
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 
 
Common Stock, $.01 par value 22,355,997 shares at October 23, 2019

 

 

Table of Contents

TABLE OF CONTENTS
 
 	Page	
Item 1. Financial Statements	3	
Condensed Consolidated Statements of Operations	3	
Condensed Consolidated Statements of Comprehensive Income (Loss)	5	
Condensed Consolidated Balance Sheets	6	
Condensed Consolidated Statements of Shareholders' Equity (Deficit)	7	
Condensed Consolidated Statements of Cash Flows	8	
Notes to Condensed Consolidated Financial Statements	9	
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21	
Item 3. Qualitative and Quantitative Disclosures about Market Risk	33	
Item 4. Controls and Procedures	33	
PART II — OTHER INFORMATION	33	
Item 1. Legal Proceedings	33	
Item 1A. Risk Factors	33	
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34	
Item 6. Exhibits	34	
EXHIBIT INDEX	34	
SIGNATURES	35	
 	 	
 EX-10.1	 	
 EX-31.1	 	
 EX-31.2	 	
 EX-32.1	 	
 EX-101 INSTANCE DOCUMENT	 	
 EX-101 SCHEMA DOCUMENT	 	
 EX-101 CALCULATION LINKBASE DOCUMENT	 	
 EX-101 LABELS LINKBASE DOCUMENT	 	
 EX-101 PRESENTATION LINKBASE DOCUMENT	 	
 EX-101 DEFINITION LINKBASE DOCUMENT	 	
 
2

Table of Contents

PART I — FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)
 
 	 	Three months ended September 30,	 	
 	 	2019	 	 	2018	 	
Net sales	 	$	192,418	 	 	$	190,775	 	
Freight billed to customers	 	 	804	 	 	 	780	 	
Total revenues	 	 	193,222	 	 	 	191,555	 	
Cost of sales	 	 	158,836	 	 	 	154,315	 	
Gross profit	 	 	34,386	 	 	 	37,240	 	
Selling, general and administrative expenses	 	 	30,982	 	 	 	33,336	 	
Income from operations	 	 	3,404	 	 	 	3,904	 	
Other income (expense)	 	 	346	 	 	 	(1,453	)	
Earnings before interest and income taxes	 	 	3,750	 	 	 	2,451	 	
Interest expense	 	 	5,699	 	 	 	5,652	 	
Loss before income taxes	 	 	(1,949	)	 	 	(3,201	)	
Provision for income taxes	 	 	1,508	 	 	 	1,758	 	
Net loss	 	$	(3,457	)	 	$	(4,959	)	
 	 	 	 	 	 	 	 	 	
Net loss per share:	 	 	 	 	 	 	 	 	
Basic	 	$	(0.15	)	 	$	(0.22	)	
Diluted	 	$	(0.15	)	 	$	(0.22	)	
Dividends declared per share	 	$	—	 	 	$	—	 	
 
See accompanying notes
 
3

Table of Contents
 
Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)
 
 	 	Nine months ended September 30,	 	
 	 	2019	 	 	2018	 	
Net sales	 	$	573,542	 	 	$	586,222	 	
Freight billed to customers	 	 	2,298	 	 	 	2,475	 	
Total revenues	 	 	575,840	 	 	 	588,697	 	
Cost of sales	 	 	460,771	 	 	 	471,294	 	
Gross profit	 	 	115,069	 	 	 	117,403	 	
Selling, general and administrative expenses	 	 	94,375	 	 	 	98,396	 	
Impairment of goodwill and other intangible assets	 	 	46,881	 	 	 	—	 	
Income (loss) from operations	 	 	(26,187	)	 	 	19,007	 	
Other income (expense)	 	 	(1,858	)	 	 	(980	)	
Earnings (loss) before interest and income taxes	 	 	(28,045	)	 	 	18,027	 	
Interest expense	 	 	17,210	 	 	 	16,192	 	
Income (loss) before income taxes	 	 	(45,255	)	 	 	1,835	 	
Provision for income taxes	 	 	6,511	 	 	 	5,767	 	
Net loss	 	$	(51,766	)	 	$	(3,932	)	
 	 	 	 	 	 	 	 	 	
Net loss per share:	 	 	 	 	 	 	 	 	
Basic	 	$	(2.31	)	 	$	(0.18	)	
Diluted	 	$	(2.31	)	 	$	(0.18	)	
Dividends declared per share	 	$	—	 	 	$	0.1175	 	
 
See accompanying notes
 
4

Table of Contents

Libbey Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
(unaudited)
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	$	(3,457	)	 	$	(4,959	)	 	$	(51,766	)	 	$	(3,932	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Other comprehensive income (loss):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pension and other post-retirement benefit adjustments, net of tax	 	 	790	 	 	 	874	 	 	 	3,077	 	 	 	4,508	 	
Change in fair value of derivative instruments, net of tax	 	 	(1,811	)	 	 	(734	)	 	 	(9,695	)	 	 	1,208	 	
Foreign currency translation adjustments, net of tax	 	 	(4,343	)	 	 	(2,707	)	 	 	(4,640	)	 	 	(5,766	)	
Other comprehensive income (loss), net of tax	 	 	(5,364	)	 	 	(2,567	)	 	 	(11,258	)	 	 	(50	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Comprehensive income (loss)	 	$	(8,821	)	 	$	(7,526	)	 	$	(63,024	)	 	$	(3,982	)	
 
See accompanying notes
 
5

Table of Contents

Libbey Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share amounts)
 
 	 	September 30, 2019	 	 	December 31, 2018	 	
 	 	(unaudited)	 	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	27,668	 	 	$	25,066	 	
Accounts receivable — net	 	 	90,745	 	 	 	83,977	 	
Inventories — net	 	 	195,669	 	 	 	192,103	 	
Prepaid and other current assets	 	 	20,709	 	 	 	16,522	 	
Total current assets	 	 	334,791	 	 	 	317,668	 	
Purchased intangible assets — net	 	 	11,868	 	 	 	13,385	 	
Goodwill	 	 	38,431	 	 	 	84,412	 	
Deferred income taxes	 	 	29,346	 	 	 	26,090	 	
Other assets	 	 	14,670	 	 	 	7,660	 	
Operating lease right-of-use assets	 	 	62,052	 	 	 	—	 	
Property, plant and equipment — net	 	 	249,734	 	 	 	264,960	 	
Total assets	 	$	740,892	 	 	$	714,175	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)	 	 	 	 	 	 	 	 	
Accounts payable	 	$	74,963	 	 	$	74,836	 	
Salaries and wages	 	 	28,409	 	 	 	27,924	 	
Accrued liabilities	 	 	48,433	 	 	 	43,728	 	
Accrued income taxes	 	 	4,424	 	 	 	3,639	 	
Pension liability (current portion)	 	 	3,479	 	 	 	3,282	 	
Non-pension post-retirement benefits (current portion)	 	 	3,956	 	 	 	3,951	 	
Operating lease liabilities (current portion)	 	 	12,465	 	 	 	—	 	
Long-term debt due within one year	 	 	4,400	 	 	 	4,400	 	
Total current liabilities	 	 	180,529	 	 	 	161,760	 	
Long-term debt	 	 	411,906	 	 	 	393,300	 	
Pension liability	 	 	42,513	 	 	 	45,206	 	
Non-pension post-retirement benefits	 	 	39,719	 	 	 	43,015	 	
Noncurrent operating lease liabilities	 	 	50,325	 	 	 	—	 	
Deferred income taxes	 	 	2,429	 	 	 	2,755	 	
Other long-term liabilities	 	 	24,019	 	 	 	18,246	 	
Total liabilities	 	 	751,440	 	 	 	664,282	 	
Contingencies (Note 15)	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Shareholders’ equity (deficit):	 	 	 	 	 	 	 	 	
Common stock, par value $.01 per share, 50,000,000 shares authorized, 22,355,997 shares issued in 2019 (22,157,220 shares issued in 2018)	 	 	224	 	 	 	222	 	
Capital in excess of par value	 	 	338,098	 	 	 	335,517	 	
Retained deficit	 	 	(223,207	)	 	 	(171,441	)	
Accumulated other comprehensive loss	 	 	(125,663	)	 	 	(114,405	)	
Total shareholders' equity (deficit)	 	 	(10,548	)	 	 	49,893	 	
Total liabilities and shareholders' equity (deficit)	 	$	740,892	 	 	$	714,175	 	
 
See accompanying notes
 
6

Table of Contents

Libbey Inc.
Condensed Consolidated Statements of Shareholders' Equity (Deficit)
(dollars in thousands, except share amounts)
(unaudited)
 
Nine months ended September 30, 2019	 	Common Stock
Shares	 	 	Common Stock
Amount	 	 	Capital in Excess of
Par Value	 	 	Retained
Deficit	 	 	Accumulated Other Comprehensive Loss	 	 	Total	 	
Balance December 31, 2018	 	 	22,157,220	 	 	$	222	 	 	$	335,517	 	 	$	(171,441	)	 	$	(114,405	)	 	$	49,893	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(4,542	)	 	 	 	 	 	 	(4,542	)	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,303	)	 	 	(2,303	)	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	937	 	 	 	 	 	 	 	 	 	 	 	937	 	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(317	)	 	 	 	 	 	 	 	 	 	 	(317	)	
Stock issued	 	 	116,348	 	 	 	1	 	 	 	(8	)	 	 	 	 	 	 	 	 	 	 	(7	)	
Balance March 31, 2019	 	 	22,273,568	 	 	 	223	 	 	 	336,129	 	 	 	(175,983	)	 	 	(116,708	)	 	 	43,661	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(43,767	)	 	 	 	 	 	 	(43,767	)	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(3,591	)	 	 	(3,591	)	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	1,117	 	 	 	 	 	 	 	 	 	 	 	1,117	 	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(92	)	 	 	 	 	 	 	 	 	 	 	(92	)	
Stock issued	 	 	73,518	 	 	 	—	 	 	 	1	 	 	 	 	 	 	 	 	 	 	 	1	 	
Balance June 30, 2019	 	 	22,347,086	 	 	 	223	 	 	 	337,155	 	 	 	(219,750	)	 	 	(120,299	)	 	 	(2,671	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(3,457	)	 	 	 	 	 	 	(3,457	)	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(5,364	)	 	 	(5,364	)	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	950	 	 	 	 	 	 	 	 	 	 	 	950	 	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(7	)	 	 	 	 	 	 	 	 	 	 	(7	)	
Stock issued	 	 	8,911	 	 	 	1	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	1	 	
Balance September 30, 2019	 	 	22,355,997	 	 	$	224	 	 	$	338,098	 	 	$	(223,207	)	 	$	(125,663	)	 	$	(10,548	)	

Nine months ended September 30, 2018	 	Common Stock
Shares	 	 	Common Stock
Amount	 	 	Capital in Excess of
Par Value	 	 	Retained
Deficit	 	 	Accumulated Other Comprehensive Loss	 	 	Total	 	
Balance December 31, 2017	 	 	22,018,010	 	 	$	220	 	 	$	333,011	 	 	$	(161,165	)	 	$	(105,172	)	 	$	66,894	 	
Cumulative-effect adjustment for the adoption of ASU 2017-12	 	 	 	 	 	 	 	 	 	 	 	 	 	 	275	 	 	 	(275	)	 	 	—	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,961	)	 	 	 	 	 	 	(2,961	)	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	6,558	 	 	 	6,558	 	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	270	 	 	 	 	 	 	 	 	 	 	 	270	 	
Dividends	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,595	)	 	 	 	 	 	 	(2,595	)	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(203	)	 	 	 	 	 	 	 	 	 	 	(203	)	
Stock issued	 	 	63,582	 	 	 	1	 	 	 	91	 	 	 	 	 	 	 	 	 	 	 	92	 	
Balance March 31, 2018	 	 	22,081,592	 	 	 	221	 	 	 	333,169	 	 	 	(166,446	)	 	 	(98,889	)	 	 	68,055	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	3,988	 	 	 	 	 	 	 	3,988	 	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(4,041	)	 	 	(4,041	)	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	1,131	 	 	 	 	 	 	 	 	 	 	 	1,131	 	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(11	)	 	 	 	 	 	 	 	 	 	 	(11	)	
Stock issued	 	 	50,816	 	 	 	—	 	 	 	—	 	 	 	 	 	 	 	 	 	 	 	—	 	
Balance June 30, 2018	 	 	22,132,408	 	 	 	221	 	 	 	334,289	 	 	 	(162,458	)	 	 	(102,930	)	 	 	69,122	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(4,959	)	 	 	 	 	 	 	(4,959	)	
Other comprehensive income (loss)	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	(2,567	)	 	 	(2,567	)	
Stock compensation expense	 	 	 	 	 	 	 	 	 	 	658	 	 	 	 	 	 	 	 	 	 	 	658	 	
Stock withheld for employee taxes	 	 	 	 	 	 	 	 	 	 	(90	)	 	 	 	 	 	 	 	 	 	 	(90	)	
Stock issued	 	 	12,892	 	 	 	—	 	 	 	5	 	 	 	 	 	 	 	 	 	 	 	5	 	
Balance September 30, 2018	 	 	22,145,300	 	 	$	221	 	 	$	334,862	 	 	$	(167,417	)	 	$	(105,497	)	 	$	62,169	 	
 
See accompanying notes
 
7

Table of Contents

Libbey Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
 	 	Nine months ended September 30,	 	
 	 	2019	 	 	2018	 	
Operating activities:	 	 	 	 	 	 	 	 	
Net loss	 	$	(51,766	)	 	$	(3,932	)	
Adjustments to reconcile net loss to net cash provided by operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	29,465	 	 	 	34,389	 	
Impairment of goodwill and other intangible assets	 	 	46,881	 	 	 	—	 	
Change in accounts receivable	 	 	(7,575	)	 	 	(1,688	)	
Change in inventories	 	 	(5,452	)	 	 	(24,445	)	
Change in accounts payable	 	 	5,987	 	 	 	(5,139	)	
Accrued interest and amortization of discounts and finance fees	 	 	868	 	 	 	801	 	
Pension & non-pension post-retirement benefits, net	 	 	(1,765	)	 	 	1,154	 	
Accrued liabilities & prepaid expenses	 	 	277	 	 	 	6,938	 	
Income taxes	 	 	(3,066	)	 	 	(1,662	)	
Cloud computing costs	 	 	(3,647	)	 	 	—	 	
Share-based compensation expense	 	 	2,888	 	 	 	2,127	 	
Other operating activities	 	 	(429	)	 	 	(957	)	
Net cash provided by operating activities	 	 	12,666	 	 	 	7,586	 	
 	 	 	 	 	 	 	 	 	
Investing activities:	 	 	 	 	 	 	 	 	
Additions to property, plant and equipment	 	 	(26,903	)	 	 	(35,123	)	
Net cash used in investing activities	 	 	(26,903	)	 	 	(35,123	)	
 	 	 	 	 	 	 	 	 	
Financing activities:	 	 	 	 	 	 	 	 	
Borrowings on ABL credit facility	 	 	81,971	 	 	 	78,850	 	
Repayments on ABL credit facility	 	 	(60,305	)	 	 	(46,876	)	
Other repayments	 	 	—	 	 	 	(3,077	)	
Repayments on Term Loan B	 	 	(3,300	)	 	 	(3,300	)	
Stock options exercised	 	 	—	 	 	 	5	 	
Taxes paid on distribution of equity awards	 	 	(416	)	 	 	(304	)	
Dividends	 	 	—	 	 	 	(2,595	)	
Net cash provided by financing activities	 	 	17,950	 	 	 	22,703	 	
 	 	 	 	 	 	 	 	 	
Effect of exchange rate fluctuations on cash	 	 	(1,111	)	 	 	(774	)	
Increase (decrease) in cash	 	 	2,602	 	 	 	(5,608	)	
 	 	 	 	 	 	 	 	 	
Cash & cash equivalents at beginning of period	 	 	25,066	 	 	 	24,696	 	
Cash & cash equivalents at end of period	 	$	27,668	 	 	$	19,088	 	
 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	 	 	 	
Cash paid during the period for interest	 	$	15,853	 	 	$	14,868	 	
Cash paid during the period for income taxes	 	$	7,139	 	 	$	7,219	 	
 
See accompanying notes
 
8

Table of Contents
 
Libbey Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)

1.    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®, 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.
 
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 American exchange under the ticker symbol LBY.

2.    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 and nine month periods ended September 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019.
 
The balance sheet at December 31, 2018, 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, 2018.
 
Software We account for software in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (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 3 to 10 year period. Software is classified on the balance sheet in property, plant and equipment, and the related cash flows are shown as cash outflows from investing activities.
 
Cloud Computing Arrangements We account for implementation costs for software that we gain access to in hosted cloud computing arrangements in accordance with FASB ASC 350. Capitalized costs of hosted cloud computing arrangements include configuration, installation, other upfront costs and internal labor costs of employees devoted to the cloud computing software implementation project. Once a project is complete, amortization is computed using the straight-line method over the term of the associated hosting arrangement, generally 3 to 10 years. In connection with our adoption of Accounting Standards Update (ASU) 2018-15 on January 1, 2019, these implementation costs are now classified on the balance sheet in prepaid and other current assets and other assets, and the related cash flows are presented as cash outflows from operations. Prior to January 1, 2019, implementation costs were included in property, plant and equipment, and the related cash flows were shown as cash outflows from investing activities. See New Accounting Standards - Adopted below. Our cloud computing arrangements primarily relate to our new global enterprise resource planning (ERP) system. At September 30, 2019, the net book value of these implementation costs included $0.3 million in prepaid and other current assets and $6.0 million in other assets on the Condensed Consolidated Balance Sheet. Amortization expense for the three and nine-month periods were both immaterial.
 
Leases We determine if an arrangement is a lease at inception. As of January 1, 2019, operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our balance sheet; related payments are included in operating activities on the statement of cash flows. We currently do not have any finance leases; but, if we do in the future, we will include them in property, plant and equipment, long-term debt due within one year and long-term debt within our balance sheet.
 
ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
 
9

Table of Contents
 
When our leases do not provide an implicit rate, we use our incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our secured borrowing rates as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.
 
The operating lease ROU asset also includes any lease prepayments made before commencement or in advance of the payment due date. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of 12 months or less (short-term leases) are not recorded on the balance sheet. Our lease agreements do not contain any residual value guarantees or material restrictive covenants. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease costs represent the incremental change in lease payments associated with an indexed rate (i.e. Consumers Price Index), and these costs are not included in the lease liability on the balance sheet because they are unknown at commencement date.
 
We have lease agreements with lease and non-lease components. Non-lease components for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties. For real estate leases and a limited class of equipment leases, we account for the lease and non-lease components separately. Non-lease components are not recorded on the balance sheet as a ROU asset and lease liability and are not included in lease costs. For all other equipment leases, we account for the lease and non-lease components as a single lease component.
 
See New Accounting Standards - Adopted below for the adoption impact of this lease accounting standard.
 
Stock-Based Compensation Expense
 
Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Stock-based compensation expense	 	$	953	 	 	$	671	 	 	$	2,888	 	 	$	2,127	 	
 
New Accounting Standards - Adopted
 
Each change to U.S. GAAP is established by the FASB in the form of an ASU to the FASB’s 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 Condensed Consolidated Financial Statements.
 
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to recognize on the balance sheet ROU assets and corresponding liabilities for both finance and operating leases with lease terms greater than 12 months. On January 1, 2019, we adopted this standard using the optional transition method of applying the modified retrospective approach at our adoption date. Under this method, previously reported comparative periods prior to 2019 have not been restated. We have elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our prior conclusions on existing contracts for lease identification, lease classification and initial direct costs. In addition, for most of our classes of equipment leases, we elected the practical expedient to not separate lease and non-lease components. We also made an accounting policy election to keep leases with a term of 12 months or less off of the balance sheet for all classes of underlying assets. At adoption, we had operating leases which resulted in us recognizing operating ROU assets and lease liabilities on the balance sheet of approximately $69 million. The adoption of this ASU did not have a material impact on our condensed consolidated results of operations or cash flows, and there was no cumulative effect adjustment to retained earnings. The new standard also required additional disclosures which are included in note 13.
 
On January 1, 2019, we early adopted 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. Prior to January 1, 2019, implementation costs for cloud computing arrangements were capitalized into property, plant and equipment and amortized on a straight-line basis. Upon adoption of this new standard, we reclassed $2.8 million from construction in progress within property, plant, and equipment to other assets. When implementation projects are completed and amortization of capitalized costs begins, a portion is recorded in prepaids and other current assets. Results and disclosures for reporting periods beginning on or after January 1, 2019, are presented under the new guidance within ASU 2018-15, while prior period amounts and disclosures are not adjusted and continue to be reported in accordance with our previous accounting.
 
New Accounting Standards - Not Yet Adopted
 
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. In October of 2019, the FASB approved a delayed effective date for Smaller Reporting Company filers; thus, our effective date is now for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Although we are still evaluating the impact of this standard, we believe it will not have a material impact on our Condensed Consolidated Financial Statements.
 
10

Table of Contents

3.    Balance Sheet Details
 
The following table provides detail of selected balance sheet items:
 
(dollars in thousands)	 	September 30, 2019	 	 	December 31, 2018	 	
Accounts receivable:	 	 	 	 	 	 	 	 	
Trade receivables	 	$	89,202	 	 	$	82,521	 	
Other receivables	 	 	1,543	 	 	 	1,456	 	
Total accounts receivable, less allowances of $9,577 and $8,538	 	$	90,745	 	 	$	83,977	 	
 	 	 	 	 	 	 	 	 	
Inventories:	 	 	 	 	 	 	 	 	
Finished goods	 	$	177,789	 	 	$	175,074	 	
Work in process	 	 	1,433	 	 	 	1,363	 	
Raw materials	 	 	4,243	 	 	 	4,026	 	
Repair parts	 	 	10,282	 	 	 	10,116	 	
Operating supplies	 	 	1,922	 	 	 	1,524	 	
Total inventories, less loss provisions of $7,342 and $9,453	 	$	195,669	 	 	$	192,103	 	
 	 	 	 	 	 	 	 	 	
Accrued liabilities:	 	 	 	 	 	 	 	 	
Accrued incentives	 	$	22,621	 	 	$	19,359	 	
Other accrued liabilities	 	 	25,812	 	 	 	24,369	 	
Total accrued liabilities	 	$	48,433	 	 	$	43,728	 	
 
4.    Borrowings
 
Borrowings consist of the following:
 
 	 	 	 	 	 	September 30,	 	 	December 31,	 	
(dollars in thousands)	 	Interest Rate	 	Maturity Date	 	2019	 	 	2018	 	
Borrowings under ABL Facility	 	floating (2)	 	December 7, 2022 (1)	 	$	41,014	 	 	$	19,868	 	
Term Loan B	 	floating (3)	 	April 9, 2021	 	 	376,900	 	 	 	380,200	 	
Total borrowings	 	 	417,914	 	 	 	400,068	 	
Less — unamortized discount and finance fees	 	 	1,608	 	 	 	2,368	 	
Total borrowings — net	 	 	416,306	 	 	 	397,700	 	
Less — long term debt due within one year	 	 	4,400	 	 	 	4,400	 	
Total long-term portion of borrowings — net	 	$	411,906	 	 	$	393,300	 	
________________________
(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 2.91 percent at September 30, 2019.	
(3) 	We have entered into interest rate swaps that effectively fix a series of our future interest payments on a portion of the Term Loan B debt. See interest rate swaps in note 8 for additional details. The Term Loan B floating interest rate was 5.04 percent at September 30, 2019.	
    
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 September 30, 2019, $9.6 million in letters of credit and other reserves were outstanding. Remaining unused availability under the ABL Facility was $49.4 million at September 30, 2019, compared to $71.6 million at December 31, 2018.
 
On June 17, 2019, Crisa Libbey Mexico S. de R.L. de C.V. entered into a $3.0 million working capital line of credit with Banco Santander Mexico to cover seasonal working capital needs, guaranteed by its parent company, Libbey Mexico, S. de R.L. de C.V. The line of credit matures on December 14, 2020, and has a floating interest rate of LIBOR plus 3.20 percent. At September 30, 2019, there were no borrowings under this line of credit. Interest with respect to borrowings on the line of credit is due monthly.

5.    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 (14.4) percent for the nine months ended September 30, 2019, compared to 314.3 percent for the nine months ended September 30, 2018. Our effective tax rate for the nine months ended September 30, 2019, was negative because the company recorded positive tax expense despite incurring an overall pretax loss. This occurred because the pretax loss was driven by nondeductible expenses, principally the nondeductible goodwill impairment recorded in the second quarter of the year and nondeductible interest.
 
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, the Mexican tax authority (SAT) assessed one of our Mexican subsidiaries 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 in the Mexican courts all significant components of the assessment that are not nullified at the administrative appeal level. We believe that our tax reserves related to uncertain tax positions are adequate at this time.
 
11

Table of Contents

6.    Pension and Non-pension Post-retirement Benefits
 
The components of our net pension expense, including the SERP (supplemental employee retirement plan), are as follows:
 
Three months ended September 30,	 	U.S. Plans	 	 	Non-U.S. Plans	 	 	Total	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Service cost	 	$	783	 	 	$	1,003	 	 	$	256	 	 	$	289	 	 	$	1,039	 	 	$	1,292	 	
Interest cost	 	 	3,382	 	 	 	3,154	 	 	 	761	 	 	 	755	 	 	 	4,143	 	 	 	3,909	 	
Expected return on plan assets	 	 	(5,194	)	 	 	(5,665	)	 	 	—	 	 	 	—	 	 	 	(5,194	)	 	 	(5,665	)	
Amortization of unrecognized:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service cost (credit)	 	 	—	 	 	 	—	 	 	 	(49	)	 	 	(51	)	 	 	(49	)	 	 	(51	)	
Actuarial loss	 	 	1,087	 	 	 	1,618	 	 	 	102	 	 	 	158	 	 	 	1,189	 	 	 	1,776	 	
Pension expense	 	$	58	 	 	$	110	 	 	$	1,070	 	 	$	1,151	 	 	$	1,128	 	 	$	1,261	 	
 
Nine months ended September 30,	 	U.S. Plans	 	 	Non-U.S. Plans	 	 	Total	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Service cost	 	$	2,349	 	 	$	3,007	 	 	$	775	 	 	$	865	 	 	$	3,124	 	 	$	3,872	 	
Interest cost	 	 	10,146	 	 	 	9,461	 	 	 	2,302	 	 	 	2,259	 	 	 	12,448	 	 	 	11,720	 	
Expected return on plan assets	 	 	(15,580	)	 	 	(16,994	)	 	 	—	 	 	 	—	 	 	 	(15,580	)	 	 	(16,994	)	
Amortization of unrecognized:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service cost (credit)	 	 	—	 	 	 	1	 	 	 	(150	)	 	 	(152	)	 	 	(150	)	 	 	(151	)	
Actuarial loss	 	 	3,262	 	 	 	4,854	 	 	 	310	 	 	 	471	 	 	 	3,572	 	 	 	5,325	 	
Pension expense	 	$	177	 	 	$	329	 	 	$	3,237	 	 	$	3,443	 	 	$	3,414	 	 	$	3,772	 	
 
We have contributed $0.8 million and $2.5 million of cash to our pension plans for the three months and nine months ended September 30, 2019, respectively. Pension contributions for the remainder of 2019 are estimated to be $0.9 million.
 
The provision for our non-pension, post-retirement, benefit expense consists of the following:
 
Three months ended September 30,	 	U.S. Plans	 	 	Non-U.S. Plans	 	 	Total	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Service cost	 	$	110	 	 	$	151	 	 	$	1	 	 	$	1	 	 	$	111	 	 	$	152	 	
Interest cost	 	 	459	 	 	 	456	 	 	 	6	 	 	 	9	 	 	 	465	 	 	 	465	 	
Amortization of unrecognized:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service (credit)	 	 	(71	)	 	 	(71	)	 	 	—	 	 	 	—	 	 	 	(71	)	 	 	(71	)	
Actuarial (gain)	 	 	(94	)	 	 	(52	)	 	 	(14	)	 	 	(16	)	 	 	(108	)	 	 	(68	)	
Non-pension post-retirement benefit expense	 	$	404	 	 	$	484	 	 	$	(7	)	 	$	(6	)	 	$	397	 	 	$	478	 	
 
Nine months ended September 30,	 	U.S. Plans	 	 	Non-U.S. Plans	 	 	Total	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Service cost	 	$	332	 	 	$	453	 	 	$	1	 	 	$	1	 	 	$	333	 	 	$	454	 	
Interest cost	 	 	1,377	 	 	 	1,367	 	 	 	24	 	 	 	29	 	 	 	1,401	 	 	 	1,396	 	
Amortization of unrecognized:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Prior service (credit)	 	 	(212	)	 	 	(212	)	 	 	—	 	 	 	—	 	 	 	(212	)	 	 	(212	)	
Actuarial (gain)	 	 	(282	)	 	 	(157	)	 	 	(51	)	 	 	(49	)	 	 	(333	)	 	 	(206	)	
Non-pension post-retirement benefit expense	 	$	1,215	 	 	$	1,451	 	 	$	(26	)	 	$	(19	)	 	$	1,189	 	 	$	1,432	 	
 
Our 2019 estimate of non-pension cash payments is $5.2 million, of which we have paid $0.8 million and $4.3 million for the three months and nine months ended September 30, 2019, respectively.
 
12

Table of Contents

7.    Net Loss per Share of Common Stock
 
The following table sets forth the computation of basic and diluted loss per share:
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands, except earnings per share)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Numerator for earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss that is available to common shareholders	 	$	(3,457	)	 	$	(4,959	)	 	$	(51,766	)	 	$	(3,932	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Denominator for basic earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average shares outstanding	 	 	22,484,158	 	 	 	22,222,827	 	 	 	22,403,253	 	 	 	22,162,237	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Denominator for diluted earnings per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of stock options and restricted stock units	 	 	—	 	 	 	—	 	 	 	—	 	 	 	—	 	
Adjusted weighted average shares and assumed conversions	 	 	22,484,158	 	 	 	22,222,827	 	 	 	22,403,253	 	 	 	22,162,237	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic loss per share	 	$	(0.15	)	 	$	(0.22	)	 	$	(2.31	)	 	$	(0.18	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted loss per share	 	$	(0.15	)	 	$	(0.22	)	 	$	(2.31	)	 	$	(0.18	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Anti-dilutive shares excluded from computation of diluted loss per share	 	 	1,925,173	 	 	 	1,270,680	 	 	 	1,776,055	 	 	 	1,230,244	 	
 
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.

8.    Derivatives
 
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 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 Condensed Consolidated Balance Sheets the amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement.
 
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 September 30, 2019, by Standard and Poor’s.
 
Fair Values
 
The following table provides the fair values of our derivative financial instruments for the periods presented, all of which are cash flow hedges:
 
 	 	 	 	Fair Value of Derivative Assets	 	
(dollars in thousands)	 	Balance Sheet Location	 	September 30, 2019	 	 	December 31, 2018	 	
Interest rate swaps	 	Prepaid and other current assets	 	$	—	 	 	$	1,425	 	
Natural gas contracts	 	Prepaid and other current assets	 	 	—	 	 	 	226	 	
Natural gas contracts	 	Other assets	 	 	—	 	 	 	39	 	
Total derivative assets	 	 	 	$	—	 	 	$	1,690	 	
 
 	 	 	 	Fair Value of Derivative Liabilities	 	
Interest rate swaps	 	Accrued liabilities	 	$	2,139	 	 	$	—	 	
Interest rate swaps	 	Other long-term liabilities	 	 	13,757	 	 	 	5,713	 	
Natural gas contracts	 	Accrued liabilities	 	 	727	 	 	 	—	 	
Natural gas contracts	 	Other long-term liabilities	 	 	106	 	 	 	—	 	
Total derivative liabilities	 	 	 	$	16,729	 	 	$	5,713	 	
 
The following table presents cash settlements (paid) received related to the below derivatives:
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Natural gas contracts	 	$	(437	)	 	$	48	 	 	$	(374	)	 	$	(186	)	
Interest rate swaps	 	 	264	 	 	 	123	 	 	 	955	 	 	 	(58	)	
Total	 	$	(173	)	 	$	171	 	 	$	581	 	 	$	(244	)	
 
13

Table of Contents
 
The following table provides a summary of the impacts of derivative gain (loss) of our cash flow hedges on the Condensed Consolidated Statements of Operations and other comprehensive income (OCI):
 
 	 	 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	Location	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Derivative gain (loss) recognized into OCI:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Natural gas contracts	 	OCI	 	$	(330	)	 	$	179	 	 	$	(1,473	)	 	$	513	 	
Interest rate swaps	 	OCI	 	 	(2,234	)	 	 	(998	)	 	 	(10,699	)	 	 	735	 	
Total	 	 	 	$	(2,564	)	 	$	(819	)	 	$	(12,172	)	 	$	1,248	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Derivative gain (loss) reclassified from accumulated OCI to current earnings:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Natural gas contracts	 	Cost of Sales	 	$	(438	)	 	$	48	 	 	$	(375	)	 	$	(186	)	
Interest rate swaps	 	Interest expense	 	 	219	 	 	 	135	 	 	 	909	 	 	 	32	 	
Total	 	 	 	$	(219	)	 	$	183	 	 	$	534	 	 	$	(154	)	
 
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 Condensed Consolidated Balance Sheets:
 
 	 	 	 	Notional Amounts	 	
Derivative Types	 	Unit of Measure	 	September 30, 2019	 	 	December 31, 2018	 	
Natural gas contracts	 	Millions of British Thermal Units (MMBTUs)	 	 	2,890,000	 	 	 	3,150,000	 	
 
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 Condensed Consolidated Statement of Operations.
 
Based on our current valuation, we estimate that accumulated losses for natural gas contracts currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in a loss of $0.7 million in our Condensed 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 September 30, 2019, 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 accumulated losses currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in an increase to interest expense of $2.1 million in our Condensed Consolidated Statements of Operations.
 
14

Table of Contents

9.    Accumulated Other Comprehensive Income (Loss)
 
Accumulated other comprehensive income (loss) (AOCI), net of tax, is as follows:
 
Three months ended September 30, 2019 (dollars in thousands)	 	Foreign Currency Translation	 	 	 	Derivative Instruments	 	 	 	Pension and Other
Post-retirement Benefits	 	 	 	Accumulated Other
Comprehensive Loss	 	
Balance on June 30, 2019	 	$	(23,537	)	 	 	$	(10,750	)	 	 	$	(86,012	)	 	 	$	(120,299	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts recognized into AOCI	 	 	(4,543	)	 	 	 	(2,564	)	 	 	 	—	 	 	 	 	(7,107	)	
Currency impact	 	 	—	 	 	 	 	—	 	 	 	 	49	 	 	 	 	49	 	
Amounts reclassified from AOCI	 	 	—	 	 	 	 	219	 	(1)	 	 	961	 	(2)	 	 	1,180	 	
Tax effect	 	 	200	 	 	 	 	534	 	 	 	 	(220	)	 	 	 	514	 	
Other comprehensive income (loss), net of tax	 	 	(4,343	)	 	 	 	(1,811	)	 	 	 	790	 	 	 	 	(5,364	)	
Balance on September 30, 2019	 	$	(27,880	)	 	 	$	(12,561	)	 	 	$	(85,222	)	 	 	$	(125,663	)	
 
Nine months ended September 30, 2019 (dollars in thousands)	 	Foreign Currency Translation	 	 	 	Derivative Instruments	 	 	 	Pension and Other
Post-retirement Benefits	 	 	 	Accumulated Other
Comprehensive Loss	 	
Balance on December 31, 2018	 	$	(23,240	)	 	 	$	(2,866	)	 	 	$	(88,299	)	 	 	$	(114,405	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts recognized into AOCI	 	 	(4,832	)	 	 	 	(12,172	)	 	 	 	1,148	 	 	 	 	(15,856	)	
Currency impact	 	 	—	 	 	 	 	—	 	 	 	 	(1	)	 	 	 	(1	)	
Amounts reclassified from AOCI	 	 	—	 	 	 	 	(534	)	(1)	 	 	2,877	 	(2)	 	 	2,343	 	
Tax effect	 	 	192	 	 	 	 	3,011	 	 	 	 	(947	)	 	 	 	2,256	 	
Other comprehensive income (loss), net of tax	 	 	(4,640	)	 	 	 	(9,695	)	 	 	 	3,077	 	 	 	 	(11,258	)	
Balance on September 30, 2019	 	$	(27,880	)	 	 	$	(12,561	)	 	 	$	(85,222	)	 	 	$	(125,663	)	
 
Three months ended September 30, 2018 (dollars in thousands)	 	Foreign Currency Translation	 	 	 	Derivative Instruments	 	 	 	Pension and Other
Post-retirement Benefits	 	 	 	Accumulated Other
Comprehensive Loss	 	
Balance on June 30, 2018	 	$	(19,242	)	 	 	$	2,018	 	 	 	$	(85,706	)	 	 	$	(102,930	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Amounts recognized into AOCI	 	 	(2,707	)	 	 	 	(819	)	 	 	 	—	 	 	 	 	(3,526	)	
Currency impact	 	 	—	 	 	 	 	—	 	 	 	 	(356	)	 	 	 	(356	)	
Amounts reclassified from AOCI	 	 	—	 	 	 	 	(183	)	(1)	 	 	1,586	 	(2)	 	 	1,403	 	
Tax effect	 	 	—	 	 	 	 	268	 	 	 	 	(356	)	 	 	 	(88	)	
Other comprehensive income (loss), net of tax	 	 	(2,707	)	 	 	 	(734	)	 	 	 	874	 	 	 	 	(2,567	)	
Balance on September 30, 2018	 	$	(21,949	)	 	 	$	1,284	 	 	 	$	(84,832	)	 	 	$	(105,497	)	
 
Nine months ended September 30, 2018 (dollars in thousands)	 	Foreign Currency Translation	 	 	 	Derivative Instruments	 	 	 	Pension and Other
Post-retirement Benefits	 	 	 	Accumulated Other
Comprehensive Loss	 	
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	 	 	(5,766	)	 	 	 	1,248	 	 	 	 	1,527	 	 	 	 	(2,991	)	
Currency impact	 	 	—	 	 	 	 	—	 	 	 	 	(316	)	 	 	 	(316	)	
Amounts reclassified from AOCI	 	 	—	 	 	 	 	154	 	(1)	 	 	4,756	 	(2)	 	 	4,910	 	
Tax effect	 	 	—	 	 	 	 	(194	)	 	 	 	(1,459	)	 	 	 	(1,653	)	
Other comprehensive income (loss), net of tax	 	 	(5,766	)	 	 	 	1,208	 	 	 	 	4,508	 	 	 	 	(50	)	
Balance on September 30, 2018	 	$	(21,949	)	 	 	$	1,284	 	 	 	$	(84,832	)	 	 	$	(105,497	)	
_________________________
(1) 	We reclassified natural gas contracts through cost of sales and the interest rate swaps through interest expense on the Condensed Consolidated Statements of Operations. See note 8 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 Condensed Consolidated Statements of Operations. See note 6 for additional information.	
 
15

Table of Contents

10.    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. 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.
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Net Sales:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. & Canada	 	$	119,351	 	 	$	115,304	 	 	$	358,154	 	 	$	351,719	 	
Latin America	 	 	35,308	 	 	 	35,406	 	 	 	103,917	 	 	 	110,029	 	
EMEA	 	 	31,736	 	 	 	33,289	 	 	 	92,456	 	 	 	103,712	 	
Other	 	 	6,023	 	 	 	6,776	 	 	 	19,015	 	 	 	20,762	 	
Consolidated	 	$	192,418	 	 	$	190,775	 	 	$	573,542	 	 	$	586,222	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment EBIT:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. & Canada	 	$	9,038	 	 	$	7,538	 	 	$	36,102	 	 	$	25,620	 	
Latin America	 	 	4,363	 	 	 	1,727	 	 	 	8,199	 	 	 	11,310	 	
EMEA	 	 	931	 	 	 	1,358	 	 	 	3,644	 	 	 	4,984	 	
Other	 	 	(174	)	 	 	852	 	 	 	(2,495	)	 	 	383	 	
Total Segment EBIT	 	$	14,158	 	 	$	11,475	 	 	$	45,450	 	 	$	42,297	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reconciliation of Segment EBIT to Net Loss:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Segment EBIT	 	$	14,158	 	 	$	11,475	 	 	$	45,450	 	 	$	42,297	 	
Retained corporate costs	 	 	(7,391	)	 	 	(6,683	)	 	 	(23,597	)	 	 	(21,929	)	
Impairment of goodwill and other intangible assets (note 16)	 	 	—	 	 	 	—	 	 	 	(46,881	)	 	 	—	 	
Fees associated with strategic initiative	 	 	—	 	 	 	(2,341	)	 	 	—	 	 	 	(2,341	)	
Organizational realignment	 	 	(3,017	)	 	 	—	 	 	 	(3,017	)	 	 	—	 	
Interest expense	 	 	(5,699	)	 	 	(5,652	)	 	 	(17,210	)	 	 	(16,192	)	
Provision for income taxes	 	 	(1,508	)	 	 	(1,758	)	 	 	(6,511	)	 	 	(5,767	)	
Net loss	 	$	(3,457	)	 	$	(4,959	)	 	$	(51,766	)	 	$	(3,932	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation & Amortization:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. & Canada	 	$	2,928	 	 	$	3,850	 	 	$	9,275	 	 	$	10,289	 	
Latin America	 	 	3,719	 	 	 	4,208	 	 	 	11,336	 	 	 	13,412	 	
EMEA	 	 	1,781	 	 	 	1,835	 	 	 	5,186	 	 	 	5,784	 	
Other	 	 	747	 	 	 	992	 	 	 	2,522	 	 	 	3,615	 	
Corporate	 	 	368	 	 	 	385	 	 	 	1,146	 	 	 	1,289	 	
Consolidated	 	$	9,543	 	 	$	11,270	 	 	$	29,465	 	 	$	34,389	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital Expenditures:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
U.S. & Canada	 	$	1,380	 	 	$	6,101	 	 	$	7,304	 	 	$	18,830	 	
Latin America	 	 	6,130	 	 	 	3,718	 	 	 	13,852	 	 	 	8,885	 	
EMEA	 	 	511	 	 	 	1,619	 	 	 	4,249	 	 	 	4,362	 	
Other	 	 	67	 	 	 	129	 	 	 	367	 	 	 	391	 	
Corporate	 	 	515	 	 	 	2,207	 	 	 	1,131	 	 	 	2,655	 	
Consolidated	 	$	8,603	 	 	$	13,774	 	 	$	26,903	 	 	$	35,123	 	
 
16

Table of Contents

11.    Revenue
 
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. Adjustments related to revenue recognized in prior periods was not material for the three months and nine months ended September 30, 2019 and 2018. There were no material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018.
 
Disaggregation of Revenue:
 
The following table presents our net sales disaggregated by business channel:
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Foodservice	 	$	73,217	 	 	$	73,625	 	 	$	231,033	 	 	$	242,992	 	
Retail	 	 	64,713	 	 	 	63,325	 	 	 	180,508	 	 	 	180,756	 	
Business-to-business	 	 	54,488	 	 	 	53,825	 	 	 	162,001	 	 	 	162,474	 	
Consolidated	 	$	192,418	 	 	$	190,775	 	 	$	573,542	 	 	$	586,222	 	
 
Each operating segment has revenues across all our business channels. Each channel has a different marketing strategy, customer base and product composition. For all periods presented, 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 business-to-business and retail.

12.    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; 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)	 	September 30, 2019	 	December 31, 2018	
(dollars in thousands)	 	Level 1	 	Level 2	 	Level 3	 	Total	 	Level 1	 	Level 2	 	Level 3	 	Total	
Commodity futures natural gas contracts	 	$	—	 	 	$	(833	)	 	$	—	 	 	$	(833	)	 	$	—	 	 	$	265	 	 	$	—	 	 	$	265	 	
Interest rate swaps	 	 	—	 	 	 	(15,896	)	 	 	—	 	 	 	(15,896	)	 	 	—	 	 	 	(4,288	)	 	 	—	 	 	 	(4,288	)	
Net derivative asset (liability)	 	$	—	 	 	$	(16,729	)	 	$	—	 	 	$	(16,729	)	 	$	—	 	 	$	(4,023	)	 	$	—	 	 	$	(4,023	)	
 
The fair values of our commodity futures natural gas contracts are determined using observable market inputs. The fair value of our interest rate swaps 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 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 Condensed Consolidated Balance Sheets, as well as the related fair values, are as follows:
 
 	 	Fair Value	 	September 30, 2019	 	 	December 31, 2018	 	
(dollars in thousands)	 	Hierarchy Level	 	Carrying Amount	 	 	Fair Value	 	 	Carrying Amount	 	 	Fair Value	 	
Term Loan B	 	Level 2	 	$	376,900	 	 	$	280,791	 	 	$	380,200	 	 	$	362,141	 	
 
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 cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short-term nature.
 
17

Table of Contents

13.     Leases
 
Globally, we lease certain warehouses, office space, showrooms, manufacturing and office equipment, automobiles and outlet stores. Many of the real estate leases contain one or more options to renew, with renewal options that can extend the lease term from one to 20 years or more. The exercise of lease renewal options is at our discretion and is not reasonably certain at lease commencement. Most of our equipment leases have a lease term of two to eight years with limited renewal options. However, one class of equipment has a lease term of 15 years with annual renewal options thereafter. Generally, the longer term lease agreements contain escalating lease payments or are adjusted periodically for inflation.
 
At September 30, 2019, the weighted-average remaining lease term was 6.5 years, and the weighted-average discount rate was 4.06 percent. Upon adoption of the new lease standard, discount rates used for existing leases were established at January 1, 2019.
 
The following table presents the lease costs and supplemental cash flow information related to our operating leases:
 
(dollars in thousands)	 	Three months ended September 30, 2019	 	 	Nine months ended September 30, 2019	 	
Operating lease costs	 	$	3,900	 	 	$	11,833	 	
Short-term lease costs (1)	 	 	1,010	 	 	 	2,828	 	
Total lease costs	 	$	4,910	 	 	$	14,661	 	
(1)Includes variable lease costs which are immaterial.
 
Cash paid for operating leases included in the measurement of lease liabilities	 	$	11,718	 	
ROU assets obtained in exchange for lease liabilities	 	$	73,058	 	
 
The following table reconciles the undiscounted cash flows to the operating lease liabilities recorded on the balance sheet:
(dollars in thousands)	 	September 30, 2019	 	
2019 (remainder of year)	 	$	3,913	 	
2020	 	 	14,295	 	
2021	 	 	10,923	 	
2022	 	 	9,694	 	
2023	 	 	9,058	 	
2024 and thereafter	 	 	23,577	 	
Total minimum lease payments	 	 	71,460	 	
Less: interest	 	 	(8,670	)	
Present value of future minimum lease payments	 	 	62,790	 	
Less: lease liabilities (current portion)	 	 	(12,465	)	
Noncurrent lease liabilities	 	$	50,325	 	
 
As presented in our 2018 Form 10-K, the future minimum rental commitments under ASC 840 for non-cancelable operating leases as of December 31, 2018, was as follows (dollars in thousands):
 
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	2024 and	 	
2019	 	 	2020	 	 	2021	 	 	2022	 	 	2023	 	 	thereafter	 	
$15,407	 	 	$13,787	 	 	$10,339	 	 	$9,143	 	 	$8,551	 	 	$20,755	 	

18

Table of Contents

14.     Other Income (Expense)
 
Items included in other income (expense) in the Condensed Consolidated Statements of Operations are as follows:
 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Gain (loss) on currency transactions	 	$	810	 	 	$	(1,294	)	 	$	(539	)	 	$	(282	)	
Pension and non-pension benefits, excluding service cost	 	 	(375	)	 	 	(295	)	 	 	(1,146	)	 	 	(878	)	
Other non-operating income (expense)	 	 	(89	)	 	 	136	 	 	 	(173	)	 	 	180	 	
Other income (expense)	 	$	346	 	 	$	(1,453	)	 	$	(1,858	)	 	$	(980	)	

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 cleanup 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.
 
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. There were no significant changes to our environmental legal proceedings since December 31, 2018. Please refer to Part II, Item 8. "Financial Statements and Supplementary Data," note 17, Contingencies, included in our 2018 Annual Report on Form 10-K for a more complete discussion.
 
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.

16.     Purchased Intangible Assets and Goodwill
            
Purchased Intangibles
 
Changes in purchased intangibles balances are as follows:
(dollars in thousands)	 	Nine months ended September 30, 2019	 	
Beginning balance December 31, 2018	 	$	13,385	 	
Amortization	 	 	(522	)	
Impairment (see below)	 	 	(900	)	
Foreign currency impact	 	 	(95	)	
Ending balance September 30, 2019	 	$	11,868	 	
 
Purchased intangible assets are composed of the following:
(dollars in thousands)	 	September 30, 2019	 	 	December 31, 2018	 	
Indefinite life intangible assets	 	$	11,080	 	 	$	12,035	 	
Definite life intangible assets, net of accumulated amortization of $20,388 and $20,006	 	 	788	 	 	 	1,350	 	
Total	 	$	11,868	 	 	$	13,385	 	
 
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 on-going assessment of goodwill as of June 30, 2019 resulted in the need to test Libbey Holland's indefinite life intangible asset (Royal Leerdam® trade name) for impairment. We used a relief from royalty method to determine the fair market value that was compared to the carrying value of the indefinite life intangible asset. The sales forecast for Royal Leerdam® branded product was lowered due to declining performance of mid-tier retailers as consumers in EMEA move to discount and on-line retailers. As a result, the estimated fair value was determined to be lower than the carrying value, and we recorded a non-cash impairment charge of $0.9 million during the second quarter of 2019 in our EMEA reporting segment. The inputs used for this analysis are considered Level 3 inputs in the fair value hierarchy (see note 12).
 
The remaining definite life intangible assets at September 30, 2019 consist of customer relationships that are amortized over a period of 20 years and have a weighted average remaining life of 5.3 years. Amortization expense for definite life intangible assets was $0.5 million for the nine months ended September 30, 2019. The future annual amortization expense remains unchanged from the Form 10-K for the year ended December 31, 2018.
 
19

Table of Contents
 
Goodwill
 
Changes in goodwill balances are as follows:
(dollars in thousands)	 	U.S. & Canada	 	 	Latin America	 	 	Total	 	
Beginning balance December 31, 2018:	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill	 	$	43,872	 	 	$	125,681	 	 	$	169,553	 	
Accumulated impairment losses	 	 	(5,441	)	 	 	(79,700	)	 	 	(85,141	)	
Net beginning balance	 	 	38,431	 	 	 	45,981	 	 	 	84,412	 	
Impairment (see below)	 	 	—	 	 	 	(45,981	)	 	 	(45,981	)	
Ending balance September 30, 2019:	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill	 	 	43,872	 	 	 	125,681	 	 	 	169,553	 	
Accumulated impairment losses	 	 	(5,441	)	 	 	(125,681	)	 	 	(131,122	)	
Net ending balance	 	$	38,431	 	 	$	—	 	 	$	38,431	 	
 
As part of our on-going assessment of goodwill at June 30, 2019, we determined that a triggering event occurred due to the Company's market capitalization being less than the carrying value, resulting from the significant decline in the Company's share price during the quarter. Thus, an interim impairment test was performed as of June 30, 2019. Additionally, during the second quarter, management updated its long-range plan; the updated plan contemplates lower sales and profitability within the Mexico reporting unit (within the Latin America reporting segment) as compared to the projections used in the most recent goodwill impairment testing performed as of October 1, 2018. As the impairment testing indicated that the carrying value of the Mexico reporting unit exceeded its fair value, we recorded a non-cash impairment charge of $46.0 million during the second quarter of 2019. After recording the impairment charge, there is no longer any goodwill on the balance sheet related to the Mexico acquisition.
 
When performing our test for impairment, we measured 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 (all Level 3 inputs in the fair value hierarchy). 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.
 
As of the June 30, 2019 testing date, the estimated fair value of our other reporting unit that has goodwill exceeded its carrying value, by approximately 40 percent, and is in the U.S. and Canada reporting segment.
 
20

Table of Contents

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	
 
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Condensed Consolidated Financial Statements and the related notes thereto appearing elsewhere in this report and in our Annual Report filed with the Securities and Exchange Commission. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ from those anticipated in these forward-looking statements as a result of many factors. Our risk factors are set forth in Part I, Item 1A. “Risk Factors” in our 2018 Annual Report on Form 10-K for the year ended December 31, 2018.
 
Overview
 
Our business continued to be impacted during the third quarter of 2019, by global competition in all of our distribution channels; reduced business and consumer confidence in the U.S. and Europe resulting from economic and political uncertainty that in turn stemmed from factors including ongoing trade tension between the U.S. and China and the potential for a no-deal Brexit in Europe; and slowing economies in Europe, China and parts of Latin America. Other factors impacting our business during the third quarter of 2019 were continued declines in U.S. & Canada foodservice traffic, as reported by third-party research firms Knapp-Track and Blackbox; continued migration of consumer purchasing from brick-and-mortar stores to online commerce, particularly in the U.S. and Canada and Europe; shifting consumer preferences in Europe from mid-tier retailers (where sales of Royal Leerdam® products have been concentrated) to discounters; and increased competitive pressures in Latin America, as Chinese manufacturers divert sales of their products from the U.S. market to Latin America in order to avoid the increased tariffs imposed by the U.S. on Chinese imports into the U.S.  Management expects these trends, and the challenging environment experienced during 2018 and the first nine months of 2019, to continue for the remainder of the year, including in the business-to-business channel, which is dependent on customer demands.
 
Despite these headwinds, our net sales for the third quarter of 2019, were $192.4 million, 0.9 percent higher than the prior-year quarter, or 2.0 percent higher on a constant currency basis. The increase in net sales was driven by favorable price and mix of product sold, primarily in the U.S. and Canada segment, partially offset by unfavorable impacts from currency, channel mix and volume. We recorded a net loss of $3.5 million for the three months ended September 30, 2019, compared to a net loss of $5.0 million in the year-ago quarter. The $1.5 million improvement in net loss for the current quarter was driven by improved profitability in the U.S. and Canada and Latin America segments, as well as the result of disciplined spending throughout the company. In addition, we continue to make progress on expanding our e-commerce platform and with our business transformation initiative, which includes implementation of our new ERP system. We also are responding to challenges in the U.S. & Canada foodservice channel of distribution by targeting the growing healthcare and hospitality segments and by leveraging our digital and e-commerce capabilities to reach and influence end users to pull our products through our distribution partners in the foodservice channel.
 
We intend to use our cash flow from operations to reduce our debt obligations and continue investing in strategic initiatives that are expected to increase long-term shareholder returns.
 
On August 26, 2019, we committed to an organizational realignment plan focusing on transformational actions and structural changes to lower our cost base, improve our financial performance and cash flow generation, and create a simplified organization best positioned to deliver against our key financial and operational priorities. The plan includes the following actions, which we expect to substantially complete by the end of the second quarter of 2020:
 
 	•	Transitioning to a global, functionally aligned organization to better leverage expertise and scale;	
 	•	Centralizing manufacturing operations and supply chain management to optimize and leverage capabilities and capacity across the global network;	
 	•	Integrating e-commerce functions into the core business, resulting in a more efficient omni-channel commercial operating structure as well as the creation of a new global marketing organization to drive efficiencies;	
 	•	Decreasing the number of organizational layers and broadening managers' spans of control to simplify decision making and improve agility and responsiveness; and	
 	•	Leveraging our extensive sales and channel expertise to drive synergies and growth across Libbey's United States & Canada and Latin America regions.	
 
As a result of the plan, we expect to incur pre-tax charges in the range of approximately $5.0 million to $5.5 million, which is expected to primarily impact both the third and fourth quarters of 2019 and reduce annual pre-tax run-rate costs by approximately $9 million to $11 million beginning in 2020. During the third quarter of 2019, we recorded organizational realignment charges of $3.0 million, primarily consisting of cash severance and other employee related costs. Potential charges in the fourth quarter of 2019 consist of non-cash pension settlement charges of $2.0 million to $2.5 million. 
 
Outlook for 2019: 
 
Performance in our core U.S. and Canada market remains solid, but in light of headwinds in our European and Latin American markets, in addition to unfavorable currency impacts, we now expect full-year 2019 net sales to be flat to slightly down compared to 2018 net sales.  We are continuing to focus on cash generation, including by managing inventories down compared to the prior year by approximately $10.0 million.  These efforts, which include taking discretionary downtime, are expected to result in Adjusted EBITDA margins in the range of 8.5 percent to 9.0 percent (see reconciliation of this non-GAAP measure below in the "Discussion of Third Quarter 2019 Compared to Third Quarter 2018"). We expect capital expenditures and ERP capital for 2019 to be near $35.0 million, at the low end of the previously-guided range. Finally, we expect further spending discipline in selling, general and administrative expense.
 
See note 10, Segments, for details on how we report and define our segments. 
 
21

Table of Contents
 
Results of Operations
 
The following table presents key results of our operations for the three months and nine months ended September 30, 2019 and 2018:
    
 	 	Three months ended September 30,	 	Nine months ended September 30,	
(dollars in thousands, except percentages and per-share amounts)	 	2019	 	2018	 	2019	 	2018	
Net sales	 	$	192,418	 	 	$	190,775	 	 	$	573,542	 	 	$	586,222	 	
Gross profit	 	$	34,386	 	 	$	37,240	 	 	$	115,069	 	 	$	117,403	 	
Gross profit margin	 	 	17.9	%	 	 	19.5	%	 	 	20.1	%	 	 	20.0	%	
Income (loss) from operations (IFO)	 	$	3,404	 	 	$	3,904	 	 	$	(26,187	)	 	$	19,007	 	
IFO margin	 	 	1.8	%	 	 	2.0	%	 	 	(4.6	)%	 	 	3.2	%	
Net loss	 	$	(3,457	)	 	$	(4,959	)	 	$	(51,766	)	 	$	(3,932	)	
Net loss margin	 	 	(1.8	)%	 	 	(2.6	)%	 	 	(9.0	)%	 	 	(0.7	)%	
Diluted net loss per share	 	$	(0.15	)	 	$	(0.22	)	 	$	(2.31	)	 	$	(0.18	)	
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (1) (non-GAAP)	 	$	16,310	 	 	$	16,062	 	 	$	51,318	 	 	$	54,757	 	
Adjusted EBITDA margin (1) (non-GAAP)	 	 	8.5	%	 	 	8.4	%	 	 	8.9	%	 	 	9.3	%	
_________________________
(1) 	We believe that Adjusted EBITDA and the associated margin, non-GAAP financial measures, are useful metrics for evaluating our financial performance, as they are measures that we use internally to assess our performance. For a reconciliation from net loss to Adjusted EBITDA, certain limitations and reasons we believe these non-GAAP measures are useful, see the "Reconciliation of Net Loss to Adjusted EBITDA" and "Non-GAAP Measures" sections below in the Discussion of  Third Quarter 2019 Compared to Third Quarter 2018.	
 
Discussion of Third Quarter 2019 Compared to Third Quarter 2018
 
Net Sales
 
The following table summarizes net sales by operating segment:
 
Three months ended September 30,	 	 	 	 	 	 	 	 	 	Increase/(Decrease)	 	 	 	 	 	Constant Currency Sales	
(dollars in thousands)	 	2019	 	 	2018	 	 	$ Change	 	 	% Change	 	Currency Effects	 	 	Growth (Decline) (1) 	
U.S. & Canada	 	$	119,351	 	 	$	115,304	 	 	$	4,047	 	 	 	3.5	%	 	$	(14	)	 	 	3.5	%	
Latin America	 	 	35,308	 	 	 	35,406	 	 	 	(98	)	 	 	(0.3	)%	 	 	(540	)	 	 	1.2	%	
EMEA	 	 	31,736	 	 	 	33,289	 	 	 	(1,553	)	 	 	(4.7	)%	 	 	(1,408	)	 	 	(0.4	)%	
Other	 	 	6,023	 	 	 	6,776	 	 	 	(753	)	 	 	(11.1	)%	 	 	(179	)	 	 	(8.5	)%	
Consolidated	 	$	192,418	 	 	$	190,775	 	 	$	1,643	 	 	 	0.9	%	 	$	(2,141	)	 	 	2.0	%	
_________________________
(1) 	We believe constant currency sales growth (decline), a non-GAAP measure, is a useful metric for evaluating our financial performance. See the "Non-GAAP Measures" section below for the reasons we believe this non-GAAP metric is useful and how it is derived.	
 
22

Table of Contents
 
Net Sales — U.S. & Canada
 
Net sales in U.S. & Canada in the third quarter of 2019 were $119.4 million, compared to $115.3 million in the third quarter of 2018, an increase of 3.5 percent, driven by favorable price and mix of product sold and partially offset by lower volume and unfavorable channel mix versus the prior-year period. Net sales in both our business-to-business and retail channels increased $1.6 million in the third quarter of 2019  compared to prior year, primarily due to favorable price and mix of product sold in both channels as well as higher volume in the business-to-business channel. In spite of continued declines in foodservice traffic, as reported by third-party research firms Knapp-Track and Blackbox, net sales in our foodservice channel increased $0.8 million during the quarter primarily due to favorable price and mix of product sold, partially offset by lower volume compared to the prior year.
 
Net Sales — Latin America
 
Net sales in Latin America in the third quarter of 2019 were $35.3 million, compared to $35.4 million in the third quarter of 2018, a decrease of 0.3 percent (an increase of 1.2 percent excluding currency fluctuation). The decrease in net sales is primarily attributable to unfavorable product mix sold, an unfavorable currency impact of $0.5 million and unfavorable channel mix, mostly offset by higher volumes. Net sales in the foodservice channel decreased $0.3 million in comparison to the prior-year period, and net sales in the retail channel increased $0.2 million in comparison to the prior-year period. In the business-to-business channel net sales were flat in the third quarter of 2019 compared to the prior-year period.
 
Net Sales — EMEA
 
Net sales in EMEA in the third quarter of 2019 were $31.7 million, compared to $33.3 million in the third quarter of 2018, a decrease of 4.7 percent (a decrease of 0.4 percent excluding currency fluctuation). The net sales decrease is primarily attributable to lower volume in the business-to-business channel, as well as an unfavorable currency impact of $1.4 million. The unfavorable items were partially offset by favorable price and mix of product sold in all three channels.
 
Gross Profit
 
Gross profit decreased to $34.4 million in the third quarter of 2019, compared to $37.2 million in the prior-year quarter. Gross profit as a percentage of net sales decreased to 17.9 percent in the third quarter of 2019, compared to 19.5 percent in the prior-year quarter. The primary drivers of the $2.9 million reduction in gross profit were unfavorable manufacturing activity of $6.0 million (primarily related to discretionary downtime taken to control inventories) and a $1.2 million organizational realignment charge. These unfavorable impacts were partially offset by a favorable net sales impact of $4.9 million. Manufacturing activity includes the impact of fluctuating production activities from all facilities globally (including downtime, efficiency and utilization) and repairs and maintenance. The net sales impact equals net sales less the associated inventory at standard cost rates.
 
Income From Operations
 
Income from operations for the quarter ended September 30, 2019, decreased $0.5 million to $3.4 million, compared to $3.9 million in the prior-year quarter. Income from operations as a percentage of net sales was 1.8 percent for the quarter ended September 30, 2019, compared to 2.0 percent in the prior-year quarter. The unfavorable change in income from operations was driven by the $2.9 million reduction in gross profit (discussed above), partially offset by reduced selling, general and administrative expenses of $2.4 million. The favorable change in selling, general and administrative expenses was driven by reduced spend in the following areas: e-commerce initiative of $1.1 million, discretionary expenses of $0.9 million, and $2.3 million of non-repeating fees associated with a strategic initiative that was terminated in the prior-year period. Partially offsetting these favorable factors were $1.8 million in organizational realignment charges, primarily consisting of cash severance and other employee related costs.
 
Net Loss and Diluted Net Loss Per Share
 
We recorded a net loss of ($3.5) million, or ($0.15) per diluted share, in the third quarter of 2019, compared to a net loss of ($5.0) million, or ($0.22) per diluted share, in the prior-year quarter. Net loss as a percentage of net sales was (1.8) percent in the third quarter of 2019, compared to (2.6) percent in the prior-year quarter. The favorable change in net loss and diluted net loss per share is due to the factors discussed in Income From Operations above, a favorable change of $1.8 million in other income (expense) driven by foreign currency impacts, and less income tax expense of $0.2 million. The Company's effective tax rate was (77.4) percent for the third quarter of 2019, compared to (54.9) percent in the prior-year quarter. The change in the effective tax rate was driven by several items, including differing levels of pretax income, nondeductible interest expense and the timing and mix of pretax income earned in tax jurisdictions with varying tax rates differing from that forecasted for the full year.
 
23

Table of Contents
 
Segment Earnings Before Interest and Income Taxes (Segment EBIT)
 
The following table summarizes Segment EBIT(1) by operating segments:
 
Three months ended September 30,	 	 	 	 	 	 	 	 	 	 	 	 	 	Segment EBIT Margin	
(dollars in thousands)	 	2019	 	 	2018	 	 	$ Change	 	 	2019	 	2018	
U.S. & Canada	 	$	9,038	 	 	$	7,538	 	 	$	1,500	 	 	 	7.6	%	 	 	6.5	%	
Latin America	 	$	4,363	 	 	$	1,727	 	 	$	2,636	 	 	 	12.4	%	 	 	4.9	%	
EMEA	 	$	931	 	 	$	1,358	 	 	$	(427	)	 	 	2.9	%	 	 	4.1	%	
_________________________
(1) 	Segment EBIT represents earnings before interest and taxes 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. See note 10 to the Condensed Consolidated Financial Statements for a reconciliation of Segment EBIT to net loss.	
 
 	For the three months ended September 30, 2019, Segment EBIT excludes organizational realignment charges of $1.6 million in U.S. and Canada and $0.8 million in EMEA.	
 
Segment EBIT — U.S. & Canada
 
Segment EBIT was $9.0 million in the third quarter of 2019, compared to $7.5 million in the third quarter of 2018. Segment EBIT as a percentage of net sales increased to 7.6 percent for 2019, compared to 6.5 percent in 2018. The $1.5 million increase in Segment EBIT was driven by a favorable sales impact of $4.4 million, a $1.5 million reduction in e-commerce spend and a $1.2 million reduction in shipping and storage costs. Partially offsetting the favorable items were unfavorable manufacturing activity of $4.8 million (including additional downtime of $3.3 million in the current year to control inventory), and the net impact of inventory reserve adjustments of $0.9 million. Shipping and storage costs include freight, warehousing expenses and associated labor.
 
Segment EBIT — Latin America
 
Segment EBIT increased to $4.4 million in the third quarter of 2019, from $1.7 million in the third quarter of 2018. Segment EBIT as a percentage of net sales increased to 12.4 percent for 2019, compared to 4.9 percent in 2018. The primary driver of the $2.6 million increase was a favorable currency impact of $2.7 million. Favorable production efficiencies experienced in the current quarter versus the prior-year quarter were offset by additional downtime taken to control inventory.
 
Segment EBIT — EMEA
 
Segment EBIT decreased to $0.9 million in the third quarter of 2019, compared to $1.4 million in the third quarter of 2018. Segment EBIT as a percentage of net sales decreased to 2.9 percent for 2019, from 4.1 percent in 2018. The majority of the $0.4 million decrease in Segment EBIT was driven by unfavorable manufacturing activity of $1.0 million (due to discretionary downtime), partially offset by a favorable sales impact of $0.6 million.
 
Adjusted EBITDA (non-GAAP)
 
Adjusted EBITDA increased by $0.2 million to $16.3 million in the third quarter of 2019, compared to $16.1 million in the third quarter of 2018. As a percentage of net sales, our Adjusted EBITDA margin was 8.5 percent for the third quarter of 2019, compared to 8.4 percent in the year-ago quarter. The key contributors to the increase in Adjusted EBITDA were a favorable sales impact of $4.9 million and a favorable currency impact of $2.0 million. These favorable items were partially offset by $6.0 million of unfavorable manufacturing activity (primarily related to discretionary downtime to control inventory) and increased spend of $0.7 million on our ERP implementation. Adjusted EBITDA excludes special items that Libbey believes are not reflective of our core operating performance as noted below in the "Reconciliation of Net Loss to Adjusted EBITDA."
 
24

Table of Contents
 
Reconciliation of Net Loss to Adjusted EBITDA 
 	 	Three months ended September 30,	 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	 	2019	 	 	2018	 	
Net loss (U.S. GAAP)	 	$	(3,457	)	 	$	(4,959	)	 	$	(51,766	)	 	$	(3,932	)	
Add:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	5,699	 	 	 	5,652	 	 	 	17,210	 	 	 	16,192	 	
Provision for income taxes	 	 	1,508	 	 	 	1,758	 	 	 	6,511	 	 	 	5,767	 	
Depreciation and amortization	 	 	9,543	 	 	 	11,270	 	 	 	29,465	 	 	 	34,389	 	
Add: Special items before interest and taxes:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Fees associated with strategic initiative	 	 	—	 	 	 	2,341	 	 	 	—	 	 	 	2,341	 	
Impairment of goodwill and other intangible assets (see note 16)	 	 	—	 	 	 	—	 	 	 	46,881	 	 	 	—	 	
Organizational realignment	 	 	3,017	 	 	 	—	 	 	 	3,017	 	 	 	—	 	
Adjusted EBITDA (non-GAAP)	 	$	16,310	 	 	$	16,062	 	 	$	51,318	 	 	$	54,757	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	$	192,418	 	 	$	190,775	 	 	$	573,542	 	 	$	586,222	 	
Net loss margin (U.S. GAAP)	 	 	(1.8	)%	 	 	(2.6	)%	 	 	(9.0	)%	 	 	(0.7	)%	
Adjusted EBITDA margin (non-GAAP)	 	 	8.5	%	 	 	8.4	%	 	 	8.9	%	 	 	9.3	%	
 
Reconciliation of Net Income (Loss) margin to Adjusted EBITDA Margin - Outlook for Year 2019
(percent of estimated 2019 net sales)	 	Outlook for the year ended December 31, 2019	
Net income (loss) margin (U.S. GAAP)(1)	 	 	(7.0%)-(6.5	%)	
Add:	 	 	 	 	
Interest expense	 	 	2.9	%	
Provision for income taxes	 	 	1.3	%	
Depreciation and amortization	 	 	5	%	
Special items through September 30, 2019 before interest and taxes (1)	 	 	6.3	%	
Adjusted EBITDA Margin (non-GAAP)	 	 	8.5% - 9.0	%	
_____________________
(1) Potential special charges related to the strategic review of our business in China are not reflected in the reconciliation.
 
Non-GAAP Measures
 
We sometimes refer to amounts, associated margins and other data derived from condensed consolidated financial information but not required by GAAP to be presented in financial statements. Certain of these data are considered “non-GAAP financial measures” under Securities and Exchange Commission (SEC) Regulation G. Our non-GAAP measures are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. Libbey believes these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for greater transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management's internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool.
 
We define Adjusted EBITDA as net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and special items that Libbey believes are not reflective of our core operating performance. The most directly comparable U.S. GAAP financial measure is net income (loss).
 
We present Adjusted EBITDA because we believe it is used by analysts, investors and other interested parties in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core business operating results. Adjusted EBITDA also allows for a measure of comparability to other companies with different capital and legal structures, which accordingly may be subject to different interest rates and effective tax rates, and to companies that may incur different depreciation and amortization expenses or impairment charges. In addition, we use Adjusted EBITDA internally to measure profitability.
 
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
 	•	Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;	
 	•	Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts;	
 	•	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements of capital expenditures or contractual commitments;	
 	•	Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and	
 	•	Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure.	
 
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP.
 
25

Table of Contents
 
Constant Currency
 
We translate revenue and expense accounts in our non-U.S. operations at current average exchange rates during the year. References to "constant currency," "excluding currency impact" and "adjusted for currency" are considered non-GAAP measures. Constant currency references regarding net sales reflect a simple mathematical translation of local currency results using the comparable prior period’s currency conversion rate. Constant currency references regarding Segment EBIT and Adjusted EBITDA comprise a simple mathematical translation of local currency results using the comparable prior period's currency conversion rate plus the transactional impact of changes in exchange rates from revenues, expenses and assets and liabilities that are denominated in a currency other than the functional currency. We believe this non-GAAP constant currency information provides valuable supplemental information regarding our core operating results, better identifies operating trends that may otherwise be masked or distorted by exchange rate changes and provides a higher degree of transparency of information used by management in its evaluation of our ongoing operations. These non-GAAP measures should be viewed in addition to, and not as an alternative to, the reported results prepared in accordance with GAAP. Our currency market risks include currency fluctuations relative to the U.S. dollar, Canadian dollar, Mexican peso, euro and RMB.
 
Discussion of First Nine Months 2019 Compared to First Nine Months 2018
 
Net Sales
 
The following table summarizes net sales by operating segment:
 
Nine months ended September 30,	 	 	 	 	 	 	 	 	 	Increase/(Decrease)	 	 	 	 	 	Constant Currency Sales	
(dollars in thousands)	 	2019	 	 	2018	 	 	$ Change	 	 	% Change	 	Currency Effects	 	 	Growth (Decline) (1)	
U.S. & Canada	 	$	358,154	 	 	$	351,719	 	 	$	6,435	 	 	 	1.8	%	 	$	(59	)	 	 	1.8	%	
Latin America	 	 	103,917	 	 	 	110,029	 	 	 	(6,112	)	 	 	(5.6	)%	 	 	(831	)	 	 	(4.8	)%	
EMEA	 	 	92,456	 	 	 	103,712	 	 	 	(11,256	)	 	 	(10.9	)%	 	 	(5,620	)	 	 	(5.4	)%	
Other	 	 	19,015	 	 	 	20,762	 	 	 	(1,747	)	 	 	(8.4	)%	 	 	(941	)	 	 	(3.9	)%	
Consolidated	 	$	573,542	 	 	$	586,222	 	 	$	(12,680	)	 	 	(2.2	)%	 	$	(7,451	)	 	 	(0.9	)%	
_________________________
(1) 	We believe constant currency sales growth (decline), a non-GAAP measure, is a useful metric for evaluating our financial performance. See the "Non-GAAP Measures" section above for the reasons we believe this non-GAAP metric is useful and how it is derived.	
 
Net Sales — U.S. & Canada
 
Net sales in the U.S. & Canada were $358.2 million in the first nine months of 2019, compared to $351.7 million in the first nine months of 2018, an increase of 1.8 percent, driven by favorable price and mix of product sold and higher volumes, partially offset by unfavorable channel mix. Net sales in our business-to-business and retail channels increased $7.2 million and $5.7 million, respectively, in the current-year period primarily due to increased volume. Net sales in our foodservice channel decreased $6.4 million primarily due to lower volume, partially offset by favorable price and mix of product sold compared to the prior year. Part of the decline in foodservice volume was caused by first-quarter 2019 events relating to the U.S. government shutdown and unusually severe weather across much of the U.S.
 
Net Sales — Latin America
 
Net sales in Latin America were $103.9 million in the first nine months of 2019, compared to $110.0 million in the first nine months of 2018, a decrease of 5.6 percent (a decrease of 4.8 percent excluding the impact of currency). The decrease in net sales is primarily attributable to unfavorable product mix in the business-to-business and retail channels, as well as lower volume across all three channels and unfavorable currency of $0.8 million. The unfavorable items were partially offset by favorable pricing. In comparison to the prior year period, net sales in the business-to-business channel decreased $2.6 million, and net sales in the retail channel decreased $2.0 million. In addition, net sales in the foodservice channel decreased $1.5 million year over year.
 
26

Table of Contents
 
Net Sales — EMEA
 
Net sales in EMEA were $92.5 million in the first nine months of 2019, compared to $103.7 million in the first nine months of 2018, a decrease of 10.9 percent (a decrease of 5.4 percent excluding currency fluctuation). Lower volumes across all three channels and an unfavorable currency impact of $5.6 million led to the decrease in net sales, compared to the prior-year period. Partially offsetting the reductions were favorable price and mix of product sold.
 
Gross Profit
 
Gross profit decreased to $115.1 million in the first nine months of 2019, compared to $117.4 million in the prior-year period. Gross profit as a percentage of net sales increased slightly to 20.1 percent in the nine months ended September 30, 2019, compared to 20.0 percent in the prior-year period. Factors contributing to the $2.3 million decrease in gross profit were unfavorable manufacturing activity of $2.8 million, unfavorable shipping and storage expense of $1.5 million [primarily related to third-party logistics (3PL) service costs and additional freight expense], a $1.2 million organizational realignment charge and an unfavorable currency impact of $0.6 million. Partially offsetting these unfavorable items were lower depreciation and amortization expense of $2.7 million and a favorable sales impact of $1.1 million. 
 
Income (Loss) From Operations
 
We recorded a loss from operations for the nine months ended September 30, 2019, of ($26.2) million, a $45.2 million decrease compared to income from operations of $19.0 million in the prior-year period. Loss from operations as a percentage of net sales was (4.6) percent for the nine months ended September 30, 2019, compared to income from operations as a percentage of net sales of 3.2 percent in the prior-year period. The unfavorable change in income (loss) from operations was driven by $46.9 million of non-cash impairment charges ($46.0 million for goodwill in our Latin America segment and $0.9 million for a trade name in our EMEA segment), partially offset by reduced selling, general and administrative expenses of $4.0 million, as well as the $2.3 million decrease in gross profit discussed above. The favorable change in selling, general and administrative expenses was driven by $2.3 million of  non-repeating fees associated with a strategic initiative that was terminated in the third quarter of 2018, $2.1 million reduction in spend on discretionary expenses and a favorable currency impact of $0.9 million. Partially offsetting the favorable items were $1.8 million of organizational realignment charges, primarily consisting of cash severance and other employee related costs. In addition, reduced spend relating to our e-commerce initiative of $1.9 million was primarily offset by increased spend of $1.6 million on our ERP implementation in the current year.
 
Net Loss and Diluted Net Loss Per Share
 
We recorded a net loss of ($51.8) million, or ($2.31) per diluted share, in the first nine months of 2019, compared to net loss of ($3.9) million, or ($0.18) per diluted share, in the year-ago period. Net loss as a percentage of net sales was (9.0) percent in the first nine months of 2019, compared to (0.7) percent in the first nine months of 2018. The unfavorable change in net loss and diluted net loss per share is due to the factors discussed in Income (Loss) From Operations above, as well as higher interest expense of $1.0 million, an unfavorable change of $0.9 million in other income (expense) driven by foreign currency impacts and additional income tax expense of $0.7 million. The Company's effective tax rate was (14.4) percent for the first nine months of 2019, compared to 314.3 percent in the year-ago period. The change in the effective tax rate was driven by several items, including differing levels of pretax income, the nondeductible goodwill impairment, nondeductible interest expense and the timing and mix of pretax income earned in tax jurisdictions with varying tax rates differing from that forecasted for the full year.
 
Segment Earnings Before Interest and Income Taxes (Segment EBIT)
 
The following table summarizes Segment EBIT(1) by operating segments:
 
Nine months ended September 30, 2019	 	 	 	 	 	 	 	 	 	 	 	 	 	Segment EBIT Margin	
(dollars in thousands)	 	2019	 	 	2018	 	 	$ Change	 	 	2019	 	2018	
U.S. & Canada	 	$	36,102	 	 	$	25,620	 	 	$	10,482	 	 	 	10.1	%	 	 	7.3	%	
Latin America	 	$	8,199	 	 	$	11,310	 	 	$	(3,111	)	 	 	7.9	%	 	 	10.3	%	
EMEA	 	$	3,644	 	 	$	4,984	 	 	$	(1,340	)	 	 	3.9	%	 	 	4.8	%	
_________________________
(1)	Segment EBIT represents earnings before interest and taxes 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. See note 10 to the Condensed Consolidated Financial Statements for a reconciliation of Segment EBIT to net loss.	
 
 	For the nine month period ended September 30, 2019, Segment EBIT excludes $46.9 million of non-cash impairment charges ($46.0 million for goodwill in our Latin America segment and $0.9 million for a trade name in our EMEA segment), as well as organizational realignment charges of $1.6 in the U.S. and Canada and $0.8 million in EMEA.	
 
27

Table of Contents
 
Segment EBIT — U.S. & Canada
 
Segment EBIT increased to $36.1 million in the first nine months of 2019, compared to $25.6 million in the first nine months of 2018. Segment EBIT as a percentage of net sales increased to 10.1 percent for the nine months ended September 30, 2019, compared to 7.3 percent in the prior-year period. The $10.5 million increase in Segment EBIT was driven by a favorable sales impact of $3.4 million, a $2.1 million decrease in selling, general and administrative spend (including a $0.7 million decrease in e-commerce spend and a $0.9 million decrease in marketing spend), favorable manufacturing activity of $1.9 million (including a $1.4 million decrease in the impact of downtime compared to the prior year, when we experienced a larger than normal number of furnace rebuilds), a $1.0 million decrease in utility spend, a $1.0 million decrease in depreciation and amortization expense, and lower shipping and storage expense of $0.9 million.
 
Segment EBIT — Latin America
 
Segment EBIT decreased to $8.2 million in the first nine months of 2019, compared to $11.3 million in the prior-year period. Segment EBIT as a percentage of net sales decreased to 7.9 percent for the nine months ended September 30, 2019, compared to 10.3 percent in the prior-year period. The primary driver of the $3.1 million decrease was the $3.3 million impact of discretionary downtime to control inventories.
 
Segment EBIT — EMEA
 
Segment EBIT decreased to $3.6 million for the first nine months of 2019, compared to $5.0 million in the prior-year period. Segment EBIT as a percentage of net sales decreased to 3.9 percent for the first nine months of 2019, compared to 4.8 percent in the prior-year period. The majority of the $1.3 million decrease in Segment EBIT was driven by an unfavorable sales impact of $1.0 million.
 
Adjusted EBITDA (non-GAAP)
 
Adjusted EBITDA decreased by $3.4 million in the first nine months of 2019 to $51.3 million, compared to $54.8 million in the first nine months of 2018. As a percentage of net sales, Adjusted EBITDA was 8.9 percent for the first nine months of 2019, compared to 9.3 percent in the year-ago period. The key contributors to the decrease in Adjusted EBITDA were a $2.9 million unfavorable impact of manufacturing activity, a $1.5 million increase in shipping and storage expense, a $1.3 million increase in benefit-related expenses, and an unfavorable currency impact of $0.6 million, all of which were partially offset by reduced legal and professional spend of $1.7 million and a favorable sales impact of $1.1 million. Adjusted EBITDA excludes special items that Libbey believes are not reflective of our core operating performance, as noted above in the "Reconciliation of Net Loss to Adjusted EBITDA" included in the "Discussion of Third Quarter 2019 Compared to Third Quarter 2018" section of this quarterly report, which is incorporated herein by reference.

Capital Resources and Liquidity
 
Historically, cash flows generated from operations, cash on hand and our borrowing capacity under our ABL Facility have enabled us to meet our cash requirements, including capital expenditures and working capital requirements. Under the ABL Facility at September 30, 2019, we had $41.0 million of outstanding borrowings and $9.6 million outstanding in letters of credit and other reserves, resulting in $49.4 million of unused availability. On June 17, 2019, Libbey Mexico entered into a $3.0 million working capital line of credit to cover working capital needs; there were no borrowings under this line of credit at September 30, 2019. In addition, we had $27.7 million of cash on hand at September 30, 2019, compared to $25.1 million of cash on hand at December 31, 2018. Of our total cash on hand at September 30, 2019, and December 31, 2018, $27.1 million and $21.7 million, respectively, were held in foreign subsidiaries. We plan to indefinitely reinvest the excess of the amount for financial reporting over the tax basis of investments in our European and Mexican operations to support ongoing operations, capital expenditures and debt service. All other earnings may be distributed to the extent allowable under local laws. Our Chinese subsidiaries' cash and cash equivalents balance was $18.7 million as of September 30, 2019. Local PRC law currently limits distribution of this cash as a dividend; however, additional amounts may become distributable based on future income. For further information regarding potential dividends from our non-U.S. subsidiaries, see note 7, Income Taxes, in our 2018 Annual Report on Form 10-K for the year ended December 31, 2018.
 
28

Table of Contents
 
Our sales and operating income tend to be stronger in the last three quarters of each year and weaker in the first quarter of each year, primarily due to the impact of consumer buying patterns and production activity. This seasonal pattern causes cash provided by operating activities to be higher in the second half of the year and lower during the first half of the year. Based on our operating plans and current forecast expectations, we anticipate that our level of cash on hand, cash flows from operations and borrowing capacity under our lines of credit will provide sufficient cash availability to meet our ongoing liquidity needs.
 
Balance Sheet and Cash Flows
 
Cash and Equivalents
 
See the cash flow section below for a discussion of our cash balance.

Trade Working Capital
 
The following table presents our Trade Working Capital(4) components:
 
(dollars in thousands, except percentages and DSO, DIO, DPO and DWC)	 	September 30, 2019	 	December 31, 2018	 	September 30, 2018	
Accounts receivable — net	 	$	90,745	 	 	$	83,977	 	 	$	91,082	 	
DSO (1)	 	 	42.2	 	 	 	38.4	 	 	 	41.0	 	
Inventories — net	 	$	195,669	 	 	$	192,103	 	 	$	210,591	 	
DIO (2)	 	 	91.0	 	 	 	87.9	 	 	 	94.8	 	
Accounts payable	 	$	74,963	 	 	$	74,836	 	 	$	72,927	 	
DPO (3)	 	 	34.8	 	 	 	34.2	 	 	 	32.8	 	
Trade Working Capital (4) (non-GAAP)	 	$	211,451	 	 	$	201,244	 	 	$	228,746	 	
DWC (5)	 	 	98.3	 	 	 	92.1	 	 	 	103.0	 	
    Percentage of net sales	 	 	26.9	%	 	 	25.2	%	 	 	28.2	%	
_________________________
(1) 	Days sales outstanding (DSO) measures the number of days it takes to turn receivables into cash.	
(2) 	Days inventory outstanding (DIO) measures the number of days it takes to turn inventory into net sales.	
(3) 	Days payable outstanding (DPO) measures the number of days it takes to pay the balances of our accounts payable.	
(4) 	Trade Working Capital is defined as net accounts receivable plus net inventories less accounts payable. See below for further discussion as to the reasons we believe this non-GAAP financial measure is useful.	
(5) 	Days working capital (DWC) measures the number of days it takes to turn our Trade Working Capital into cash.	
 
DSO, DIO, DPO and DWC are calculated using the last twelve months' net sales as the denominator and are based on a 365-day year.
 
We believe that Trade Working Capital is important supplemental information for investors in evaluating liquidity in that it provides insight into the availability of net current resources to fund our ongoing operations. Trade Working Capital is a measure used by management in internal evaluations of cash availability and operational performance.
 
Trade Working Capital is used in conjunction with and in addition to results presented in accordance with U.S. GAAP. Trade Working Capital is neither intended to represent nor be an alternative to any measure of liquidity and operational performance recorded under U.S. GAAP. Trade Working Capital may not be comparable to similarly titled measures reported by other companies.
 
Trade Working Capital (as defined above) was $211.5 million at September 30, 2019, an increase of $10.2 million from December 31, 2018. Our Trade Working Capital normally increases during the first nine months of the year due to the seasonality of our business. In particular, inventory normally increases to prepare for seasonally higher orders that typically exceed production levels in the later part of the year. Our increase in Trade Working Capital is primarily due to additional inventories resulting from seasonality, higher inventory levels to fulfill customer orders and new product introductions. In addition, there was an increase in accounts receivable, partially offset by a slight increase in accounts payable due to timing of payments. As a result, Trade Working Capital as a percentage of the last twelve-month net sales was 26.9 percent at September 30, 2019, 25.2 percent at December 31, 2018, and 28.2 percent at September 30, 2018.
 
29

Table of Contents

Borrowings
 
The following table presents our total borrowings:
 
(dollars in thousands)	 	Interest Rate	 	Maturity Date	 	September 30, 2019	 	 	December 31, 2018	 	
Borrowings under ABL Facility	 	floating (2)	 	December 7, 2022 (1)	 	$	41,014	 	 	$	19,868	 	
Term Loan B	 	floating (3)	 	April 9, 2021	 	 	376,900	 	 	 	380,200	 	
Total borrowings	 	 	 	 	 	 	417,914	 	 	 	400,068	 	
Less — unamortized discount and finance fees	 	 	 	 	 	 	1,608	 	 	 	2,368	 	
Total borrowings — net (4)	 	 	 	 	 	$	416,306	 	 	$	397,700	 	
_________________________
(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 2.91 percent at September 30, 2019.	
(3) 	See “Derivatives” below and note 8 to the Condensed Consolidated Financial Statements.	
(4) 	Total borrowings — net includes long-term debt due within one year and long-term debt as stated in our Condensed Consolidated Balance Sheets.	
 
We had total borrowings of $417.9 million and $400.1 million at September 30, 2019, and December 31, 2018, respectively. Contributing to the $17.8 million increase in borrowings was a $21.1 million increase in borrowings under our ABL facility, partially offset by $3.3 million in quarterly amortization payments under our Term Loan B.
 
Of our total borrowings, $197.9 million, or approximately 47.4 percent, were subject to variable interest rates at September 30, 2019, as a result of converting $220.0 million of Term Loan B debt to a fixed rate using an interest rate swap. The swap is effective January 2016 through January 2020 and maintains a 4.85 percent fixed interest rate. We have executed additional swaps that convert $200.0 million of our debt from variable to fixed from January 2020 to January 2025. For further discussion on our interest rate swaps, see note 8 to the Condensed Consolidated Financial Statements. A change of one percentage point in such rates would result in a change in interest expense of approximately $2.0 million on an annual basis.
 
Included in interest expense are the amortization of discounts and other financing fees. These items amounted to $0.4 million and $0.3 million for the three months ended September 30, 2019 and 2018, respectively, and $1.0 million and $0.8 million for the nine months ended September 30, 2019 and 2018.

Cash Flow
 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	
Net cash provided by operating activities	 	$	12,666	 	 	$	7,586	 	
Net cash used in investing activities	 	$	(26,903	)	 	$	(35,123	)	
Net cash provided by financing activities	 	$	17,950	 	 	$	22,703	 	
 
Our net cash provided by operating activities was $12.7 million in the first nine months of 2019, compared to $7.6 million in the first nine months of 2018, a favorable cash flow impact of $5.1 million. Contributing to the increase in cash flow from operations were a favorable impact of $24.2 million related to Trade Working Capital (accounts receivable, inventories and accounts payable) and a favorable change in accrued wages. Offsetting these favorable cash flow items were increased payments on previously accrued liabilities, increased payments related to our ERP initiative, higher incentive compensation payments, higher pension/nonpension payments of $1.5 million, and additional customer incentive payments. 
 
Our net cash used in investing activities was $26.9 million and $35.1 million in the first nine months of 2019 and 2018, respectively, in each case representing capital expenditures.
 
Net cash provided by financing activities was $18.0 million in the first nine months of 2019, compared to $22.7 million in the year-ago period. The primary drivers of the $4.8 million change were a reduction in the net proceeds drawn on the ABL Facility of $10.3 million in the first nine months of 2019, as well as 2018 payments that did not repeat in 2019 (dividends of $2.6 million and other debt repayments of $3.1 million).
 
30

Table of Contents
 
Free Cash Flow
 
The following table presents key drivers to our non-GAAP Free Cash Flow for the periods presented:
 	 	Nine months ended September 30,	 	
(dollars in thousands)	 	2019	 	 	2018	 	
Net cash provided by operating activities	 	$	12,666	 	 	$	7,586	 	
Net cash used in investing activities	 	 	(26,903	)	 	 	(35,123	)	
Free Cash Flow (1) (non-GAAP)	 	$	(14,237	)	 	$	(27,537	)	
_________________________
(1)  	We define Free Cash Flow as the sum of net cash provided by operating activities and net cash used in investing activities. The most directly comparable U.S. GAAP financial measure is net cash provided by (used in) operating activities.	
 
We believe that Free Cash Flow is important supplemental information for investors in evaluating cash flow performance in that it provides insight into the cash flow available to fund such things as debt service, acquisitions and other strategic investment opportunities. It is a measure we use to internally evaluate the overall liquidity of the business. Free Cash Flow does not represent residual cash flows available for discretionary expenditures due to our mandatory debt service requirements.
 
Free Cash Flow is used in conjunction with, and in addition to, results presented in accordance with U.S. GAAP. Free Cash Flow is neither intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities recorded under U.S. GAAP. Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
 
Our Free Cash Flow was ($14.2) million during the first nine months of 2019, compared to ($27.5) million in the first nine months of 2018, a favorable change of $13.3 million. The primary contributors to this change are the same 1:1 relationship as the comparable cash flow impact from operating activities and the favorable change of $8.2 million in investing activities, as discussed above.

Derivatives
 
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. At September 30, 2019, we had commodity contracts for 2,890,000 MMBTUs of natural gas with a fair market value of a $0.8 million liability. We have hedged a portion of our forecasted transactions through December 2020. At December 31, 2018, we had commodity forward contracts for 3,150,000 MMBTUs of natural gas with a fair market value of a $0.3 million asset. The counterparties for these derivatives are well established financial institutions rated BBB+ or better as of September 30, 2019, by Standard & Poor’s.
 
We have interest rate swap agreements in place to fix certain interest payments of our current and future floating rate Term Loan B debt. The first interest rate swap maintains a fixed interest rate of 4.85 percent, including the credit spread, on $220.0 million of our current Term Loan B debt and matures on January 9, 2020. Two additional interest rate swaps, with a combined notional amount of $200.0 million, become effective in January 2020, when the first swap matures. These two future swaps in essence extend the first swap, have a term of January 2020 to January 2025, and carry a fixed interest rate of 6.19%, including credit spread. Upon refinancing our Term Loan B, the fixed interest rate will be 3.19 percent plus the new refinanced credit spread. At September 30, 2019, the Term Loan B debt held a floating interest rate of 5.04 percent. If the counterparties to the interest rate swap agreements were to fail to perform, the interest rate swaps would no longer provide the desired results. However, we do not anticipate nonperformance by the counterparties. The counterparties held a Standard & Poor's rating of BBB+ or better as of September 30, 2019.
 
The fair market value of our interest rate swaps 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. The fair market value of the interest rate swap agreements was a $15.9 million liability at September 30, 2019, and a $4.3 million liability at December 31, 2018.
 
31

Table of Contents

Fixed Assets   
 
On February 18, 2019, the Board of Directors of Libbey approved a plan to pursue strategic alternatives with respect to our business in the 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.
 
As this decision by the Board of Directors may result in changes in our business plans or management's intentions regarding future utilization of the related assets, a calculation was performed in accordance with FASB ASC Topic 360, "Property Plant and Equipment" (ASC 360) to determine if there was an indicator of impairment. The calculation considered all strategic alternatives that were being considered by management as of June 30, 2019 and the likelihood of each of the alternatives. The resulting calculation did not indicate an impairment as of June 30, 2019, as the combined probability weighted average of the undiscounted cash flows associated with each alternative exceeded the carrying value of the assets. We continue to monitor the alternatives being considered by management as changes in strategy or alternatives available may result in future impairment charges.
 
We also tested the Libbey Holland reporting unit's fixed assets under ASC 360, as of June 30, 2019, as this reporting unit has a history of operating losses and our long-term plan indicates this trend will continue into the near future before turning positive. While the current long-term forecast does not indicate an impairment, the forecast is dependent on specific management actions. We continue to monitor this reporting unit. Should management decide not to take these actions, or the returns derived from such actions be less favorable than forecasted, there could be an impairment trigger which may result in an impairment charge.
 
Goodwill & Other Purchased Intangible Assets
 
As part of our on-going assessment of goodwill at June 30, 2019, it was noted that the significant reduction to the Company's share price throughout the quarter resulted in the market capitalization being less than the carrying value. As a result, we determined a triggering event had occurred and accordingly, interim impairment tests of goodwill and other intangible assets were performed as of June 30, 2019. Additionally, during the second quarter, management updated its long-range plan which indicated lower sales and profitability within the Mexico reporting unit (within the Latin America reporting segment) as compared to the projections used in the most recent goodwill impairment testing performed as of October 1, 2018. As a result, the impairment testing indicated that the carrying value of the Mexico reporting unit exceeded its fair value, and we recorded a non-cash impairment charge of $46.0 million during the second quarter of 2019. After recording the impairment charge, there is no longer any goodwill on the balance sheet related to the Mexico acquisition.
 
As of the June 30, 2019 testing date, the estimated fair value of our other reporting unit that has goodwill exceeded its carrying value, by approximately 40 percent, and is in the U.S. and Canada reporting segment.
 
In conjunction with the goodwill impairment testing as of June 30, 2019, we also tested Libbey Holland's indefinite life intangible asset (Royal Leerdam® trade name) for impairment. We used a relief from royalty method to determine the fair market value that was compared to the carrying value of the indefinite life intangible asset. The sales forecast for Royal Leerdam® branded product was lowered due to declining performance of mid-tier retailers as consumers in EMEA move to discount and on-line retailers. As a result, the estimated fair value was determined to be lower than the carrying value, and we recorded a non-cash impairment charge of $0.9 million during the second quarter of 2019 in our EMEA reporting segment.
 
With the Royal Leerdam® trade name fair value equaling its carrying value at June 30, 2019, there is a potential of future impairment for the remaining intangible asset balance of $0.9 million if there is further degradation in the perceived value of the brand.
 
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. See note 5, Income Taxes, to the Condensed Consolidated Financial Statements for a detailed discussion on tax contingencies.
 
New Accounting Standards
 
See note 2 of the Condensed Consolidated Financial Statements for a summary of the new accounting standards.
 
32

Table of Contents
 
Item 3.	Qualitative and Quantitative Disclosures about Market Risk	
 
Not applicable.
 
Item 4.	Controls and Procedures	
 
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Securities Exchange Act of 1934 (the “Exchange Act”) reports are recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
 
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.
 
There has been no change in our controls over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
 
PART II — OTHER INFORMATION
 
This document and supporting schedules contain statements that are not historical facts and constitute projections, forecasts or forward-looking statements. These forward-looking statements reflect only our best assessment at this time, and may be identified by the use of words or phrases such as “anticipate,” “target,” “believe,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would” or similar phrases. Such forward-looking statements involve risks and uncertainty; actual results may differ materially from such statements, and undue reliance should not be placed on such statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
 
Item 1.	Legal Proceedings	
 
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. For a detailed discussion on tax contingencies, see note 5, Income Taxes, to the Condensed Consolidated Financial Statements included in Part 1, Item 1 of this Quarterly Report, which is incorporated herein by reference.
 
Item 1A.	Risk Factors	
 
Our risk factors are set forth in Part I, Item 1A. "Risk Factors" in our 2018 Annual Report on Form 10-K.
 
33

Table of Contents
 
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	
 
Issuer’s Purchases of Equity Securities
Period	 	Total Number of Shares Purchased	 	 	Average Price Paid per Share	 	 	Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs	 	 	Maximum Number of Shares
that May Yet Be Purchased
Under the Plans or Programs (1)	 	
July 1 to July 31, 2019	 	 	—	 	 	$	—	 	 	 	—	 	 	 	941,250	 	
August 1 to August 31, 2019	 	 	—	 	 	$	—	 	 	 	—	 	 	 	941,250	 	
September 1 to September 30, 2019	 	 	—	 	 	$	—	 	 	 	—	 	 	 	941,250	 	
Total	 	 	—	 	 	$	—	 	 	 	—	 	 	 	941,250	 	
_________________________
(1) 	We announced on December 10, 2002, that our Board of Directors authorized the purchase of up to 2,500,000 shares of our common stock in the open market and negotiated purchases. In January 2015, our Board of Directors increased the current stock repurchase authorization by an additional 500,000 shares, for a total of 3,000,000 shares authorized. There is no expiration date for this authorization. No shares have been repurchased since April 2016.	

Item 6.	Exhibits	
 
Exhibits: The exhibits listed in the below “Exhibit Index” are filed as part of this report.
 
EXHIBIT INDEX	
S-K Item
601 No.	 	Document	
3.1	 	Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference).	
 	 	 	
3.2	 	Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.2 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 and incorporated herein by reference).	
 	 	 	
3.3	 	Certificate of Incorporation of Libbey Glass Inc. (filed as Exhibit 3.3 to Libbey Glass Inc.’s Form S-4 (Reg No. 333-139358) filed December 14, 2006, and incorporated herein by reference).	
 	 	 	
3.4	 	Amended and Restated By-Laws of Libbey Glass Inc. (filed as Exhibit 3.4 to Libbey Glass Inc.’s Form S-4 (Reg No. 333-139358) filed December 14, 2006, and incorporated herein by reference).	
 	 	 	
10.1	 	Executive Severance Compensation Policy dated as of August 13, 2019 (filed herein).	
 	 	 	
31.1	 	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein).	
 	 	 	
31.2	 	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein).	
 	 	 	
32.1	 	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein).	
 	 	 	
101.INS	 	XBRL Instance Document	
101.SCH	 	XBRL Taxonomy Extension Schema Document	
101.DEF	 	XBRL Taxonomy Extension Definition Linkbase Document	
101.CAL	 	XBRL Taxonomy Extension Calculation Linkbase Document	
101.LAB	 	XBRL Taxonomy Extension Label Linkbase Document	
101.PRE	 	XBRL Taxonomy Extension Presentation Linkbase Document	

34

Table of Contents

SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 	 	Libbey Inc.	 	
 	 	 	 	 	
Date:	October 29, 2019	by:	/s/ James C.Burmeister	 	
 	 	 	James C. Burmeister	 	
 	 	 	Senior Vice President, Chief Financial Officer and Chief Operating Officer 	 	
 
35

Exhibit 10.1
 
LIBBEY INC.	
 	
Executive Severance Compensation Policy	

I.	STATEMENT	
 
 	(a)	Except as otherwise defined in this Policy, capitalized terms are defined in Part II below.	
 
 	(b)	Under certain circumstances it is appropriate for the Company to pay severance compensation to a salaried employee whose employment with the Company is terminated. A U.S. salaried employee who satisfies the following criteria is covered by this Executive Severance Compensation Policy (“Policy”) and is referred to as a “Covered Employee”:	
 
 	1.	The employee is an exempt employee under the FLSA;	
 
 	2.	The employee is not a party to a written agreement with Libbey that provides for payment of separation benefits to the employee except under certain circumstances in connection with a change in control of Libbey; and	
 
 	3.	The employee’s classification level is Exempt Salary Level 99.	
 
 	 	Any U.S. salaried employee who is not a Covered Employee is covered by the Non-Executive Severance Policy.	
 
 	(c)	A Covered Employee will be entitled to severance compensation pursuant to this Policy if the Covered Employee’s employment with the Company is terminated without Cause and the Covered Employee executes and delivers to the Company a General Release.	
 
II.	DEFINITIONS	
 
 	(a)	“Board” means the Board of Directors of Libbey Inc.	
 
 	(b)	“Cause” means:	
 
 	1.	The Covered Employee willfully and continuously fails (other than as a result of his/her incapacity due to physical or mental illness) to substantially perform his/her duties with the Company after the Board has delivered to him/her a written demand for substantial performance that specifically identifies the manner in which the Board believes that he/she has not substantially performed his/her duties;	
 
 	2.	The Covered Employee willfully and continuously fails (other than as a result of his/her incapacity due to physical or mental illness) to substantially follow and comply with the specific and lawful directives of the Board, after the Board has delivered to him/her a written demand for substantial performance that specifically identifies the manner in which the Board believes that he/she has not substantially followed or complied with the directives of the Board;	
 
 	3.	The Covered Employee commits an act of fraud or dishonesty that causes harm to the Company;	

 
 
LIBBEY INC.	
 	
Executive Severance Compensation Policy	
 
 	4.	The Covered Employee fails to comply with a material Company policy or code of conduct;	
 
 	5.	The Covered Employee materially breaches any material obligation under any written agreement between him/her and the Company;	
 
 	6.	The Covered Employee engages in illegal conduct or gross misconduct that causes harm to the Company; or	
 
 	7.	The Covered Employee has been convicted of a misdemeanor or felony that (A) is directly related to the position that the Covered Employee occupies with the Company or (B) indicates that the Covered Employee is unsuitable for the position that he or she occupies with the Company.	
 
 	(c)	“Company” means Libbey Inc. or any of its direct or indirect wholly-owned subsidiaries.	
 
 	(d)	“Compensation Committee” means the Compensation Committee of the Board.	
 
 	(e)	“Covered Employee” means any salaried employee who is covered by this Policy, as set forth in Part I.A above.	
 
 	(f)	“Date of Termination” means the date on which the Covered Employee incurs a Separation from Service.	
 
 	(g)	“FLSA” means the United States Fair Labor Standards Act, as in effect from time to time.	
 
 	(h)	“General Release” means a general release of liability in substantially the form of attached Appendix A. The General Release will include covenants against non-disparagement and solicitation of employees and, if required by the Compensation Committee, a covenant not to compete with the Company, and will provide that, in the event of a breach by the Covered Employee of his or her obligations under the General Release, the Company will be entitled to exercise all remedies available to it at law or in equity, including seeking injunctive relief and monetary damages.	
 
 	(i)	“Non-Executive Severance Policy” means the Severance Compensation Policy – Non-Executives of the Company.	
 
 	(j)	Nonqualified Deferred Compensation” has the meaning set forth in §409A. Generally speaking, Nonqualified Deferred Compensation means compensation that is earned in one year but is paid in a subsequent year.	
 
 	(k)	“Notice of Termination” means written notice that indicates that the Covered Employee’s employment with the Company is being terminated. If termination is by the Company with Cause, the Notice of Termination must set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Covered Employee’s employment.	
 
2

 
LIBBEY INC.	
 	
Executive Severance Compensation Policy	
 
 	(l)	“§409A” means Section 409A of the Internal Revenue Code of 1986, as the same may be amended from time to time.	
 
 	(m)	“Separation from Service” has the meaning given it in §409A. Generally speaking, separation from service occurs when the facts and circumstances indicate that the employer and employee reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the employee would perform after that date (whether as an employee or as an independent contractor) would permanently decrease to no more than 20 percent of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of services to the employer, if the employee has been providing services to the employer for less than 36 months).	
 
 	(n)	“Severance Period” means (a) with respect to the Chief Executive Officer of the Company, 104 weeks, and (b) with respect to each other Covered Employee, 52 weeks.	
 
 	(o)	“Specified Employee” means a Covered Employee who is any of the following:	
 
 	1.	An officer with annual compensation greater than $160,000 (as indexed for inflation in 2010);	
 
 	2.	A five percent owner of the Company; or	
 
 	3.	A one percent owner of the Company with annual compensation greater than $160,000 (as indexed for inflation in 2010).	
 
 	 	Whether a Covered Employee is an “officer” will be determined by the Company in accordance with Section 409A. The term "officer" is not limited to corporate officers, but includes any employee who has significant administrative or policy-making responsibility. The determination is based on all the facts, including:	
 
 	●	The source of the employee's authority;	
 	●	The term for which the employee was elected or appointed; and	
 	●	The nature and extent of the employee's duties.	
 
 	 	An employee who merely has the title of an officer but not the authority is not considered an officer. Similarly, an employee who does not have an officer title but does have the authority of an officer is considered an officer regardless of title. Therefore, vice presidents, and even directors or managers, who are normally not considered officers for corporate purposes may be considered officers under Section 409A.	
 
III.	AMOUNT OF SEVERANCE PAYABLE; LIMITATIONS ON PAYMENT	
 
 	(a)	If a Covered Employee is entitled to severance compensation pursuant to Part I above, the Company will pay or provide to the Covered Employee the following benefits:	
 
3

 
LIBBEY INC.	
 	
Executive Severance Compensation Policy	
 
 	1.	Base salary through the Date of Termination;	
 
 	2.	Reimbursement of any expenses properly incurred prior to the Date of Termination in accordance with the Company’s policy on business expense reimbursement;	
 
 	3.	Any amount or benefit to which the Covered Employee is entitled under any pension plan, retirement savings plan, equity participation plan, stock purchase plan, medical benefit plan or other benefit plan or employment policy maintained by the Company in accordance with the terms of such plan;	
 
 	4.	With respect to the Covered Employee's annual incentive compensation opportunity during the year in which the Date of Termination occurs, payment, between January 1 and March 15 of the year following the year in which the Date of Termination occurs, of a prorated amount, based on actual performance for the year;	
 
 	5.	Continuation of base salary, in accordance with the Company’s normal pay practices, during the Severance Period;	
 
 	 	Note:   The Severance Period will not be counted as additional years of service for purposes of the Company’s other employee benefit plans.	
 
 	6.	Payment, in a lump sum on the first payroll date after the Date of Termination occurs, of an amount equal to (a) in the case of the Chief Executive Officer of the Company, two (2) times his or her target annual incentive, and (b) in the case of any other Covered Employee, one (1) times the Covered Employee’s target annual incentive;	
 
 	7.	Until the last day of the calendar month in which the Severance Period expires, continuation of the Covered Employee’s medical, prescription drug and dental benefits, provided that the Covered Employee pays the active-employee contributions for these benefits. Contributions will be paid through deduction from the Covered Employee’s salary continuation payments;	
 
 	8.	For the duration of the Severance Period, executive outplacement services at a cost to the Company not to exceed $10,000 per year.	
 
 	(b)	If the Covered Employee is a Specified Employee, any severance that constitutes Nonqualified Deferred Compensation will not be payable to the Covered Employee until the first to occur of (1) the first day of the seventh month after the Covered Employee’s Separation from Service or (2) the Covered Employee’s death, unless and to the extent that the Company, in its sole discretion, determines that §409A provides a valid exception to the 6-month delay rule contained in §409A, including the exception for short-term deferrals set forth in Treasury Regulation §1.409A-1(b)(4) and the exception for certain separation pay plans set forth in Treasury Regulation §1.409A-1(b)(9)(iii), which shall be applied to all installments commencing with the first installment that does not qualify as a short-term deferral until the limitation on separation pay plans is reached. In connection with the Company’s determination as set forth in the preceding sentence, the Covered Employee may furnish the Company with a tax opinion or other evidence that an exception to the 6-month delay applies, but the Company shall not be bound by any such opinion or evidence.	
 
4

 
LIBBEY INC.	
 	
Executive Severance Compensation Policy	
 
 	(c)	Severance benefits may be withheld or reduced if and to the extent that, as of the Covered Employee’s Separation from Service:	
 
 	1.	the Covered Employee is indebted to the Company for any loan or cash advance that is unpaid and satisfactory arrangements are not made with regard to the obligations;	
 
 	2.	the Covered Employee has participated in the Company’s Educational Assistance Policy, has not satisfied the minimum service requirements specified in that Policy and has not made satisfactory arrangements to repay the cost expended by the Company on the Covered Employee’s behalf pursuant to the Policy;	
 
 	3.	the Covered Employee has charged personal expenses to a Company credit card and either (a) has not paid to the Company or the credit card company the amount of such personal expenses or (b) has paid the amount of the personal expenses to the credit card company but has submitted for and received reimbursement from the Company for such personal expenses;	
 
 	4.	the Covered Employee has incurred late charges on a Company credit card account and has received reimbursement from the Company for such late charges; or	
 
 	5.	the Covered Employee is in a position in which he or she handles Company cash and an audit of the accounts that the Covered Employee is responsible for handling discloses a discrepancy.	
 
IV.	EXCEPTIONS	
 
 	(a)	Exceptions to this Severance Policy may be made only with the approval of the Chief Executive Officer, unless the Covered Employee in question is the Chief Executive Officer, in which case the approval of the Compensation Committee will be required.	
 
V.	RIGHT TO TERMINATE OR AMEND SEVERANCE POLICY	
 
 	(a)	The Company shall have the right, in its sole discretion, to suspend, terminate, amend, amend and restate, or otherwise modify this Severance Policy at any time and from time to time upon at least 90 days’ prior written notice.	
 
5

 
Appendix A
 
GENERAL RELEASE AND WAIVER OF CLAIMS 
 
The undersigned, _______________________, resident of the State of _____________ (“Releasor”), in accordance with and pursuant to the terms of the Executive Severance Compensation Policy dated as of May 11, 2015 (the “Policy”) of Libbey Inc., a Delaware corporation (the “Company”), and in consideration of the separation benefits provided pursuant to the Policy, except as set forth herein, hereby:
 
(a)     agrees that all Confidential Information of the Company or any of the Affiliates shall be treated by Releasor as confidential, and Releasor shall not, without the consent of the Company, disclose such Confidential Information to any third party or use such Confidential Information for Releasor’s personal benefit for as long as the Confidential Information is not generally available to the public. For purposes of this Agreement, “Confidential Information” means information disclosed to Releasor, or known to Releasor, fully as a consequence of or through Releasor’s employment by the Company or any Affiliate, including without limitation, information concerning customers, suppliers, employees, business methods, business plans, business strategy, technology, research, manufacturing methods, manufacturing operations, business operations, sales, costs, prices, profits and procedures of the Company or any Affiliate. As soon as possible after the Company’s written request, Releasor will return to the Company all written or electronic Confidential Information that has been provided to the Releasor, and the Releasor will destroy or return (at the Company’s option) all copies of any analyses, compilations, studies or other documents prepared by the Releasor or for the Releasor’s use containing or reflecting any Confidential Information. Within ten (10) business days of Releasor’s receipt of such request from the Company, Releasor shall deliver to the Company a notarized document certifying that such Confidential Information has been returned or destroyed in accordance with this provision.
 
(b)     agrees to disclose promptly in writing to the Company any and all information, discoveries, improvements and inventions that may have been or be made by Releasor as a result of or in conjunction with Releasor’s employment with the Company. Releasor further agrees to assign all such information, discoveries, improvements and inventions to the Company and at the request and expense of the Company to execute all patent applications and patents to the Company. If the Company is not interested in obtaining title to any particular invention, discovery or improvement and so advises Releasor in writing, then Releasor may consider the same to be Releasor’s personal property subject to the right of the Company and any Affiliate to make, use, employ and practice it for its or their own uses and purposes;
 
(c)     agrees that he or she shall not engage in any pattern of conduct that involves the making or publishing of written or oral statements or remarks (including, but not limited to, the repetition or distribution of derogatory rumors, allegations, negative reports, or comments) that are disparaging, deleterious or damaging to the integrity, reputation or goodwill of the Company, any Affiliate or any of the respective managements of either. To the extent inquiries regarding Releasor’s employment are directed to the Company’s Corporate Human Resources Manager, prospective employers will be provided the dates of Releasor’s employment and position with the Company. If Releasor directs a request for reference to a source other than the Company’s Corporate Human Resources Manager, the Company is not responsible for the results of that request;
 
(d)     agrees that, for a period of twelve (12) months commencing on the date of on which Releasor’s employment with the Company or its Affiliates was terminated (the “Date of Termination”), Releasor shall not directly or indirectly, personally or on behalf of any other person, business, corporation, or entity, contact or do business with any customer of the Company with respect to any product, business activity or service that is competitive with any product, business, activity or service of the type sold or provided by the Company;
 
6

 
(e)     agrees that, unless the Company otherwise agrees in writing, for a period of twelve (12) months commencing on the Date of Termination, the Releasor shall not, directly or indirectly, own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be connected as a director, officer, employee, partner, consultant or otherwise with any entity engaged in a business that sells, in competition with the Company and its affiliates, the same type of products as sold by the Company, including without limitation glass tableware, ceramic dinnerware and metal flatware to the foodservice industry other than as a shareholder or beneficial owner owning five percent (5%) or less of the outstanding securities of a public company. Without limiting the foregoing, currently the following business operations among others sell, in competition with the Company and its affiliates, the same type of products as sold by the Company and its affiliates: Anchor Hocking and Oneida and any affiliate thereof; Arc International and its affiliate Cardinal International, Inc.; and any glass tableware manufacturer, seller or importer for Bormioli Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the Sisecam group of companies of Turkey including Pasabahce;
 
(f)     agrees that, for a period of twelve (12) months following the Date of Termination, Releasor shall not divert or attempt to divert or take advantage of or attempt to take advantage of any actual or potential business opportunities of the Company (e.g., joint ventures, other business combinations, investment opportunities, potential investors in the Company, and other similar opportunities) of which the Releasor became aware as a result of Releasor’s employment with the Company;
 
(g)     acknowledges that the Company has invested substantial time and effort in assembling its present workforce. Accordingly, Releasor covenants and agrees that, for period of twelve (12) months commencing on the Date of Termination, Releasor shall not, either for Releasor’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venture owner or shareholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly entice, solicit, attempt to solicit, or seek to induce or influence any officer or employee of the Company to leave his or her employment with the Company or to offer employment to any person who on or during the six (6) month period immediately preceding the date of such solicitation or offer was an employee of the Company; provided, however, that this Section 15 shall not be deemed to be breached with respect to an employee or former employee of the Company who responds to a general advertisement seeking employment or who otherwise independently initiates contact for the purpose of seeking employment; and
 
(h)     remises, releases and forever discharges and covenants not to sue, and by these presents does for Releasor and Releasor’s legal representatives, trustees, beneficiaries, heirs and assigns (Releasor and such persons referred to herein, collectively, as the “Releasing Parties”) hereby remise, release and forever discharge and covenant not to sue, the Company and its affiliates and the respective Officers, directors, employees, equity holders, agent and representatives of each of them and all of their respective successor and assigns (each a “Released Party” and collectively, the “Released Parties”), of and from any and all manner of actions, proceedings, claims, causes of action, suits, promises, damages, judgments, executions, claims and demands, of any nature whatsoever, and of every kind and description, choate and inchoate, known or unknown, at law or in equity (collectively, “Claims”), which the Releasing Parties, or any of them, now have or ever had, or hereafter can, shall or may have, for, upon or by reason of any matter, cause or thing whatsoever, against the Released Parties, and each of them, from the beginning of time to the date hereof;
 
7

 
 	(i)	arising from Releasor’s employment, compensation, commissions, insurance, stock ownership, stock options, employee benefits and other terms and conditions of employment or employment practices of the Company under federal, state or local law or regulation, including, but not limited to the Employee Retirement Income Security Act of 1974 (“ERISA”), as amended;	
 
 	(ii)	relating to the termination of Releasor’s employment or the circumstances surrounding thereof based on any contract, tort, whistleblower, personal injury, retaliatory, wrongful discharge or any other theory under any federal, state or local constitution, law, regulation, common law or otherwise;	
 
 	(iii)	relating to payment of any attorneys’ fees incurred by Releasor; and	
 
 	(iv)	based on any alleged discrimination on the basis of race, color, religion, sex, age, national origin, handicap, disability or another category protected by any federal, state or local law or regulation, including, but not limited to, the Age Discrimination in Employment Act (“ADEA”), Title VII of the Civil Rights Act of 1964 (“Title VII”), the Americans with Disabilities Act (“ADA”), the Fair Labor Standards Act (“FLSA”), the Older Workers Benefit Protection Act of 1990 (“OWBPA”), or Executive Order 11246 (as any of these laws or orders may have been amended) or any other similar federal, state or local labor, employment or anti-discriminatory laws.	
 
Notwithstanding any other provision of this General Release and Waiver of Claims, Releasor does not release or waive Releasor’s rights and Claims against the Company arising out of, or related to, the obligations of the Company pursuant to the Policy, Claims for Releasor’s vested benefits under any pension plan, retirement plan and savings plan, rights under any equity participation plan and stock purchase plan and rights to continuation of medical care coverage pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and any similar state law.
 
Releasor represents and warrants on behalf of the Releasing Parties that there has been, and there will be, no assignment or other transfer of any right or interest in any Claims which Releasor has or may have against the Released Parties, and Releasor hereby agrees to indemnify and hold each Released Party harmless from any Claims, costs, expenses and attorney’s fees directly or indirectly incurred by any of the Released Parties as a result of any person asserting any right or interest pursuant to his, her or its assignment or transfer of any such right or interest.
 
Nothing in this General Release will foreclose Releasor’s right to consult or cooperate with any governmental agency.
 
Releasor agrees that if any Releasing Party hereafter commences, joins in, or in any manner seeks relief through any suit arising out of, based upon, or relating to any of the Claims released hereunder, or in any manner asserts against any Released Party any of the Claims released hereunder, then Releasor will pay to such Released Party, in addition to any all damages and compensation, direct or indirect, all attorney’s fees incurred in defending or otherwise responding to such suit or Claims.
 
Releasor further agrees that the Company and its Affiliates shall be entitled, in the event of any breach by Releasor of Releasor’s obligations under this General Release and Waiver of Claims, to exercise such remedies as the Company and its Affiliates may have at law or in equity, including without limitation the right to seek injunctive relief and monetary damages.
 
8

 
Releasor acknowledges that (i) Releasor has received the advice of legal counsel in connection with this General Release and Waiver of Claims, (ii) Releasor has read and understands that this is a General Release and Waiver of Claims, and (iii) Releasor intends to be legally bound by the same.
 
Releasor acknowledges that Releasor has been given the opportunity to consider this Release for twenty-one (21) days and has been encouraged and given the opportunity to consult with legal counsel of Releasor’s choosing before signing it. Releasor understands that Releasor shall have seven (7) days from the date on which Releasor executes this General Release and Waiver of Claims (as indicated by the date below his signature) to revoke Releasor’s signature and agreement to be bound hereby by providing written notice of revocation to the Company within such seven (7) day period. Releasor further understands and acknowledges this Release shall become effective, if not sooner revoked, on the eighth day after the execution hereof by Releasor (the “Effective Date”).
 
IN WITNESS WHEREOF, Releasor has executed and delivered this General Release and Waiver of Claims on behalf of the Releasing Parties as of the day and year set forth below.
 
Dated: _______, 20___.
 	 	 	 	 	
 	 	RELEASOR:	

 	 	 	
  	 	Name:	 	 	

 
9

EXHIBIT 31.1
Certification of Chief Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, Michael P. Bauer, certify that: 
 
 	1.	I have reviewed this quarterly report on Form 10-Q of Libbey Inc.;	
 
 	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
 	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
 	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
 	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
 
Date:	October 29, 2019	By: 	/s/ Michael P. Bauer	 	
 	 	 	Michael P. Bauer	 	
 	 	 	Chief Executive Officer 	 	

 
EXHIBIT 31.2
Certification of Chief Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
 
I, James C. Burmeister, certify that: 
 
 	1.	I have reviewed this quarterly report on Form 10-Q of Libbey Inc.;	
 
 	2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	
 
 	3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	
 
 	4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
 
 	a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;	
 
 	b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;	
 
 	c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and	
 
 	d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and	
 
 	5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):	
 
 	a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and	
 
 	b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.	
 
Date:	October 29, 2019	By:	/s/ James C. Burmeister	 	
 	 	 	James C. Burmeister	 	
 	 	 	Senior Vice President, Chief Financial Officer and Chief Operating Officer	 	

EXHIBIT 32.1
 
Certification Pursuant to 18 U.S.C. Section 1350
 
Pursuant to 18 U.S.C. § 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Libbey Inc. (the “Company”) hereby certify, to such officers' knowledge, that:
 
(i)     the accompanying Quarterly Report on Form 10-Q of the Company for the quarterly period ended September 30, 2019 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
 
(ii)     the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

Date:	October 29, 2019	By: 	/s/ Michael P. Bauer	 	
 	 	 	Michael P. Bauer	 	
 	 	 	Chief Executive Officer 	 	
 	 	 	 	 	
 	 	 	/s/ James C. Burmeister	 	
 	 	 	James C. Burmeister	 	
 	 	 	Senior Vice President, Chief Financial Officer and Chief Operating Officer