LIBBEY INC, 10-Q filed on 6/19/2020
Quarterly Report
v3.20.1
Document And Entity Information - shares
3 Months Ended
Mar. 31, 2020
Jun. 12, 2020
Document Information [Line Items]    
Entity Registrant Name LIBBEY INC  
Entity Central Index Key 0000902274  
Trading Symbol lby  
Current Fiscal Year End Date --12-31  
Entity Filer Category Non-accelerated Filer  
Entity Current Reporting Status Yes  
Entity Emerging Growth Company false  
Entity Small Business true  
Entity Interactive Data Current Yes  
Entity Common Stock, Shares Outstanding (in shares)   22,667,869
Entity Shell Company false  
Document Type 10-Q  
Document Period End Date Mar. 31, 2020  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q1  
Amendment Flag false  
Title of 12(b) Security Common Stock, $.01 par value  
v3.20.1
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Revenues $ 151,164 $ 175,649
Cost of sales 128,241 141,691
Gross profit 22,923 33,958
Selling, general and administrative expenses 26,514 32,580
Asset impairments 38,535
Income (loss) from operations (42,126) 1,378
Other income (expense) (10,652) (1,584)
Loss before interest and income taxes (52,778) (206)
Interest expense 5,591 5,632
Loss before income taxes (58,369) (5,838)
Provision (benefit) for income taxes 20,379 (1,296)
Net loss $ (78,748) $ (4,542)
Net loss per share:    
Basic (in dollars per share) $ (3.45) $ (0.20)
Diluted (in dollars per share) (3.45) (0.20)
Dividends declared per share (in dollars per share)
Product [Member]    
Revenues $ 150,521 $ 174,966
Shipping and Handling [Member]    
Revenues $ 643 $ 683
v3.20.1
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Net loss $ (78,748) $ (4,542)
Other comprehensive income (loss):    
Pension and other post-retirement benefit adjustments, net of tax 4,850 777
Derivative instruments adjustments, net of tax 10,997 (3,054)
Foreign currency translation adjustments, net of tax (1,637) (26)
Other comprehensive income (loss), net of tax 14,210 (2,303)
Comprehensive income (loss) $ (64,538) $ (6,845)
v3.20.1
Condensed Consolidated Balance Sheets (Current Period Unaudited) - USD ($)
$ in Thousands
Mar. 31, 2020
Dec. 31, 2019
ASSETS    
Cash and cash equivalents $ 66,062 $ 48,918
Accounts receivable — net 61,919 81,307
Inventories — net 189,490 174,797
Prepaid and other current assets 18,008 17,683
Total current assets 335,479 322,705
Pension Asset 6,312 5,712
Purchased intangible assets — net 11,702 11,875
Goodwill 0 38,431
Deferred income taxes 24,747
Other assets 14,487 14,608
Operating lease right-of-use assets 69,761 54,686
Property, plant and equipment — net 229,645 233,923
Total assets 667,386 706,687
LIABILITIES AND SHAREHOLDERS' DEFICIT    
Accounts payable 74,723 79,262
Salaries and wages 18,444 30,188
Accrued liabilities 38,545 50,657
Accrued income taxes 338 382
Pension liability (current portion) 2,072 2,543
Non-pension post-retirement benefits (current portion) 3,808 3,817
Operating lease liabilities (current portion) 11,585 12,769
Long-term debt due within one year 18,124 16,124
Total current liabilities 167,639 195,742
Long-term debt 425,544 375,716
Pension liability 38,308 46,619
Non-pension post-retirement benefits 45,270 45,507
Noncurrent operating lease liabilities 64,520 48,323
Deferred income taxes 2,104 2,104
Other long-term liabilities 13,930 18,463
Total liabilities 757,315 732,474
Contingencies (Note 16)
Shareholders’ deficit:    
Common stock, par value $.01 per share, 50,000,000 shares authorized, 22,604,579 shares issued in 2020 (22,360,125 shares issued in 2019) 226 224
Capital in excess of par value 338,789 338,395
Retained deficit (319,208) (240,460)
Accumulated other comprehensive loss (109,736) (123,946)
Total shareholders' deficit (89,929) (25,787)
Total liabilities and shareholders' deficit $ 667,386 $ 706,687
v3.20.1
Condensed Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares
Mar. 31, 2020
Dec. 31, 2019
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 50,000,000 50,000,000
Common stock, shares issued (in shares) 22,604,579 22,360,125
v3.20.1
Condensed Consolidated Statements of Shareholders' Equity (Deficit) (Unaudited) - USD ($)
$ in Thousands
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
AOCI Attributable to Parent [Member]
Total
Balance (in shares) at Dec. 31, 2018 22,157,220        
Balance at Dec. 31, 2018 $ 222 $ 335,517 $ (171,441) $ (114,405) $ 49,893
Net 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 (in shares) 116,348        
Stock issued $ 1 (8) (7)
Balance (in shares) at Mar. 31, 2019 22,273,568        
Balance at Mar. 31, 2019 $ 223 336,129 (175,983) (116,708) 43,661
Balance (in shares) at Dec. 31, 2019 22,360,125        
Balance at Dec. 31, 2019 $ 224 338,395 (240,460) (123,946) (25,787)
Net loss (78,748) (78,748)
Other comprehensive income (loss) 14,210 14,210
Stock compensation expense 569 569
Stock withheld for employee taxes (173) (173)
Stock issued (in shares) 244,454        
Stock issued $ 2 (2)
Balance (in shares) at Mar. 31, 2020 22,604,579        
Balance at Mar. 31, 2020 $ 226 $ 338,789 $ (319,208) $ (109,736) $ (89,929)
v3.20.1
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
3 Months Ended
Mar. 31, 2020
Mar. 31, 2019
Operating activities:    
Net loss $ (78,748) $ (4,542)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 8,845 9,931
Asset impairments 38,535
Loss on derivatives de-designated as hedging instruments 12,923
Change in accounts receivable 15,815 1,784
Change in inventories (16,740) (18,075)
Change in accounts payable 359 2,644
Accrued interest and amortization of discounts and finance fees 432 285
Pension & non-pension post-retirement benefits, net 367 (977)
Accrued liabilities & prepaid expenses (24,308) (12,054)
Income taxes 19,382 (3,516)
Cloud computing costs, net (147) (246)
Share-based compensation expense 534 942
Other operating activities (3,145) (81)
Net cash used in operating activities (25,896) (23,905)
Investing activities:    
Cash paid for property, plant and equipment (6,408) (10,361)
Net cash used in investing activities (6,408) (10,361)
Financing activities:    
Borrowings on Prepetition ABL Credit Facility 53,000 42,300
Repayments on Prepetition ABL Credit Facility (2,000) (16,800)
Other borrowings 2,000
Repayments on Prepetition Term Loan B (1,100) (1,100)
Taxes paid on distribution of equity awards (173) (317)
Debt refinancing costs (1,350)
Net cash provided by financing activities 50,377 24,083
Effect of exchange rate fluctuations on cash (929) 82
Increase (decrease) in cash 17,144 (10,101)
Cash & cash equivalents at beginning of period 48,918 25,066
Cash & cash equivalents at end of period 66,062 14,965
Supplemental disclosure of cash flow information:    
Cash paid during the period for interest, net of capitalized interest 5,073 5,147
Cash paid during the period for income taxes, net of refunds $ 922 $ 1,151
v3.20.1
Note 1 - Description of the Business and Basis of Presentation
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
1.
    Description of the Business and Basis of Presentation
 
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 and metal flatware for sale primarily in the foodservice, retail and business-to-business channels of distribution. Our salesforce 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 the Exchange Act, 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 SEC and can also be found at
www.sec.gov
.
 
Basis of Presentation
 
The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and with the instructions to Form
10
-Q and Item 
10
of Regulation S-
X.
Accordingly, they do
not
include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the
three
month period ended
March 31, 2020
, are
not
necessarily indicative of the results that
may
be expected for the year ending
December 31, 2020
.
 
The balance sheet at
December 31, 2019
, 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, 2019
.
 
Ability to Continue as a
Going Concern
 
The Company’s financial statements have been prepared under the assumption that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and satisfaction of liabilities and commitments in the normal course of business. On
June 1, 2020 (
the “Petition Date”), the Company filed a petition for reorganization in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) under Chapter
11
of the United States Bankruptcy Code (the “Bankruptcy Code”) (see further description in note
2
, Subsequent Event). The Condensed Consolidated Financial Statements do
not
reflect any adjustments that might result from the outcome of our Chapter
11
proceedings. The risks and uncertainties surrounding the Chapter
11
Cases (as defined below), the events of default under our credit agreements, and the results of operations due to the spread of the COVID-
19
(as defined below) pandemic impacting the Company’s business raise substantial doubt as to the Company’s ability to continue as a going concern. Our ability to continue as a going concern is dependent upon, among other things, our ability to become profitable, maintain profitability and successfully implement our Chapter
11
plan of reorganization. As the progress of these plans and transactions is subject to approval of the Bankruptcy Court and, therefore,
not
within our control, successful reorganization and emergence from bankruptcy cannot be considered probable and such plans do
not
alleviate substantial doubt about our ability to continue as a going concern.
v3.20.1
Note 2 - Subsequent Event - Chapter 11 Bankruptcy Filing
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Reorganization under Chapter 11 of US Bankruptcy Code Disclosure [Text Block]
2.
   Subsequent Event - Chapter
11
Bankruptcy Filing
 
Chapter
11
Proceedings
 
On
June 1, 2020,
the Company and certain of its direct and indirect subsidiaries (collectively with the Company, the “Debtors”) filed voluntary petitions (“Bankruptcy Petitions”) for relief under Chapter
11
of the Bankruptcy Code (the “Chapter
11
Cases”) with the Bankruptcy Court. The Debtors’ Chapter
11
Cases are being jointly administered under the caption
In re
Libbey Glass Inc.,
et al.
, Case
No.
20
-
11439
(LSS). Documents filed on the docket of, and other information related to, the Chapter
11
Cases are available free of charge online at https://cases.primeclerk.com/libbey.
 
The Debtors' filing of the Chapter
11
Cases constituted an event of default that accelerated the Debtor's obligations under the following debt instruments:
 
Amended and Restated Credit Agreement, dated as of
February 8, 2010 (
as amended, amended and restated or otherwise modified), among Libbey Glass, Libbey Europe B.V., a Netherlands corporation, the Company, the other subsidiaries of the Company party thereto, JPMorgan Chase Bank, N.A., as administrative agent with respect to the U.S. loans, J.P. Morgan Europe Limited, as administrative agent with respect to the Netherlands loans, the other titled agents party thereto and the lenders party thereto from time to time (the “Prepetition ABL Lenders”) (the “Prepetition ABL Credit Agreement”);
 
Credit Agreement, dated as of
April 9, 2014 (
as amended, amended and restated or otherwise modified), among Libbey Glass, the Company, the other subsidiaries of the Company party thereto, Cortland Capital Market Services LLC, as administrative agent (as successor to Citibank, N.A., in its capacities as administrative agent and collateral agent), and the lenders party thereto from time to time (the “Prepetition Term Loan B Credit Agreement”).
 
Due to the Chapter
11
Cases, the lenders’ ability to exercise certain remedies against the Debtors under their respective credit agreements was automatically stayed as of the Petition Date. Contemporaneous with the filing of the Chapter
11
Cases on the Petition Date, the Prepetition ABL Lenders agreed to forbear from exercising their rights and remedies under the Prepetition ABL Credit Agreement against the subsidiaries of the Company organized in the Netherlands party thereto.
 
Operation and Implications of the Chapter
11
Cases
 
The Debtors are authorized to continue to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As debtors-in-possession under the Bankruptcy Code, the Debtors
may
not
engage in transactions outside the ordinary course of business without the prior approval of the Bankruptcy Court. Further, the Debtors filed a variety of “first day” motions with the Bankruptcy Court requesting permission to continue the Debtor’s business activities in the ordinary course. The Bankruptcy Court entered an order approving the Debtors’ “first day” motions on
June 2, 2020,
on an interim basis.
 
The Company’s financial statements contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. Our ability to continue as a going concern is contingent upon our ability to comply with the financial and other covenants contained in the debtor-in-possession financing (the “DIP Financing”) described in note
5
, the development of, and the Bankruptcy Court's approval of, a Chapter
11
plan of reorganization and our ability to successfully implement a restructuring transaction and Chapter
11
 plan of reorganization and obtain new financing, among other factors. Such conditions raise substantial doubt as to the Company’s ability to continue as a going concern.
 
The Company cannot predict the ultimate outcome of the Chapter
11
Cases. As a result of the Chapter
11
Cases, the realization of assets and the satisfaction of liabilities are subject to uncertainty. While operating as debtors-in-possession under Chapter
11,
the Debtors
may
sell or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary course of business (and subject to restrictions contained in the DIP Financing and applicable orders of the Bankruptcy Court), for amounts other than those reflected in the Company’s financial statements. Further, any restructuring plan
may
impact the amounts and classifications of assets and liabilities reported in our Condensed Consolidated Financial Statements.
 
Financing during the Chapter
11
Cases
 
For details on financing during the Chapter
11
Cases, see note
5
, Borrowings, for discussion of the DIP Financing, which provides up to
$160
million, exclusive of a portion of prepetition term loans to be rolled up in accordance with the terms of the DIP Term Loan (as defined below), in senior secured, super-priority financing, subject to the terms, conditions, and priorities set forth in the applicable definitive documentation and orders of the Bankruptcy Court.
 
Significant Bankruptcy Court Actions
 
On
June 2, 2020
at the
first
-day hearings of the Chapter
11
Cases, the Bankruptcy Court issued certain interim and final orders related to the Debtors’ business. These orders authorized the Debtors to, among other things, enter into the DIP Financing (described in note
5
), pay certain prepetition employee and retiree expenses and benefits, use their existing cash management system, maintain and administer certain customer programs, pay certain critical and foreign vendors and pay certain prepetition taxes and related fees. In addition, during the
first
-day hearings, the Bankruptcy Court set
July 2, 2020
as the date for the
second
-day hearings in the Chapter
11
Cases. We expect that at the
second
-day hearings the Bankruptcy Court will consider issuing final orders related to the matters approved in the interim orders as well as certain other related matters. These orders are significant because they allow us to operate our businesses in the normal course.
 
NYSE American Listing Status
 
The Company’s common stock (the “Common Stock”) was previously traded on the NYSE American LLC (the “NYSE American”) exchange under the symbol “LBY.” On
June 1, 2020,
the staff of NYSE Regulation, Inc. (“NYSE Regulation”) suspended trading of the Common Stock on the NYSE American and notified the Company that NYSE Regulation would file a delisting application with the SEC to delist the Common Stock from the NYSE American. NYSE Regulation filed such delisting application on Form
25
on
June 
10,
2020,
and the delisting will be effective
10
days thereafter. Our Common Stock began trading on the OTC Pink marketplace under the symbol “LBYYQ” on
June 2, 2020.
The Company can provide
no
assurance that the Common Stock will continue to trade on this market, whether broker-dealers will continue to provide public quotes of the Common Stock on this market, whether the trading volume of the Common Stock will be sufficient to provide for an efficient trading market or whether quotes for the Common Stock will continue on this market in the future. The transition to over-the-counter markets will
not
affect the Company’s business operations or its SEC reporting requirements and does
not
conflict with or cause an event of default under any of the Company’s material debt or other agreements. Trading prices for the Company’s securities
may
bear little or
no
relationship to the actual recovery, if any, by the holders of the Company’s equity securities as a result of the Chapter
11
Cases. The Company expects that its equity holders will experience a complete loss on their investment, depending on the outcome of the Chapter
11
Cases.
v3.20.1
Note 3 - Significant Accounting Policies
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
3.
    Significant Accounting Policies
 
Cloud Computing Arrangements
 
 
At
March 31, 2020
 and 
December 31, 2019
, the net book value of our implementation costs for hosted cloud computing arrangements included $
0.3
 million in prepaid and other current assets for both periods, as well as $
7.1
 million and
$6.5
million, respectively, in other assets on the Condensed Consolidated Balance Sheets. Amortization expense for the 
three
-month periods
 ended
March 31, 2020
and
2019
was immaterial.
 
Stock-Based Compensation Expense
 
Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
 
   
Three months ended March 31,
 
(dollars in thousands)
 
2020
   
2019
 
Stock-based compensation expense
  $
534
    $
942
 
 
New Accounting Standards
 
Each change to U.S. GAAP is established by the Financial Accounting Standards Board (“FASB”) in the form of an Accounting Standards Update (“ASU”) to the FASB’s Accounting Standards Codification (“ASC”). We consider the applicability and impact of all ASUs. ASUs
not
listed below were assessed and either were determined to be
not
applicable or are expected to have minimal impact on the Company’s Condensed Consolidated Financial Statements.
 
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 applica
tion 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.
 
In
December 2019,
the FASB issued ASU
2019
-
12,
 
Income Taxes 
(Topic
740
): 
Simplifying the Accounting for Income Taxes
. This standard simplifies the accounting for income taxes by removing certain exceptions in Topic
740
 and simplifying other areas. ASU
2019
-
12
 is effective for fiscal years beginning after
December 15, 2020,
including interim periods within those fiscal years. If early adoption is elected, all amendments must be adopted in the same period. We are currently assessing the impact that this standard will have on our Condensed Consolidated Financial Statements.
v3.20.1
Note 4 - Balance Sheet Details
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Supplemental Balance Sheet Disclosures [Text Block]
4.
    Balance Sheet Details
 
The following table provides detail of selected balance sheet items:
 
(dollars in thousands)
 
March 31, 2020
   
December 31, 2019
 
Accounts receivable:
     
 
     
 
Trade receivables   $
60,892
    $
79,829
 
Other receivables    
1,027
     
1,478
 
Total accounts receivable, less allowances of $7,961 and $10,803   $
61,919
    $
81,307
 
                 
Inventories:
     
 
     
 
Finished goods   $
172,097
    $
157,348
 
Work in process    
1,465
     
1,183
 
Raw materials    
4,081
     
4,008
 
Repair parts    
9,996
     
10,254
 
Operating supplies    
1,851
     
2,004
 
Total inventories, less loss provisions of $7,693 and $7,750   $
189,490
    $
174,797
 
                 
Accrued liabilities:
     
 
     
 
Accrued incentives   $
12,052
    $
24,337
 
Other accrued liabilities    
26,493
     
26,320
 
Total accrued liabilities   $
38,545
    $
50,657
 
 
v3.20.1
Note 5 - Borrowings
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Debt Disclosure [Text Block]
5.
    Borrowings
 
Prepetition Debt
 
Prepetition borrowings consist of the following:
 
         
March 31,
   
December 31,
 
(dollars in thousands)
 
Interest Rate
 
Maturity Date
(1)
 
2020
   
2019
 
Prepetition ABL Credit Facility
 
floating
(2)
 
December 7, 2022
  $
68,052
    $
17,386
 
Prepetition Term Loan B
 
floating
(3)
 
April 9, 2021
   
374,700
     
375,800
 
Mexico working capital line of credit   LIBOR + 3.2%
(4)
 
December 14, 2020
   
2,000
     
 
Total borrowings
   
444,752
     
393,186
 
Less — unamortized discount and finance fees
   
1,084
     
1,346
 
Total borrowings — net
   
443,668
     
391,840
 
Less — long term debt due within one year
   
18,124
     
16,124
 
Total long-term portion of borrowings — net
  $
425,544
    $
375,716
 
________________________
(
1
)
 
The filing of our Bankruptcy Petitions constituted an event of default with respect to our Prepetition Term Loan B and Prepetition ABL Credit Facility. The Mexico working capital line of credit was fully repaid and terminated on
June 2, 2020. 
(
2
)
 
The interest rate for the Prepetition ABL Credit Facility is comprised of several different borrowings at various rates. The weighted average rate of all Prepetition ABL Credit Facility borrowings was
2.37
percent at
March 31, 2020
.
(
3
)
 
We have entered into interest rate swaps that effectively fix a series of our future interest payments on a portion of the Prepetition Term Loan B debt. See interest rate swaps in note
9
 for additional details. The Prepetition Term Loan B floating interest rate was
4.01
percent at
March 31, 2020
.
(
4
)
The interest rate at
March 31, 2020
was
4.27
percent.
    
The Prepetition ABL Credit 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
March 31, 2020
,
$15.0
 million in letters of credit and other reserves were outstanding. Remaining unused availability under the Prepetition ABL Credit Facility was
$5.4
 million at
March 31, 2020
, compared to
$68.2
million at
December 31, 2019
.
 
Subsequent Event - Debtor-in-Possession Financing
 
Debtor-in-Possession Credit Facilities
 
The Company has obtained new debtor-in-possession financing consisting of a senior secured asset based revolving credit facility (the “DIP ABL Credit Facility”), and a senior secured super-priority multi-draw term loan facility (the “DIP Term Loan”), and together, collectively, the (“DIP Facilities”).
 
The DIP Facilities are subject to final approval by the Bankruptcy Court and are subject to customary conditions precedent.
 
The DIP ABL
Credit
Facility
 
On
June 3, 2020,
Libbey Glass Inc. and Libbey Europe B.V., as borrowers (the “ABL Borrowers”), entered into the Debtor-In-Possession Credit Agreement (the “DIP ABL Credit Agreement”) with the guarantors party thereto, the lenders party thereto from time to time, and JPMorgan Chase Bank, N.A., as administrative agent. The lenders under the DIP ABL Credit Agreement are the same as the existing lenders under the Prepetition ABL Credit Agreement.
 
The DIP ABL Credit Facility provides for a secured debtor-in-possession revolving credit facility in an aggregate principal amount of up to
$100.0
million, subject to a borrowing base comprised of certain inventory and accounts receivables, largely consistent with the borrowing base under the Prepetition ABL Credit Facility.
 
As a result of the filing of the Chapter
11
Cases, all derivative contracts were terminated. Those Terminated Swap Obligations (as defined in the DIP ABL Credit Agreement) remain outstanding; however such amounts do
not
reduce the borrowing capacity of the DIP ABL Credit Facility.
 
Loans under the DIP ABL Credit Facility bear interest, at the option of the ABL Borrowers, of either (
1
) the Adjusted LIBO Rate (as defined in the DIP ABL Credit Agreement), subject to a
1.00
percent floor, plus
3.50
percent per annum or (
2
) the CB Floating Rate (as defined in the DIP ABL Credit Agreement) plus
2.50
percent per annum. Terminated Swap Obligations (as defined in the DIP ABL Credit Agreement) bear interest, at the option of the ABL Borrowers of either (i) the Adjusted LIBO Rate, subject to a
1.00
percent floor, plus
4.50
percent per annum or (
2
) the CB Floating Rate plus
3.50
percent per annum. The DIP ABL Credit Facility matures on the earliest of (a) the date that is
one hundred eighty
(
180
) days after the Petition Date, (b) the consummation of a sale of all or substantially all of the Debtors’ assets, (c) if the Final Financing Order (as defined in the DIP ABL Credit Agreement) has
not
been entered, the date that is
thirty-five
(
35
) days after the Petition Date (or such later date to which the deadline for the entry of the Final Financing Order
may
be extended), (d) the effective date of a reorganization plan, (e) the maturity date (as defined in the DIP Term Loan Agreement) or (f) any earlier date on which the borrowings are permanently reduced to
zero
or otherwise terminated pursuant to the terms of the DIP ABL Credit Agreement.
 
Certain advances under the DIP ABL Credit Facility include the repayment (or deemed repayment) of certain Prepetition ABL Credit Facility obligations with a corresponding dollar-for-dollar increase in the DIP ABL Credit Facility and the assumption or deemed re-issuance of Letters of Credit, Banking Services Obligations and Swap Obligations (as each term is defined in the Prepetition ABL Credit Agreement). Letters of Credit and other reserves are applied against the
$100.0
million borrowing limit. The DIP ABL Credit Agreement requires that all other proceeds or advances under the DIP ABL Credit Facility be used only for ordinary course general corporate and working capital purposes, costs of administration of the Chapter
11
Cases, certain professional fees and fees and expenses relating to the DIP Facilities, in each case, in accordance with a cash flow budget that will be updated periodically, subject to certain permitted variances.
 
The DIP ABL Credit Facility has:
 
 
a senior lien on Prepetition ABL Priority Collateral (as defined in the Interim Order),
 
 
a priority lien on
100
percent of the equity of the foreign subsidiaries,
 
 
a priority lien on certain foreign collateral, and
 
 
a junior lien on Prepetition Term Loan Priority Collateral (as defined in the Interim Order).
 
DIP Term Loan
 
On
June 3, 2020,
the Company, Libbey Glass Inc., as borrower, the other Debtors, the other guarantors party thereto, Cortland Capital Market Services LLC, as administrative agent and collateral agent, and the lenders party thereto from time to time entered into the Superpriority Secured Debtor-In-Possession Credit Agreement (the “DIP Term Loan Credit Agreement” and, together with the DIP ABL Credit Agreement, the “DIP Credit Agreements”). The lenders under the DIP Term Loan Credit Agreement are certain lenders under the Prepetition Term Loan B Credit Agreement.
 
The DIP Term Loan is a multi-draw senior secured debtor-in-possession facility comprised of
$60.0
million in new money term loans and a “roll-up” of outstanding prepetition term loan obligations of an aggregate amount of
$60.0
million. A draw in the principal amount of
$30.0
million was made available upon entry of the interim order by the Bankruptcy Court (the “Interim Order”) on
June 3, 2020,
with the remaining amount to become available upon entry of a final order by the Bankruptcy Court (the “Final Order”).
 
The DIP Term Loan bears interest at a percentage per annum equal to: (i) for Eurocurrency Rate Loans, the Eurocurrency Rate (as defined in the DIP Term Loan Credit Agreement), subject to a
1.00
percent floor, plus
11.00
percent and (ii) for Base Rate Loans, the Base Rate (as defined in the DIP Term Loan Credit Agreement), subject to a
2.00
percent floor, plus
10.00
percent. The Roll-Up Loans (as defined in the DIP Term Loan Credit Agreement) bear interest at a percentage per annum equal to: (i) for Eurocurrency Rate Loans, (A) the Eurocurrency Rate, subject to a
1.00
percent floor, plus
1.00
percent payable in cash plus (B)
2.00
percent paid-in-kind (PIK) and (ii) for Base Rate Loans, (A) the Base Rate, subject to a
2.00
percent floor, plus
0.00
percent payable in cash plus (B)
2.00
percent PIK.
 
The DIP Term Loan matures on the earliest of (i)
thirty-five
(
35
) days following the Petition Date, or such later date as agreed to by the Required Lenders (as defined in the DIP Term Loan Credit Agreement) if the Final Order shall
not
have been entered by such date, (ii) the effective date of any Chapter
11
reorganization plan of any Debtor, (iii) the date on which all or substantially all of the assets of the Debtors are sold in a sale under a Chapter
11
plan or pursuant to Section
363
of the Bankruptcy Code, (iv)
one hundred eighty
(
180
) days following the Petition Date, and (v) the date that all loans shall become due and payable in full in accordance with the terms of the DIP Term Loan Credit Agreement.    
 
The DIP Term Loan has:
 
 
a senior lien on the Prepetition Term Loan B Priority Collateral (as defined in the Interim Order),
 
 
a junior lien on
100
percent of the equity in the foreign subsidiaries,
 
 
a junior lien on certain foreign collateral, and
 
 
a junior lien on the Prepetition ABL Priority Collateral (as defined in the Interim Order).
 
The DIP Facilities
 
The DIP Facilities contain customary representations, warranties and covenants that are typical and customary for debtor-in-possession facilities of this type, including, but
not
limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of other indebtedness, investments, loans and advances, transactions with affiliates, and compliance with case milestones. The DIP Credit Agreements also contain customary events of default, including as a result of certain events occurring in the Chapter
11
Cases. 
 
On
June 3, 2020,
the Bankruptcy Court approved an Interim Order authorizing the Debtors to pay certain fees related to the DIP Facilities in accordance with the applicable commitment and fee letters.
 
These DIP Facilities, coupled with our normal operating cash flows, are providing liquidity to support operations and our continued service of customers and end users globally during the court-supervised process.
 
The foregoing summaries of the DIP Facilities do
not
purport to be complete descriptions and are qualified in their entirety by reference to the complete text of both the DIP Term Loan Credit Agreement and the DIP ABL Credit Agreement, which were filed with a Current Report on Form
8
-K on
June 9, 2020, 
as Exhibit
4.1
 and Exhibit
4.2,
respectively, and incorporated herein by reference.
v3.20.1
Note 6 - Income Taxes
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
6.
    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 (
34.9
) percent for the
three
months ended
March 31, 2020
, compared to
22.2
 percent for the
three
months ended
March 31, 2019
. Our effective tax rate for the
three
months ended
March 31, 2020
, was negative because the Company recorded positive tax expense despite incurring an overall pretax loss. This occurred because the Company recorded valuation allowances against the deferred tax assets in all of the jurisdictions in which it operates. These valuation allowances resulted from Management's conclusion that the Company is
not
more likely than
not
to realize future tax benefits from deferred tax assets due to Management's opinion that there is substantial doubt that the Company will be able to continue as a going concern within
one
year of the date of the financial statements.
 
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. We believe that our tax reserves related to uncertain tax positions are adequate at this time.
v3.20.1
Note 7 - Pension and Non-pension Post-retirement Benefits
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Retirement Benefits [Text Block]
7.
    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 March 31,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2020
   
2019
   
2020
   
2019
   
2020
   
2019
 
Service cost
  $
858
    $
783
    $
372
    $
259
    $
1,230
    $
1,042
 
Interest cost
   
2,952
     
3,382
     
841
     
769
     
3,793
     
4,151
 
Expected return on plan assets
   
(5,164
)    
(5,193
)    
     
     
(5,164
)    
(5,193
)
Amortization of unrecognized:
                                               
Prior service cost (credit)
   
     
     
(49
)    
(50
)    
(49
)    
(50
)
Actuarial loss
   
1,857
     
1,087
     
228
     
103
     
2,085
     
1,190
 
Pension expense
  $
503
    $
59
    $
1,392
    $
1,081
    $
1,895
    $
1,140
 
 
We have contributed $
1.0
 million of cash to our pension plans for the
three
months ended
March 31, 2020.
 Pension contributions for the remainder of
2020
are estimated to be $
1.6
 million.
 
The provision for our non-pension, post-retirement, benefit expense consists of the following:
 
Three months ended March 31,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2020
   
2019
   
2020
   
2019
   
2020
   
2019
 
Service cost
  $
110
    $
110
    $
    $
    $
110
    $
110
 
Interest cost
   
396
     
469
     
7
     
9
     
403
     
478
 
Amortization of unrecognized:
                                               
Prior service (credit)
   
(71
)    
(70
)    
     
     
(71
)    
(70
)
Actuarial (gain)
   
(62
)    
(82
)    
(19
)    
(18
)    
(81
)    
(100
)
Non-pension post-retirement benefit expense
  $
373
    $
427
    $
(12
)   $
(9
)   $
361
    $
418
 
 
Our
2020
estimate of non-pension cash payments is $
3.9
 million, of which we have paid $
0.8
 million for the
three
months ended
March 31, 2020
.
v3.20.1
Note 8 - Net Loss Per Share of Common Stock
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Earnings Per Share [Text Block]
8.
    Net Loss per Share of Common Stock
 
The following table sets forth the computation of basic and diluted loss per share:
 
   
Three months ended March 31,
 
(dollars in thousands, except earnings per share)
 
2020
   
2019
 
Numerator for earnings per share:
     
 
     
 
Net loss that is available to common shareholders
  $
(78,748
)   $
(4,542
)
                 
Denominator for basic earnings per share:
     
 
     
 
Weighted average shares outstanding
   
22,820,119
     
22,262,565
 
                 
Denominator for diluted earnings per share:
     
 
     
 
Effect of stock options and restricted stock units
   
     
 
Adjusted weighted average shares and assumed conversions
   
22,820,119
     
22,262,565
 
                 
Basic loss per share
  $
(3.45
)   $
(0.20
)
                 
Diluted loss per share
  $
(3.45
)   $
(0.20
)
                 
Anti-dilutive shares excluded from computation of diluted loss per share
   
1,771,269
     
1,483,470
 
 
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.
v3.20.1
Note 9 - Derivatives
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Derivative Instruments and Hedging Activities Disclosure [Text Block]
9.
    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. Prior to
March 31, 2020,
these derivatives qualified for hedge accounting since the hedges were highly effective, and we designated and documented contemporaneously the hedging relationships involving these derivative instruments. Due to the Company's credit risk profile and changes in the probability of the forecasted transactions being hedged, we concluded we
no
longer met the criteria for the application of hedge accounting as of
March 31, 2020.
As a result, amounts related to the hedging relationship previously recorded in AOCI were reclassified to earnings. In addition, the filing of the Chapter
11
Cases resulted in the termination of all our derivative contracts.
 
The counterparties for the derivative agreements are rated BBB+ or better as of
March 31, 2020
, by Standard & Poor’s.
 
Fair Values
 
The following table provides the fair values of our derivative financial instruments for the periods presented:
 
   
 
 
Fair Value of Derivative Assets
 
(dollars in thousands)
 
Balance Sheet Location
 
March 31, 2020
   
December 31, 2019
 
Derivatives not designated as hedging instruments:                    
Natural gas contracts  
Other assets
  $
47
     
 
Total undesignated derivative assets  
 
  $
47
    $
 
 
       
Fair Value of Derivative Liabilities
 
Derivatives designated as hedging instruments:                    
Interest rate swaps
 
Accrued liabilities
  $
    $
2,931
 
Interest rate swaps
 
Other long-term liabilities
   
     
11,632
 
Natural gas contracts
 
Accrued liabilities
   
     
836
 
Natural gas contracts
 
Other long-term liabilities
   
     
3
 
Total designated derivative liabilities
 
 
  $
    $
15,402
 
                     
Derivatives not designated as hedging instruments:                    
Interest rate contract  
Accrued liabilities
   
4,446
     
 
Interest rate contract  
Other long-term liabilities
   
8,056
     
 
Natural gas contracts  
Accrued liabilities
   
468
     
 
Total undesignated derivative liabilities  
 
   
12,970
     
 
Total derivative liabilities  
 
  $
12,970
    $
15,402
 
 
The following table presents cash settlements (paid) received related to the below derivatives:
 
   
Three months ended March 31,
 
(dollars in thousands)
 
2020
   
2019
 
Natural gas contracts
  $
(617
)   $
128
 
Interest rate swaps
   
(529
)    
344
 
Total
  $
(1,146
)   $
472
 
 
The following table provides a summary of the impacts of derivative gain (loss) on the Condensed Consolidated Statements of Operations and other comprehensive income (OCI):
 
       
Three months ended March 31,
 
(dollars in thousands)
 
Location
 
2020
   
2019
 
Derivative gain (loss) recognized into OCI:
     
 
 
 
 
 
 
 
Natural gas contracts
 
OCI
  $
(199
)   $
(37
)
Interest rate swaps
 
OCI
   
1,273
     
(3,478
)
Total
 
 
  $
1,074
    $
(3,515
)
                     
Derivative gain (loss) reclassified from accumulated OCI to current earnings:
     
 
 
 
 
 
 
 
Natural gas contracts
 
Cost of Sales
  $
(617
)   $
128
 
Interest rate swaps
 
Interest expense
   
(788
)    
355
 
Total
 
 
  $
(1,405
)   $
483
 
                     
Derivatives de-designated as hedging instruments:                    
Derivative gain (loss) recognized in current earnings:
                   
Interest rate swaps  
Other income (expense)
  $
(12,502
)   $
 
Natural gas contracts  
Other income (expense)
   
(421
)    
 
Total  
 
  $
(12,923
)   $
 
 
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
 
March 31, 2020
   
December 31, 2019
 
Natural gas contracts
 
Millions of British Thermal Units (MMBTUs)
   
3,060,000
     
2,460,000
 
 
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. At
March 31, 2020,
we evaluated our natural gas hedging relationships and, based on the Company's credit risk, concluded that it was
no
longer probable that we had an effective hedging relationship. As a result, amounts previously deferred in AOCI were reclassified to earnings, resulting in
$0.4
million of expense recognized in other income (expense). See note
15
, Other Income (Expense).
 
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 Prepetition Term Loan B. Prior to
March 31, 2020,
the interest rate swaps effectively converted a portion of our Prepetition 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
)
 
Includes a LIBOR portion that is fixed at 
3.19
percent plus the credit spread.
 
Our interest rate swaps are valued using the market standard methodology of netting discounted expected future variable cash receipts, the discounted future fixed cash payments, and credit risk of both the counterparties and the Company. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves.
 
At
March 31, 2020,
our remaining interest rate swaps
no
longer qualified to be designated as a cash flow hedge 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. Due to the Company's credit risk profile and changes in the probability of the forecasted transactions
no
longer occurring, we concluded we
no
longer met the criteria for the application of hedge accounting as of
March 31, 2020.
As a result, amounts previously deferred in AOCI were reclassified to earnings, resulting in
$12.5
 million of expense recognized in other income (expense). See note
15
, Other Income (Expense).
v3.20.1
Note 10 - Accumulated Other Comprehensive Income (Loss)
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Comprehensive Income (Loss) Note [Text Block]
10.
    Accumulated Other Comprehensive Income (Loss)
 
Accumulated other comprehensive income (loss) (AOCI), net of tax, is as follows:
 
Three months ended March 31, 2020 (dollars in thousands)
 
Foreign Currency Translation
     
Derivative Instruments
 
 
 
Pension and Other Post-retirement Benefits
 
 
 
Accumulated Other Comprehensive Loss
 
Balance on December 31, 2019   $
(25,147
)     $
(11,432
)
 
  $
(87,367
)
 
  $
(123,946
)
                                       
Amounts recognized into AOCI    
(1,637
)      
1,074
 
 
   
 
 
   
(563
)
Currency impact
   
       
 
 
   
2,253
 
 
   
2,253
 
Amounts reclassified from AOCI
   
       
1,405
 
(1)
   
1,884
 
(2)
   
3,289
 
Amounts reclassified from AOCI for derivatives de-designated    
       
12,923
 
(3)
   
 
 
   
12,923
 
Tax effect    
       
(4,405
)
 
   
713
 
 
   
(3,692
)
Other comprehensive income (loss), net of tax    
(1,637
)      
10,997
 
 
   
4,850
 
 
   
14,210
 
Balance on March 31, 2020   $
(26,784
)     $
(435
)
 
  $
(82,517
)
 
  $
(109,736
)
 
Three months ended March 31, 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
   
244
       
(3,515
)
 
   
 
 
   
(3,271
)
Currency impact
   
       
 
 
   
34
 
 
   
34
 
Amounts reclassified from AOCI
   
       
(483
)
(1)
   
970
 
(2)
   
487
 
Tax effect
   
(270
)      
944
 
 
   
(227
)
 
   
447
 
Other comprehensive income (loss), net of tax
   
(26
)      
(3,054
)
 
   
777
 
 
   
(2,303
)
Balance on March 31, 2019
  $
(23,266
)     $
(5,920
)
 
  $
(87,522
)
 
  $
(116,708
)
_________________________
(
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
9
 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
7
 for additional information.
(
3
)
Libbey de-designated the interest rate swaps and natural gas swaps as of
March 31, 2020,
as the transactions were
no
longer probable of occurring. Amounts were reclassified to other income (expense). See note
9
for additional information.
v3.20.1
Note 11 - Segments
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Segment Reporting Disclosure [Text Block]
11.
    Segments
 
Our segments are 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 glassware products 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 for the Company. We do
not
have any customers who represent
10
 percent or more of total sales. Inter-segment sales are consummated at arm’s length and are reflected at end-market reporting below.
 
   
Three months ended March 31,
 
(dollars in thousands)
 
2020
   
2019
 
Net Sales:
     
 
     
 
U.S. & Canada
  $
95,876
    $
109,906
 
Latin America
   
26,643
     
30,401
 
EMEA
   
25,280
     
28,042
 
Other
   
2,722
     
6,617
 
Consolidated
  $
150,521
    $
174,966
 
                 
Segment EBIT:
     
 
     
 
U.S. & Canada
  $
6,898
    $
9,797
 
Latin America
   
4,521
     
649
 
EMEA
   
(1,610
)    
(50
)
Other
   
(1,372
)    
(1,152
)
Total Segment EBIT
  $
8,437
    $
9,244
 
                 
Reconciliation
 of Segment EBIT to Net Loss:
     
 
     
 
Segment EBIT
  $
8,437
    $
9,244
 
Retained corporate costs
   
(7,198
)    
(9,450
)
Asset impairments (note 17)
   
(38,535
)    
 
Fees associated with strategic initiative
   
(406
)    
 
Debt refinancing & prepetition reorganization charges (note 15)    
(3,356
)    
 
Workforce reduction
   
(517
)    
 
Loss on derivatives de-designated as hedging instruments    
(12,923
)    
 
Employee benefit liability adjustment
(1)
(note 15)
   
1,720
     
 
Interest expense
   
(5,591
)    
(5,632
)
(Provision) benefit for income taxes
   
(20,379
)    
1,296
 
Net loss
  $
(78,748
)   $
(4,542
)
                 
Depreciation & Amortization:
     
 
     
 
U.S. & Canada
  $
2,963
    $
3,133
 
Latin America
   
3,368
     
3,780
 
EMEA
   
1,314
     
1,699
 
Other
   
823
     
882
 
Corporate
   
377
     
437
 
Consolidated
  $
8,845
    $
9,931
 
                 
Capital Expenditures:
     
 
     
 
U.S. & Canada
  $
4,287
    $
3,384
 
Latin America
   
904
     
4,191
 
EMEA
   
1,190
     
2,346
 
Other
   
24
     
259
 
Corporate
   
3
     
181
 
Consolidated
  $
6,408
    $
10,361
 
______________________
(
1
Relates to a post-employment benefit liability adjustment within the U.S. and Canada Segment that was
not
related to current period operations and, therefore, excluded from Segment EBIT.
v3.20.1
Note 12 - Revenue
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Revenue from Contract with Customer [Text Block]
12.
    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 ended
 
March 31, 2020
and
2019
. There were
no
material contract assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheets as of
March 31, 2020
and
December 31, 2019
.
 
Disaggregation of Revenue:
 
The following table presents our net sales disaggregated by business channel:
   
Three months ended March 31,
 
(dollars in thousands)
 
2020
   
2019
 
Foodservice
  $
55,326
    $
70,817
 
Retail
   
50,651
     
55,573
 
Business-to-business
   
44,544
     
48,576
 
Consolidated
  $
150,521
    $
174,966
 
 
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.
v3.20.1
Note 13 - Fair Value
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Fair Value Disclosures [Text Block]
13.
    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)
 
March 31, 2020
 
December 31, 2019
(dollars in thousands)
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Commodity futures natural gas contracts
  $
 
  $
 
  $
(421
)
  $
(421
)
  $
 
  $
(839
)
  $
 
  $
(839
)
Interest rate swaps    
 
   
 
   
(12,502
)
   
(12,502
)
   
 
   
(14,563
)
   
 
   
(14,563
)
Net derivative asset (liability)   $
 
  $
 
  $
(12,923
)
  $
(12,923
)
  $
 
  $
(15,402
)
  $
 
  $
(15,402
)
 
The fair values of our commodity futures natural gas contracts are determined using observable market inputs and credit risk of both the counterparties and the Company. The fair value of our interest rate swaps is based on the market standard methodology of netting discounted expected future variable cash receipts, the discounted future fixed cash payments, and credit risk of both the counterparties and the Company. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level
2
of the fair value hierarchy, the credit valuation adjustments associated with the Company's derivatives utilize Level
3
inputs, such as trading levels of our currently traded outstanding debt, credit ratings and collateral values, to evaluate the likelihood of default by the Company and the counterparties. As of 
March 
31,
2020,
we determined that the effect of credit valuation adjustments on the valuation of our derivative positions was significant to the overall valuation. We recorded a credit value adjustment of
$9.7
million to the overall valuation of the Company’s interest rate swaps and natural gas contracts. As a result, we concluded our derivative valuations would be classified in Level
3
of the fair value hierarchy at
March 31, 2020.
 
On
January 1, 2020,
we had
no
derivatives positions for which the Company utilized significant Level
3
inputs to determine fair value. During the
three
months ended
March 31, 2020,
we concluded our derivative positions previously categorized as Level
2
now meet the criteria for a Level
3
classification transfer. The Company recognizes transfers into and out of the levels indicated above at the end of a reporting period. There were
no
other Level
3
activities to reconcile during the period. At
March 31, 2020,
the ending balance in the Level
3
fair value hierarchy was a
$12.9
million net derivative liability.
 
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
 
March 31, 2020
   
December 31, 2019
 
(dollars in thousands)
 
Hierarchy Level
 
Carrying Amount
   
Fair Value
   
Carrying Amount
   
Fair Value
 
Prepetition Term Loan B
 
Level 2
  $
374,700
    $
168,615
    $
375,800
    $
304,398
 
 
The fair value of our Prepetition Term Loan B has been calculated based on quoted market prices for the same or similar issues, and the fair value of our Prepetition ABL Credit Facility and Mexico working capital line of credit approximate 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.
v3.20.1
Note 14 - Leases
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]
14.
     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. During the
first
quarter of
2020,
we signed an amendment to a lease that, among other things, extended the term of a real estate lease
ten
years.
 
The following table reconciles the undiscounted cash flows to the operating lease liabilities recorded on the balance sheet:
 
(dollars in thousands)
 
March 31, 2020
     
December 31, 2019
 
2020 (remainder of year as of March 31, 2020)
  $
11,027
    $
14,970
 
2021
   
13,401
     
11,255
 
2022
   
12,380
     
9,987
 
2023
   
11,731
     
9,283
 
2024
   
10,332
     
8,005
 
2025 and thereafter
   
29,797
     
15,768
 
Total minimum lease payments
   
88,668
     
69,268
 
Less: interest
   
(12,563
)    
(8,176
)
Present value of future minimum lease payments
   
76,105
     
61,092
 
Less: lease liabilities (current portion)
   
(11,585
)    
(12,769
)
Noncurrent lease liabilities
  $
64,520
    $
48,323
 
 
v3.20.1
Note 15 - Other Income (Expense)
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Other Income and Other Expense Disclosure [Text Block]
15.
     Other Income (Expense)
 
Items included in other income (expense) in the Condensed Consolidated Statements of Operations are as follows:   
 
   
Three months ended March 31,
 
(dollars in thousands)
 
2020
   
2019
 
Gain (loss) on currency transactions
  $
4,779
    $
(1,163
)
Pension and non-pension benefits, excluding service cost
   
(916
)    
(406
)
Loss on derivatives de-designated as hedging instruments (note 9)    
(12,923
)    
 
Debt refinancing fees    
(2,088
)    
 
Prepetition reorganization charges    
(1,268
)    
 
Employee benefit liability adjustment    
1,720
     
 
Other non-operating income (expense)
   
44
     
(15
)
Other income (expense)
  $
(10,652
)   $
(1,584
)
v3.20.1
Note 16 - Contingencies
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Contingencies Disclosure [Text Block]
16.
    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, 2019
. Please refer to Part II, Item
8.
“Financial Statements and Supplementary Data,” note
17,
Contingencies, included in our
2019
Annual Report on Form
10
-K for a more complete discussion.
 
On
June 1, 2020,
the Debtors filed voluntary petitions for relief under Chapter
11
of the Bankruptcy Code in the Bankruptcy Court. As a result of such bankruptcy filings, substantially all proceedings pending against the Debtors have been stayed by operation of Section
362
(a) of the Bankruptcy Code (see further description in note
2
, Subsequent Event).
 
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.
v3.20.1
Note 17 - Purchased Intangible Assets and Goodwill
3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
17.
     Purchased Intangible Assets and Goodwill
            
Purchased Intangibles
 
Changes in purchased intangibles balances are as follows:
(dollars in thousands)
 
Three months ended March 31, 2020
 
Beginning balance December 31, 2019
  $
11,875
 
Amortization
   
(38
)
Impairment
(see below)
   
(104
)
Foreign currency impact
   
(31
)
Ending balance March 31, 2020
  $
11,702
 
 
Purchased intangible assets are composed of the following:
(dollars in thousands)
 
March 31, 2020
   
December 31, 2019
 
Indefinite life intangible assets
  $
10,983
    $
11,104
 
Definite life intangible assets, net of accumulated amortization of $20,486 and $20,507    
719
     
771
 
Total
  $
11,702
    $
11,875
 
 
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.
As of
March 31, 2020,
we tested Libbey Holland's indefinite life intangible asset (Royal Leerdam
®
trade name) for impairment using a relief from royalty method to determine the fair market value that was then compared to the carrying value of the asset. The sales forecast for Royal Leerdam
®
branded product was lowered due to declining demand as a result of COVID-
19
and macroeconomic uncertainty in the near-term. 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
$0.1
 million during the
first
 quarter of
2020
 in our EMEA reporting segment. The inputs used for this analysis are considered Level
3
inputs in the fair value hierarchy (see note
13
). With the Royal Leerdam
® 
trade name fair value equaling its carrying value at
March 31, 2020,
there is potential of future impairment for the remaining intangible asset balance of
$0.8
million if the demand does
not
recover in future periods as expected.
 
The remaining definite life intangible asset at
March 31, 2020
consists of customer relationships that is amortized over a period of
20
years with a remaining life of
4.8
 years. The future annual amortization expense remains unchanged from what was disclosed in the Form
10
-K for the year ended
December 31, 2019
.
 
Goodwill
 
Changes in goodwill balances are as follows:
(dollars in thousands)
 
U.S. & Canada
   
Latin America
   
Total
 
Beginning balance December 31, 2019:
                       
Goodwill
  $
43,872
    $
125,681
    $
169,553
 
Accumulated impairment losses
   
(5,441
)    
(125,681
)    
(131,122
)
Net beginning balance
   
38,431
     
     
38,431
 
Impairment
(see below)
   
(38,431
)    
     
(38,431
)
Ending balance March 31, 2020:
                       
Goodwill
   
43,872
     
125,681
     
169,553