LIBBEY INC, 10-K filed on 2/27/2019
Annual Report
v3.10.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Feb. 21, 2019
Jun. 30, 2018
Entity Information [Line Items]      
Entity Registrant Name LIBBEY INC    
Entity Central Index Key 0000902274    
Current Fiscal Year End Date --12-31    
Entity Filer Category Accelerated Filer    
Document Type 10-K    
Document Period End Date Dec. 31, 2018    
Document Fiscal Year Focus 2018    
Document Fiscal Period Focus FY    
Amendment Flag false    
Entity Common Stock, Shares Outstanding   22,157,700  
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Public Float     $ 177,382,478
Entity Emerging Growth Company false    
Entity Small Business true    
Entity Shell Company false    
v3.10.0.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2018
Dec. 31, 2017
ASSETS    
Cash and cash equivalents $ 25,066 $ 24,696
Accounts receivable — net 83,977 89,997
Inventories — net 192,103 187,886
Prepaid and other current assets 16,522 12,550
Total current assets 317,668 315,129
Pension asset 0 2,939
Purchased intangible assets — net 13,385 14,565
Goodwill 84,412 84,412
Deferred income taxes 26,090 24,892
Other assets 7,660 9,627
Property, plant and equipment — net 264,960 265,675
Total assets 714,175 717,239
LIABILITIES AND SHAREHOLDERS' EQUITY    
Accounts payable 74,836 78,346
Salaries and wages 27,924 27,409
Accrued liabilities 43,728 43,920
Accrued income taxes 3,639 1,862
Pension liability (current portion) 3,282 2,185
Non-pension post-retirement benefits (current portion) 3,951 4,185
Long-term debt due within one year 4,400 7,485
Total current liabilities 161,760 165,392
Long-term debt 393,300 376,905
Pension liability 45,206 43,555
Non-pension post-retirement benefits 43,015 49,758
Deferred income taxes 2,755 1,850
Other long-term liabilities 18,246 12,885
Total liabilities 664,282 650,345
Contingencies (note 17)
Shareholders’ equity:    
Common stock, par value $.01 per share, 50,000,000 shares authorized, 22,157,220 shares issued in 2018 (22,018,010 shares issued in 2017) 222 220
Capital in excess of par value 335,517 333,011
Retained deficit (171,441) (161,165)
Accumulated other comprehensive loss (114,405) (105,172)
Total shareholders’ equity 49,893 66,894
Total liabilities and shareholders’ equity $ 714,175 $ 717,239
v3.10.0.1
Consolidated Balance Sheets Parentheticals - $ / shares
Dec. 31, 2018
Dec. 31, 2017
Common stock, par value $ 0.01 $ 0.01
Common stock, shares authorized 50,000,000 50,000,000
Common stock, shares issued 22,157,220 22,018,010
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Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Total Revenues $ 801,093 $ 785,156
Cost of sales 646,202 631,115
Gross profit 154,891 154,041
Selling, general and administrative expenses 127,851 126,205
Goodwill impairment 0 79,700
Income (loss) from operations 27,040 (51,864)
Other income (expense) (2,764) (5,306)
Earnings (loss) before interest and income taxes 24,276 (57,170)
Interest expense 21,979 20,400
Income (loss) before income taxes 2,297 (77,570)
Provision for income taxes 10,253 15,798
Net loss $ (7,956) $ (93,368)
Net loss per share:    
Basic $ (0.36) $ (4.24)
Diluted $ (0.36) $ (4.24)
Weighted average shares:    
Basic 22,180,102 22,030,672
Diluted 22,180,102 22,030,672
Dividends declared per share $ 0.1175 $ 0.47
Net sales    
Total Revenues $ 797,858 $ 781,828
Freight billed to customers    
Total Revenues $ 3,235 $ 3,328
v3.10.0.1
Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Net loss $ (7,956) $ (93,368)
Other comprehensive income (loss):    
Pension and other post-retirement benefit adjustments, net of tax 1,041 7,514
Change in fair value of derivative instruments, net of tax (2,942) 866
Foreign currency translation adjustments, net of tax (7,057) 11,645
Other comprehensive income (loss), net of tax (8,958) 20,025
Comprehensive income (loss) $ (16,914) $ (73,343)
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Consolidated Statements of Shareholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Capital in Excess of Par Value
Retained Deficit
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Cumulative-effect adjustment | Accounting Standards Update 2016-09 $ 2,310   $ 127 $ 2,183  
Balance, value at Dec. 31, 2016 145,119 $ 219 329,722 (59,625) $ (125,197)
Balance, shares at Dec. 31, 2016   21,864,541      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Net loss (93,368)     (93,368)  
Other comprehensive income (loss) 20,025       20,025
Stock compensation expense 3,372   3,372    
Stock issued, value 418 $ 1 417    
Stock issued, shares   153,469      
Stock withheld for employee taxes (627)   (627)    
Dividends (10,355)     (10,355)  
Balance value at Dec. 31, 2017 66,894 $ 220 333,011 (161,165) (105,172)
Balance, shares at Dec. 31, 2017   22,018,010      
Increase (Decrease) in Stockholders' Equity [Roll Forward]          
Cumulative-effect adjustment | Accounting Standards Update 2017-12 0     275 (275)
Net loss (7,956)     (7,956)  
Other comprehensive income (loss) (8,958)       (8,958)
Stock compensation expense 2,746   2,746    
Stock issued, value 98 $ 2 96    
Stock issued, shares   139,210      
Stock withheld for employee taxes (336)   (336)    
Dividends (2,595)     (2,595)  
Balance value at Dec. 31, 2018 $ 49,893 $ 222 $ 335,517 $ (171,441) $ (114,405)
Balance, shares at Dec. 31, 2018   22,157,220      
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Operating activities:    
Net loss $ (7,956) $ (93,368)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 44,333 45,544
Goodwill impairment 0 79,700
Change in accounts receivable 5,203 (2,698)
Change in inventories (6,424) (13,443)
Change in accounts payable (4,759) 5,574
Accrued interest and amortization of discounts and finance fees 1,158 1,318
Pension & non-pension post-retirement benefits, net (283) 1,680
Accrued liabilities & prepaid expenses 267 2,737
Income taxes 3,591 13,121
Share-based compensation expense 2,827 3,460
Other operating activities (1,087) 1,683
Net cash provided by operating activities 36,870 45,308
Investing activities:    
Additions to property, plant and equipment (45,087) (47,628)
Net cash used in investing activities (45,087) (47,628)
Financing activities:    
Borrowings on ABL credit facility 129,769 34,086
Repayments on ABL credit facility (109,901) (34,086)
Other repayments (3,077) (632)
Repayments on Term Loan B (4,400) (24,400)
Stock options exercised 5 466
Taxes paid on distribution of equity awards (336) (627)
Dividends (2,595) (10,355)
Other financing activities 0 334
Net cash provided by (used in) financing activities 9,465 (35,214)
Effect of exchange rate fluctuations on cash (878) 1,219
Increase (decrease) in cash 370 (36,315)
Cash & cash equivalents at beginning of year 24,696 61,011
Cash & cash equivalents at end of year 25,066 24,696
Supplemental disclosure of cash flow information:    
Cash paid during the year for interest, net of capitalized interest 20,091 18,638
Cash paid during the year for income taxes $ 8,514 $ 3,371
v3.10.0.1
Description of the Business
12 Months Ended
Dec. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of the Business
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.
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Significant Accounting Policies
12 Months Ended
Dec. 31, 2018
Accounting Policies [Abstract]  
Significant Accounting Policies
Significant Accounting Policies
Basis of Presentation The Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31st. The preparation of financial statements and related disclosures in conformity with United States generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.

Revenue Recognition Our customer contracts generally include a single performance obligation, the shipment of specified products, and are recognized at a point in time when control of the product has transferred to the customer. Transfer of control primarily takes place when risk of loss transfers in accordance with applicable shipping terms. Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which we expect to be entitled in exchange for transferring goods or providing services. When applicable, the transaction price includes estimates of variable consideration. We estimate provisions for rebates, customer incentives, allowances, returns and discounts based on the terms of the contracts, historical experience and anticipated customer purchases during the rebate period as sales occur. We continually evaluate the adequacy of these methods used, adjusting our estimates when the amount of consideration to which we expect to be entitled changes. Refund liabilities are included in accrued liabilities on the Consolidated Balance Sheet. Our payment terms are based on customary business practices and can vary by region and customer type, but are generally 0-90 days. Since the term between invoicing and expected payment is less than a year, we do not adjust the transaction price for the effects of a financing component. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate governmental agencies. For contracts with a duration of less than one year, we follow an allowable practical expedient and expense contract acquisition costs when incurred. We do not have any costs to obtain or fulfill a contract that are capitalized under ASC Topic 340-40. For further disclosure on revenue see New Accounting Standards - Adopted below and note 18.

Cost of Sales Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs. Shipping and delivery costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales. In addition, reimbursement of certain pre-production costs is considered a development activity and is included in cost of sales.

Cash and Cash Equivalents We consider all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.

Accounts Receivable and Allowance for Doubtful Accounts We record trade receivables when revenue is recorded in accordance with our revenue recognition policy and relieve accounts receivable when payments are received from customers. The allowance for doubtful accounts is established through charges to the provision for bad debts. We regularly evaluate the adequacy of the allowance for doubtful accounts based on historical trends in collections and write-offs, our judgment as to the probability of collecting accounts and our evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Accounts are determined to be uncollectible when the debt is deemed to be worthless or only recoverable in part and are written off at that time through a charge against the allowance. Generally, we do not require collateral on our accounts receivable.

Inventory Valuation Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method is used for our U.S. glass inventories, which represented 34.9 percent and 32.2 percent of our total inventories in 2018 and 2017, respectively. The remaining inventories are valued using either the first-in, first-out (FIFO) or average cost method. For those inventories valued on the LIFO method, the excess of FIFO cost over LIFO, was $15.9 million and $13.4 million in 2018 and 2017, respectively. Cost includes the cost of materials, direct labor, in-bound freight and the applicable share of manufacturing overhead.

Purchased Intangible Assets and Goodwill Financial Accounting Standards Board Accounting Standards Codification™ ("FASB ASC") Topic 350 - "Intangibles-Goodwill and other" ("FASB ASC 350") requires goodwill and purchased indefinite life intangible assets to be reviewed for impairment annually, or more frequently if impairment indicators arise. Intangible assets with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. As of October 1st of each year, we update our separate impairment evaluations for both goodwill and indefinite life intangible assets. For further disclosure on goodwill and intangibles, see note 4.

Software We account for software in accordance with FASB ASC 350. Software represents the costs of internally developed and/or purchased software for internal use. Capitalized costs include software packages, installation and internal labor costs of employees devoted to the software development project. Costs incurred to modify existing software, providing significant enhancements and creating additional functionality are also capitalized. Once a project is complete, we estimate the useful life of the internal-use software, generally amortizing these costs over a five-year period.

Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally 3 to 14 years for equipment and furnishings and 10 to 40 years for buildings and improvements. Maintenance and repairs are expensed as incurred.
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. See note 5 for further disclosure.
Self-Insurance Reserves Self-insurance reserves reflect the estimated liability for group health and workers' compensation claims not covered by third-party insurance. We accrue estimated losses based on actuarial models and assumptions as well as our historical loss experience. Workers' compensation accruals are recorded at the estimated ultimate payout amounts based on individual case estimates. In addition, we record estimates of incurred-but-not-reported losses based on actuarial models.
Pension and Non-pension Post-retirement Benefits We account for pension and non-pension post-retirement benefits in accordance with FASB ASC Topic 715 - "Compensation-Retirement Benefits" ("FASB ASC 715"). FASB ASC 715 requires recognition of the over-funded or under-funded status of pension and other post-retirement benefit plans on the balance sheet. Under FASB ASC 715, gains and losses, prior service costs and credits and any remaining prior transaction amounts that have not yet been recognized through net periodic benefit cost are recognized in accumulated other comprehensive loss, net of tax effect where appropriate. The service cost component of pension and post-retirement benefit costs is reported within income from operations while the non-service cost components of net benefit cost (interest costs, expected return on assets, amortization of prior service costs, settlement charges and other costs) are recorded in other income (expense).
The U.S. pension plans cover most hourly U.S.-based employees (excluding new hires at Shreveport after December 15, 2008 and at Toledo after September 30, 2010) and those salaried U.S.-based employees hired before January 1, 2006. Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly-owned subsidiary in Mexico. For further discussion see note 8.
We also provide certain post-retirement healthcare and life insurance benefits covering substantially all U.S. and Canadian salaried employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after December 15, 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon reaching a certain age and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. Under a cross-indemnity agreement, Owens-Illinois, Inc. assumed liability for the non-pension, post-retirement benefit of our retirees who had retired as of June 24, 1993. Therefore, the benefits related to these retirees are not included in our liability. For further discussion see note 9.
Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax attribute carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are determined separately for each tax paying component in which we conduct our operations or otherwise incur taxable income or losses.

We are subject to income taxes in the U.S. and various foreign jurisdictions. Management judgment is required in evaluating our tax positions and determining our provision for income taxes. Throughout the course of business, there are numerous transactions and calculations for which the ultimate tax determination is uncertain. When management believes uncertain tax positions may be challenged despite our belief that the tax return positions are supportable, we record unrecognized tax benefits as liabilities in accordance with the requirements of ASC 740. When our judgment with respect to these uncertain tax positions changes as a result of a change in facts and circumstances, such as the outcome of a tax audit, we adjust these liabilities through increases or decreases to the income tax provision. For further discussion see note 7.
Derivatives We account for derivatives in accordance with FASB ASC Topic 815 "Derivatives and Hedging" ("FASB ASC 815"). We hold derivative financial instruments to hedge certain of our interest rate risks associated with long-term debt and commodity price risks associated with forecasted future natural gas requirements. These derivatives qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in earnings. Cash flows from hedges of debt, interest rate swaps and natural gas contracts are classified as operating activities. For further discussion see note 12.
Environmental In accordance with U.S. GAAP, we recognize environmental clean-up liabilities on an undiscounted basis when loss is probable and can be reasonably estimated. The cost of the clean-up is estimated by financial and legal specialists based on current law. Such estimates are based primarily upon the estimated cost of investigation and remediation required, and the likelihood that, where applicable, other potentially responsible parties will not be able to fulfill their commitments at the sites where the Company may be jointly and severally liable.
Foreign Currency Translation Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. The effect of exchange rate changes on transactions denominated in currencies other than the functional currency is recorded in other income (expense). For further detail see note 16.
Stock-Based Compensation Expense We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation — Stock Compensation,” ("FASB ASC 718") and FASB ASC Topic 505-50, “Equity-Based Payments to Non-Employees” ("FASB ASC 505-50"). Stock-based compensation cost is measured based on the fair value of the equity instruments issued. FASB ASC 718 and 505-50 apply to all of our outstanding, unvested, stock-based payment awards.
Treasury Stock Treasury Stock purchases are recorded at cost. During 2018 and 2017, we did not purchase treasury stock. At December 31, 2018, we had 941,250 shares of common stock available for repurchase, as authorized by our Board of Directors.
Research and Development Research and development costs are charged to selling, general and administrative expense in the Consolidated Statements of Operations when incurred. Expenses for 2018 and 2017 were $3.6 million and $3.0 million, respectively.
Advertising Costs We expense all advertising costs as incurred. Expenses for 2018 and 2017 were $6.1 million and $5.3 million, respectively.
Computation of Earnings (Loss) Per Share of Common Stock Basic earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share of common stock is computed using the weighted average number of shares of common stock outstanding plus the dilutive effects of equity-based compensation outstanding during the period using the treasury stock method.
Reclassifications In connection with our adoption of ASU 2017-07, certain pension and non-pension expense amounts in the prior year's financial statements have been reclassified to conform with the current year presentation. See New Accounting Standards - Adopted below.
New Accounting Standards - Adopted

Each change to U.S. GAAP is established by the Financial Accounting Standards Board (FASB) in the form of an accounting standards update (ASU) to the FASB’s Accounting Standards Codification (ASC). We consider the applicability and impact of all ASUs. ASUs not listed below were assessed and either were determined to be not applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements.

On January 1, 2018, we adopted ASU 2014-09, Revenue From Contracts With Customers and all related amendments, also known as ASC Topic 606, using the modified retrospective method. There was no cumulative effect adjustment required as a result of initially applying the new standard to existing contracts at adoption on January 1, 2018, and we expect the impact of adopting the new standard to be immaterial to our Consolidated Statement of Operations on an ongoing basis. Additionally, there was no impact to our Consolidated Balance Sheets. The enhanced disclosure requirements are included in note 18, Revenue. Results for reporting periods beginning on or after January 1, 2018, are presented under ASC Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our previous accounting under ASC Topic 605.

On January 1, 2018, we adopted ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Post-retirement Benefit Cost. ASU 2017-07 improves the presentation of net periodic pension and post-retirement benefit costs. We retrospectively adopted the presentation requirement that the service cost component of pension and post-retirement benefit costs be reported within income from operations. The other components of net benefit cost (interest costs, expected return on assets, amortization of prior service costs, settlement charges and other costs) have been reclassified from cost of sales and selling, general and administrative expenses to other income (expense). On a prospective basis, only the service cost component will be capitalized in inventory or property, plant and equipment, when applicable. The effect of the retrospective presentation change related to the net periodic pension and non-pension benefit costs (credits) on our Consolidated Statement of Operations was as follows:
 
 
Year ended December 31, 2017
(dollars in thousands)
 
Previously Reported
 
Reclassification
 
As Revised
Cost of sales
 
$
634,185

 
$
(3,070
)
 
$
631,115

Selling, general and administrative expenses
 
124,926

 
1,279

 
126,205

Other income (expense)
 
(3,515
)
 
(1,791
)
 
(5,306
)


On January 1, 2018, we early adopted ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. ASU 2017-12 amended the hedge accounting rules to simplify the application of hedge accounting guidance and better portray the economic results of risk management activities in the financial statements. As of January 1, 2018, we recorded a $0.3 million reduction to our retained deficit and an increase in accumulated other comprehensive loss related to our natural gas swap contracts in Mexico that were previously not designated as hedging instruments. On a prospective basis, the change in fair value of these derivatives will be recognized in other comprehensive income (loss) rather than other income (expense) within the Consolidated Statement of Operations. Results and disclosures for reporting periods beginning on or after January 1, 2018, are presented under the new guidance within ASU 2017-12, while prior period amounts and disclosures are not adjusted and continue to be reported in accordance with our previous accounting. See note 12, Derivatives, for further details and disclosures.

On December 31, 2018, we early adopted ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20): Disclosure Framework - Changes to the Disclosure Requirements for Defined Benefit Plans. This update modifies the annual disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. ASU 2018-14 removes disclosures that are no longer deemed cost beneficial and adds the following disclosure requirements: 1) weighted-average interest crediting rates for cash balance plans; and 2) an explanation of the reasons for significant gains/losses related to changes in the benefit obligation during the period. The update also clarifies the requirements when entities aggregate disclosures for two or more plans. The new disclosure requirements were applied on a retrospective basis and are included in note 8, Pension, and note 9, Non-pension Post-retirement Benefits.

On December 31, 2018, we early adopted ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This standard allows an optional reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. Consequently, the stranded tax effects resulting from the Tax Cuts and Jobs Act will be eliminated, resulting in the reporting of more useful information to financial statement users. ASU 2018-02 relates to only the reclassification of the income tax effects of the Tax Cuts and Jobs Act. The underlying guidance requiring that the effect of a change in tax laws or rates be included in income from continuing operations is not affected. ASU 2018-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years, with early application permitted. We elected not to reclassify the stranded tax effects related to the Tax Cuts and Jobs Act. The adoption did not have an impact on our Consolidated Financial Statements.

New Accounting Standards - Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to recognize on the balance sheet right-of-use assets and corresponding liabilities for leases with lease terms of more than 12 months. Leases will be classified as either finance or operating leases, with classification affecting the pattern of expense recognition in the income statement. The new guidance also clarifies the definition of a lease and disclosure requirements. ASU 2016-02 is effective for us in the first quarter of 2019. ASU 2016-02 requires lessees and lessors to apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach does not require any transition accounting for leases that expired before the earliest comparative period presented. In the third quarter of 2018, the FASB approved an optional transition method permitting an entity to apply the transition provisions of ASU 2016-02 at its adoption date instead of at the earliest comparative period presented in the financial statements. Since this optional adoption method eases the transition burden, we plan to elect it and record a cumulative effect adjustment as of January 1, 2019, without restatement of the previously reported comparative periods. We anticipate recording additional assets and liabilities on the balance sheet similar to the amount of the total present value of our future undiscounted minimum operating lease payments as shown in note 15 of these Consolidated Financial Statements. Additionally, the adoption of this ASU is not expected to have a material impact on our consolidated results of operations or cash flows. We have elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, permits us to carry forward our prior conclusions for lease identification and lease classification on existing contracts. We also made an accounting policy election to keep short-term leases off of the balance sheet for all classes of underlying assets. We continue to evaluate the related disclosures in the new lease guidance. We utilized a comprehensive approach to review our lease portfolio, selected a system for managing our leases, completed system implementation, updated our internal controls and conducted training on our new process.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard introduces a new approach to estimating credit losses on certain types of financial instruments, including trade receivables, and modifies the impairment model for available-for-sale debt securities. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.

In August 2018, the FASB issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for internal-use software. The new guidance also prescribes the balance sheet, income statement and cash flow classification of the capitalized implementation costs and related amortization expense, and requires additional quantitative and qualitative disclosures. ASU 2018-15 is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years, with early application permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
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Balance Sheet Details
12 Months Ended
Dec. 31, 2018
Balance Sheet Details [Abstract]  
Balance Sheet Details
Balance Sheet Details
The following table provides detail of selected balance sheet items:
December 31,
(dollars in thousands)
 
2018
 
2017
Accounts receivable:
 
 
 
 
Trade receivables
 
$
82,521

 
$
88,786

Other receivables
 
1,456

 
1,211

Total accounts receivable, less allowances of $8,538 and $9,051
 
$
83,977

 
$
89,997

 
 
 
 
 
Inventories:
 
 
 
 
Finished goods
 
$
175,074

 
$
170,774

Work in process
 
1,363

 
1,485

Raw materials
 
4,026

 
3,906

Repair parts
 
10,116

 
10,240

Operating supplies
 
1,524

 
1,481

Total inventories, less loss provisions of $9,453 and $10,308
 
$
192,103

 
$
187,886

 
 
 
 
 
Accrued liabilities:
 
 
 
 
Accrued incentives
 
$
19,359

 
$
19,728

Other accrued liabilities
 
24,369

 
24,192

Total accrued liabilities
 
$
43,728

 
$
43,920

 
 
 
 
 
v3.10.0.1
Purchased Intangible Assets and Goodwill
12 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Purchased Intangible Assets and Goodwill
Purchased Intangible Assets and Goodwill

Purchased Intangibles

Changes in purchased intangibles balances are as follows:
(dollars in thousands)
 
2018
 
2017
Beginning balance
 
$
14,565

 
$
15,225

Amortization
 
(1,049
)
 
(1,073
)
Foreign currency impact
 
(131
)
 
413

Ending balance
 
$
13,385

 
$
14,565



Purchased intangible assets are composed of the following:
December 31,
(dollars in thousands)
 
2018
 
2017
Indefinite life intangible assets
 
$
12,035

 
$
12,120

Definite life intangible assets, net of accumulated amortization of $20,006 and $19,093
 
1,350

 
2,445

Total
 
$
13,385

 
$
14,565



Amortization expense for definite life intangible assets was $1.0 million and $1.1 million for years 2018 and 2017, respectively.

Indefinite life intangible assets are composed of trade names and trademarks that have an indefinite life and are therefore individually tested for impairment on an annual basis, or more frequently in certain circumstances where impairment indicators arise, in accordance with FASB ASC 350. Our measurement date for impairment testing is October 1st of each year. When performing our test for impairment of individual indefinite life intangible assets, we use a relief from royalty method to determine the fair market value that is compared to the carrying value of the indefinite life intangible asset. The inputs used for this analysis are considered Level 3 inputs in the fair value hierarchy. See note 14 for further discussion of the fair value hierarchy. Our October 1st review for 2018 and 2017 did not indicate impairment of our indefinite life intangible assets.

The remaining definite life intangible assets at December 31, 2018 consist of customer relationships that are amortized over a period ranging from 13 to 20 years. The weighted average remaining life on the definite life intangible assets is 4.3 years at December 31, 2018.

Future estimated amortization expense of definite life intangible assets is as follows (dollars in thousands):
2019
2020
2021
2022
2023
 
$564
$157
$157
$157
$157
 


Goodwill

Changes in goodwill balances are as follows:
 
 
2018
 
2017
(dollars in thousands)
 
U.S. & Canada
 
Latin America
 
Total
 
U.S. & Canada
 
Latin America
 
Total
Beginning balance:
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
$
43,872

 
$
125,681

 
$
169,553

 
$
43,872

 
$
125,681

 
$
169,553

Accumulated impairment losses
 
(5,441
)
 
(79,700
)
 
(85,141
)
 
(5,441
)
 

 
(5,441
)
Net beginning balance
 
38,431

 
45,981

 
84,412

 
38,431

 
125,681

 
164,112

Impairment
 

 

 

 

 
(79,700
)
 
(79,700
)
Ending balance:
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
 
43,872

 
125,681

 
169,553

 
43,872

 
125,681

 
169,553

Accumulated impairment losses
 
(5,441
)
 
(79,700
)
 
(85,141
)
 
(5,441
)
 
(79,700
)
 
(85,141
)
Net ending balance
 
$
38,431

 
$
45,981

 
$
84,412

 
$
38,431

 
$
45,981

 
$
84,412



Goodwill impairment tests are completed for each reporting unit on an annual basis, or more frequently in certain circumstances where impairment indicators arise. The inputs used for this analysis are considered Level 2 and Level 3 inputs in the fair value hierarchy. See note 14 for further discussion of the fair value hierarchy.

When performing our test for impairment, we measure each reporting unit's fair value using a combination of "income" and "market" approaches on a shipping point basis. The income approach calculates the fair value of the reporting unit based on a discounted cash flow analysis, incorporating the weighted average cost of capital of a hypothetical third-party buyer. Significant estimates in the income approach include the following: discount rate; expected financial outlook and profitability of the reporting unit's business; and foreign currency impacts (Level 3 inputs). Discount rates use the weighted average cost of capital for companies within our peer group, adjusted for specific company risk premium factors. The market approach uses the "Guideline Company" method, which calculates the fair value of the reporting unit based on a comparison of the reporting unit to comparable publicly traded companies. Significant estimates in the market approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment, assessing comparable multiples, as well as consideration of control premiums (Level 2 inputs). The blended approach assigns a 70 percent weighting to the income approach and 30 percent to the market approach (Level 3 input). The higher weighting is given to the income approach due to some limitations of publicly available peer information used in the market approach. The blended fair value of both approaches is then compared to the carrying value, and to the extent that fair value exceeds the carrying value, no impairment exists. However, to the extent the carrying value exceeds the fair value, an impairment is recorded.

The results of our October 1, 2018 annual impairment test indicated the estimated fair values of all reporting units that have goodwill were in excess of their carrying values, with the Mexico reporting unit's excess fair value exceeding carrying value by approximately 15 percent. The reporting unit within the U.S. and Canada reporting segment, which consists of two aggregated components, had an estimated fair value over carrying value of greater than 50 percent.

As part of our on-going assessment of goodwill at September 30, 2017, we noted that third quarter 2017 sales, profitability and cash flow of our Mexico reporting unit (within the Latin America reporting segment) significantly underperformed in comparison to the forecast, and expectations for the fourth quarter of 2017 were lowered as well. These factors, as well as continuing competitive pressures, long-term weakness of the Mexican peso relative to the U.S. dollar, and an increase in the discount rate of 70 basis points from December 31, 2016 to September 30, 2017, contributed to increased pressure on the outlook of the reporting unit. As a result, we determined a triggering event had occurred for our Mexico reporting unit. Accordingly, an interim impairment test was performed, indicating that the carrying value exceeded its fair value, and in accordance with the early adoption of ASU 2017-04, we recorded a non-cash impairment charge of $79.7 million during the third quarter of 2017.

As the impairment assessment performed at September 30, 2017 resulted in the fair value of the Mexico reporting unit equaling its carrying value, there was no further impairment as of October 1, 2017. The results of our review performed as of October 1, 2017 also did not indicate an impairment for our other reporting unit with goodwill.
v3.10.0.1
Property, Plant and Equipment
12 Months Ended
Dec. 31, 2018
Property, Plant and Equipment [Abstract]  
Property, Plant and Equipment
Property, Plant and Equipment

Property, plant and equipment consists of the following:
December 31,
(dollars in thousands)
 
2018
 
2017
Land
 
$
20,374

 
$
20,859

Buildings
 
109,470

 
107,659

Machinery and equipment
 
531,838

 
505,978

Furniture and fixtures
 
15,668

 
15,391

Software
 
25,218

 
24,464

Construction in progress
 
24,945

 
12,933

Gross property, plant and equipment
 
727,513

 
687,284

Less accumulated depreciation
 
462,553

 
421,609

Net property, plant and equipment
 
$
264,960

 
$
265,675



Depreciation expense was $43.2 million and $44.4 million for the years 2018 and 2017, respectively.
v3.10.0.1
Borrowings
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Borrowings
Borrowings

Borrowings consist of the following:
December 31,
(dollars in thousands)
 
Interest Rate
 
Maturity Date
 
2018
 
2017
Borrowings under ABL Facility
 
floating
(2) 
December 7, 2022 (1)
 
$
19,868

 
$

Term Loan B
 
floating
(3) 
April 9, 2021
 
380,200

 
384,600

AICEP Loan
 
0.00%
 
July 30, 2018
 

 
3,085

Total borrowings
 
400,068

 
387,685

Less — unamortized discount and finance fees
 
2,368

 
3,295

Total borrowings — net
 
397,700

 
384,390

Less — long term debt due within one year
 
4,400

 
7,485

Total long-term portion of borrowings — net
 
$
393,300

 
$
376,905

___________________________
(1) Maturity date will be January 9, 2021, if Term Loan B is not refinanced by this date.
(2) The interest rate for the ABL Facility is comprised of several different borrowings at various rates. The weighted average rate of all ABL Facility borrowings was 1.94 percent at December 31, 2018.
(3) See interest rate swaps under "Term Loan B" below and note 12.
Annual maturities for all of our total borrowings for the next five years and beyond are as follows:
2019
2020
2021
2022
2023
Thereafter
 
$4,400
$4,400
$391,268
$—
$—
$—
 


Amended and Restated ABL Credit Agreement

Libbey Glass and Libbey Europe entered into an Amended and Restated Credit Agreement, dated as of February 8, 2010 and amended as of April 29, 2011, May 18, 2012, April 9, 2014 and December 7, 2017 (as amended, the ABL Facility), with a group of four financial institutions. The ABL Facility provides for borrowings of up to $100.0 million, subject to certain borrowing base limitations, reserves and outstanding letters of credit.

All borrowings under the ABL Facility are secured by:
a first-priority security interest in substantially all of the existing and future personal property of Libbey Glass and its domestic subsidiaries (ABL Priority Collateral);
a first-priority security interest in:
100 percent of the stock of Libbey Glass and 100 percent of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries;
100 percent of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries; and
65 percent of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries;
a first-priority security interest in substantially all proceeds and products of the property and assets described above; and
a second-priority security interest in substantially all of the owned real property, equipment and fixtures in the United States of Libbey Glass and its domestic subsidiaries, subject to certain exceptions and permitted liens (Term Priority Collateral).

Additionally, borrowings by Libbey Europe under the ABL Facility are secured by:
a first-priority lien on substantially all of the existing and future real and personal property of Libbey Europe and its Dutch subsidiaries; and
a first-priority security interest in:
100 percent of the stock of Libbey Europe and 100 percent of the stock of substantially all of the Dutch subsidiaries; and
100 percent (or a lesser percentage in certain circumstances) of the outstanding stock issued by the first-tier foreign subsidiaries of Libbey Europe and its Dutch subsidiaries.
Swingline borrowings are limited to $10.0 million, with swingline borrowings for Libbey Europe being limited to the U.S. equivalent of $5.0 million. Loans comprising each CBFR (CB Floating Rate) Borrowing, including each Swingline Loan, bear interest at the CB Floating Rate plus the Applicable Rate, and euro-denominated swingline borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swingline rate, as defined in the ABL Facility, subject to a LIBOR floor of 0.0 percent. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and Eurocurrency Loans were 0.50 percent and 1.50 percent, respectively, at December 31, 2018. Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the total credit provided under the ABL Facility. The Commitment Fee was 0.25 percent at December 31, 2018. No compensating balances are required by the ABL Facility. The ABL Facility does not require compliance with a fixed charge coverage ratio covenant, unless aggregate unused availability falls below $10.0 million. If our aggregate unused ABL availability were to fall below $10.0 million, the fixed charge coverage ratio requirement would be 1:00 to 1:00. Libbey Glass and Libbey Europe have the option to increase the ABL Facility by $25.0 million. At December 31, 2018, Libbey Glass and Libbey Europe had outstanding borrowings under the ABL Facility of $3.5 million and $16.4 million, respectively. There were no Libbey Glass or Libbey Europe borrowings under the facility at December 31, 2017. Interest is payable on the last day of the interest period, which can range from one month to six months depending on the maturity of each individual borrowing on the ABL facility.

The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable and inventory. The borrowing base is the sum of (a) 85 percent of eligible accounts receivable and (b) the lesser of (i) 85 percent of the net orderly liquidation value (NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million.

At December 31, 2018, the available borrowing base under the ABL Facility was offset by a $0.5 million rent reserve. The ABL Facility also provides for the issuance of up to $15.0 million of letters of credit that, when outstanding, are applied against the $100.0 million limit. At December 31, 2018, $8.0 million in letters of credit were outstanding. Remaining unused availability under the ABL Facility was $71.6 million at December 31, 2018, compared to $91.9 million under the ABL Facility at December 31, 2017.
Term Loan B
On April 9, 2014, Libbey Glass consummated its $440.0 million Senior Secured Term Loan B of Libbey Glass due 2021 (Term Loan B). The net proceeds of the Term Loan B were $438.9 million, after the 0.25 percent original issue discount of $1.1 million. The Term Loan B had related fees of approximately $6.7 million that will be amortized to interest expense over the life of the loan.

The Term Loan B is evidenced by a Senior Secured Credit Agreement, dated April 9, 2014 (Credit Agreement), between Libbey Glass, the Company, the domestic subsidiaries of Libbey Glass listed as guarantors therein (Subsidiary Guarantors and together with the Company, Guarantors), and the lenders. Under the terms of the Credit Agreement, aggregate principal of $1.1 million is due on the last business day of each quarter. The Term Loan B bears interest at the rate of LIBOR plus 3.0 percent, subject to a LIBOR floor of 0.75 percent. The interest rate was 5.39 percent per year at December 31, 2018 and 4.43 percent at December 31, 2017, and will mature on April 9, 2021. Although the Credit Agreement does not contain financial covenants, the Credit Agreement contains other covenants that restrict the ability of Libbey Glass and the Guarantors to, among other things:

incur, assume or guarantee additional indebtedness;
pay dividends, make certain investments or other restricted payments;
create liens;
enter into affiliate transactions;
merge or consolidate, or otherwise dispose of all or substantially all the assets of Libbey Glass and the Guarantors; and
transfer or sell assets.

We may voluntarily prepay, in whole or in part, the Term Loan B without premium or penalty but with accrued interest. Beginning with the year-ended December 31, 2015, the Credit Agreement requires us to make an annual mandatory prepayment offer to lenders of 0.0 to 50.0 percent of our excess cash flow, depending on our excess cash flow and leverage ratios as defined in the Credit Agreement. The calculation is made at the end of each year and the mandatory prepayment offer to lenders is made no later than ten business days after the filing of our annual compliance certificate to the lenders. The amount of any required mandatory prepayment offer is reduced by the amounts of any optional prepayments we made during the applicable year or prior to the prepayment offer in the year the offer is required to be made.

The Credit Agreement provides for customary events of default. In the case of an event of default as defined in the Credit Agreement, all of the outstanding Term Loan B will become due and payable immediately without further action or notice. The Term Loan B and the related guarantees under the Credit Agreement are secured by (i) first priority liens on the Term Priority Collateral and (ii) second priority liens on the ABL Collateral.

On April 1, 2015 and September 24, 2018, we executed interest rate swaps on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swaps effectively convert a portion of our Term Loan B debt from a variable interest rate to a fixed interest rate, thus reducing the impact of interest rate changes on future income. See note 12 for further discussion on the interest rate swaps.
AICEP Loan
From time to time since July 2012, Libbey Portugal has entered into loan agreements with Agencia para Investmento Comercio Externo de Portugal, EPE (AICEP), the Portuguese Agency for investment and external trade. This loan was fully repaid in July 2018, and the interest rate was 0.0 percent.
Notes Payable
We have an overdraft line of credit for a maximum of €0.8 million. At December 31, 2018 and 2017, there were no borrowings under the facility, which had an interest rate of 1.50 percent. Interest with respect to the note is paid monthly.
v3.10.0.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The provisions for income taxes were calculated based on the following components of income (loss) before income taxes:
Year ended December 31,
(dollars in thousands)
 
2018
 
2017
United States
 
$
(12,682
)
 
$
(65,224
)
Non-U.S. 
 
14,979

 
(12,346
)
Total income (loss) before income taxes
 
$
2,297

 
$
(77,570
)


The current and deferred provisions (benefit) for income taxes were:
Year ended December 31,
(dollars in thousands)
 
2018
 
2017
Current:
 
 
 
 
U.S. federal
 
$
1,945

 
$
(183
)
Non-U.S. 
 
6,780

 
4,517

U.S. state and local
 
694

 
834

Total current income tax provision
 
9,419

 
5,168

 
 
 
 
 
Deferred:
 
 
 
 
U.S. federal
 
687

 
9,950

Non-U.S. 
 
310

 
1,190

U.S. state and local
 
(163
)
 
(510
)
Total deferred income tax provision
 
834

 
10,630

 
 
 
 
 
Total:
 
 
 
 
U.S. federal
 
2,632

 
9,767

Non-U.S. 
 
7,090

 
5,707

U.S. state and local
 
531

 
324

Total income tax provision
 
$
10,253

 
$
15,798



U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside of the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such temporary differences totaled $14.6 million and $11.4 million as of December 31, 2018 and 2017, respectively. The amount of unrecognized deferred income tax liability on this temporary difference is $3.0 million and $2.4 million as of December 31, 2018 and 2017, respectively.

Reconciliation from the statutory U.S. federal income tax rate to the consolidated effective income tax rate was as follows:
Year ended December 31,
 
2018
 
2017
Statutory U.S. federal income tax rate
 
21.0

%
 
35.0

%
Increase (decrease) in rate due to:
 
 
 
 
 
 
   Non-U.S. income tax differential
 
19.9

 
 
1.2

 
   U.S. state and local income taxes, net of related U.S. federal income taxes
 
22.6

 
 
0.1

 
   U.S. federal credits
 
(9.8
)
 
 
0.3

 
   Permanent adjustments
 
27.7

 
 
0.6

 
   Foreign withholding taxes
 
75.9

 
 
(2.0
)
 
   Valuation allowances
 
143.5

 
 
(4.4
)
 
   Unrecognized tax benefits
 
48.4

 
 
(3.9
)
 
   Impact of foreign exchange
 
71.6

 
 
(1.6
)
 
   Impact of legislative changes
 

 
 
(8.7
)
 
   Goodwill impairment
 

 
 
(36.0
)
 
   Other
 
25.6

 
 
(1.0
)
 
Consolidated effective income tax rate
 
446.4

%
 
(20.4
)
%


Deferred income tax assets and liabilities: Deferred income tax assets and liabilities result from temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and from income tax carryovers and credits. The significant components of our deferred income tax assets and liabilities are as follows:
December 31,
(dollars in thousands)
 
2018
 
2017
Deferred income tax assets:
 
 
 
 
Pension
 
$
9,722

 
$
8,108

Non-pension post-retirement benefits
 
11,712

 
13,385

Other accrued liabilities
 
16,477

 
13,213

Receivables
 
1,994

 
2,118

Net operating loss and charitable contribution carryforwards
 
14,143

(a)
16,599

Tax credits
 
13,373

(b)
13,288

Total deferred income tax assets
 
67,421

(c)
66,711

Valuation allowances
 
(22,068
)
 
(19,076
)
Net deferred income tax assets
 
45,353

 
47,635

 
 
 
 
 
Deferred income tax liabilities:
 
 
 
 
Property, plant and equipment
 
15,332

 
18,246

Inventories
 
1,699

 
1,639

Intangibles and other
 
4,987

 
4,708

Total deferred income tax liabilities
 
22,018

 
24,593

Net deferred income tax asset
 
$
23,335

 
$
23,042


___________________________
(a)
At December 31, 2018, U.S. operating loss carryforwards of $3.9 million expire between 2019 and 2038, and non-U.S. operating loss carryforwards of $10.2 million expire between 2021 and 2027.
(b)
At December 31, 2018, U.S. general business credit carryforwards of $3.0 million expire between 2024 and 2038. U.S. AMT credits of $1.3 million and the foreign credits of $9.0 million do not expire.
(c)
In order to fully realize our U.S. deferred tax assets as of December 31, 2018, the Company needs to generate approximately $151.9 million of future taxable income.

Valuation Allowances: We currently have a valuation allowance in place on our deferred income tax assets in the Netherlands. We intend to maintain this allowance until a period of sustainable income is achieved and management concludes it is more likely than not that those deferred income tax assets will be realized.

A valuation allowance has been recorded against the deferred tax asset related to the limitation on the U.S. deduction for interest expense. Management concluded that it is not more likely than not that the disallowed interest expense for 2018 can be utilized in future years, due to IRS guidance that was issued in the fourth quarter of 2018. In addition, partial valuation allowances have been recorded against state operating loss carryforwards.

Uncertain Tax Positions: The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. In August 2016, one of our Mexican subsidiaries received a tax assessment from the Mexican tax authority (SAT) related to the audit of its 2010 tax year. The amount assessed was approximately 3 billion Mexican pesos, which was equivalent to approximately $157 million U.S. dollars as of the date of the assessment. The Company has filed an administrative appeal with SAT requesting that the assessment be fully nullified. We are awaiting the outcome of the appeal. Management, in consultation with external legal counsel, believes that if contested in the Mexican court system, it is more likely than not that the Company would prevail on all significant components of the assessment. Management intends to continue to vigorously contest all significant components of the assessment in the Mexican courts if they are not nullified at the administrative appeal level. We believe that our tax reserves related to uncertain tax positions are adequate at this time.

A reconciliation of the beginning and ending gross unrecognized tax benefits, excluding interest and penalties, is as follows:
(dollars in thousands)
 
2018
 
2017
Beginning balance
 
$
5,007

 
$
3,521

Additions based on tax positions related to the current year
 
438

 
435

Additions for tax positions of prior years
 
9

 
1,735

Reductions for tax positions of prior years
 
(1,698
)
 
(468
)
Changes due to lapse of statute of limitations
 
513

 
279

Reductions due to settlements with tax authorities
 
(57
)
 
(495
)
Ending balance
 
$
4,212

 
$
5,007



We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes. Other disclosures relating to unrecognized tax benefits are as follows:
December 31,
(dollars in thousands)
 
2018
 
2017
Amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate
 
$
5,283

 
$
4,107

Interest, net of tax benefit, accrued in the Consolidated Balance Sheets
 
$
1,027

 
$
572

Penalties, accrued in the Consolidated Balance Sheets
 
$
43

 
$
38

Interest expense recognized in the Consolidated Statements of Operations
 
$
523

 
$
506

Penalties expense (benefit) recognized in the Consolidated Statements of Operations
 
$
5

 
$
(67
)


Based upon the outcome of tax examinations, judicial proceedings, other settlements with taxing jurisdictions, or expiration of statutes of limitations, it is reasonably possible that the ultimate resolution of these unrecognized tax benefits may result in a payment that is materially different from the current estimate of the tax liabilities. It is also reasonably possible that gross unrecognized tax benefits may decrease within the next twelve months by approximately $4.1 million due to settlements with tax authorities.

Other Matters: We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. As of December 31, 2018, the tax years that remained subject to examination by major tax jurisdictions were as follows:
Jurisdiction
 
Open Years
Canada
 
2015
2018
China
 
2008
2018
Mexico (excluding 2011 which is closed)
 
2010
2018
Netherlands
 
2016
2018
Portugal
 
2008
2018
United States (excluding 2013 which is closed)
 
2011
2018


United States Tax Reform: The Tax Cuts and Jobs Act (the Act), signed into law on December 22, 2017, changed many aspects of the U.S. tax code, by reducing the corporate income tax rate from 35 percent to 21 percent, shifting to a territorial tax system with a related one-time transition tax on accumulated, unremitted earnings of foreign subsidiaries, limiting interest deductions, allowing the current expensing of certain capital expenditures, and numerous other changes that applied prospectively beginning in 2018. We recorded a charge of $6.7 million in the fourth quarter of 2017, principally related to re-measurement of the net U.S. deferred income tax assets at the 21 percent tax rate. We applied the guidance in SAB 118 when accounting for the enactment date effects of the Act in 2017 and throughout 2018. As of December 31, 2018, we completed our accounting for all the enactment date income tax effects of the Act. There were no material revisions to the taxes recorded at December 31, 2017.

The Act subjects a U.S. shareholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign entities. The FASB Staff Q&A Topic 740, No. 5 "Accounting for Global Low-Taxed Income", states that an entity may make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax expense is incurred as a period expense. We have elected to account for GILTI as a period expense when incurred.
v3.10.0.1
Pension
12 Months Ended
Dec. 31, 2018
Retirement Benefits [Abstract]  
Pension
Pension

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and length of service for salaried employees and job grade and length of service for hourly employees. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006, and most hourly U.S.-based employees (excluding employees hired at Shreveport after December 15, 2008, and at Toledo after September 30, 2010). Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly owned subsidiary in Mexico and are unfunded.

Effect on Operations
The components of our net pension expense, including the SERP, are as follows:
Year ended December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost (benefits earned during the period)
 
$
4,009

 
$
3,916

 
$
1,142

 
$
1,085

 
$
5,151

 
$
5,001

Interest cost on projected benefit obligation
 
12,615

 
13,787

 
2,984

 
2,749

 
15,599

 
16,536

Expected return on plan assets
 
(22,658
)
 
(22,479
)
 

 

 
(22,658
)
 
(22,479
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost (credit)
 
1

 
236

 
(201
)
 
(204
)
 
(200
)
 
32

Actuarial loss
 
6,472

 
5,232

 
622

 
594

 
7,094

 
5,826

Settlement charge
 

 
245

 
92

 

 
92

 
245

Pension expense
 
$
439

 
$
937

 
$
4,639

 
$
4,224

 
$
5,078

 
$
5,161



In 2018 and 2017, the pension settlement charges were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts. The non-service cost components of pension expense are included in other income (expense) on the Consolidated Statements of Operations. See note 16 for additional information.

Actuarial Assumptions
The assumptions used to determine net periodic pension expense for each year and the benefit obligations at December 31st were as follows:
 
 
U.S. Plans
 
Non-U.S. Plans
 
 
2018
 
2017
 
2018
 
2017
Net periodic pension expense:
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
3.64%
to
3.69%
 
4.18%
to
4.23%
 
9.40%
 
9.30%
Expected long-term rate of return on plan assets
 
7.00%
 
7.00%
 
Not applicable
 
Not applicable
Rate of compensation increase
 
Not applicable
 
Not applicable
 
4.30%
 
4.30%
Cash balance interest crediting rate
 
5.50%
 
5.50%
 
Not applicable
 
Not applicable
Benefit obligations:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Discount rate
 
4.31%
to
4.33%
 
3.64%
to
3.69%
 
10.60%
 
9.40%
Rate of compensation increase
 
Not applicable
 
Not applicable
 
4.30%
 
4.30%
Cash balance interest crediting rate
 
5.50%
 
5.50%
 
Not applicable
 
Not applicable


The discount rate enables us to estimate the present value of expected future cash flows on the measurement date. The rate used reflects a rate of return on high-quality fixed income investments that match the duration of expected benefit payments at our December 31 measurement date. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year. A higher discount rate decreases the present value of benefit obligations and decreases pension expense.

To determine the expected long-term rate of return on plan assets for our funded plans, we consider the current and expected asset allocations, as well as historical and expected returns on various categories of plan assets. At December 31, 2018, the expected long-term rate of return on plan assets is 6.50 percent, which will be used to measure the earnings effects for 2019.

The cash balance interest crediting rate, which applies only to the U.S. Salaried Plan, enables us to calculate the benefit obligation through projecting future interest credits on cash balance accounts between the measurement date and a participant’s assumed retirement date. The rate adjusts annually and is the 30-year Treasury rate in effect as of October in the preceding plan year, subject to a minimum of 5 percent. A lower cash balance interest crediting rate assumption decreases the benefit obligation and decreases pension expense.

Future benefits are assumed to increase in a manner consistent with past experience of the plans except for the Libbey U.S. Salaried Pension Plan and SERP as discussed above, which, to the extent benefits are based on compensation, includes assumed compensation increases as presented above. Amortization included in net pension expense is based on the average remaining service of employees.

We account for our defined benefit pension plans on an expense basis that reflects actuarial funding methods. The actuarial valuations require significant estimates and assumptions to be made by management, primarily with respect to the discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The discount rate is based on a selected settlement portfolio from a universe of high quality bonds. In determining the expected long-term rate of return on plan assets, we consider historical market and portfolio rates of return, asset allocations and expectations of future rates of return. We evaluate these critical assumptions on our annual measurement date of December 31st. Other assumptions involving demographic factors such as retirement age, mortality and turnover are evaluated periodically and are updated to reflect our experience. Actual results in any given year often will differ from actuarial assumptions because of demographic, economic and other factors.

For our U.S. pension plans, we use the RP 2014 Sex Distinct Mortality Tables, as released by the Society of Actuaries, to determine our projected benefit obligations. Beginning annually in 2015, the Society of Actuaries has published new generational projection scales reflecting additional years of mortality experience, and we have adopted these updates in each respective year.

Projected Benefit Obligation (PBO) and Fair Value of Assets

The changes in the projected benefit obligations and fair value of plan assets are as follows:
Year ended December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Change in projected benefit obligation:
 
 
 
 
 
 
 
 
 
 
 
 
Projected benefit obligation, beginning of year
 
$
354,053

 
$
336,648

 
$
31,967

 
$
28,161

 
$
386,020

 
$
364,809

Service cost
 
4,009

 
3,916

 
1,142

 
1,085

 
5,151

 
5,001

Interest cost
 
12,615

 
13,787

 
2,984

 
2,749

 
15,599

 
16,536

Exchange rate fluctuations
 

 

 
138

 
1,214

 
138

 
1,214

Actuarial (gain) loss
 
(28,481
)
 
22,991

 
(3,056
)
 
1,409

 
(31,537
)
 
24,400

Settlements paid
 

 
(281
)
 

 

 

 
(281
)
Benefits paid
 
(19,602
)
 
(23,008
)
 
(3,197
)
 
(2,651
)
 
(22,799
)
 
(25,659
)
Projected benefit obligation, end of year
 
$
322,594

 
$
354,053

 
$
29,978

 
$
31,967

 
$
352,572

 
$
386,020

 
 
 
 
 
 
 
 
 
 
 
 
 
Change in fair value of plan assets:
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of plan assets, beginning of year
 
$
343,219

 
$
318,414

 
$

 
$

 
$
343,219

 
$
318,414

Actual return on plan assets
 
(19,533
)
 
47,595

 

 

 
(19,533
)
 
47,595

Employer contributions
 

 
499

 
3,197

 
2,651

 
3,197

 
3,150

Settlements paid
 

 
(281
)
 

 

 

 
(281
)
Benefits paid
 
(19,602
)
 
(23,008
)
 
(3,197
)
 
(2,651
)
 
(22,799
)
 
(25,659
)
Fair value of plan assets, end of year
 
$
304,084

 
$
343,219

 
$

 
$

 
$
304,084

 
$
343,219

 
 
 
 
 
 
 
 
 
 
 
 
 
Funded ratio
 
94.3
%
 
96.9
%
 
%
 
%
 
86.2
%
 
88.9
%
Funded status and net accrued pension benefit cost
 
$
(18,510
)
 
$
(10,834
)
 
$
(29,978
)
 
$
(31,967
)
 
$
(48,488
)
 
$
(42,801
)


The U.S. defined benefit pension plans experienced actuarial (gains) losses of $(28.5) million and $23.0 million for the years ended December 31, 2018 and 2017, respectively, primarily driven by assumption changes in the discount rate used to determine the benefit obligations.

The non-U.S. defined benefit pension plans experienced actuarial (gains) losses of $(3.1) million and $1.4 million for the years ended December 31, 2018 and 2017, respectively, primarily driven by assumption changes in the discount rate and demographic experience used to determine the benefit obligations.

The current portion of the pension liability reflects the amount of expected benefit payments that are greater than the plan assets on a plan-by-plan basis. The net accrued pension benefit liability at December 31st represents underfunded (including unfunded) pension benefits, and is included in the Consolidated Balance Sheets as follows:
December 31,
(dollars in thousands)
 
2018
 
2017
Pension asset
 
$

 
$
2,939

Pension liability (current portion)
 
(3,282
)
 
(2,185
)
Pension liability
 
(45,206
)
 
(43,555
)
Net accrued pension liability
 
$
(48,488
)
 
$
(42,801
)








The cumulative pretax amounts recognized in accumulated other comprehensive loss (AOCI) as of December 31 are as follows:
December 31,
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Net actuarial loss
 
$
105,468

 
$
98,228

 
$
8,732

 
$
12,378

 
$
114,200

 
$
110,606

Prior service cost (credit)
 

 
1

 
(2,447
)
 
(2,636
)
 
(2,447
)
 
(2,635
)
Total cost in AOCI
 
$
105,468

 
$
98,229

 
$
6,285

 
$
9,742

 
$
111,753

 
$
107,971



Estimated contributions for 2019, as well as, contributions made in 2018 and 2017 to the pension plans are as follows:
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
Estimated contributions in 2019
 
$
138

 
$
3,310

 
$
3,448

Contributions made in 2018
 
$

 
$
3,197

 
$
3,197

Contributions made in 2017
 
$
499

 
$
2,651

 
$
3,150



It is difficult to estimate future cash contributions to the pension plans, as such amounts are a function of actual investment returns, withdrawals from the plans, changes in interest rates and other factors uncertain at this time. It is possible that greater cash contributions may be required in 2019 than the amounts in the above table. Although a decline in market conditions, changes in current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact in future required contributions to our pension plans, we currently do not expect funding requirements to have a material adverse impact on current or future liquidity.

Pension benefit payment amounts are anticipated to be paid from the plans (including the SERP) as follows:
Year
(dollars in thousands)
 
U.S. Plans
 
Non-U.S. Plans
 
Total
2019
 
$
19,836

 
$
3,310

 
$
23,146

2020
 
$
20,046