LIBBEY INC, 10-K filed on 2/27/2020
Annual Report
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Document And Entity Information - USD ($)
12 Months Ended
Dec. 31, 2019
Feb. 20, 2020
Jun. 30, 2019
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 Voluntary Filers No    
Entity Well-known Seasoned Issuer No    
Entity Emerging Growth Company false    
Entity Small Business true    
Entity Interactive Data Current Yes    
Entity Common Stock, Shares Outstanding (in shares)   22,361,002  
Entity Public Float     $ 40,800,424
Entity Shell Company false    
Document Type 10-K    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Amendment Flag false    
Title of 12(b) Security Common Stock, $.01 par value    
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Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
ASSETS    
Cash and cash equivalents $ 48,918 $ 25,066
Accounts receivable — net 81,307 83,977
Inventories — net 174,797 192,103
Prepaid and other current assets 17,683 16,522
Total current assets 322,705 317,668
Pension asset 5,712
Purchased intangible assets — net 11,875 13,385
Goodwill, Ending Balance 38,431 84,412
Deferred income taxes 24,747 26,090
Other assets 14,608 7,660
Operating Lease, Right-of-Use Asset 54,686
Property, plant and equipment — net 233,923 264,960
Total assets 706,687 714,175
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)    
Accounts payable 79,262 74,836
Salaries and wages 30,188 27,924
Accrued liabilities 50,657 43,728
Accrued income taxes 382 3,639
Pension liability (current portion) 2,543 3,282
Non-pension post-retirement benefits (current portion) 3,817 3,951
Operating lease liabilities (current portion) 12,769
Long-term debt due within one year 16,124 4,400
Total current liabilities 195,742 161,760
Long-term debt 375,716 393,300
Pension liability 46,619 45,206
Non-pension post-retirement benefits 45,507 43,015
Noncurrent operating lease liabilities 48,323
Deferred income taxes 2,104 2,755
Other long-term liabilities 18,463 18,246
Total liabilities 732,474 664,282
Contingencies (note 17)
Shareholders’ equity (deficit):    
Common stock, par value $.01 per share, 50,000,000 shares authorized, 22,360,125 shares issued in 2019 (22,157,220 shares issued in 2018) 224 222
Capital in excess of par value 338,395 335,517
Retained deficit (240,460) (171,441)
Accumulated other comprehensive loss (123,946) (114,405)
Total shareholders’ equity (deficit) (25,787) 49,893
Total liabilities and shareholders’ equity (deficit) $ 706,687 $ 714,175
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Consolidated Balance Sheets (Parentheticals) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
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) 22,360,125 22,157,220
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Consolidated Statements of Operations - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Revenues $ 785,602 $ 801,093
Cost of sales 631,393 646,202
Gross profit 154,209 154,891
Selling, general and administrative expenses 122,370 127,851
Asset impairments (note 4) 65,152
Income (loss) from operations (33,313) 27,040
Other income (expense) (4,443) (2,764)
Earnings (loss) before interest and income taxes (37,756) 24,276
Interest expense 22,510 21,979
Income (loss) before income taxes (60,266) 2,297
Provision for income taxes 8,753 10,253
Net loss $ (69,019) $ (7,956)
Net loss per share:    
Basic (in dollars per share) $ (3.08) $ (0.36)
Diluted (in dollars per share) $ (3.08) $ (0.36)
Weighted average shares:    
Basic (in shares) 22,419,138 22,180,102
Diluted (in shares) 22,419,138 22,180,102
Dividends declared per share (in dollars per share) $ 0.1175
Product [Member]    
Revenues $ 782,437 $ 797,858
Shipping and Handling [Member]    
Revenues $ 3,165 $ 3,235
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Consolidated Statements of Comprehensive Income (Loss) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Net loss $ (69,019) $ (7,956)
Other comprehensive income (loss):    
Pension and other post-retirement benefit adjustments, net of tax 932 1,041
Change in fair value of derivative instruments, net of tax (8,566) (2,942)
Foreign currency translation adjustments, net of tax (1,907) (7,057)
Other comprehensive income (loss), net of tax (9,541) (8,958)
Comprehensive income (loss) $ (78,560) $ (16,914)
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Consolidated Statements of Shareholders' Equity (Deficit) - 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, 2017 22,018,010        
Balance at Dec. 31, 2017 $ 220 $ 333,011 $ (161,165) $ (105,172) $ 66,894
Cumulative-effect adjustment for the adoption of ASU 2017-12 275 (275)
Net loss (7,956) (7,956)
Other comprehensive loss (8,958) (8,958)
Stock compensation expense 2,746 2,746
Stock issued (in shares) 139,210        
Stock issued $ 2 96 98
Stock withheld for employee taxes (336) (336)
Dividends (2,595) (2,595)
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 (69,019) (69,019)
Other comprehensive loss (9,541) (9,541)
Stock compensation expense 3,307 3,307
Stock issued (in shares) 202,905        
Stock issued $ 2 (9) (7)
Stock withheld for employee taxes (420) (420)
Balance (in shares) at Dec. 31, 2019 22,360,125        
Balance at Dec. 31, 2019 $ 224 $ 338,395 $ (240,460) $ (123,946) $ (25,787)
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Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Operating activities:    
Net loss $ (69,019) $ (7,956)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 39,046 44,333
Asset impairments (note 4) 65,152
Change in accounts receivable 2,336 5,203
Change in inventories 16,545 (6,424)
Change in accounts payable 9,202 (4,759)
Accrued interest and amortization of discounts and finance fees 1,173 1,158
Pension & non-pension post-retirement benefits, net (376) (283)
Accrued liabilities & prepaid expenses 4,350 267
Income taxes (5,062) 3,591
Cloud computing costs (4,188)
Share-based compensation expense 3,231 2,827
Other operating activities 1,042 (1,087)
Net cash provided by operating activities 63,432 36,870
Investing activities:    
Cash paid for property, plant and equipment (31,159) (45,087)
Net cash used in investing activities (31,159) (45,087)
Financing activities:    
Borrowings on ABL credit facility 93,171 129,769
Repayments on ABL credit facility (95,601) (109,901)
Other repayments (3,077)
Repayments on Term Loan B (4,400) (4,400)
Stock options exercised 5
Taxes paid on distribution of equity awards (420) (336)
Dividends (2,595)
Debt refinancing costs (755)
Net cash provided by (used in) financing activities (8,005) 9,465
Effect of exchange rate fluctuations on cash (416) (878)
Increase in cash 23,852 370
Cash & cash equivalents at beginning of year 25,066 24,696
Cash & cash equivalents at end of year 48,918 25,066
Supplemental disclosure of cash flow information:    
Cash paid during the year for interest, net of capitalized interest 20,738 20,091
Cash paid during the year for income taxes $ 11,887 $ 8,514
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Note 1 - Description of the Business
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]
1.
Description of the Business
 
Libbey is a leading global manufacturer and marketer of glass tableware products. We produce glass tableware in
five
countries and sell to customers in over
100
countries. We design and market, under our Libbey
®
, Libbey Signature
®
, Master’s Reserve
®
, Crisa
®
, Royal Leerdam
®
, World
®
Tableware, Syracuse
®
China and Crisal Glass
®
brand names (among others), an extensive line of high-quality glass tableware, ceramic dinnerware and metal flatware 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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Note 2 - Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Significant Accounting Policies [Text Block]
2.
Significant Accounting Policies
 
Basis of Presentation  
The Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is
December 31
st
. The preparation of financial statements and related disclosures in conformity with United States generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.
 
Revenue Recognition  
Our customer contracts generally include a single performance obligation, the shipment of specified products, and are recognized at a point in time when control of the product has transferred to the customer. Transfer of control primarily takes place when risk of loss transfers in accordance with applicable shipping terms. Revenue is recognized based on the consideration specified in a contract with the customer, and is measured as the amount of consideration to which we expect to be entitled in exchange for transferring goods or providing services. When applicable, the transaction price includes estimates of variable consideration. We estimate provisions for rebates, customer incentives, allowances, returns and discounts based on the terms of the contracts, historical experience and anticipated customer purchases during the rebate period as sales occur. We continually evaluate the adequacy of these methods used, adjusting our estimates when the amount of consideration to which we expect to be entitled changes. Refund liabilities are included in accrued liabilities on the Consolidated Balance Sheet. Our payment terms are based on customary business practices and can vary by region and customer type, but are generally
0
-
90
days. Since the term between invoicing and expected payment is less than a year, we do
not
adjust the transaction price for the effects of a financing component. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate governmental agencies. For contracts with a duration of less than
one
year, we follow an allowable practical expedient and expense contract acquisition costs when incurred. We do
not
have any costs to obtain or fulfill a contract that are capitalized under ASC Topic
340
-
40.
For further discussion see 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. Outstanding checks in excess of funds on deposit are included in accounts payable or accrued liabilities, depending on the nature of the payment.
 
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
34.3
 percent and
34.9
percent of our total inventories in
2019
and
2018,
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
$16.6
million and
$15.9
million in
2019
and
2018,
respectively. Cost includes the cost of materials, direct labor, in-bound freight and the applicable share of manufacturing overhead.
 
Purchased Intangible Assets and Goodwill  
Financial Accounting Standards Board Accounting Standards Codification
®
(“FASB ASC”) Topic
350
 - “Intangibles-Goodwill and other” (“FASB ASC 
350”
) requires goodwill and purchased indefinite life intangible assets to be reviewed for impairment annually, or more frequently if impairment indicators arise. Intangible assets with lives restricted by contractual, legal or other means will continue to be amortized over their useful lives. As of
October 
1
st
 of each year, we update our separate impairment evaluations for both goodwill and indefinite life intangible assets. For further disclosure on goodwill and intangibles, see note 4.
 
Software
  We account for software in accordance with  FASB ASC 
350.
Software represents the costs of internally developed and/or purchased software for internal use. Capitalized costs include software packages, installation and internal labor costs of employees devoted to the software development project. Costs incurred to modify existing software, providing significant enhancements and creating additional functionality are also capitalized. Once a project is complete, we estimate the useful life of the internal-use software, generally amortizing these costs over a
3
to
10
year period. Software is classified on the Consolidated Balance Sheet in property, plant and equipment, and the related cash flows are shown as cash outflows from investing activities.
 
Cloud Computing Arrangements 
We account for implementation costs for software that we gain access to in hosted cloud computing arrangements in accordance with FASB ASC
350.
Capitalized costs of hosted cloud computing arrangements include configuration, installation, other upfront costs and internal labor costs of employees devoted to the cloud computing software implementation project. Once a project is complete, amortization is computed using the straight-line method over the term of the associated hosting arrangement, generally
3
to
10
years. In connection with our adoption of Accounting Standards Update (ASU)
2018
-
15
on
January 1, 2019,
these implementation costs are now classified on the Consolidated Balance Sheet in prepaid and other current assets and other assets, and the related cash flows are presented as cash outflows from operations. Prior to
January 1, 2019,
implementation costs were included in property, plant and equipment, and the related cash flows were shown as cash outflows from investing activities. See
New Accounting Standards - Adopted
below. Our cloud computing arrangements primarily relate to our new global enterprise resource planning (ERP) system. At
December 31, 2019,
the net book value of these implementation costs included
$0.3
 million in prepaid and other current assets and
$6.5
million in other assets on the Consolidated Balance Sheet. Expense for
2019
was immaterial.
 
Leases  
We determine if an arrangement is a lease at inception. As of
January 1, 2019,
operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities and noncurrent operating lease liabilities in our Consolidated Balance Sheet; related payments are included in operating activities on the Consolidated Statement of Cash Flows. We currently do
not
have any finance leases; but, if we do in the future, we will include them in property, plant and equipment, long-term debt due within
one
year and long-term debt within our Consolidated Balance Sheet.
 
ROU assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term.
 
When our leases do
not
provide an implicit rate, we use our incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We give consideration to our secured borrowing rates as well as publicly available data for instruments with a similar term in a similar environment when calculating our incremental borrowing rates.
 
The operating lease ROU asset also includes any lease prepayments made before commencement or in advance of the payment due date. Our lease terms
may
include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Leases with a term of
12
months or less (short-term leases) are
not
recorded on our Consolidated Balance Sheet. Our lease agreements do
not
contain any residual value guarantees or material restrictive covenants. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Variable lease costs represent the incremental change in lease payments associated with an indexed rate (i.e. Consumers Price Index), and these costs are
not
included in the lease liability on the Consolidated Balance Sheet because they are unknown at commencement date.
 
We have lease agreements with lease and non-lease components. Non-lease components for real estate leases relate primarily to common area maintenance, insurance, taxes and utilities associated with the properties. For real estate leases and a limited class of equipment leases, we account for the lease and non-lease components separately. Non-lease components are
not
recorded on the Consolidated Balance Sheet as a ROU asset and lease liability and are
not
included in lease costs. For all other equipment leases, we account for the lease and non-lease components as a single lease component.
 
See
New Accounting Standards - Adopted
below for the adoption impact of this lease accounting standard.
 
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 the salaried U.S.-based employees of Libbey hired before
January 
1,
2006,
and over half of the hourly U.S.-based employees. Hourly employees hired at Shreveport after
December 15, 2008,
and at Toledo after
September 
30,
2010,
are
not
eligible to participate. 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 over half of our union hourly employees. Hourly employees hired at Shreveport after
December 15, 2008,
and at Toledo after
September 30, 2010,
are
not
eligible to participate. 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
2019
and
2018,
we did
not
purchase treasury stock. At
December 31, 2019,
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
2019
and
2018
were
$3.1
 million and
$3.6
 million, respectively.
 
Advertising Costs  
We expense all advertising costs as incurred. Expenses for
2019
 and
2018
were
$5.0
million and
$6.1
 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.
 
New Accounting Standards - Adopted
 
Each change to U.S. GAAP is established by the FASB in the form of an ASU to the FASB’s ASC. We consider the applicability and impact of all ASUs. ASUs
not
listed below were assessed and either were determined to be
not
applicable or are expected to have minimal impact on the Company’s Consolidated Financial Statements.
 
In
February 2016,
the FASB issued ASU
2016
-
02,
Leases
(Topic
842
), which requires a lessee to recognize on the balance sheet ROU assets and corresponding liabilities for both finance and operating leases with lease terms greater than
12
months. On
January 1, 2019,
we adopted this standard using the optional transition method of applying the modified retrospective approach at our adoption date. Under this method, previously reported comparative periods prior to
2019
have
not
been restated. We have elected the package of practical expedients permitted under the transition guidance, which allowed us to carry forward our prior conclusions on existing contracts for lease identification, lease classification and initial direct costs. In addition, for most of our classes of equipment leases, we elected the practical expedient to
not
separate lease and non-lease components. We also made an accounting policy election to keep leases with a term of
12
months or less off of the balance sheet for all classes of underlying assets. At adoption, we had operating leases which resulted in us recognizing operating ROU assets and lease liabilities on the balance sheet of approximately
$69
million. The adoption of this ASU did
not
have a material impact on our consolidated results of operations or cash flows, and there was
no
cumulative effect adjustment to retained earnings. The new standard also required additional disclosures which are included in note 15.
 
On
January 1, 2019,
we early adopted ASU
2018
-
15,
Intangibles-Goodwill and Other-Internal-Use Software
(Subtopic
350
-
40
):
Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract
. This standard aligns the requirements for capitalizing implementation costs in a cloud computing arrangement service contract with the requirements for capitalizing implementation costs incurred for internal-use software. The new guidance also prescribes the balance sheet, income statement and cash flow classification of the capitalized implementation costs and related amortization expense, and requires additional quantitative and qualitative disclosures. Prior to
January 1, 2019,
implementation costs for cloud computing arrangements were capitalized into property, plant and equipment and amortized on a straight-line basis. Upon adoption of this new standard, we reclassed
$2.8
million from construction in progress within property, plant, and equipment to other assets. When implementation projects are completed and amortization of capitalized costs begins, a portion is recorded in prepaids and other current assets. Results and disclosures for reporting periods beginning on or after
January 1, 2019,
are presented under the new guidance within ASU
2018
-
15,
while prior period amounts and disclosures are
not
adjusted and continue to be reported in accordance with our previous accounting.
 
New Accounting Standards -
Not
Yet Adopted
 
In
June 2016,
the FASB issued ASU
2016
-
13,
Financial Instruments - Credit Losses
(Topic
326
):
Measurement of Credit Losses on Financial Instruments
. This standard introduces a new approach to estimating credit losses on certain types of financial instruments, including trade receivables, and modifies the impairment model for available-for-sale debt securities. ASU
2016
-
13
is effective for fiscal years beginning after
December 15, 2019,
including interim periods within those fiscal years, with early application permitted. In
October
of
2019,
the FASB approved a delayed effective date for Smaller Reporting Company filers; thus, our effective date is now for fiscal years beginning after
December 15, 2022,
including interim periods within those fiscal years. Although we are still evaluating the impact of this standard, we believe it will
not
have a material impact on our 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 Consolidated Financial Statements.
v3.19.3.a.u2
Note 3 - Balance Sheet Details
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Supplemental Balance Sheet Disclosures [Text Block]
3.
Balance Sheet Details
 
The following table provides detail of selected balance sheet items:
 
 
December 31,
     
 
     
 
(dollars in thousands)
 
2019
   
2018
 
Accounts receivable:
     
 
     
 
Trade receivables
  $
79,829
    $
82,521
 
Other receivables
   
1,478
     
1,456
 
Total accounts receivable, less allowances of $10,803 and $8,538
  $
81,307
    $
83,977
 
                 
Inventories:
     
 
     
 
Finished goods
  $
157,348
    $
175,074
 
Work in process
   
1,183
     
1,363
 
Raw materials
   
4,008
     
4,026
 
Repair parts
   
10,254
     
10,116
 
Operating supplies
   
2,004
     
1,524
 
Total inventories, less loss provisions of $7,750 and $9,453
  $
174,797
    $
192,103
 
                 
Accrued liabilities:
     
 
     
 
Accrued incentives
  $
24,337
    $
19,359
 
Other accrued liabilities
   
26,320
     
24,369
 
Total accrued liabilities
  $
50,657
    $
43,728
 
v3.19.3.a.u2
Note 4 - Purchased Intangible Assets and Goodwill
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Goodwill and Intangible Assets Disclosure [Text Block]
4.
Purchased Intangible Assets and Goodwill
 
Purchased Intangibles
 
Changes in purchased intangibles balances are as follows:
 
(dollars in thousands)
 
2019
   
2018
 
Beginning balance
  $
13,385
    $
14,565
 
Amortization
   
(560
)    
(1,049
)
Impairment
(see below)
   
(900
)    
 
Foreign currency impact
   
(50
)    
(131
)
Ending balance
  $
11,875
    $
13,385
 
 
Purchased intangible assets are composed of the following:
 
December 31,
     
 
     
 
(dollars in thousands)
 
2019
   
2018
 
Indefinite life intangible assets
  $
11,104
    $
12,035
 
Definite life intangible assets, net of accumulated amortization of $20,507 and $20,006
   
771
     
1,350
 
Total
  $
11,875
    $
13,385
 

Indefinite life intangible assets are composed of trade names and trademarks that have an indefinite life and are therefore individually tested for impairment on an annual basis, or more frequently in certain circumstances where impairment indicators arise, in accordance with FASB ASC
350.
Our on-going assessment of goodwill as of
June 30, 2019
resulted in the need to test Libbey Holland’s indefinite life intangible asset (Royal Leerdam
® 
trade name) for impairment. We used a relief from royalty method to determine the fair market value that was compared to the carrying value of the indefinite life intangible asset. The sales forecast for Royal Leerdam
® 
branded product was lowered due to declining performance of mid-tier retailers as consumers in EMEA move to discount and on-line retailers. As a result, the estimated fair value was determined to be lower than the carrying value, and we recorded a non-cash impairment charge of
$0.9
million during the
second
quarter of
2019
in our EMEA reporting segment. The inputs used for this analysis are considered Level
3
inputs in the fair value hierarchy. See note 14 for further discussion of the fair value hierarchy. Our annual impairment testing on
October 1, 2019 
and
2018
 did
not
indicate impairment of our indefinite life intangible assets.
 
The remaining definite life intangible asset at
December 
31,
2019
 consists of customer relationships that is amortized over
20
years with a remaining life of
5.0
 years. Amortization expense for definite life intangible assets was
$0.6
million and
$1.0
million for years
2019
and
2018,
respectively.
 
Future estimated amortization expense of definite life intangible assets is as follows (dollars in thousands):
 
2020
 
2021
 
2022
 
2023
 
2024
$154  
$154
 
$154
 
$154
 
$154
 
Goodwill
 
Changes in goodwill balances are as follows:
 
   
2019
   
2018
 
(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
)    
(79,700
)    
(85,141
)
Net beginning balance
   
38,431
     
45,981
     
84,412
     
38,431
     
45,981
     
84,412
 
Impairment
   
     
(45,981
)    
(45,981
)    
     
     
 
Ending balance:
                                               
Goodwill
   
43,872
     
125,681
     
169,553
     
43,872
     
125,681
     
169,553
 
Accumulated impairment losses
   
(5,441
)    
(125,681
)    
(131,122
)    
(5,441
)    
(79,700
)    
(85,141
)
Net ending balance
  $
38,431
    $
    $
38,431
    $
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.
 
As part of our on-going assessment of goodwill at
June 30, 2019,
we determined that a triggering event occurred due to the Company’s market capitalization being less than the carrying value, resulting from the significant decline in the Company’s share price during the quarter. Thus, an interim impairment test was performed as of
June 30, 2019.
Additionally, during the
second
quarter, management updated its long-range plan; the updated plan contemplated lower sales and profitability within the Mexico reporting unit (within the Latin America reporting segment) as compared to the projections used in the goodwill impairment testing performed as of
October 1, 2018.
As the impairment testing indicated that the carrying value of the Mexico reporting unit exceeded its fair value, we recorded a non-cash impairment charge of
$46.0
million during the
second
quarter of
2019.
After recording the impairment charge, there is
no
longer any goodwill on the balance sheet related to the Mexico acquisition.
 
When performing our test for impairment, we 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, 2019
and
2018
annual impairment reviews did
not
indicate an impairment of goodwill. There were
no
indicators of impairment in our remaining reporting unit with goodwill at
December 31, 2019.
 
For the year ended
December 31, 2019,
asset impairments on the Consolidated Statement of Operations includes the following (dollars in thousands):
 
Balance sheet location
 
Notes
 
Segment
 
Impairment
 
Goodwill
 
Note 4
 
Latin America
  $
45,981
 
Purchased intangible assets - net
 
Note 4
 
EMEA
   
900
 
Property, plant and equipment - net
 
Note 5
 
EMEA
   
12,956
 
Operating lease right-of-use assets
 
Notes 5 & 15
 
EMEA
   
5,315
 
Total asset impairments
  $
65,152
 
v3.19.3.a.u2
Note 5 - Property, Plant and Equipment
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Property, Plant and Equipment Disclosure [Text Block]
5.
Property, Plant and Equipment
 
Property, plant and equipment consists of the following:
 
December 31,
(dollars in thousands)
 
2019
   
2018
 
Land   $
16,515
    $
20,374
 
Buildings    
100,730
     
109,470
 
Machinery and equipment    
486,517
     
531,838
 
Furniture and fixtures    
15,594
     
15,668
 
Software    
22,440
     
25,218
 
Construction in progress    
18,628
     
24,945
 
Gross property, plant and equipment    
660,424
     
727,513
 
Less accumulated depreciation    
426,501
     
462,553
 
Net property, plant and equipment   $
233,923
    $
264,960
 
 
Depreciation expense was
$38.4
 million and
$43.2
 million for the years
2019
 and
2018,
respectively.
 
In accordance with FASB ASC
360,
management concluded an impairment assessment for the Libbey Holland asset group (within our EMEA segment) was necessary, and it was performed as of
December 31, 2019.
The recoverability test failed and, therefore, the Libbey Holland asset group was written down to estimated fair value, utilizing both an income approach using a present value technique and a market approach whereby multiple cash flow scenarios reflecting a range of possible outcomes with varying probability weightings are relied upon. 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. As a result, Libbey Holland property, plant and equipment and operating lease right-of-use assets were written down
$13.0
million and
$5.3
million, respectively, at
December 31, 2019. 
See note 4 for a reconciliation of
2019
non-cash asset impairments to the asset impairments line on the Consolidated Statements of Operations.
v3.19.3.a.u2
Note 6 - Borrowings
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Debt Disclosure [Text Block]
6.
Borrowings
 
Borrowings consist of the following:
 
December 31,
   
 
       
 
     
 
(dollars in thousands)
 
Interest Rate
 
Maturity Date
 
2019
   
2018
 
Borrowings under ABL Facility   floating 
(2)
  December 7, 2022
(1)
  $
17,386
    $
19,868
 
Term Loan B   floating 
(3)
 
April 9, 2021
   
375,800
     
380,200
 
Total borrowings
 
 
 
 
   
393,186
     
400,068
 
Less — unamortized discount and finance fees
 
 
 
 
   
1,346
     
2,368
 
Total borrowings — net
 
 
 
 
   
391,840
     
397,700
 
Less — long term debt due within one year
 
 
 
 
   
16,124
     
4,400
 
Total long-term portion of borrowings — net
 
 
 
 
  $
375,716
    $
393,300
 
___________________________
(
1
)
Maturity date will be
January 9, 2021,
if Term Loan B is
not
refinanced by this date.
(
2
)
The interest rate on the ABL Facility borrowings was
1.75
 percent at
December 31, 2019.
(
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:
 
2020
 
2021
 
2022
 
2023
 
2024
 
Thereafter
$16,124  
$359,676
 
$17,386
 
$—
 
$—
 
$—
 
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
0.75
percent and
1.75
percent, respectively, at
December 
31,
2019.
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,
2019.
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,
2019,
Libbey Europe had outstanding borrowings under the ABL Facility of
$17.4
million, and Libbey Glass had
no
outstanding borrowings. 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. 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.
 
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,
2019,
$10.0
million in letters of credit and other reserves were outstanding. Remaining unused availability under the ABL Facility was
$68.2
million at
December 
31,
2019,
compared to
$71.6
million under the ABL Facility at
December 
31,
2018.
 
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
4.71
percent per year at
December 
31,
2019
and
5.39
percent at
December 
31,
2018,
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 anticipated payment associated with our
2019
financial results is included in long-term debt due within
one
year on the Consolidated Balance Sheet.
 
The Credit Agreement provides for customary events of default, including cross default with the ABL Facility. 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.
 
Libbey Mexico Line of Credit
 
On
June 17, 2019,
Crisa Libbey Mexico S. de R.L. de C.V. entered into a
$3.0
million working capital line of credit with Banco Santander Mexico to cover seasonal working capital needs, guaranteed by its parent company, Libbey Mexico, S. de R.L. de C.V. The line of credit matures on
December 14, 2020,
and has a floating interest rate of LIBOR plus
3.20
percent. At
December 31, 2019,
there were
no
borrowings under this line of credit. Interest with respect to borrowings on the line of credit is due monthly.
 
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,
2019
and
2018,
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.
v3.19.3.a.u2
Note 7 - Income Taxes
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
7.
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)
 
2019
   
2018
 
United States
  $
(6,405
)   $
(12,682
)
Non-U.S.
   
(53,861
)    
14,979
 
Total income (loss) before income taxes
  $
(60,266
)   $
2,297
 
 
The current and deferred provisions (benefit) for income taxes were:
 
Year ended December 31,
 
 
 
 
 
 
 
 
(dollars in thousands)
 
2019
   
2018
 
Current:
 
 
 
 
 
 
 
 
U.S. federal
  $
1,011
    $
1,945
 
Non-U.S.
   
5,142
     
6,780
 
U.S. state and local
   
326
     
694
 
Total current income tax provision
   
6,479
     
9,419
 
                 
Deferred:
 
 
 
 
 
 
 
 
U.S. federal
   
576
     
687
 
Non-U.S.
   
1,645
     
310
 
U.S. state and local
   
53
     
(163
)
Total deferred income tax provision
   
2,274
     
834
 
                 
Total:
 
 
 
 
 
 
 
 
U.S. federal
   
1,587
     
2,632
 
Non-U.S.
   
6,787
     
7,090
 
U.S. state and local
   
379
     
531
 
Total income tax provision
  $
8,753
    $
10,253
 
 
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.
 There were
no
such temporary differences as of
December 31, 2019. 
At
December 31, 2018,
the temporary differences totaled
$14.6
 million and the unrecognized 
deferred income tax liability was 
$3.0
 million.
 
Reconciliation from the statutory U.S. federal income tax rate to the consolidated effective income tax rate was as follows:
 
Year ended December 31,
 
2019
   
2018
 
Statutory U.S. federal income tax rate
   
21.0
%    
21.0
%
Increase (decrease) in rate due to:
               
Non-U.S. income tax differential
   
0.2
     
19.9
 
U.S. state and local income taxes, net of related U.S. federal income taxes
   
0.3
     
22.6
 
U.S. federal credits
   
1.4
     
(9.8
)
Permanent adjustments
   
(1.9
)    
27.7
 
Foreign withholding taxes
   
(1.0
)    
75.9
 
Valuation allowances
   
(9.6
)    
143.5
 
Unrecognized tax benefits
   
0.7
     
48.4
 
Impact of foreign exchange
   
(1.6
)    
71.6
 
Asset impairments
   
(17.6
)    
 
Other
   
(6.4
)    
25.6
 
Consolidated effective income tax rate
   
(14.5
)%    
446.4
%
 
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)
 
2019
   
2018
 
Deferred income tax assets:
 
 
 
 
 
 
 
 
 
Pension
  $
7,510
 
 
$
9,722
   
Non-pension post-retirement benefits
   
12,271
 
 
 
11,712
   
Other accrued liabilities
   
22,486
 
 
 
16,477
   
Receivables
   
2,544
 
 
 
1,994
   
Operating lease liabilities    
15,068
 
 
 
   
Net operating loss and charitable contribution carryforwards
   
11,333
 
(1)
 
14,143
 
 
Tax credits
   
11,432
 
(2)
 
13,373
 
 
Total deferred income tax assets
   
82,644
 
(3)
 
67,421
 
 
Valuation allowances
   
(26,963
)
 
 
(22,068
)  
Net deferred income tax assets
   
55,681
 
 
 
45,353
   
                   
Deferred income tax liabilities:
 
 
 
 
 
 
 
 
 
Property, plant and equipment
   
13,213
 
 
 
15,332
   
Inventories
   
1,587
 
 
 
1,699
   
Operating lease right-of-use assets    
14,009
 
 
 
   
Intangibles and other
   
4,229
 
 
 
4,987
   
Total deferred income tax liabilities
   
33,038
 
 
 
22,018
   
Net deferred income tax asset
  $
22,643
 
 
$
23,335
   
___________________________
(
1
)
At
December 31, 2019,
non-U.S. operating loss carryforwards of
$42.0
 million expire between
2021
and
2027.
(
2
)
At
December 31, 2019,
U.S. general business credit carryforwards of
$2.2
 million expire between
2024
and
2038.
U.S. AMT credits of
$0.1
 million and the foreign credits of
$9.1
 million do
not
expire.
(
3
)
In order to fully realize our U.S. deferred tax assets as of
December 31, 2019,
the Company needs to generate approximately
$179.2
 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.
Management’s outlook regarding the future profitability of our China operations make it unlikely that any of its deferred tax assets will ever be utilized.  As a result, a valuation allowance was recorded against the net deferred tax assets of our primary China subsidiary. 
 
Management concluded that it is
not
more likely than
not
that the disallowed interest expense for
2019
 and
2018
 can be fully utilized in future years. Accordingly, a partial valuation allowance has been recorded against the deferred tax asset related to the limitation on the U.S. deduction for interest expense. 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.
 
During
December
of 
2019,
Management and SAT reached an agreement whereby Libbey would concede certain tax issues resulting in payment of tax, interest and penalty of
$3.2
 million. SAT would uphold its adverse finding on the remaining issue.  Libbey believes SAT’s position on the remaining issue is invalid, intends to litigate the issue, and believes it is more likely than
not
that the Company will prevail in litigation. The SAT Legal Division formalized this agreement in
January, 2020
by issuing a resolution ordering SAT Audit Division to issue a revised assessment consistent with this agreement. 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)
 
2019
   
2018
 
Beginning balance
  $
4,212
    $
5,007
 
Additions based on tax positions related to the current year
   
1,199
     
438
 
Additions for tax positions of prior years
   
6
     
9
 
Reductions for tax positions of prior years
   
(82
)    
(1,698
)
Changes due to lapse of statute of limitations
   
-
     
513
 
Reductions due to settlements with tax authorities
   
(3,045
)    
(57
)
Ending balance
  $
2,290
    $
4,212
 
 
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)
 
2019
   
2018
 
Amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate
  $
2,455
    $
5,283
 
Interest, net of tax benefit, accrued in the Consolidated Balance Sheets
  $
91
    $
1,027
 
Penalties, accrued in the Consolidated Balance Sheets
  $
74
    $
43
 
Interest expense recognized in the Consolidated Statements of Operations
  $
36
    $
523
 
Penalties expense (benefit) recognized in the Consolidated Statements of Operations
  $
31
    $
5
 
 
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
$0.1
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,
2019,
the tax years that remained subject to examination by major tax jurisdictions were as follows:
 
Jurisdiction
 
Open Years
 
Canada
   
2016
2019
 
China
   
2014
2019
 
Mexico (excluding 2011 which is closed)
   
2010
2019
 
Netherlands
   
2018 –
2019
 
Portugal
   
2009
 – 2019
 
United States (excluding 2012 and 2013 which are closed)
   
2011
2019
 
v3.19.3.a.u2
Note 8 - Pension
12 Months Ended
Dec. 31, 2019
Notes to Financial Statements  
Pension and Other Postretirement Benefits Disclosure [Text Block]
8.
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 over half of the hourly U.S.-based employees. Hourly employees hired at Shreveport after
December 15, 2008,
and at Toledo after
September 
30,
2010,
are
not
eligible to participate. 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,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2019
   
2018
   
2019
   
2018
   
2019
   
2018
 
Service cost (benefits earned during the period)
  $
3,368
    $
4,009
    $
1,032
    $
1,142
    $
4,400
    $
5,151
 
Interest cost on projected benefit obligation
   
13,530
     
12,615
     
3,068
     
2,984
     
16,598
     
15,599
 
Expected return on plan assets
   
(20,781
)    
(22,658
)    
     
     
(20,781
)    
(22,658
)
Amortization of unrecognized:
                                               
Prior service cost (credit)
   
     
1
     
(200
)    
(201
)    
(200
)    
(200
)
Actuarial loss
   
4,396
     
6,472
     
413
     
622
     
4,809
     
7,094
 
Settlement charge
   
9
     
     
     
92
     
9
     
92
 
Pension expense
  $
522
    $
439
    $
4,313
    $
4,639
    $
4,835
    $
5,078
 
 
The non-service cost components of pension expense are included in other income (expense) on the Consolidated Statements of Operations. See note 16 for additional information.
 
Actuarial Assumptions
 
The assumptions used to determine net periodic pension expense for each year and the benefit obligations at
December 31
st
were as follows:
 
   
U.S. Plans
   
Non-U.S. Plans
 
   
2019
   
2018
   
2019
   
2018
 
Net periodic pension expense:
     
 
     
 
     
 
     
 
Discount rate
   
4.31%
to
4.33%
     
3.64%
to
3.69%
     
10.06%
     
9.40%
 
Expected long-term rate of return on plan assets
   
6.50%
     
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
   
3.45%
to
3.50%
     
4.31%
to
4.33%
     
8.80%
     
10.60%
 
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,
2019,
the expected long-term rate of return on plan assets is
6.50
percent, which will be used to measure the earnings effects for
2020.
 
The cash balance interest crediting rate, which applies only to the U.S. Salaried Plan, enables us to calculate the benefit obligation through projecting future interest credits on cash balance accounts between the measurement date and a participant’s assumed retirement date. The rate adjusts annually and is the
30
-year Treasury rate in effect as of
October
in the preceding plan year, subject to a minimum of
5
percent. A lower cash balance interest crediting rate assumption decreases the benefit obligation and decreases pension expense.
 
Future benefits are assumed to increase in a manner consistent with past experience of the plans except for the Libbey U.S. Salaried Pension Plan and SERP as discussed above, which, to the extent benefits are based on compensation, includes assumed compensation increases as presented above. Amortization included in net pension expense is based on the average remaining service of employees.
 
We account for our defined benefit pension plans on an expense basis that reflects actuarial funding methods. The actuarial valuations require significant estimates and assumptions to be made by management, primarily with respect to the discount rate and expected long-term return on plan assets. These assumptions are all susceptible to changes in market conditions. The discount rate is based on a selected settlement portfolio from a universe of high quality bonds. In determining the expected long-term rate of return on plan assets, we consider historical market and portfolio rates of return, asset allocations and expectations of future rates of return. We evaluate these critical assumptions on our annual measurement date of
December 
31
st
. Other assumptions involving demographic factors such as retirement age, mortality and turnover are evaluated periodically and are updated to reflect our experience. Actual results in any given year often will differ from actuarial assumptions because of demographic, economic and other factors.
 
For our U.S. pension plans, we began using the Pri-
2012
mortality base table and MP-
2019
generational mortality improvement projection scale, as released by the Society of Actuaries in
October 2019,
to determine our projected benefit obligations at
December 31, 2019.
Prior to this, we used the RP
2014
Sex Distinct Mortality Tables along with the yearly generational projection scale, as released by the Society of Actuaries. 
 
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,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2019
   
2018
   
2019
   
2018
   
2019
   
2018
 
Change in projected benefit obligation:
                                               
Projected benefit obligation, beginning of year
  $
322,594
    $
354,053
    $
29,978
    $
31,967
    $
352,572
    $
386,020
 
Service cost
   
3,368
     
4,009
     
1,032
     
1,142
     
4,400
     
5,151
 
Interest cost
   
13,530
     
12,615
     
3,068
     
2,984
     
16,598
     
15,599
 
Exchange rate fluctuations
   
     
     
1,549
     
138
     
1,549
     
138
 
Actuarial (gain) loss
   
28,820
     
(28,481
)    
8,878
     
(3,056
)    
37,698
     
(31,537
)
Settlements paid
   
(112
)    
     
     
     
(112
)    
 
Benefits paid
   
(19,745
)    
(19,602
)    
(3,210
)    
(3,197
)    
(22,955
)    
(22,799
)
Projected benefit obligation, end of year
  $
348,455
    $
322,594
    $
41,295
    $
29,978
    $
389,750
    $
352,572
 
                                                 
Change in fair value of plan assets:
                                               
Fair value of plan assets, beginning of year
  $
304,084
    $
343,219
    $
    $
    $
304,084
    $
343,219
 
Actual return on plan assets
   
61,961
     
(19,533
)    
     
     
61,961
     
(19,533
)
Employer contributions
   
112
     
     
3,210
     
3,197
     
3,322
     
3,197
 
Settlements paid
   
(112
)    
     
     
     
(112
)    
 
Benefits paid
   
(19,745
)    
(19,602
)    
(3,210
)    
(3,197
)    
(22,955
)    
(22,799
)
Fair value of plan assets, end of year
  $
346,300
    $
304,084
    $
    $
    $
346,300
    $
304,084
 
                                                 
Funded ratio
   
99.4
%    
94.3
%    
0
%    
0
%    
88.9
%    
86.2
%
Funded status and net accrued pension benefit cost
  $
(2,155
)   $
(18,510
)   $
(41,295
)   $
(29,978
)   $
(43,450
)   $
(48,488
)
 
The U.S. defined benefit pension plans experienced actuarial (gains) losses of
$28.8
 million and $(
28.5
) million for the years ended
December 31, 2019 
and
2018,
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
$8.9
 million and $(
3.1
) million for the years ended
December 31, 2019 
and
2018,
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 present value of expected benefit payments to be paid in the subsequent year by the Company. The net accrued pension benefit liability at
December 31
st
represents underfunded (including unfunded) pension benefits, and is included in the Consolidated Balance Sheets as follows:
 
December 31,
     
 
     
 
(dollars in thousands)
 
2019
   
2018
 
Pension asset
  $
5,712
    $
 
Pension liability (current portion)
   
(2,543
)    
(3,282
)
Pension liability
   
(46,619
)    
(45,206
)
Net accrued pension liability
  $
(43,450
)   $
(48,488
)
 
The cumulative pretax amounts recognized in accumulated other comprehensive loss (AOCI) as of
December 
31
are as follows:
 
December 31,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2019
   
2018
   
2019
   
2018
   
2019
   
2018
 
Net actuarial loss
  $
88,703
    $
105,468
    $
17,772
    $
8,732
    $
106,475
    $
114,200
 
Prior service cost (credit)
   
     
     
(2,351
)    
(2,447
)    
(2,351
)    
(2,447
)
Total cost in AOCI
  $
88,703
    $
105,468
    $
15,421
    $
6,285
    $
104,124
    $
111,753
 
 
Estimated contributions for
2020,
as well as, contributions made in
2019
 and
2018
 to the pension plans are as follows:
 
(dollars in thousands)
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
Estimated contributions in 2020
  $
163
    $
2,486
    $
2,649
 
Contributions made in 2019
  $
112
    $
3,210
    $
3,322
 
Contributions made in 2018
  $
    $
3,197
    $
3,197
 
 
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
2020
 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:
 
Fiscal Year
       
 
     
 
     
 
(dollars in thousands)
   
U.S. Plans
   
Non-U.S. Plans
   
Total
 
2020
    $
20,040
    $
2,486
    $
22,526
 
2021
    $
20,212
    $
2,580
    $
22,792
 
2022
    $
20,412
    $
2,988
    $
23,400
 
2023
    $
20,669
    $
2,763
    $
23,432
 
2024
    $
20,748
    $
3,002
    $
23,750
 
2025-2029     $
103,285
    $
18,071
    $
121,356
 
 
Projected and Accumulated Benefit Obligations in Excess of Plan Assets
 
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with a projected and accumulated benefit obligation in excess of plan assets at
December 
31,
2019
 and
2018
 were as follows:
 
December 31,
 
U.S. Plans
   
Non-U.S. Plans
   
Total
 
(dollars in thousands)
 
2019
   
2018
   
2019
   
2018
   
2019
   
2018
 
Projected benefit obligation
  $
268,232
    $
322,594
    $
41,295
    $
29,978
    $
309,527