Company Quick10K Filing
Quick10K
Libbey
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$5.71 22 $126
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
8-K 2019-02-18 Earnings, Exit Costs, Exhibits
8-K 2019-01-07 Officers
8-K 2018-11-06 Earnings, Exhibits
8-K 2018-07-31 Earnings, Exhibits
8-K 2018-05-16 Shareholder Vote, Other Events
8-K 2018-05-01 Earnings, Exhibits
8-K 2018-02-27 Earnings, Exhibits
8-K 2018-01-09 Officers
HRS Harris
KEYS Keysight Technologies
CGNX Cognex
ENR Energizer Holdings
BMI Badger Meter
VICR Vicor
TPIC TPI Composites
FARO Faro Technologies
ACLS Axcelis
HPJ Highpower International
LBY 2018-09-30
Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Qualitative and Quantitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 6. Exhibits
EX-31.1 ex-311.htm
EX-31.2 ex-312.htm
EX-32.1 ex-321.htm

Libbey Earnings 2018-09-30

LBY 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 form10-q.htm FORM 10-Q Document

 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2018
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-12084
Libbey Inc.
 
(Exact name of registrant as specified in its charter)
Delaware
 
34-1559357
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

 
300 Madison Avenue, Toledo, Ohio 43604
 
(Address of principal executive offices) (Zip Code)
 
 
 
 
419-325-2100
 
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer
o
 
 
Accelerated Filer
þ
 
Non-Accelerated Filer
o
(Do not check if a smaller reporting company)
 
Smaller reporting company
o
 
 
 
 
 
Emerging growth company
o
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value 22,147,265 shares at October 31, 2018.
 



TABLE OF CONTENTS

 
Page
 EX-31.1
 
 EX-31.2
 
 EX-32.1
 
 EX-101 INSTANCE DOCUMENT
 
 EX-101 SCHEMA DOCUMENT
 
 EX-101 CALCULATION LINKBASE DOCUMENT
 
 EX-101 LABELS LINKBASE DOCUMENT
 
 EX-101 PRESENTATION LINKBASE DOCUMENT
 
 EX-101 DEFINITION LINKBASE DOCUMENT
 

2


PART I — FINANCIAL INFORMATION

Item 1.
Financial Statements

Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)

 
Three months ended September 30,
 
2018
 
2017
Net sales
$
190,775

 
$
187,339

Freight billed to customers
780

 
1,058

Total revenues
191,555

 
188,397

Cost of sales
154,315

 
150,396

Gross profit
37,240

 
38,001

Selling, general and administrative expenses
33,336

 
29,460

Goodwill impairment

 
79,700

Income (loss) from operations
3,904

 
(71,159
)
Other income (expense)
(1,453
)
 
193

Earnings (loss) before interest and income taxes
2,451

 
(70,966
)
Interest expense
5,652

 
5,118

Income (loss) before income taxes
(3,201
)
 
(76,084
)
Provision for income taxes
1,758

 
2,731

Net loss
$
(4,959
)
 
$
(78,815
)
 
 
 
 
Net loss per share:
 
 
 
Basic
$
(0.22
)
 
$
(3.57
)
Diluted
$
(0.22
)
 
$
(3.57
)
Dividends declared per share
$

 
$
0.1175

See accompanying notes


3


Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)

 
 
 
 
 
Nine months ended September 30,
 
2018
 
2017
Net sales
$
586,222

 
$
557,847

Freight billed to customers
2,475

 
2,481

Total revenues
588,697

 
560,328

Cost of sales
471,294

 
449,737

Gross profit
117,403

 
110,591

Selling, general and administrative expenses
98,396

 
96,875

Goodwill impairment

 
79,700

Income (loss) from operations
19,007

 
(65,984
)
Other income (expense)
(980
)
 
(3,445
)
Earnings (loss) before interest and income taxes
18,027

 
(69,429
)
Interest expense
16,192

 
15,123

Income (loss) before income taxes
1,835

 
(84,552
)
Provision for income taxes
5,767

 
1,665

Net loss
$
(3,932
)
 
$
(86,217
)
 
 
 
 
Net loss per share:
 
 
 
    Basic
$
(0.18
)
 
$
(3.92
)
    Diluted
$
(0.18
)
 
$
(3.92
)
Dividends declared per share
$
0.1175

 
$
0.3525

See accompanying notes


4


Libbey Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(dollars in thousands)
(unaudited)


 
 
Three months ended September 30,
 
Nine months ended September 30,
 
 
2018
 
2017
 
2018
 
2017
 
 
 
 
 
 
 
 
 
Net loss
 
$
(4,959
)
 
$
(78,815
)
 
$
(3,932
)
 
$
(86,217
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
Pension and other post-retirement benefit adjustments, net of tax
 
874

 
1,422

 
4,508

 
4,872

Change in fair value of derivative instruments, net of tax
 
(734
)
 
597

 
1,208

 
199

Foreign currency translation adjustments, net of tax
 
(2,707
)
 
2,650

 
(5,766
)
 
9,647

Other comprehensive income (loss), net of tax
 
(2,567
)
 
4,669

 
(50
)
 
14,718

 
 
 
 
 
 
 
 
 
Comprehensive income (loss)
 
$
(7,526
)
 
$
(74,146
)
 
$
(3,982
)
 
$
(71,499
)
See accompanying notes


5


Libbey Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except share amounts)

 
September 30, 2018
 
December 31, 2017
 
(unaudited)
 
 
ASSETS
 
 
 
Cash and cash equivalents
$
19,088

 
$
24,696

Accounts receivable — net
91,082

 
89,997

Inventories — net
210,591

 
187,886

Prepaid and other current assets
18,051

 
12,550

Total current assets
338,812

 
315,129

Pension asset
4,249

 
2,939

Purchased intangible assets — net
13,685

 
14,565

Goodwill
84,412

 
84,412

Deferred income taxes
25,482

 
24,892

Other assets
9,429

 
9,627

Property, plant and equipment — net
264,057

 
265,675

Total assets
$
740,126

 
$
717,239

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
 
 
Accounts payable
$
72,927

 
$
78,346

Salaries and wages
27,171

 
27,409

Accrued liabilities
51,568

 
43,223

Accrued income taxes
4,798

 
1,862

Pension liability (current portion)
2,286

 
2,185

Non-pension post-retirement benefits (current portion)
4,181

 
4,185

Derivative liability

 
697

Long-term debt due within one year
4,400

 
7,485

Total current liabilities
167,331

 
165,392

Long-term debt
406,252

 
376,905

Pension liability
41,295

 
43,555

Non-pension post-retirement benefits
48,599

 
49,758

Deferred income taxes
1,864

 
1,850

Other long-term liabilities
12,616

 
12,885

Total liabilities
677,957

 
650,345

Contingencies (Note 14)


 


 
 
 
 
Shareholders’ equity:
 
 
 
Common stock, par value $.01 per share, 50,000,000 shares authorized, 22,145,300 shares issued in 2018 (22,018,010 shares issued in 2017)
221

 
220

Capital in excess of par value
334,862

 
333,011

Retained deficit
(167,417
)
 
(161,165
)
Accumulated other comprehensive loss
(105,497
)
 
(105,172
)
Total shareholders’ equity
62,169

 
66,894

Total liabilities and shareholders’ equity
$
740,126

 
$
717,239


See accompanying notes

6


Libbey Inc.
Condensed Consolidated Statement of Shareholders' Equity
(dollars in thousands, except share amounts)
(unaudited)

 
 
Common
Stock
Shares
 
Common
Stock
Amount
 
Capital in Excess of Par Value
 
Retained
Deficit
 
Accumulated Other Comprehensive Loss
 
Total
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance December 31, 2017
 
22,018,010

 
$
220

 
$
333,011

 
$
(161,165
)
 
$
(105,172
)
 
$
66,894

Cumulative-effect adjustment for the adoption of ASU 2017-12
 
 
 
 
 
 
 
275

 
(275
)
 

Net loss
 
 
 
 
 
 
 
(3,932
)
 
 
 
(3,932
)
Other comprehensive income (loss)
 
 
 
 
 
 
 
 
 
(50
)
 
(50
)
Stock compensation expense
 
 
 
 
 
2,059

 
 
 
 
 
2,059

Dividends
 
 
 
 
 
 
 
(2,595
)
 
 
 
(2,595
)
Stock withheld for employee taxes
 
 
 
 
 
(304
)
 
 
 
 
 
(304
)
Stock issued
 
127,290

 
1

 
96

 

 
 
 
97

Balance September 30, 2018
 
22,145,300

 
$
221

 
$
334,862

 
$
(167,417
)
 
$
(105,497
)
 
$
62,169

See accompanying notes


7


Libbey Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
Nine months ended September 30,
 
2018
 
2017
Operating activities:
 
 
 
Net loss
$
(3,932
)
 
$
(86,217
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
34,389

 
33,616

Goodwill impairment

 
79,700

Loss on asset sales and disposals
256

 
224

Change in accounts receivable
(1,688
)
 
(2,000
)
Change in inventories
(24,445
)
 
(25,944
)
Change in accounts payable
(5,139
)
 
3,283

Accrued interest and amortization of discounts and finance fees
801

 
929

Pension & non-pension post-retirement benefits, net
1,154

 
3,007

Accrued liabilities & prepaid expenses
6,938

 
8,716

Income taxes
(1,662
)
 
(1,942
)
Share-based compensation expense
2,127

 
2,930

Other operating activities
(1,213
)
 
(94
)
Net cash provided by operating activities
7,586

 
16,208

 
 
 
 
Investing activities:
 
 
 
Additions to property, plant and equipment
(35,123
)
 
(39,140
)
Net cash used in investing activities
(35,123
)
 
(39,140
)
 
 
 
 
Financing activities:
 

 
 

Borrowings on ABL credit facility
78,850

 
21,004

Repayments on ABL credit facility
(46,876
)
 
(12,277
)
Other repayments
(3,077
)
 
(632
)
Repayments on Term Loan B
(3,300
)
 
(18,300
)
Stock options exercised
5

 
466

Taxes paid on distribution of equity awards
(304
)
 
(623
)
Dividends
(2,595
)
 
(7,762
)
Other financing activities

 
888

Net cash provided by (used in) financing activities
22,703

 
(17,236
)
 
 
 
 
Effect of exchange rate fluctuations on cash
(774
)
 
731

Decrease in cash
(5,608
)
 
(39,437
)
 
 
 
 
Cash & cash equivalents at beginning of period
24,696

 
61,011

Cash & cash equivalents at end of period
$
19,088

 
$
21,574

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid during the period for interest
$
14,868

 
$
13,949

Cash paid during the period for income taxes
$
7,219

 
$
2,609


See accompanying notes

8


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

1.
Description of the Business

Libbey is a leading global manufacturer and marketer of glass tableware products. We produce glass tableware in five countries and sell to customers in over 100 countries. We design and market, under our Libbey®, Libbey Signature®, Master's Reserve®, Crisa®, Royal Leerdam®, World® Tableware, Syracuse® China and Crisal Glass® brand names (among others), an extensive line of high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware items for sale primarily in the foodservice, retail and business-to-business channels of distribution. Our sales force presents our tabletop products to the global marketplace in a coordinated fashion. We own and operate two glass tableware manufacturing plants in the United States as well as glass tableware manufacturing plants in Mexico (Libbey Mexico), the Netherlands (Libbey Holland), Portugal (Libbey Portugal) and China (Libbey China). In addition, we import tabletop products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tabletop market by offering an extensive product line at competitive prices.

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

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

2.
Significant Accounting Policies

Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and nine month periods ended September 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018.

The balance sheet at December 31, 2017, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The financial information included herein should be read in conjunction with our Consolidated Financial Statements in Item 8 of our Form 10-K for the year ended December 31, 2017.

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.

Stock-Based Compensation Expense

Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
Stock-based compensation expense
 
$
671

 
$
782

 
$
2,127

 
$
2,930



9


Reclassifications

In connection with our adoption of ASU 2017-07, certain pension and non-pension expense amounts in prior periods have been reclassified to conform with the current period 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 Condensed 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 Condensed Consolidated Statement of Operations on an ongoing basis. Additionally, there was no impact to our Condensed Consolidated Balance Sheets. The enhanced disclosure requirements are included in note 11, 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 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 Condensed Consolidated Statement of Operations was as follows:
 
 
Three months ended September 30, 2017
 
Nine months ended September 30, 2017
(dollars in thousands)
 
Previously Reported
 
Reclassification
 
As Revised
 
Previously Reported
 
Reclassification
 
As Revised
Cost of sales
 
$
151,202

 
$
(806
)
 
$
150,396

 
$
452,041

 
$
(2,304
)
 
$
449,737

Selling, general and administrative expenses
 
29,082

 
378

 
29,460

 
95,733

 
1,142

 
96,875

Other income (expense)
 
621

 
(428
)
 
193

 
(2,283
)
 
(1,162
)
 
(3,445
)

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 Condensed 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 8, Derivatives, for further details and disclosures.

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

10


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. This would ease the transition burden and allow us to record a cumulative effect adjustment to retained earnings as of January 1, 2019, without restatement of the previously reported comparative periods. Therefore, this is our planned adoption method. We continue to evaluate the impact that the new lease guidance will have on our financial statements and related disclosures, including the additional assets and liabilities that will be recognized on the balance sheet. To facilitate this, we are utilizing a comprehensive approach to review our lease portfolio, have selected a system for managing our leases and are progressing through system implementation, updating of our internal controls and training. See note 15, Operating Leases, in our 2017 Annual Report on Form 10-K for the year ended December 31, 2017, for our minimum lease commitments under non-cancellable operating leases.

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

In February 2018, the FASB issued 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 more useful information reported 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. At this time, we do not plan to adopt this optional ASU.

In August 2018, the FASB issued 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. ASU 2018-14 is effective for fiscal years ending after December 15, 2020, with early application permitted. The ASU provisions only impact annual disclosures and are to be applied on a retrospective basis to all periods presented. We are currently assessing the impact that this standard will have on our annual disclosures.

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 Condensed Consolidated Financial Statements.


11


3.
Balance Sheet Details

The following table provides detail of selected balance sheet items:
(dollars in thousands)
 
September 30, 2018
 
December 31, 2017
Accounts receivable:
 
 
 
 
Trade receivables
 
$
89,268

 
$
88,786

Other receivables
 
1,814

 
1,211

Total accounts receivable, less allowances of $7,043 and $9,051
 
$
91,082

 
$
89,997

 
 
 
 
 
Inventories:
 
 
 
 
Finished goods
 
$
193,306

 
$
170,774

Work in process
 
1,215

 
1,485

Raw materials
 
4,239

 
3,906

Repair parts
 
10,430

 
10,240

Operating supplies
 
1,401

 
1,481

Total inventories, less loss provisions of $9,312 and $10,308
 
$
210,591

 
$
187,886

 
 
 
 
 
Accrued liabilities:
 
 
 
 
Accrued incentives
 
$
24,463

 
$
19,728

Other accrued liabilities
 
27,105

 
23,495

Total accrued liabilities
 
$
51,568

 
$
43,223



4.
Borrowings

Borrowings consist of the following:
(dollars in thousands)
 
Interest Rate
 
Maturity Date
 
September 30,
2018
 
December 31,
2017
Borrowings under ABL Facility
 
floating
(2) 
December 7, 2022 (1)
 
$
31,974

 
$

Term Loan B
 
floating
(3) 
April 9, 2021
 
381,300

 
384,600

AICEP Loan
 
0.00%
 
July 30, 2018
 

 
3,085

Total borrowings
 
 
 
 
 
413,274

 
387,685

Less — unamortized discount and finance fees
 
 
2,622

 
3,295

Total borrowings — net
 
 
 
 
 
410,652

 
384,390

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

 
7,485

Total long-term portion of borrowings — net
 
 
$
406,252

 
$
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 3.60 percent at September 30, 2018.
(3) 
We have entered into interest rate swaps that effectively fix a series of our future interest payments on a portion of the Term Loan B debt. See interest rate swaps in note 8 for additional details. The Term Loan B floating interest rate was 5.13 percent at September 30, 2018.
    
At September 30, 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 September 30, 2018, $7.9 million in letters of credit were outstanding. Remaining unused availability under the ABL Facility was $59.6 million at September 30, 2018, compared to $91.9 million at December 31, 2017.


12


5.
Income Taxes

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

Our effective tax rate was 314.3 percent for the nine months ended September 30, 2018, compared to (2.0) percent for the nine months ended September 30, 2017. Our effective tax rate for the nine months ended September 30, 2018, which was above the United States statutory rate of 21 percent, was increased 195.1 percent by the timing and mix of pretax income earned outside the United States, increased 30.9 percent by the impact of foreign exchange, and increased 67.3 percent by other items including foreign withholding tax and nondeductible expenses. Our effective tax rate for the nine months ended September 30, 2017, which was below the United States statutory rate of 35 percent, was reduced 40.2 percent by the nondeductible goodwill impairment charge, increased 13.7 percent by the timing and mix of pretax income earned outside the United States, decreased 5.3 percent by the impact of foreign exchange, and decreased 5.2 percent by other items including foreign withholding tax and nondeductible expenses.

The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. In August 2016, the Mexican tax authority (SAT) assessed one of our Mexican subsidiaries related to the audit of its 2010 tax year. The amount assessed was approximately 3 billion Mexican pesos, which was equivalent to approximately $157 million U.S. dollars as of the date of the assessment. The Company has filed an administrative appeal with SAT requesting that the assessment be fully nullified. We are awaiting the outcome of the appeal. Management, in consultation with external legal counsel, believes that if contested in the Mexican court system, it is more likely than not that the Company would prevail on all significant components of the assessment. Management intends to continue to vigorously contest all significant components of the assessment in the Mexican courts if they are not nullified at the administrative appeal level. We believe that our tax reserves related to uncertain tax positions are adequate at this time. There were no significant developments affecting this matter for the nine months ended September 30, 2018.

The Tax Cuts and Jobs Act (the Act), enacted December 22, 2017, changed many aspects of the U.S. tax code. Our accounting for the Act is incomplete. As noted at year-end, however, we were able to reasonably estimate certain effects and, therefore, recorded provisional adjustments associated with the deemed repatriation transition tax and the revaluation of our deferred taxes. We have not yet adopted an accounting policy regarding whether we will treat Global Intangible Low Taxed Income (GILTI) as a period cost or establish deferred taxes related thereto. We have not made any additional measurement-period adjustments related to these items during the first nine months of the year. However, we are continuing to gather additional information to complete our accounting for these items and expect to complete our accounting within the prescribed measurement period.


13


6.
Pension and Non-pension Post-retirement Benefits

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

The components of our net pension expense, including the SERP, are as follows:
Three months ended September 30,
 
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
 
$
1,003

 
$
979

 
$
289

 
$
286

 
$
1,292

 
$
1,265

Interest cost
 
3,154

 
3,445

 
755

 
725

 
3,909

 
4,170

Expected return on plan assets
 
(5,665
)
 
(5,619
)
 

 

 
(5,665
)
 
(5,619
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost (credit)
 

 
59

 
(51
)
 
(54
)
 
(51
)
 
5

Actuarial loss
 
1,618

 
1,308

 
158

 
156

 
1,776

 
1,464

Pension expense
 
$
110

 
$
172

 
$
1,151

 
$
1,113

 
$
1,261

 
$
1,285

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
 
$
3,007

 
$
2,937

 
$
865

 
$
814

 
$
3,872

 
$
3,751

Interest cost
 
9,461

 
10,337

 
2,259

 
2,063

 
11,720

 
12,400

Expected return on plan assets
 
(16,994
)
 
(16,859
)
 

 

 
(16,994
)
 
(16,859
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service cost (credit)
 
1

 
177

 
(152
)
 
(153
)
 
(151
)
 
24

Actuarial loss
 
4,854

 
3,925

 
471

 
446

 
5,325

 
4,371

Pension expense
 
$
329

 
$
517

 
$
3,443

 
$
3,170

 
$
3,772

 
$
3,687

 
 
 
 
 
 
 
 
 
 
 
 
 

We have contributed $0.9 million and $2.1 million of cash to our pension plans for the three months and nine months ended September 30, 2018, respectively. Pension contributions for the remainder of 2018 are estimated to be $1.3 million.

We provide certain retiree healthcare and life insurance benefits covering our U.S. and Canadian salaried employees hired before January 1, 2004, and a majority of our union hourly employees (excluding employees hired at Shreveport after December 15, 2008, and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension, post-retirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S., non-pension, post-retirement plans cover the retirees and active employees of Libbey who are located in Canada. The post-retirement benefit plans are unfunded.


14


The provision for our non-pension, post-retirement, benefit expense consists of the following:
Three months ended September 30,
 
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
 
$
151

 
$
157

 
$
1

 
$

 
$
152

 
$
157

Interest cost
 
456

 
526

 
9

 
10

 
465

 
536

Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service (credit)
 
(71
)
 
(50
)
 

 

 
(71
)
 
(50
)
Actuarial (gain)
 
(52
)
 
(65
)
 
(16
)
 
(13
)
 
(68
)
 
(78
)
Non-pension post-retirement benefit expense
 
$
484

 
$
568

 
$
(6
)
 
$
(3
)
 
$
478

 
$
565

 
 
 
 
 
 
 
 
 
 
 
 
 
Nine months ended September 30,
 
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
 
2018
 
2017
Service cost
 
$
453

 
$
473

 
$
1

 
$
1

 
$
454

 
$
474

Interest cost
 
1,367

 
1,578

 
29

 
32

 
1,396

 
1,610

Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
 
Prior service (credit)
 
(212
)
 
(151
)
 

 

 
(212
)
 
(151
)
Actuarial (gain)
 
(157
)
 
(194
)
 
(49
)
 
(39
)
 
(206
)
 
(233
)
Non-pension post-retirement benefit expense
 
$
1,451

 
$
1,706

 
$
(19
)
 
$
(6
)
 
$
1,432

 
$
1,700

 
 
 
 
 
 
 
 
 
 
 
 
 

Our 2018 estimate of non-pension cash payments is $4.3 million, of which we have paid $1.3 million and $3.2 million for the three months and nine months ended September 30, 2018, respectively.

7.
Net Loss per Share of Common Stock

The following table sets forth the computation of basic and diluted loss per share:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(dollars in thousands, except earnings per share)
 
2018
 
2017
 
2018
 
2017
Numerator for earnings per share:
 
 
 
 
 
 
 
 
Net loss that is available to common shareholders
 
$
(4,959
)
 
$
(78,815
)
 
$
(3,932
)
 
$
(86,217
)
 
 
 
 
 
 
 
 
 
Denominator for basic earnings per share:
 
 
 
 
 
 
 
 
Weighted average shares outstanding
 
22,222,827

 
22,075,318

 
22,162,237

 
22,015,008

 
 
 
 
 
 
 
 
 
Denominator for diluted earnings per share:
 
 
 
 
 
 
 
 
Effect of stock options and restricted stock units
 

 

 

 

Adjusted weighted average shares and assumed conversions
 
22,222,827

 
22,075,318

 
22,162,237

 
22,015,008

 
 
 
 
 
 
 
 
 
Basic loss per share
 
$
(0.22
)
 
$
(3.57
)
 
$
(0.18
)
 
$
(3.92
)
 
 
 
 
 
 
 
 
 
Diluted loss per share
 
$
(0.22
)
 
$
(3.57
)
 
$
(0.18
)
 
$
(3.92
)
 
 
 
 
 
 
 
 
 
Shares excluded from diluted loss per share due to:
 
 
 
 
 
 
 
Net loss position (excluded from denominator)
 
384,885

 
63,488

 
164,378

 
92,051

Inclusion would have been anti-dilutive (excluded from calculation)
 
563,903

 
893,198

 
669,496

 
780,062


When applicable, diluted shares outstanding include the dilutive impact of restricted stock units. Diluted shares also include the impact of eligible employee stock options, which are calculated based on the average share price for each fiscal period using the treasury stock method.


15


8.
Derivatives
We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt and commodity price risks associated with forecasted future natural gas requirements. These derivatives, except for the natural gas contracts used in our Mexican manufacturing facilities prior to 2018, qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings. Our contracts with counterparties generally contain right of offset provisions. These provisions effectively reduce our exposure to credit risk in situations where the Company has gain and loss positions outstanding with a single counterparty. It is our policy to offset on the Condensed Consolidated Balance Sheets the amounts recognized for derivative instruments executed with the same counterparty under a master netting agreement.

Prior to January 1, 2018, our derivatives used to reduce economic volatility of natural gas prices in Mexico were not designated as cash flow hedges. All mark-to-market changes on these derivatives were reflected in other income (expense). On January 1, 2018, we adopted ASU 2017-12 for hedge accounting. Under this new guidance, we apply contractually specified component hedging to all of our natural gas hedges. This allows us to record changes in fair value for outstanding natural gas derivatives to other comprehensive income (loss) beginning January 1, 2018. See note 2 for additional details on the adoption of ASU 2017-12.

We do not believe we are exposed to more than a nominal amount of credit risk in our natural gas hedges and interest rate swaps as the counterparties are established financial institutions. The counterparties for the derivative agreements are rated BBB+ or better as of September 30, 2018, by Standard and Poor’s.
Fair Values

The following table provides the fair values of our derivative financial instruments for the periods presented:
(dollars in thousands)
 
 
 
Fair Value of Derivative Assets
 
Balance Sheet Location
 
September 30, 2018
 
December 31, 2017
Cash flow hedges:
 
 
 
 
 
 
Interest rate swaps
 
Prepaid and other current assets
 
$
1,548

 
$

Interest rate swaps
 
Other assets
 

 
646

Natural gas contracts
 
Prepaid and other current assets
 
196

 

Total designated
 
1,744

 
646

Total derivative assets
 
$
1,744

 
$
646

 
 
 
 
 
 
 
 
 
 
 
Fair Value of Derivative Liabilities
 
 
 
 
September 30, 2018
 
December 31, 2017
Cash flow hedges:
 
 
 
 
 
 
Interest rate swaps
 
Derivative liability
 
$

 
$
213

Interest rate swaps
 
Other long-term liabilities
 
412

 

Natural gas contracts
 
Derivative liability
 

 
220

Natural gas contracts
 
Other long-term liabilities
 

 
7

Total designated
 
412

 
440

Derivatives not designated as hedging instruments:
 
 
 
 
Natural gas contracts
 
Derivative liability
 

 
264

Natural gas contracts
 
Other long-term liabilities
 

 
12

Total undesignated
 
 
 

 
276

Total derivative liabilities
 
$
412

 
$
716



16


The following table presents cash settlements (paid) received related to the below derivatives:
 
 
Three months ended September 30,
 
Nine months ended September 30,
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
Natural gas contracts
 
$
48

 
$
(121
)
 
$
(186
)
 
$
177

Interest rate swaps
 
123

 
(384
)
 
(58
)
 
(1,494
)
Total
 
$
171

 
$
(505
)
 
$
(244
)
 
$
(1,317
)

The following table provides a summary of the impacts of derivative gain (loss) on the Consolidated Statements of Operations and other comprehensive income (OCI):
 
 
 
 
Three months ended September 30,
 
Nine months ended September 30,
(dollars in thousands)
 
Location
 
2018
 
2017
 
2018
 
2017
Cash flow hedges:
 
 
 
 
 
 
 
 
 
 
Effective portion of derivative gain (loss) recognized into OCI:
 
 
 
 
 
 
 
 
Natural gas contracts
 
OCI
 
$
179

 
$
6

 
$
513

 
$
(703
)
Interest rate swaps
 
OCI
 
(998
)
 
87

 
735

 
(328
)
Total
 
$
(819
)
 
$
93

 
$
1,248

 
$
(1,031
)
 
 
 
 
 
 
 
 
 
 
 
Effective portion of derivative gain (loss) reclassified from accumulated OCI to current earnings:
 
 
 
 
 
 
 
 
Natural gas contracts
 
Cost of Sales
 
$
48

 
$
(76
)
 
$
(186
)
 
$
81

Interest rate swaps
 
Interest expense
 
135

 
(358
)
 
32

 
(1,415
)
Total
 
$
183

 
$
(434
)
 
$
(154
)
 
$
(1,334
)
 
 
 
 
 
 
 
 
 
 
 
Derivatives not designated as hedging instruments:
 
 
 
 
 
 
 
 
Gain (loss) recognized in current earnings:
 
 
 
 
 
 
 
 
Natural gas contracts
 
Other income (expense)
 
$

 
$
(4
)
 
$

 
$
(823
)
Total
 
$

 
$
(4
)
 
$

 
$
(823
)

Natural Gas Contracts

We use natural gas swap contracts related to forecasted future North American natural gas requirements. The objective of these commodity contracts is to limit the fluctuations in prices paid due to price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 70 percent of our anticipated requirements, 18 months in the future, or more, depending on market conditions. The fair values of these instruments are determined from market quotes.

The following table presents the notional amount of our natural gas derivatives on the Condensed Consolidated Balance Sheets:
 
 
 
 
Notional Amounts
Derivative Types
 
Unit of Measure
 
September 30, 2018
 
December 31, 2017
Natural gas contracts
 
Millions of British Thermal Units (MMBTUs)
 
3,960,000

 
2,480,000


Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses would be recorded to earnings immediately. Changes in the fair value of these hedges are recorded in other comprehensive income (loss). As the natural gas contracts mature, the accumulated gains (losses) for the respective contracts are reclassified from accumulated other comprehensive loss to current expense in cost of sales in our Condensed Consolidated Statement of Operations.


17


Based on our current valuation, we estimate that accumulated gains for natural gas currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in $0.2 million of gain to our Condensed Consolidated Statements of Operations.

Interest Rate Swaps

The table below lists the interest rate swaps we executed as part of our risk management strategy to mitigate the risks associated with the fluctuating interest rates under our Term Loan B. The interest rate swaps effectively convert a portion of our Term Loan B debt from a variable interest rate to a fixed interest rate, thus reducing the impact of interest rate changes on future income.
Swap execution date
 
Effective date
 
Expiration date
 
Notional amount
 
Fixed swap rate
 
April 1, 2015
 
January 11, 2016
 
January 9, 2020
 
$220.0 million
 
4.85
%
 
September 24, 2018
 
January 9, 2020
 
January 9, 2025
 
$200.0 million
 
6.19
%
(1) 
________________________
(1) 
Upon refinancing our Term Loan B, the fixed interest rate will be 3.19 percent plus the new refinanced credit spread.

Our interest rate swaps are valued using the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves.

Our interest rate swaps qualify and are designated as cash flow hedges at September 30, 2018, and are accounted for under FASB ASC 815, "Derivatives and Hedging." Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses are recorded to earnings immediately. Changes in the fair value of these hedges are recorded in other comprehensive income (loss). Based on our current valuation, we estimate that accumulated gains currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in a reduction to interest expense of $1.5 million in our Condensed Consolidated Statements of Operations.


18


9.
Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) (AOCI), net of tax, is as follows:
Three months ended September 30, 2018
(dollars in thousands)
 
Foreign Currency Translation
 
Derivative Instruments
 
Pension and Other Post-retirement Benefits
 
Accumulated Other
Comprehensive Loss
Balance on June 30, 2018
 
$
(19,242
)
 
$
2,018

 
$
(85,706
)
 
$
(102,930
)
 
 
 
 
 
 
 
 
 
Amounts recognized into AOCI
 
(2,707
)
 
(819
)
 

 
(3,526
)
Currency impact
 

 

 
(356
)
 
(356
)
Amounts reclassified from AOCI
 

 
(183
)
(1) 
1,586

(2) 
1,403

Tax effect
 

 
268

 
(356
)
 
(88
)
Other comprehensive income (loss), net of tax
 
(2,707
)

(734
)

874


(2,567
)
Balance on September 30, 2018
 
$
(21,949
)
 
$
1,284

 
$
(84,832
)
 
$
(105,497
)
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2018
(dollars in thousands)
 
Foreign Currency Translation
 
Derivative Instruments
 
Pension and Other Post-retirement Benefits
 
Accumulated Other
Comprehensive Loss
Balance on December 31, 2017
 
$
(16,183
)
 
$
351

 
$
(89,340
)
 
$
(105,172
)
 
 
 
 
 
 
 
 
 
Cumulative-effect adjustment for the adoption of ASU 2017-12
 

 
(275
)
 

 
(275
)
 
 
 
 
 
 
 
 
 
Amounts recognized into AOCI
 
(5,766
)
 
1,248

 
1,527

 
(2,991
)
Currency impact
 

 

 
(316
)
 
(316
)
Amounts reclassified from AOCI
 

 
154

(1) 
4,756

(2) 
4,910

Tax effect
 

 
(194
)
 
(1,459
)
 
(1,653
)
Other comprehensive income (loss), net of tax
 
(5,766
)
 
1,208

 
4,508

 
(50
)
Balance on September 30, 2018
 
$
(21,949
)
 
$
1,284

 
$
(84,832
)
 
$
(105,497
)

19


Three months ended September 30, 2017
(dollars in thousands)
 
Foreign Currency Translation
 
Derivative Instruments
 
Pension and Other Post-retirement Benefits
 
Accumulated Other
Comprehensive Loss
Balance on June 30, 2017
 
$
(20,831
)
 
$
(913
)
 
$
(93,404
)
 
$
(115,148
)
 
 
 
 
 
 
 
 
 
Amounts recognized into AOCI
 
3,477

 
93

 

 
3,570

Currency impact
 

 

 
110

 
110

Amounts reclassified from AOCI
 

 
434

(1) 
1,341

(2) 
1,775

Tax effect
 
(827
)
 
70

 
(29
)
 
(786
)
Other comprehensive income (loss), net of tax
 
2,650


597


1,422


4,669

Balance on September 30, 2017
 
$
(18,181
)
 
$
(316
)
 
$
(91,982
)
 
$
(110,479
)
 
 
 
 
 
 
 
 
 
Nine months ended September 30, 2017
(dollars in thousands)
 
Foreign Currency Translation
 
Derivative Instruments
 
Pension and Other Post-retirement Benefits
 
Accumulated Other
Comprehensive Loss
Balance on December 31, 2016
 
$
(27,828
)
 
$
(515
)
 
$
(96,854
)
 
$
(125,197
)
 
 
 
 
 
 
 
 
 
Amounts recognized into AOCI
 
10,474

 
(1,031
)
 
4,801

 
14,244

Currency impact
 

 

 
(628
)
 
(628
)
Amounts reclassified from AOCI
 

 
1,334

(1) 
4,011

(2) 
5,345

Tax effect
 
(827
)
 
(104
)
 
(3,312
)
 
(4,243
)
Other comprehensive income (loss), net of tax
 
9,647

 
199

 
4,872

 
14,718

Balance on September 30, 2017
 
$
(18,181
)
 
$
(316
)
 
$
(91,982
)
 
$
(110,479
)
___________________________
(1) 
We reclassified natural gas contracts through cost of sales and the interest rate swaps through interest expense on the Condensed Consolidated Statements of Operations. See note 8 for additional information.
(2) 
We reclassified the net pension and non-pension post-retirement benefits amortization and settlement charges through other income (expense) on the Condensed Consolidated Statements of Operations. See note 6 for additional information.

10.
Segments

Our reporting segments align with our regionally focused organizational structure, which we believe enables us to better serve customers across the globe. Under this structure, we report financial results for U.S. and Canada; Latin America; Europe, the Middle East and Africa (EMEA); and Other. Segment results are based primarily on the geographical destination of the sale. Our three reportable segments are defined below. Our operating segment that does not meet the criteria to be a reportable segment is disclosed as Other.

U.S. & Canada—includes sales of manufactured and sourced tableware having an end-market destination in the U.S and Canada, excluding glass products for Original Equipment Manufacturers (OEM), which remain in the Latin America segment.

Latin America—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Latin America, as well as glass products for OEMs regardless of end–market destination.

EMEA—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Europe, the Middle East and Africa.

Other—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Asia Pacific.

Our measure of profit for our reportable segments is Segment Earnings before Interest and Taxes (Segment EBIT) and excludes amounts related to certain items we consider not representative of ongoing operations as well as certain retained corporate costs and other allocations that are not considered by management when evaluating performance. Segment EBIT also includes an allocation of manufacturing costs for inventory produced at a Libbey facility that is located in a region other than the end market in which the inventory is sold. This allocation can fluctuate from year to year based on the relative demands for products produced in regions other than the end markets in which they are sold. We use Segment EBIT, along with net sales

20


and selected cash flow information, to evaluate performance and to allocate resources. Segment EBIT for reportable segments includes an allocation of some corporate expenses based on the costs of services performed.

Certain activities not related to any particular reportable segment are reported within retained corporate costs. These costs include certain headquarter, administrative and facility costs, and other costs that are global in nature and are not allocable to the reporting segments.

The accounting policies of the reportable segments are the same as those described in note 2. We do not have any customers who represent 10 percent or more of total sales. Inter-segment sales are consummated at arm’s length and are reflected at end-market reporting below.
 
 
Three months ended September 30,
 
Nine months ended September 30,
(dollars in thousands)
 
2018
 
2017
 
2018
 
2017
Net Sales:
 
 
 
 
 
 
 
 
U.S. & Canada
 
$
115,304

 
$
112,252

 
$
351,719

 
$
343,452

Latin America
 
35,406

 
35,339

 
110,029

 
102,564

EMEA
 
33,289

 
33,743

 
103,712

 
90,128

Other
 
6,776

 
6,005

 
20,762

 
21,703

Consolidated
 
$
190,775

 
$
187,339

 
$
586,222

 
$
557,847

 
 
 
 
 
 
 
 
 
Segment EBIT:
 
 
 
 
 
 
 
 
U.S. & Canada
 
$
7,538

 
$
10,761

 
$
25,620

 
$
33,307

Latin America
 
1,727

 
3,721

 
11,310

 
2,549

EMEA
 
1,358

 
1,482

 
4,984

 
(1,412
)
Other
 
852

 
(1,529
)
 
383

 
(3,598
)
Total Segment EBIT
 
$
11,475

 
$
14,435

 
$
42,297

 
$
30,846

 
 
 
 
 
 
 
 
 
Reconciliation of Segment EBIT to Net Loss:
 
 
 
 
 
 
 
 
Segment EBIT
 
$
11,475

 
$
14,435

 
$
42,297

 
$
30,846

Retained corporate costs
 
(6,683
)
 
(5,701
)
 
(21,929
)
 
(18,087
)
Goodwill impairment (note 15)
 

 
(79,700
)
 

 
(79,700
)
Fees associated with strategic initiative (1)
 
(2,341
)
 

 
(2,341
)
 

Reorganization charges
 

 

 

 
(2,488
)
Interest expense
 
(5,652
)
 
(5,118
)
 
(16,192
)
 
(15,123
)
Provision for income taxes
 
(1,758
)
 
(2,731
)
 
(5,767
)
 
(1,665
)
Net loss
 
$
(4,959
)
 
$
(78,815
)
 
$
(3,932
)
 
$
(86,217
)
 
 
 
 
 
 
 
 
 
Depreciation & Amortization:
 
 
 
 
 
 
 
 
U.S. & Canada
 
$
3,850

 
$
2,850

 
$
10,289

 
$
9,016

Latin America
 
4,208

 
4,850

 
13,412

 
13,757

EMEA
 
1,835

 
1,816

 
5,784

 
5,508

Other
 
992

 
1,138

 
3,615

 
3,821

Corporate
 
385

 
579

 
1,289

 
1,514

Consolidated
 
$
11,270

 
$
11,233

 
$
34,389

 
$
33,616

 
 
 
 
 
 
 
 
 
Capital Expenditures:
 
 
 
 
 
 
 
 
U.S. & Canada
 
$
6,101

 
$
2,751

 
$
18,830