Notes to Consolidated Financial Statements
|
|
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
®
, Masters 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 markets. 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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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
. All material intercompany accounts and transactions have been eliminated. 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
Revenue is recognized when products are shipped and title and risk of loss have passed to the customer. Revenue is recorded net of returns, discounts and incentives offered to customers. We estimate returns, discounts and incentives at the time of sale based on the terms of the agreements, historical experience and forecasted sales. We continually evaluate the adequacy of these methods used to estimate returns, discounts and incentives. Taxes collected from customers are excluded from revenues and credited directly to obligations to the appropriate governmental agencies.
Cost of Sales
Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original or remaining maturity of less than three months at the date of purchase to be cash equivalents. Cash and cash equivalents are maintained with various financial institutions.
Accounts Receivable and Allowance for Doubtful Accounts
We record trade receivables when revenue is recorded in accordance with our revenue recognition policy and relieve accounts receivable when payments are received from customers. The allowance for doubtful accounts is established through charges to the provision for bad debts. We regularly evaluate the adequacy of the allowance for doubtful accounts based on historical trends in collections and write-offs, our judgment as to the probability of collecting accounts and our evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Accounts are determined to be uncollectible when the debt is deemed to be worthless or only recoverable in part and are written off at that time through a charge against the allowance. Generally, we do not require collateral on our accounts receivable.
Inventory Valuation
Inventories are valued at the lower of cost or market. The last-in, first-out (LIFO) method is used for our U.S. glass inventories, which represented
29.1 percent
and
32.0 percent
of our total inventories in
2016
and
2015
, 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
$12.9 million
and
$12.3 million
in
2016
and
2015
, 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 purchased software packages for internal use. Capitalized costs include software packages, installation and/or internal labor costs. These costs generally are amortized over a
five
-year period.
Property, Plant and Equipment
Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally
3
to
14
years for equipment and furnishings and
10
to
40
years for buildings and improvements. Maintenance and repairs are expensed as incurred.
Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Measurement of an impairment loss for long-lived assets that we expect to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. See note 5 for further disclosure.
Self-Insurance Reserves
Self-insurance reserves reflect the estimated liability for group health and workers' compensation claims not covered by third-party insurance. We accrue estimated losses based on actuarial models and assumptions as well as our historical loss experience. Workers' compensation accruals are recorded at the estimated ultimate payout amounts based on individual case estimates. In addition, we record estimates of incurred-but-not-reported losses based on actuarial models.
Pension and Nonpension Postretirement Benefits
We account for pension and nonpension postretirement 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 postretirement 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 U.S. pension plans cover most hourly U.S.-based employees (excluding new hires at Shreveport after December 15, 2008 and at Toledo after September 30, 2010) and those salaried U.S.-based employees hired before January 1, 2006. Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly-owned subsidiaries in Mexico and the Netherlands (until December 2015). In December 2015, we unwound direct ownership of our defined benefit pension plan in the Netherlands. For further discussion see note 9.
We also provide certain postretirement health care and life insurance benefits covering substantially all U.S. and Canadian salaried employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after December 15, 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon reaching a certain age and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. Under a cross-indemnity agreement, Owens-Illinois, Inc. assumed liability for the nonpension postretirement 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 10.
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. FASB ASC Topic 740, “Income Taxes,” requires that a valuation allowance be 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. For further discussion see note 8.
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, commodity price risks associated with forecasted future natural gas requirements and foreign exchange rate risks associated with occasional transactions denominated in a currency other than the U.S. dollar. These derivatives (except for the foreign currency contracts and natural gas hedges in Mexico) 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 earnings. Cash flows from hedges of debt, short-term forward exchange contracts, currency swaps, interest rate swaps, and natural gas contracts are classified as operating activities. See additional discussion at note 13.
Environmental
In accordance with U.S. GAAP accounting standards, 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. For further detail see note 17.
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 2016, 2015 and 2014, we purchased
111,292
,
412,473
and
34,985
shares of treasury stock at an average price of
$17.97
,
$37.03
and
$30.30
, respectively. At December 31, 2016, 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
2016
,
2015
and
2014
, respectively, were
$4.3 million
,
$6.1 million
and
$6.2 million
.
Advertising Costs
We expense all advertising costs as incurred. The expenses for
2016
,
2015
and
2014
, respectively, were
$5.7 million
,
$10.7 million
and
$4.1 million
.
Computation of Income Per Share of Common Stock
Basic net income per share of common stock is computed using the weighted average number of shares of common stock outstanding during the period. Diluted net income per share of common stock is computed using the weighted average number of shares of common stock outstanding and dilutive potential common share equivalents during the period.
Reclassifications
Certain amounts in prior years' financial statements have been reclassified to conform to the presentation used in the year ended December 31,
2016
, including the reclassification of pension assets in the fair value hierarchy table in accordance with adopting ASU 2015-07 at December 31, 2016. See below and note 9.
New Accounting Standards
In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue From Contracts With Customers", as amended by ASU's 2015-14, 2016-08, 2016-10, 2016-11, 2016-12 and 2016-20, (ASU 2014-09), which outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. ASU 2014-09 is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard. This update is effective for interim and annual reporting periods beginning after December 15, 2017. We plan to adopt this standard in the first quarter of 2018 using the modified retrospective method, whereby the cumulative effect of applying the standard is recognized at the date of initial application. We have substantially completed our evaluation of significant contracts and the review of our current accounting policies and practices to identify potential differences that would result from applying the requirements of ASU 2014-09 to our revenue contracts. In addition, we have identified, and are in the
process of implementing, appropriate changes to business processes, systems and controls to support recognition and disclosure under the new standard. We do not expect the adoption of ASU 2014-09 to have a material impact on the amount and timing of revenue recognized in our Consolidated Financial Statements.
In August 2014, the FASB issued Accounting Standards Update No. 2014-15, "Presentation of Financial Statements-Going Concern" (ASU 2014-15), which establishes management’s responsibility, in connection with preparing financial statements for each annual and interim reporting period, to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern. ASU 2014-15 also provides guidance to determine whether to disclose information about relevant conditions and events when there is substantial doubt about an entity’s ability to continue as a going concern. This update is effective for the annual reporting period ending after December 15, 2016, and for interim and annual periods thereafter. Early application was permitted. We adopted ASU 2014-15 as of December 31, 2016, and it had no impact on our balance sheet, results of operations, cash flows or disclosures at December 31, 2016.
In May 2015, the FASB issued Accounting Standards Update 2015-07, "Disclosures for Investments in Certain Entities that Calculate Net Asset Value Per Share (or its Equivalent)" (ASU 2015-07), which removes the requirement to categorize within the fair value hierarchy investments for which fair values are estimated using the net asset value (NAV) practical expedient provided by FASB ASC Topic 820, Fair Value Measurement. Disclosures about investments in certain entities that calculate NAV per share are limited under ASU 2015-07 to those investments for which the entity has elected to estimate the fair value using the NAV practical expedient. ASU 2015-07 is effective for entities for fiscal years beginning after December 15, 2015 and interim periods within, with retrospective application to all periods presented. Early application was permitted. We adopted ASU 2015-07 as of January 1, 2016. The guidance impacted the presentation of our pension assets that use NAV as a practical expedient (see note 9, Pension)
.
In February 2016, the FASB issued Accounting Standards Update No. 2016-02, "Leases (Topic 842)" (ASU 2016-02), which requires a lessee to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet. 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 fiscal years beginning after December 15, 2018, with early application permitted. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach does not require any transition accounting for leases that expired before the earliest comparative period presented. We are currently evaluating the impact of this standard and anticipate the new guidance will significantly impact our Consolidated Financial Statements as we have a significant number of leases. See note 16, Operating Leases, for our minimum lease commitments under non-cancellable operating leases.
In March 2016, the FASB issued Accounting Standards Update No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" (ASU 2016-09). Areas for simplification in this update involve several aspects of accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. ASU 2016-09 is effective for interim and annual reporting periods beginning after December 15, 2016, with early application permitted. When we adopt this in the first quarter of 2017, there will be an adjustment to retained earnings as of January 1, 2017, an immaterial impact to the Consolidated Statements of Operations, and a reclass between operating and financing activities on the previously reported Consolidated Statements of Cash Flows that will increase cash provided by operating activities and decrease cash used in financing activities.
In June 2016, the FASB issued Accounting Standards Update No. 2016-13. "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" (ASU 2016-13). 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 period within those fiscal years, with early application permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
In August 2016, the FASB issued Accounting Standards Update No. 2016-15, "Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments" (ASU 2016-15). ASU 2016-15 addresses how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows. ASU 2016-15 is effective for interim and annual periods beginning after December 15, 2017, with early adoption permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
In October 2016, the FASB issued Accounting Standards Update No. 2016-16, "Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory" (ASU 2016-16). ASU 2016-16 clarifies that an entity should recognize the income
tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. ASU 2016-16 is effective for annual and interim reporting periods beginning after December 15, 2017, with early adoption permitted. We are currently assessing the impact that this standard will have on our Consolidated Financial Statements.
In January 2017, the FASB issued Accounting Standards Update No. 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment" (ASU 2017-04). ASU 2017-04 simplifies the goodwill impairment testing by eliminating Step 2 from the goodwill impairment testing required, should an impairment be discovered during its annual or interim assessment. ASU 2017-04 is effective for annual or interim impairment tests beginning after December 15, 2019, with early adoption permitted. We plan to adopt this standard for our annual, and any interim, goodwill impairment testing to be performed after January 1, 2017.
The following table provides detail of selected balance sheet items:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Accounts receivable:
|
|
|
|
|
Trade receivables
|
|
$
|
82,851
|
|
|
$
|
91,324
|
|
Other receivables
|
|
2,262
|
|
|
3,055
|
|
Total accounts receivable, less allowances of $7,832 and $7,066
|
|
$
|
85,113
|
|
|
$
|
94,379
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
Finished goods
|
|
$
|
152,261
|
|
|
$
|
159,998
|
|
Work in process
|
|
1,625
|
|
|
1,183
|
|
Raw materials
|
|
4,432
|
|
|
4,944
|
|
Repair parts
|
|
10,558
|
|
|
10,763
|
|
Operating supplies
|
|
1,133
|
|
|
1,139
|
|
Total inventories, less loss provisions of $9,484 and $5,313
|
|
$
|
170,009
|
|
|
$
|
178,027
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
Accrued incentives
|
|
$
|
19,771
|
|
|
$
|
21,450
|
|
Other accrued liabilities
|
|
22,036
|
|
|
23,729
|
|
Total accrued liabilities
|
|
$
|
41,807
|
|
|
$
|
45,179
|
|
|
|
|
|
|
The increase in inventory loss provisions at December 31, 2016 is due to our second quarter 2016 initiative to optimize our product portfolio to reduce inventory and simplify and improve our operations.
|
|
4.
|
Purchased Intangible Assets and Goodwill
|
Purchased Intangibles
Changes in purchased intangibles balances are as follows:
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2016
|
|
2015
|
Beginning balance
|
|
$
|
16,364
|
|
|
$
|
17,771
|
|
Amortization
|
|
(1,039
|
)
|
|
(1,039
|
)
|
Foreign currency impact
|
|
(100
|
)
|
|
(368
|
)
|
Ending balance
|
|
$
|
15,225
|
|
|
$
|
16,364
|
|
Purchased intangible assets are composed of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Indefinite life intangible assets
|
|
$
|
11,888
|
|
|
$
|
11,949
|
|
Definite life intangible assets, net of accumulated amortization of $17,706 and $16,758
|
|
3,337
|
|
|
4,415
|
|
Total
|
|
$
|
15,225
|
|
|
$
|
16,364
|
|
Amortization expense for definite life intangible assets was
$1.0 million
,
$1.0 million
and
$1.1 million
for years
2016
,
2015
and
2014
, respectively.
Indefinite life intangible assets are composed of trade names and trademarks that have an indefinite life and are therefore individually tested for impairment on an annual basis, or more frequently in certain circumstances where impairment indicators arise, in accordance with FASB ASC 350. Our measurement date for impairment testing is October 1
st
of each year. When performing our test for impairment of individual indefinite life intangible assets, we use a relief from royalty method to determine the fair market value that is compared to the carrying value of the indefinite life intangible asset. The inputs used for this analysis are considered Level 3 inputs in the fair value hierarchy. See note 15 for further discussion of the fair value hierarchy. Our October 1
st
review for
2016
and
2015
did not indicate impairment of our indefinite life intangible assets.
The remaining definite life intangible assets at December 31,
2016
consist of customer relationships that are amortized over a period ranging from
13
to
20
years. The weighted average remaining life on the definite life intangible assets is
3.3
years at December 31,
2016
.
Future estimated amortization expense of definite life intangible assets is as follows (dollars in thousands):
|
|
|
|
|
|
|
2017
|
2018
|
2019
|
2020
|
2021
|
|
$1,031
|
$1,031
|
$551
|
$145
|
$145
|
|
Goodwill
Changes in goodwill balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
(dollars in thousands)
|
|
U.S. & Canada
|
|
Latin America
|
|
EMEA
|
|
Total
|
|
U.S. & Canada
|
|
Latin America
|
|
EMEA
|
|
Total
|
Beginning balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
43,872
|
|
|
$
|
125,681
|
|
|
$
|
9,434
|
|
|
$
|
178,987
|
|
|
$
|
43,872
|
|
|
$
|
125,681
|
|
|
$
|
9,434
|
|
|
$
|
178,987
|
|
Accumulated impairment losses
|
|
(5,441
|
)
|
|
—
|
|
|
(9,434
|
)
|
|
(14,875
|
)
|
|
(5,441
|
)
|
|
—
|
|
|
(9,434
|
)
|
|
(14,875
|
)
|
Net beginning balance
|
|
38,431
|
|
|
125,681
|
|
|
—
|
|
|
164,112
|
|
|
38,431
|
|
|
125,681
|
|
|
—
|
|
|
164,112
|
|
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
43,872
|
|
|
125,681
|
|
|
9,434
|
|
|
178,987
|
|
|
43,872
|
|
|
125,681
|
|
|
9,434
|
|
|
178,987
|
|
Accumulated impairment losses
|
|
(5,441
|
)
|
|
—
|
|
|
(9,434
|
)
|
|
(14,875
|
)
|
|
(5,441
|
)
|
|
—
|
|
|
(9,434
|
)
|
|
(14,875
|
)
|
Net ending balance
|
|
$
|
38,431
|
|
|
$
|
125,681
|
|
|
$
|
—
|
|
|
$
|
164,112
|
|
|
$
|
38,431
|
|
|
$
|
125,681
|
|
|
$
|
—
|
|
|
$
|
164,112
|
|
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 15 for further discussion of the fair value hierarchy.
When performing our test for impairment, we measure each reporting unit's fair value using a blended analysis of the present value of future discounted cash flows and the market valuation approach. The discounted cash flow model 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 discounted cash flows model include the following: discount rate, expected financial outlook and profitability of the reporting unit's business, and foreign currency impacts (all Level 3 inputs). The market valuation approach 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 valuation approach model include identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable multiples in estimating the fair value of the reporting unit (Level 2 inputs).
The fair value is then compared to the carrying value. To the extent that fair value exceeds the carrying value, no impairment exists. However, to the extent the carrying value exceeds the fair value, we compare the implied fair value of goodwill to its book value to determine if an impairment should be recorded. Our annual review was performed as of October 1
st
for each year presented, and our review for
2016
and
2015
did not indicate an impairment of goodwill. Subsequently, events occurred, including a further decline in the value of the peso and a shift in the geopolitical environment, which were indicators of potential impairment at December 31,
2016
. Therefore, we conducted an additional review as of December 31, 2016 which did not indicate an impairment to goodwill.
|
|
5.
|
Property, Plant and Equipment
|
Property, plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Land
|
|
$
|
19,524
|
|
|
$
|
19,871
|
|
Buildings
|
|
102,666
|
|
|
102,236
|
|
Machinery and equipment
|
|
473,004
|
|
|
470,862
|
|
Furniture and fixtures
|
|
14,208
|
|
|
14,313
|
|
Software
|
|
22,733
|
|
|
23,630
|
|
Construction in progress
|
|
16,113
|
|
|
9,137
|
|
Gross property, plant and equipment
|
|
648,248
|
|
|
640,049
|
|
Less accumulated depreciation
|
|
391,856
|
|
|
367,515
|
|
Net property, plant and equipment
|
|
$
|
256,392
|
|
|
$
|
272,534
|
|
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. Software consists of internally developed and purchased software packages for internal use. Capitalized costs include software packages, installation, and/or certain internal labor costs. These costs are generally amortized over a
five
-year period. Depreciation expense was
$47.3 million
,
$41.4 million
and $
39.1 million
for the years
2016
,
2015
and
2014
, respectively.
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
Interest Rate
|
|
Maturity Date
|
|
2016
|
|
2015
|
Borrowings under ABL Facility
|
|
floating
|
|
April 9, 2019
|
|
$
|
—
|
|
|
$
|
—
|
|
Term Loan B
|
|
floating
|
(1)
|
April 9, 2021
|
|
409,000
|
|
|
433,400
|
|
AICEP Loan
|
|
0.00%
|
|
January, 2017 to July 30, 2018
|
|
3,320
|
|
|
3,451
|
|
Total borrowings
|
|
412,320
|
|
|
436,851
|
|
Less — unamortized discount and finance fees
|
|
4,480
|
|
|
5,832
|
|
Total borrowings — net
|
|
407,840
|
|
|
431,019
|
|
Less — long term debt due within one year
|
|
5,009
|
|
|
4,747
|
|
Total long-term portion of borrowings — net
|
|
$
|
402,831
|
|
|
$
|
426,272
|
|
___________________________
(1) - See interest rate swap under "Term Loan B" below and note 13.
Annual maturities for all of our total borrowings for the next five years and beyond are as follows:
|
|
|
|
|
|
|
|
2017
|
2018
|
2019
|
2020
|
2021
|
Thereafter
|
|
$5,009
|
$7,111
|
$4,400
|
$4,400
|
$391,400
|
$—
|
|
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 and April 9, 2014 (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
$15.0 million
, with swingline borrowings for Libbey Europe being limited to the U.S. equivalent of
$7.5 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. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and Eurocurrency Loans were
0.50 percent
and
1.50 percent
, respectively, at December 31,
2016
. 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,
2016
. 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
. There were
no
Libbey Glass or Libbey Europe borrowings under the facility at December 31,
2016
or at December 31,
2015
. Interest is payable on the last day of the interest period, which can range from
one month
to
six months
depending on the maturity of each individual borrowing on the ABL facility.
The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable and inventory. The borrowing base is the sum of (a)
85 percent
of eligible accounts receivable and (b) the lesser of (i)
85 percent
of the net orderly liquidation value (NOLV) of eligible inventory, (ii)
65 percent
of eligible inventory, or (iii)
$75.0 million
.
At
December 31, 2016
, the available total borrowing base is offset only by a
$0.5 million
rent reserve. The ABL Facility also provides for the issuance of up to
$30.0 million
of letters of credit which, when outstanding, are applied against the
$100.0
million
limit. At December 31,
2016
,
$7.0 million
in letters of credit were outstanding. Remaining unused availability under the ABL Facility was
$88.4 million
at December 31,
2016
, compared to
$91.0 million
under the ABL Facility at December 31,
2015
.
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
3.75 percent
per year at
December 31, 2016
and
2015
, 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;
|
|
|
•
|
enter into affiliate transactions;
|
|
|
•
|
merge or consolidate, or otherwise dispose of all or substantially all the assets of Libbey Glass and the Guarantors; and
|
|
|
•
|
transfer or sell assets.
|
We may voluntarily prepay, in whole or in part, the Term Loan B without premium or penalty but with accrued interest. Beginning with the year-ended December 31, 2015, the Credit Agreement requires us to make an annual mandatory prepayment offer to lenders of
0.0
to
50.0
percent of our excess cash flow, depending on our excess cash flow and leverage ratios as defined in the Credit Agreement. The calculation is made at the end of each year and the mandatory prepayment offer to lenders is made no later than
ten
business days after the filing of our annual compliance certificate to the lenders. The amount of any required mandatory prepayment offer is reduced by the amounts of any optional prepayments we made during the applicable year or prior to the prepayment offer in the year the offer is required to be made.
The Credit Agreement provides for customary events of default. In the case of an event of default as defined in the Credit Agreement, all of the outstanding Term Loan B will become due and payable immediately without further action or notice. The Term Loan B and the related guarantees under the Credit Agreement are secured by (i) first priority liens on the Term Priority Collateral and (ii) second priority liens on the ABL Collateral.
On April 1, 2015, we executed an interest rate swap on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swap effectively converts
$220.0 million
of our Term Loan B debt from a variable interest rate to a
4.85 percent
fixed interest rate, thus reducing the impact of interest rate changes on future income. The fixed rate swap is effective January 2016 through January 2020. The interest rate swap is designated as a cash flow hedge and is accounted for under FASB ASC 815 "Derivatives and Hedging". See note 13 for further discussion on the interest rate swap.
Senior Secured Notes
The
6.875 percent
Senior Secured Notes were issued at par and had related fees of approximately
$13.2 million
. These fees were amortized to interest expense over the life of the notes until the notes were refinanced in 2014. The Senior Secured Notes were issued pursuant to an Indenture, dated May 18, 2012 (Notes Indenture), 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 Bank of New York Mellon Trust Company, N.A., as trustee (Notes Trustee) and collateral agent.
In the second quarter of 2014, we completed the refinancing of all Libbey Glass's then outstanding
$405.0 million
in aggregate principal amount Senior Secured Notes (
$360.0 million
on April 9, 2014 and
$45.0 million
on May 9, 2014). These transactions included charges of
$37.3 million
for an early call premium and
$9.1 million
for the write off of the remaining financing fees from the Senior Secured Notes. These charges were considered in the computation of the loss on redemption of debt in the year-ended December 31, 2014.
We had an interest rate agreement in place through May 9, 2014 with respect to
$45.0 million
of our Senior Secured Notes as a means to manage our fixed to variable interest rate ratio. The interest rate agreement effectively converted this portion of our long-term borrowings from fixed rate debt to variable rate debt. The variable interest rate for our borrowings related to the agreement at May 9, 2014, excluding applicable fees, was
5.5 percent
. We settled the swap at fair value, resulting in a payment of
$1.1 million
on May 13, 2014. Upon the redemption of the Senior Secured Notes, the unamortized balance of
$0.8 million
of the carrying value adjustment on debt related to the interest rate agreement was recognized as expense in loss on redemption of debt on the Consolidated Statements of Operations. See note 13 for further discussion and the net impact recorded on the Consolidated Statements of Operations.
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. The amount of the loans outstanding is
€3.2 million
(approximately
$3.3 million
) at
December 31, 2016
, and the interest rate is
0.0 percent
. Semi-annual installments of principal are due through the maturity date in July 2018.
RMB Working Capital Loan
On September 2, 2013, Libbey China entered into a RMB
31.5 million
(approximately
$5.2 million
) working capital loan with China Construction Bank (CCB) to cover seasonal working capital needs. The
364
-day loan was set to mature on September 1, 2014, and had a variable interest rate as announced by the People's Bank of China. On July 14, 2014, Libbey China prepaid the working capital loan along with accrued and unpaid interest. The loan held an annual interest rate of
6.3 percent
at the repayment date. This obligation was secured by a mortgage lien on the Libbey China facility.
On July 24, 2014, Libbey China entered into a RMB
20.0 million
(approximately
$3.3 million
) working capital loan with CCB to cover seasonal working capital needs. The working capital loan was set to mature on July 23, 2015, and had a fixed interest rate of
6.78 percent
, which was paid monthly. On March 4, 2015, Libbey China prepaid the working capital loan along with accrued and unpaid interest. This obligation was secured by a mortgage lien on the Libbey China facility.
Promissory Note
In September 2001, we issued a
$2.7 million
promissory note at an interest rate of
6.0 percent
in connection with the purchase of our Laredo, Texas warehouse facility. On December 10, 2014, we paid in full the remaining principal and unpaid interest due on the note, totaling
$0.4 million
. Principal and interest with respect to the promissory note were paid monthly.
Notes Payable
We have an overdraft line of credit for a maximum of
€0.8 million
. At December 31,
2016
and
2015
, there were
no
borrowings under the facility, which had an interest rate of
5.80 percent
. Interest with respect to the note is paid monthly.
Capacity Realignment
In February 2013, we announced plans to discontinue production of certain glassware in North America and reduce manufacturing capacity at our Shreveport, Louisiana, manufacturing facility. As a result, on May 30, 2013, we ceased production of certain glassware in North America, discontinued the use of a furnace at our Shreveport, Louisiana, manufacturing plant and began relocating a portion of the production from the idled furnace to our Toledo, Ohio, and Monterrey, Mexico, locations. These activities were all within the U.S. and Canada and Latin America segments and were completed by March 31, 2014. In connection with this plan, we incurred pretax charges of
$7.5 million
for employee termination costs, fixed asset impairment charges, depreciation expense and other restructuring expenses. Employee termination costs included severance, medical benefits and outplacement services for the terminated employees. The fixed asset impairment charges were to adjust certain machinery and equipment to the estimated fair market value. For the year end December 31, 2014, we recorded a pretax charge of
$1.0 million
in cost of sales related to other restructuring expenses in the Latin America segment.
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)
|
|
2016
|
|
2015
|
|
2014
|
United States
|
|
$
|
29,742
|
|
|
$
|
27,146
|
|
|
$
|
(15,488
|
)
|
Non-U.S.
|
|
(1,958
|
)
|
|
971
|
|
|
29,018
|
|
Total income before income taxes
|
|
$
|
27,784
|
|
|
$
|
28,117
|
|
|
$
|
13,530
|
|
The current and deferred provisions (benefit) for income taxes were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Current:
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
470
|
|
|
$
|
300
|
|
|
$
|
59
|
|
Non-U.S.
|
|
7,625
|
|
|
9,142
|
|
|
10,180
|
|
U.S. state and local
|
|
201
|
|
|
162
|
|
|
157
|
|
Total current income tax provision (benefit)
|
|
8,296
|
|
|
9,604
|
|
|
10,396
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
U.S. federal
|
|
9,981
|
|
|
(44,068
|
)
|
|
227
|
|
Non-U.S.
|
|
334
|
|
|
(3,078
|
)
|
|
(2,066
|
)
|
U.S. state and local
|
|
(900
|
)
|
|
(674
|
)
|
|
10
|
|
Total deferred income tax provision (benefit)
|
|
9,415
|
|
|
(47,820
|
)
|
|
(1,829
|
)
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
U.S. federal
|
|
10,451
|
|
|
(43,768
|
)
|
|
286
|
|
Non-U.S.
|
|
7,959
|
|
|
6,064
|
|
|
8,114
|
|
U.S. state and local
|
|
(699
|
)
|
|
(512
|
)
|
|
167
|
|
Total income tax provision (benefit)
|
|
$
|
17,711
|
|
|
$
|
(38,216
|
)
|
|
$
|
8,567
|
|
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)
|
|
2016
|
|
2015
|
Deferred income tax assets:
|
|
|
|
|
Pension
|
|
$
|
11,799
|
|
|
$
|
9,644
|
|
Non-pension postretirement benefits
|
|
22,810
|
|
|
21,751
|
|
Other accrued liabilities
|
|
19,244
|
|
|
20,432
|
|
Receivables
|
|
2,756
|
|
|
2,341
|
|
Net operating loss and charitable contribution carry forwards
|
|
16,861
|
|
|
25,754
|
|
Tax credits
|
|
11,502
|
|
|
10,245
|
|
Total deferred income tax assets
|
|
84,972
|
|
|
90,167
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
Property, plant and equipment
|
|
23,921
|
|
|
22,882
|
|
Inventories
|
|
3,866
|
|
|
2,378
|
|
Intangibles and other
|
|
5,255
|
|
|
7,883
|
|
Total deferred income tax liabilities
|
|
33,042
|
|
|
33,143
|
|
Net deferred income tax asset before valuation allowance
|
|
51,930
|
|
|
57,024
|
|
Valuation allowance
|
|
(13,773
|
)
|
|
(11,184
|
)
|
Net deferred income tax asset (liability)
|
|
$
|
38,157
|
|
|
$
|
45,840
|
|
The net deferred income tax assets and liabilities at December 31 of the respective year-ends were included in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Non-current deferred income tax asset
|
|
40,016
|
|
|
48,662
|
|
Non-current deferred income tax liability
|
|
(1,859
|
)
|
|
(2,822
|
)
|
Net deferred income tax asset (liability)
|
|
$
|
38,157
|
|
|
$
|
45,840
|
|
The 2016 deferred income tax asset for net operating loss carry forwards of
$16.8 million
relates to cumulative pretax losses incurred in the Netherlands of
$24.8 million
, in Portugal of
$0.6 million
, in China of
$0.9 million
, and in the U.S. of
$23.0 million
for federal and
$58.6 million
for state and local jurisdictions. Our foreign net operating loss carry forwards of
$26.3 million
will expire between
2017
and
2027
. Our U.S. federal net operating loss carry forward of
$23.0 million
will expire between
2031
and
2034
. This
$23.0 million
is lower than the actual amount reported on our U.S. federal income tax return by
$6.6 million
. The difference is attributable to tax deductions in excess of financial statement expenses for stock based compensation. Effective January 1, 2017, Libbey will implement ASU 2016-09 resulting in this amount being recorded as an increase to additional paid in capital and an increase to our U.S. federal net operating loss carry forward. The U.S. state and local net operating loss carry forward of
$58.6 million
will expire between
2017
and
2034
. The 2015 deferred income tax asset for net operating loss carry forwards of
$25.5 million
related to pretax losses incurred in the Netherlands of
$16.9 million
, in Portugal of
$1.8 million
, in China of
$1.3 million
, and in the U.S. of
$53.8 million
for federal and
$68.5 million
for state and local jurisdictions.
The 2016 deferred tax credits of
$11.5 million
consist of
$3.8 million
U.S. federal tax credits and
$7.7 million
non-U.S. credits. The U.S. federal tax credits consist of
$2.6 million
of general business research and development credits which will expire between 2024 and 2036 and
$1.2 million
of alternative minimum tax credits which do not expire. The non-U.S. credit of
$7.7 million
, which is related to withholding tax on inter-company debt in the Netherlands, can be carried forward indefinitely. The 2015 deferred tax credits of
$10.2 million
consisted of
$2.6 million
U.S. federal tax credits and
$7.6 million
non-U.S. credits.
In assessing the need for a valuation allowance, management considers on a quarterly basis whether it is more likely than not that some portion or all of the deferred income tax assets will be realized. The ultimate realization of deferred income tax
assets is dependent upon the generation of future taxable income (including reversals of deferred income tax liabilities) during the periods in which those deductible temporary differences reverse. As a result, we consider the historical and projected financial results of the tax paying component recording the net deferred income tax asset as well as all other positive and negative evidence. Examples of the evidence we consider are cumulative losses in recent years, losses expected in early future years, a history of potential tax benefits expiring unused and whether there were unusual, infrequent, or extraordinary items to be considered. 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.
As of December 31, 2015, management considered the evidence, both positive and negative, in assessing the realizability of our deferred tax assets in the U.S. The positive evidence, including achievement of cumulative income in recent years and expectations for sustainable future income, was strong enough to conclude that it is more likely than not that nearly all of our deferred tax assets are realizable and the valuation allowance was reduced accordingly. In order to fully realize our deferred tax assets in the U.S., the Company needs to generate approximately
$176.6 million
of future taxable income.
Our European operations in the Netherlands incurred an operating loss in 2016, continues to be in cumulative loss positions in recent years, and has a history of tax loss carry-forwards expiring unused. In addition, European economic conditions continue to be unfavorable. Accordingly, management believes it is not more likely than not that a portion of the deferred tax assets related to these operations will be realized and a valuation allowance continues to be recorded as of December 31, 2016.
The valuation allowance activity for the years ended December 31 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Beginning balance
|
|
$
|
11,184
|
|
|
$
|
66,486
|
|
|
$
|
46,048
|
|
Charge (benefit) to provision for income taxes
|
|
2,589
|
|
|
(49,877
|
)
|
|
3,507
|
|
Charge (benefit) to other comprehensive income
|
|
—
|
|
|
(5,425
|
)
|
|
16,931
|
|
Ending balance
|
|
$
|
13,773
|
|
|
$
|
11,184
|
|
|
$
|
66,486
|
|
The valuation allowance increased
$2.6 million
in 2016 from
$11.2 million
at December 31, 2015 to
$13.8 million
at December 31, 2016. The 2016 increase of
$2.6 million
is attributable to changes in deferred tax assets in foreign jurisdictions where valuation allowances are recorded. The 2016 valuation allowance of
$13.8 million
relates to net operating losses and foreign tax credits in the Netherlands. The valuation allowance decreased
$55.3 million
in 2015 from
$66.5 million
at December 31, 2014 to
$11.2 million
at December 31, 2015. The 2015 decrease of
$55.3 million
was primarily attributable to the 2015 reversal of substantially all of the U.S. valuation allowance, partially offset by changes in deferred tax assets in foreign jurisdictions where valuation allowances were recorded. The 2014 increase in valuation allowance of
$20.4 million
was attributable to the 2014 change in deferred tax assets, primarily related to the U.S. federal net operating loss carry forward and other comprehensive income losses related to pensions.
Reconciliation from the statutory U.S. federal income tax rate to the consolidated effective income tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
|
|
2016
|
|
2015
|
|
2014
|
Statutory U.S. federal income tax rate
|
|
35.0
|
|
%
|
|
35.0
|
|
%
|
|
35.0
|
|
%
|
Increase (decrease) in rate due to:
|
|
|
|
|
|
|
|
|
|
Non-U.S. income tax differential
|
|
(2.1
|
)
|
|
|
(0.9
|
)
|
|
|
(25.9
|
)
|
|
U.S. state and local income taxes, net of related U.S. federal income taxes
|
|
(1.3
|
)
|
|
|
(2.0
|
)
|
|
|
0.8
|
|
|
U.S. federal credits
|
|
(2.2
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Permanent adjustments
|
|
3.8
|
|
|
|
7.5
|
|
|
|
20.1
|
|
|
Foreign withholding taxes
|
|
5.7
|
|
|
|
4.7
|
|
|
|
14.8
|
|
|
Valuation allowance
|
|
11.1
|
|
|
|
(174.8
|
)
|
|
|
42.9
|
|
|
Unrecognized tax benefits
|
|
10.0
|
|
|
|
(0.3
|
)
|
|
|
(9.3
|
)
|
|
Impact of foreign exchange
|
|
3.4
|
|
|
|
(19.8
|
)
|
|
|
(14.0
|
)
|
|
Tax effect of intercompany capitalization
|
|
—
|
|
|
|
11.7
|
|
|
|
—
|
|
|
Other
|
|
0.3
|
|
|
|
3.0
|
|
|
|
(1.1
|
)
|
|
Consolidated effective income tax rate
|
|
63.7
|
|
%
|
|
(135.9
|
)
|
%
|
|
63.3
|
|
%
|
U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside of the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such temporary differences totaled
$27.7 million
as of December 31, 2016 and
$35.0 million
as of December 31, 2015. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.
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.
The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. In August 2016, one of our Mexican subsidiaries received a tax assessment from the Mexican tax authority (SAT) related to the audit of its 2010 tax year. The amount assessed was approximately
3 billion
Mexican pesos, which was equivalent to approximately
$157 million
U.S. dollars as of the date of the assessment. The Company has filed an administrative appeal with SAT requesting that the assessment be fully nullified. We are awaiting the outcome of the appeal. Management, in consultation with external legal counsel, believes that if contested in the Mexican court system, it is more likely than not that the Company would prevail on all significant components of the assessment. Management intends to continue to vigorously contest all significant components of the assessment in the Mexican courts if they are not nullified at the administrative appeal level. We believe that our tax reserves related to uncertain tax positions are adequate at this time.
A reconciliation of the beginning and ending gross unrecognized tax benefits, excluding interest and penalties, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Beginning balance
|
|
$
|
431
|
|
|
$
|
378
|
|
|
$
|
1,312
|
|
Additions based on tax positions related to the current year
|
|
382
|
|
|
293
|
|
|
—
|
|
Additions for tax positions of prior years
|
|
3,001
|
|
|
—
|
|
|
—
|
|
Reductions for tax positions of prior years
|
|
(293
|
)
|
|
—
|
|
|
(325
|
)
|
Changes due to lapse of statute of limitations
|
|
—
|
|
|
(240
|
)
|
|
(609
|
)
|
Ending balance
|
|
$
|
3,521
|
|
|
$
|
431
|
|
|
$
|
378
|
|
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)
|
|
2016
|
|
2015
|
|
2014
|
Impact on the effective tax rate, if unrecognized tax benefits were recognized
|
|
$
|
3,414
|
|
|
$
|
378
|
|
|
$
|
306
|
|
Interest and penalties, net of tax benefit, accrued in the Consolidated Balance Sheets
|
|
$
|
273
|
|
|
$
|
28
|
|
|
$
|
174
|
|
Interest and penalties expense (benefit) recognized in the Consolidated Statements of Operations
|
|
$
|
245
|
|
|
$
|
(146
|
)
|
|
$
|
(363
|
)
|
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
$3.9 million
due to settlements with tax authorities.
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. As of December 31,
2016
, the tax years that remained subject to examination by major tax jurisdictions were as follows:
|
|
|
|
|
|
Jurisdiction
|
|
Open Years
|
Canada
|
|
2012
|
–
|
2016
|
China
|
|
2007
|
–
|
2016
|
Mexico
|
|
2010
|
–
|
2016
|
Netherlands
|
|
2015
|
–
|
2016
|
Portugal
|
|
2013
|
–
|
2016
|
United States (excluding 2009 which is closed)
|
|
2008
|
–
|
2016
|
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 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 subsidiaries in the Netherlands and Mexico. The plan in Mexico is unfunded.
In the fourth quarter of 2015, we executed an agreement with Pensioenfonds voor de Grafische Bedrijven (“PGB”), an industry wide pension fund, and unwound direct ownership of our defined benefit pension plan in the Netherlands. In accordance with this agreement, we transferred all assets of the plan and made a cash contribution of
$5.2 million
to PGB. In return, PGB assumed the related liabilities and administrative responsibilities of the plan. As a result, there is
no
longer a pension liability on the Consolidated Balance Sheet related to this pension plan. This event also resulted in a settlement charge of
$21.6 million
being recorded in the Consolidated Statement of Operations in the fourth quarter of 2015. Beginning in 2016, Libbey Holland made cash contributions to PGB as participating employees earned pension benefits. These related costs were expensed as incurred, similar to the accounting associated with a defined contribution retirement plan and amounted to
$1.9 million
in 2016.
Effect on Operations
The components of our net pension expense, including the SERP, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Service cost (benefits earned during the period)
|
|
$
|
3,717
|
|
|
$
|
4,365
|
|
|
$
|
3,664
|
|
|
$
|
1,226
|
|
|
$
|
2,965
|
|
|
$
|
2,264
|
|
|
$
|
4,943
|
|
|
$
|
7,330
|
|
|
$
|
5,928
|
|
Interest cost on projected benefit obligation
|
|
14,963
|
|
|
14,715
|
|
|
15,378
|
|
|
2,594
|
|
|
4,332
|
|
|
5,566
|
|
|
17,557
|
|
|
19,047
|
|
|
20,944
|
|
Expected return on plan assets
|
|
(23,027
|
)
|
|
(22,661
|
)
|
|
(22,387
|
)
|
|
—
|
|
|
(2,447
|
)
|
|
(2,447
|
)
|
|
(23,027
|
)
|
|
(25,108
|
)
|
|
(24,834
|
)
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
263
|
|
|
417
|
|
|
1,059
|
|
|
(207
|
)
|
|
(244
|
)
|
|
164
|
|
|
56
|
|
|
173
|
|
|
1,223
|
|
Actuarial loss
|
|
4,272
|
|
|
7,291
|
|
|
4,057
|
|
|
782
|
|
|
1,599
|
|
|
1,012
|
|
|
5,054
|
|
|
8,890
|
|
|
5,069
|
|
Transition obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
60
|
|
|
—
|
|
|
—
|
|
|
60
|
|
Settlement charge
|
|
42
|
|
|
13
|
|
|
483
|
|
|
126
|
|
|
21,574
|
|
|
291
|
|
|
168
|
|
|
21,587
|
|
|
774
|
|
Curtailment charge (credit)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
Pension expense
|
|
$
|
230
|
|
|
$
|
4,140
|
|
|
$
|
2,254
|
|
|
$
|
4,521
|
|
|
$
|
27,765
|
|
|
$
|
6,910
|
|
|
$
|
4,751
|
|
|
$
|
31,905
|
|
|
$
|
9,164
|
|
In 2016, 2015 and 2014, we incurred pension settlement charges of
$0.2 million
,
$21.6 million
and
$0.8 million
, respectively. The pension settlement charges in 2015 were triggered primarily by the liquidation of the Dutch pension fund. The pension settlement charges in 2016 and 2014 were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts.
Actuarial Assumptions
The assumptions used to determine the benefit obligations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Discount rate
|
|
4.18%
|
to
|
4.23%
|
|
4.60%
|
to
|
4.73%
|
|
9.30%
|
|
8.10%
|
Rate of compensation increase
|
|
Not applicable
|
|
Not applicable
|
|
4.30%
|
|
4.30%
|
The assumptions used to determine net periodic pension costs were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Discount rate
|
4.66
|
%
|
to
|
4.73
|
%
|
|
4.17
|
%
|
to
|
4.29
|
%
|
|
4.83
|
%
|
to
|
5.12
|
%
|
|
8.10%
|
|
2.30
|
%
|
to
|
7.60
|
%
|
|
3.70
|
%
|
to
|
8.50
|
%
|
Expected long-term rate of return on plan assets
|
7.25%
|
|
7.25%
|
|
7.25%
|
|
—%
|
|
4.00%
|
|
4.10%
|
Rate of compensation increase
|
Not applicable
|
|
Not applicable
|
|
Not applicable
|
|
4.30%
|
|
2.00
|
%
|
to
|
4.30
|
%
|
|
2.00
|
%
|
to
|
4.30
|
%
|
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. The expected long-term rate of return on plan assets at December 31
st
is used to measure the earnings effects for the subsequent year.
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.
During 2014, the Society of Actuaries released a new mortality table, which is believed to better reflect current mortality expectations and is to be used in calculating pension obligations. In 2014, we adopted these new tables for our U.S. pension plans for use in determining our projected benefit obligations. In 2015 and 2016, the Society of Actuaries published new mortality projection scales which reflected additional years of mortality experience. We adopted these updates in each respective year.
Projected Benefit Obligation (PBO) and Fair Value of Assets
The changes in the projected benefit obligations and fair value of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation, beginning of year
|
|
$
|
325,863
|
|
|
$
|
351,477
|
|
|
$
|
35,915
|
|
|
$
|
119,986
|
|
|
$
|
361,778
|
|
|
$
|
471,463
|
|
Service cost
|
|
3,717
|
|
|
4,365
|
|
|
1,226
|
|
|
2,965
|
|
|
4,943
|
|
|
7,330
|
|
Interest cost
|
|
14,963
|
|
|
14,715
|
|
|
2,594
|
|
|
4,332
|
|
|
17,557
|
|
|
19,047
|
|
Exchange rate fluctuations
|
|
—
|
|
|
—
|
|
|
(5,821
|
)
|
|
(13,948
|
)
|
|
(5,821
|
)
|
|
(13,948
|
)
|
Actuarial (gain) loss
|
|
11,108
|
|
|
(26,796
|
)
|
|
(2,477
|
)
|
|
11,105
|
|
|
8,631
|
|
|
(15,691
|
)
|
Plan participants' contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,359
|
|
|
—
|
|
|
1,359
|
|
Plan amendments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,354
|
)
|
|
—
|
|
|
(4,354
|
)
|
Curtailment effect
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,414
|
)
|
|
—
|
|
|
(7,414
|
)
|
Settlements paid
|
|
(259
|
)
|
|
(96
|
)
|
|
—
|
|
|
(74,485
|
)
|
|
(259
|
)
|
|
(74,581
|
)
|
Benefits paid
|
|
(18,744
|
)
|
|
(17,802
|
)
|
|
(3,276
|
)
|
|
(3,631
|
)
|
|
(22,020
|
)
|
|
(21,433
|
)
|
Projected benefit obligation, end of year
|
|
$
|
336,648
|
|
|
$
|
325,863
|
|
|
$
|
28,161
|
|
|
$
|
35,915
|
|
|
$
|
364,809
|
|
|
$
|
361,778
|
|
Change in fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
$
|
316,184
|
|
|
$
|
340,082
|
|
|
$
|
—
|
|
|
$
|
74,279
|
|
|
$
|
316,184
|
|
|
$
|
414,361
|
|
Actual return on plan assets
|
|
20,974
|
|
|
(6,096
|
)
|
|
—
|
|
|
(213
|
)
|
|
20,974
|
|
|
(6,309
|
)
|
Exchange rate fluctuations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(7,761
|
)
|
|
—
|
|
|
(7,761
|
)
|
Employer contributions
|
|
259
|
|
|
96
|
|
|
3,276
|
|
|
10,452
|
|
|
3,535
|
|
|
10,548
|
|
Plan participants' contributions
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,359
|
|
|
—
|
|
|
1,359
|
|
Settlements paid
|
|
(259
|
)
|
|
(96
|
)
|
|
—
|
|
|
(74,485
|
)
|
|
(259
|
)
|
|
(74,581
|
)
|
Benefits paid
|
|
(18,744
|
)
|
|
(17,802
|
)
|
|
(3,276
|
)
|
|
(3,631
|
)
|
|
(22,020
|
)
|
|
(21,433
|
)
|
Fair value of plan assets, end of year
|
|
$
|
318,414
|
|
|
$
|
316,184
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
318,414
|
|
|
$
|
316,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded ratio
|
|
94.6
|
%
|
|
97.0
|
%
|
|
—
|
%
|
|
—
|
%
|
|
87.3
|
%
|
|
87.4
|
%
|
Funded status and net accrued pension benefit asset (cost)
|
|
$
|
(18,234
|
)
|
|
$
|
(9,679
|
)
|
|
$
|
(28,161
|
)
|
|
$
|
(35,915
|
)
|
|
$
|
(46,395
|
)
|
|
$
|
(45,594
|
)
|
The non-U.S. settlements paid in 2015 relate to us unwinding our direct ownership of the defined benefit pension plan in the Netherlands.
The current portion of the pension liability reflects the amount of expected benefit payments that are greater than the plan assets on a plan-by-plan basis. The net accrued pension benefit liability at December 31 of the respective year-ends were included in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Non-current asset
|
|
$
|
—
|
|
|
$
|
977
|
|
Current liability
|
|
(2,461
|
)
|
|
(2,297
|
)
|
Long-term liability
|
|
(43,934
|
)
|
|
(44,274
|
)
|
Net accrued pension liability
|
|
$
|
(46,395
|
)
|
|
$
|
(45,594
|
)
|
The pretax amounts recognized in accumulated other comprehensive loss as of December 31, 2016 and 2015, are as follows
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net actuarial loss
|
|
$
|
105,830
|
|
|
$
|
96,983
|
|
|
$
|
11,077
|
|
|
$
|
16,988
|
|
|
$
|
116,907
|
|
|
$
|
113,971
|
|
Prior service cost (credit)
|
|
237
|
|
|
500
|
|
|
(2,704
|
)
|
|
(3,472
|
)
|
|
(2,467
|
)
|
|
(2,972
|
)
|
Total cost
|
|
$
|
106,067
|
|
|
$
|
97,483
|
|
|
$
|
8,373
|
|
|
$
|
13,516
|
|
|
$
|
114,440
|
|
|
$
|
110,999
|
|
The pretax amounts in accumulated other comprehensive loss as of December 31, 2016, that are expected to be recognized as components of net periodic benefit cost during 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
Net actuarial loss
|
|
$
|
5,409
|
|
|
$
|
543
|
|
|
$
|
5,952
|
|
Prior service cost (credit)
|
|
236
|
|
|
(187
|
)
|
|
49
|
|
Total cost
|
|
$
|
5,645
|
|
|
$
|
356
|
|
|
$
|
6,001
|
|
Estimated contributions for 2017, as well as, contributions made in 2016 and 2015 to the pension plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
Estimated contributions in 2017
|
|
$
|
286
|
|
|
$
|
2,278
|
|
|
$
|
2,564
|
|
Contributions made in 2016
|
|
$
|
259
|
|
|
$
|
3,276
|
|
|
$
|
3,535
|
|
Contributions made in 2015
|
|
$
|
96
|
|
|
$
|
10,452
|
|
|
$
|
10,548
|
|
Included in the above table, related to the non-U.S. plans, we paid
$5.2 million
in connection with unwinding the direct ownership of our defined benefit pension plan in the Netherlands in the fourth quarter of 2015. 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 2017 than the amounts in the above table. Although a decline in market conditions, changes in current pension law and uncertainties regarding significant assumptions used in the actuarial valuations may have a material impact in future required contributions to our pension plans, we currently do not expect funding requirements to have a material adverse impact on current or future liquidity.
Pension benefit payment amounts are anticipated to be paid from the plans (including the SERP) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
2017
|
|
$
|
19,038
|
|
|
$
|
2,278
|
|
|
$
|
21,316
|
|
2018
|
|
$
|
19,957
|
|
|
$
|
1,668
|
|
|
$
|
21,625
|
|
2019
|
|
$
|
20,146
|
|
|
$
|
1,786
|
|
|
$
|
21,932
|
|
2020
|
|
$
|
20,164
|
|
|
$
|
1,903
|
|
|
$
|
22,067
|
|
2021
|
|
$
|
20,497
|
|
|
$
|
2,258
|
|
|
$
|
22,755
|
|
2022-2026
|
|
$
|
105,868
|
|
|
$
|
12,215
|
|
|
$
|
118,083
|
|
Accumulated Benefit Obligation in Excess of Plan Assets
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for pension plans with an accumulated benefit obligation in excess of plan assets at December 31, 2016 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Projected benefit obligation
|
|
$
|
336,648
|
|
|
$
|
268,218
|
|
|
$
|
28,161
|
|
|
$
|
35,915
|
|
|
$
|
364,809
|
|
|
$
|
304,133
|
|
Accumulated benefit obligation
|
|
$
|
336,648
|
|
|
$
|
268,218
|
|
|
$
|
23,194
|
|
|
$
|
29,102
|
|
|
$
|
359,842
|
|
|
$
|
297,320
|
|
Fair value of plan assets
|
|
$
|
318,414
|
|
|
$
|
257,562
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
318,414
|
|
|
$
|
257,562
|
|
Plan Assets
Our investment strategy is to control and manage investment risk through diversification across asset classes and investment styles, within established target asset allocation ranges. The investment risk of the assets is limited by appropriate diversification both within and between asset classes. Assets are diversified among a mix of traditional investments in equity and fixed income instruments, as well as alternative investments including real estate and hedge funds. It would be anticipated that a modest allocation to short-term investments would exist within the plans, since each investment manager is likely to hold some short-term investments in the portfolio with the goal of ensuring that sufficient liquidity will be available to meet expected cash flow requirements.
Our investment valuation policy is to state the investments at fair value. All investments are valued at their respective NAV as a practical expedient and calculated by the Trustee. The real estate, equity securities and fixed income investments are held in a Group Trust which is valued at the unit prices established by the Trustee and are valued using NAV as a practical expedient. Underlying equity securities (including large and small cap domestic and international equities), for which market quotations are readily available, are valued at the last reported readily available sales price on their principal exchange on the valuation date or official close for certain markets. Fixed income investments are valued on a basis of valuations furnished by a trustee-approved pricing service, which determines valuations for normal institutional-size trading units of such securities which are generally recognized at fair value as determined in good faith by the Trustee. The fair value of investments in real estate funds is based on valuation of the fund as determined by periodic appraisals of the underlying investments owned by the respective fund. Investments in registered investment companies or collective pooled funds, if any, are valued at their respective NAV. Short-term investments are valued at their respective NAV and have no redemption restrictions. The hedge fund investments are valued by using estimated month-end NAV and performance numbers provided by the fund administrator. The Plan is required to provide a month’s advance written notice to liquidate its entire share in the Group Trust. Certain investments in the hedge funds can only be liquidated on either a quarterly or semi-annual basis and require advance notification.
In connection with the unwinding of our defined benefit pension plan in the Netherlands in the fourth quarter of 2015, all related plan assets were transferred to PGB, an industry wide pension fund. In accordance with our adoption of ASU 2015-07 in 2016, all investments measured at NAV as a practical expedient for fair value have been excluded from the fair value hierarchy. The fair value measurements table presented below of our U.S. pension plan assets has been recasted to conform to the current year presentation under ASU 2015-07. See note 2 for more information.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
Measured at NAV
|
|
Target Allocation
|
|
2016
|
|
2015
|
|
2017
|
Short-term investments
|
|
$
|
8,766
|
|
|
$
|
9,558
|
|
|
3
|
%
|
Real estate
|
|
15,812
|
|
|
17,376
|
|
|
5
|
%
|
Equity securities
|
|
148,302
|
|
|
138,497
|
|
|
45
|
%
|
Debt securities
|
|
96,658
|
|
|
101,895
|
|
|
32
|
%
|
Hedge funds
|
|
48,876
|
|
|
48,858
|
|
|
15
|
%
|
Total
|
|
$
|
318,414
|
|
|
$
|
316,184
|
|
|
100
|
%
|
|
|
10.
|
Nonpension Postretirement Benefits
|
We provide certain retiree health care 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. nonpension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. nonpension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.
Effect on Operations
The provision for our nonpension postretirement benefit expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Service cost (benefits earned during the period)
|
|
$
|
797
|
|
|
$
|
855
|
|
|
$
|
1,007
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
798
|
|
|
$
|
856
|
|
|
$
|
1,008
|
|
Interest cost on projected benefit obligation
|
|
2,608
|
|
|
2,537
|
|
|
2,840
|
|
|
51
|
|
|
52
|
|
|
108
|
|
|
2,659
|
|
|
2,589
|
|
|
2,948
|
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
|
140
|
|
|
140
|
|
|
140
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140
|
|
|
140
|
|
|
140
|
|
Loss (gain)
|
|
81
|
|
|
592
|
|
|
267
|
|
|
(47
|
)
|
|
(56
|
)
|
|
—
|
|
|
34
|
|
|
536
|
|
|
267
|
|
Nonpension postretirement benefit expense
|
|
$
|
3,626
|
|
|
$
|
4,124
|
|
|
$
|
4,254
|
|
|
$
|
5
|
|
|
$
|
(3
|
)
|
|
$
|
109
|
|
|
$
|
3,631
|
|
|
$
|
4,121
|
|
|
$
|
4,363
|
|
Actuarial Assumptions
The discount rates used to determine the accumulated postretirement benefit obligation and net postretirement benefit cost were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
Accumulated postretirement benefit obligation
|
4.05
|
%
|
|
4.56
|
%
|
|
4.10
|
%
|
|
3.48
|
%
|
|
3.69
|
%
|
|
3.61
|
%
|
Net postretirement benefit cost
|
4.56
|
%
|
|
4.10
|
%
|
|
4.74
|
%
|
|
3.69
|
%
|
|
3.61
|
%
|
|
4.36
|
%
|
The weighted average assumed health care cost trend rates at December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Health care cost trend rate assumed for next year
|
6.75
|
%
|
|
7.00
|
%
|
|
6.75
|
%
|
|
7.00
|
%
|
Ultimate health care trend rate
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
|
5.00
|
%
|
Year the ultimate trend rate is reached
|
2024
|
|
|
2024
|
|
|
2024
|
|
|
2024
|
|
We use various actuarial assumptions, including the discount rate and the expected trend in health care costs, to estimate the costs and benefit obligations for our retiree health plan. The discount rate is determined based on high-quality fixed income
investments that match the duration of expected retiree medical benefits at our December 31 measurement date to establish the discount rate. The discount rate at December 31 is used to measure the year-end benefit obligations and the earnings effects for the subsequent year.
The health care cost trend rate represents our expected annual rates of change in the cost of health care benefits. The trend rate noted above represents a forward projection of health care costs as of the measurement date. A 1.0 percent change in the health care trend rate would not have a material impact upon the nonpension postretirement expense.
Accumulated Postretirement Benefit Obligation
The components of our nonpension postretirement benefit obligation are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Change in accumulated nonpension postretirement benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
58,795
|
|
|
$
|
65,565
|
|
|
$
|
1,390
|
|
|
$
|
2,536
|
|
|
$
|
60,185
|
|
|
$
|
68,101
|
|
Service Cost
|
|
797
|
|
|
855
|
|
|
1
|
|
|
1
|
|
|
798
|
|
|
856
|
|
Interest cost
|
|
2,608
|
|
|
2,537
|
|
|
51
|
|
|
52
|
|
|
2,659
|
|
|
2,589
|
|
Plan participants' contributions
|
|
528
|
|
|
610
|
|
|
—
|
|
|
—
|
|
|
528
|
|
|
610
|
|
Actuarial (gain) loss
|
|
146
|
|
|
(7,287
|
)
|
|
(102
|
)
|
|
(740
|
)
|
|
44
|
|
|
(8,027
|
)
|
Exchange rate fluctuations
|
|
—
|
|
|
—
|
|
|
46
|
|
|
(346
|
)
|
|
46
|
|
|
(346
|
)
|
Benefits paid
|
|
(3,953
|
)
|
|
(3,485
|
)
|
|
(42
|
)
|
|
(113
|
)
|
|
(3,995
|
)
|
|
(3,598
|
)
|
Benefit obligation, end of year
|
|
$
|
58,921
|
|
|
$
|
58,795
|
|
|
$
|
1,344
|
|
|
$
|
1,390
|
|
|
$
|
60,265
|
|
|
$
|
60,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and accrued benefit cost
|
|
$
|
(58,921
|
)
|
|
$
|
(58,795
|
)
|
|
$
|
(1,344
|
)
|
|
$
|
(1,390
|
)
|
|
$
|
(60,265
|
)
|
|
$
|
(60,185
|
)
|
The net accrued postretirement benefit liability at December 31 of the respective year-ends were included in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Current liability
|
|
$
|
4,892
|
|
|
$
|
4,903
|
|
Long-term liability
|
|
55,373
|
|
|
55,282
|
|
Total accrued postretirement benefit liability
|
|
$
|
60,265
|
|
|
$
|
60,185
|
|
The pretax amounts recognized in accumulated other comprehensive loss as of December 31, 2016 and 2015, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net actuarial loss (gain)
|
|
$
|
5,146
|
|
|
$
|
5,080
|
|
|
$
|
(730
|
)
|
|
$
|
(654
|
)
|
|
$
|
4,416
|
|
|
$
|
4,426
|
|
Prior service cost (credit)
|
|
(1,463
|
)
|
|
(1,323
|
)
|
|
—
|
|
|
—
|
|
|
(1,463
|
)
|
|
(1,323
|
)
|
Total cost (credit)
|
|
$
|
3,683
|
|
|
$
|
3,757
|
|
|
$
|
(730
|
)
|
|
$
|
(654
|
)
|
|
$
|
2,953
|
|
|
$
|
3,103
|
|
The pretax amounts in accumulated other comprehensive loss at December 31, 2016, that are expected to be recognized as components of net periodic benefit cost during 2017 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
Net actuarial loss (gain)
|
|
$
|
101
|
|
|
$
|
(54
|
)
|
|
$
|
47
|
|
Prior service cost (credit)
|
|
(200
|
)
|
|
—
|
|
|
(200
|
)
|
Total cost (credit)
|
|
$
|
(99
|
)
|
|
$
|
(54
|
)
|
|
$
|
(153
|
)
|
Nonpension postretirement benefit payments net of estimated future Medicare Part D subsidy payments and future retiree contributions, are anticipated to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
(dollars in thousands)
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
Total
|
2017
|
|
$
|
4,833
|
|
|
$
|
154
|
|
|
$
|
4,987
|
|
2018
|
|
$
|
4,951
|
|
|
$
|
153
|
|
|
$
|
5,104
|
|
2019
|
|
$
|
4,990
|
|
|
$
|
147
|
|
|
$
|
5,137
|
|
2020
|
|
$
|
4,872
|
|
|
$
|
141
|
|
|
$
|
5,013
|
|
2021
|
|
$
|
4,614
|
|
|
$
|
133
|
|
|
$
|
4,747
|
|
2022-2026
|
|
$
|
19,834
|
|
|
$
|
434
|
|
|
$
|
20,268
|
|
|
|
11.
|
Net Income per Share of Common Stock
|
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except earnings per share)
|
|
2016
|
|
2015
|
|
2014
|
Numerator for earnings per share:
|
|
|
|
|
|
|
Net income that is available to common shareholders
|
|
$
|
10,073
|
|
|
$
|
66,333
|
|
|
$
|
4,963
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share:
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
21,879,613
|
|
|
21,816,935
|
|
|
21,716,288
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share:
|
|
|
|
|
|
|
Effect of stock options and restricted stock units
|
|
169,330
|
|
|
342,214
|
|
|
467,249
|
|
Adjusted weighted average shares and assumed conversions
|
|
22,048,943
|
|
|
22,159,149
|
|
|
22,183,537
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
$
|
0.46
|
|
|
$
|
3.04
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
$
|
0.46
|
|
|
$
|
2.99
|
|
|
$
|
0.22
|
|
|
|
|
|
|
|
|
Shares excluded from diluted earnings per share due to:
|
|
|
|
|
|
|
Inclusion would have been anti-dilutive (excluded from calculation)
|
|
602,402
|
|
|
105,201
|
|
|
168,557
|
|
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. Under the treasury stock method, the tax-effected proceeds that hypothetically would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.
|
|
12.
|
Employee Stock Benefit Plans
|
We have a stock-based employee compensation plan. We account for stock-based compensation in accordance with FASB ASC Topic 718, “Compensation - Stock Compensation” and FASB ASC Topic 505-50, “Equity - Equity Based Payment to Non-Employees”, which requires the measurement and recognition of compensation expense for all share-based awards to our employees and directors. Share-based compensation cost is measured based on the fair value of the equity or liability instruments issued. FASB ASC 718 and FASB ASC 505-50 apply to all of our outstanding unvested share-based payment awards.
Equity Participation Plan Program Description
We have
two
equity participation plans, the Amended and Restated Libbey Inc. 2006 Omnibus Incentive Plan and the Libbey Inc. 2016 Omnibus Incentive Plan, which we refer to as the Omnibus Plans. Up to a total of
2,960,000
and
1,200,000
shares of Libbey Inc. common stock are authorized for issuance as equity-based compensation under the 2006 and 2016 Omnibus Plans, respectively. Under the Omnibus Plans, grants of equity-based compensation may take the form of stock options, stock appreciation rights, performance shares or units, restricted stock or restricted stock units or other stock-based awards. Employees and directors are eligible for awards under these plans. During 2016, there were grants of
351,590
stock options,
298,909
restricted stock units, and
16,299
cash settled restricted stock units. During 2015, there were grants of
108,297
stock options,
219,010
restricted stock units, and
1,025
cash settled restricted stock units. All option grants have an exercise price equal to the fair market value of the underlying stock on the grant date. The vesting period of options, stock appreciation rights, restricted stock units and cash settled restricted stock units outstanding as of December 31, 2016, is generally
four
years. Awards are subject to alternate vesting plans for death, disability, retirement eligibility and involuntary termination. Dividends are not payable on shares underlying options, stock appreciation rights or unvested restricted stock units. All grants of equity-based compensation are amortized over the vesting period in accordance with FASB ASC 718 expense attribution methodology. The impact of applying the provisions of FASB ASC 718 is a pretax compensation expense of
$4.8 million
,
$5.9 million
and
$5.3 million
in selling, general and administrative expenses in the Consolidated Statements of Operations for
2016
,
2015
and
2014
, respectively.
Non-Qualified Stock Option Information
The Black-Scholes option-pricing model was used to estimate the grant-date fair value for stock options. The exercise price of each stock option equals the closing market price of our common stock on the date of grant. The maximum term is
ten
years. The following table summarizes non-qualified stock option disclosures for
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except options and assumptions)
|
|
2016
|
|
2015
|
|
2014
|
Stock options granted
|
|
351,590
|
|
|
108,297
|
|
|
233,054
|
|
Stock option compensation expense included in the Consolidated Statements of Operations
|
|
$
|
705
|
|
|
$
|
1,674
|
|
|
$
|
1,591
|
|
Weighted-average grant-date fair value of options granted using the Black-Scholes model
|
|
$
|
4.20
|
|
|
$
|
14.72
|
|
|
$
|
10.86
|
|
Weighted average assumptions for stock option grants:
|
|
|
|
|
|
|
Risk-free interest
|
|
1.30%
|
|
1.68%
|
|
1.90%
|
Expected term
|
|
6.3 years
|
|
6.4 years
|
|
6.5 years
|
Expected volatility
|
|
33.14%
|
|
39.92%
|
|
42.81%
|
Dividend yield
|
|
2.69%
|
|
1.16%
|
|
0.00%
|
|
|
•
|
The risk-free interest rate is based on the U.S. Treasury yield curve at the time of grant and has a term equal to the expected life.
|
|
|
•
|
The expected term represents the period of time the options are expected to be outstanding. We use the actual historical exercise activity for determining the expected term.
|
|
|
•
|
Expected volatility is calculated based on a rolling average of the daily stock closing prices of a peer group of companies with a period equal to the expected life of the award. The peer group is used due to the Company having a period of history when we were more highly leveraged which is not relevant in evaluating expected volatility. The peer group was established using the criteria of similar industry, size, leverage and length of history.
|
|
|
•
|
The dividend yield is calculated as the ratio based on our most recent historical dividend payments per share of common stock at the grant date to the stock price on the date of grant.
|
Information with respect to our stock option activity for
2016
,
2015
and
2014
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Options
|
|
Shares
|
|
Weighted-Average
Exercise Price
per Share
|
|
Weighted-Average
Remaining
Contractual Life
(In Years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
Outstanding balance at January 1, 2014
|
|
988,780
|
|
|
$
|
14.07
|
|
|
5.0
|
|
$
|
6,856
|
|
Granted
|
|
233,054
|
|
|
$
|
23.92
|
|
|
|
|
|
Exercised
|
|
(363,459
|
)
|
|
$
|
12.57
|
|
|
|
|
$
|
5,218
|
|
Canceled
|
|
(24,365
|
)
|
|
$
|
20.58
|
|
|
|
|
|
Outstanding balance at December 31, 2014
|
|
834,010
|
|
|
$
|
17.28
|
|
|
6.7
|
|
$
|
11,808
|
|
Granted
|
|
108,297
|
|
|
$
|
36.90
|
|
|
|
|
|
Exercised
|
|
(241,122
|
)
|
|
$
|
13.85
|
|
|
|
|
$
|
5,722
|
|
Canceled
|
|
(44,514
|
)
|
|
$
|
25.43
|
|
|
|
|
|
Outstanding balance at December 31, 2015
|
|
656,671
|
|
|
$
|
21.22
|
|
|
6.8
|
|
$
|
2,103
|
|
Granted
|
|
351,590
|
|
|
$
|
17.23
|
|
|
|
|
|
Exercised
|
|
(100,813
|
)
|
|
$
|
13.90
|
|
|
|
|
$
|
379
|
|
Canceled
|
|
(262,225
|
)
|
|
$
|
23.73
|
|
|
|
|
|
Outstanding balance at December 31, 2016
|
|
645,223
|
|
|
$
|
19.17
|
|
|
6.6
|
|
$
|
1,407
|
|
Exercisable at December 31, 2016
|
|
300,288
|
|
|
$
|
18.43
|
|
|
4.3
|
|
$
|
816
|
|
Intrinsic value for share-based instruments is defined as the difference between the current market value and the exercise price.
As of December 31,
2016
,
$0.8 million
of unrecognized compensation expense related to nonvested stock options is expected to be recognized within the next
1.9 years
on a weighted-average basis. The total fair value of shares vested during
2016
,
2015
and
2014
is
$1.6 million
,
$1.7 million
and
$1.1 million
, respectively. Shares issued for exercised options are issued from treasury stock, when available.
The following table summarizes our nonvested stock option activity for
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
Nonvested Stock Options
|
|
Shares
|
|
Weighted-Average
Value (per Share)
|
Nonvested at January 1, 2014
|
|
342,276
|
|
|
$
|
9.07
|
|
Granted
|
|
233,054
|
|
|
$
|
10.86
|
|
Vested
|
|
(113,550
|
)
|
|
$
|
9.37
|
|
Forfeited
|
|
(23,265
|
)
|
|
$
|
9.73
|
|
Nonvested at December 31, 2014
|
|
438,515
|
|
|
$
|
9.91
|
|
Granted
|
|
108,297
|
|
|
$
|
14.72
|
|
Vested
|
|
(161,923
|
)
|
|
$
|
10.55
|
|
Forfeited
|
|
(42,887
|
)
|
|
$
|
11.32
|
|
Nonvested at December 31, 2015
|
|
342,002
|
|
|
$
|
10.95
|
|
Granted
|
|
351,590
|
|
|
$
|
4.20
|
|
Vested
|
|
(169,703
|
)
|
|
$
|
9.42
|
|
Forfeited
|
|
(178,954
|
)
|
|
$
|
8.41
|
|
Nonvested at December 31, 2016
|
|
344,935
|
|
|
$
|
6.14
|
|
Stock Appreciation Rights Information
The exercise price of each stock appreciation right equals the closing market price of our common stock on the date of grant. The maximum term is
ten
years. Stock appreciation rights are settled in cash for the difference between the market price on the date of exercise and the exercise price. Awards that are settled in cash are subject to liability accounting. Accordingly, the fair value of such awards is remeasured at the end of each reporting period until settled or expired. The Company entered into a CEO Retention Award Agreement pursuant to which the Company issued
240,829
stock appreciation rights to our former CEO
on December 16, 2013. On January 11, 2016, vesting of all unvested retention stock appreciation rights otherwise scheduled to vest on December 31, 2018 was accelerated as a result of the departure of our former CEO.
The Black-Scholes option-pricing model was used to estimate the grant-date fair value. The following table summarizes stock appreciation rights disclosures for
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except stock appreciation rights and assumptions)
|
|
2016
|
|
2015
|
|
2014
|
Stock appreciation rights granted
|
|
—
|
|
|
—
|
|
|
2,600
|
|
Stock appreciation rights compensation expense (credit) included in the Consolidated Statements of Operations
|
|
$
|
(462
|
)
|
|
$
|
(273
|
)
|
|
$
|
736
|
|
Weighted-average grant-date fair value of stock appreciation rights granted using the Black-Scholes model
|
|
|
|
|
|
|
$
|
10.45
|
|
Weighted average assumptions for stock appreciation rights granted:
|
|
|
|
|
|
|
Risk-free interest
|
|
|
|
|
|
1.92%
|
Expected term
|
|
|
|
|
|
6.5 years
|
Expected volatility
|
|
|
|
|
|
43.14%
|
Dividend yield
|
|
|
|
|
|
0.00%
|
The risk-free interest rate, expected term, expected volatility and dividend yield assumptions are calculated consistent with our non-qualified stock option awards.
Information with respect to our stock appreciation right activity for
2016
,
2015
and
2014
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Appreciation Rights
|
|
Shares
|
|
Weighted Average Exercise Price
|
|
Weighted-Average
Remaining
Contractual Life
(In Years)
|
|
Aggregate
Intrinsic
Value
(in thousands)
|
Outstanding Balance at January 1, 2014
|
|
250,979
|
|
|
$
|
21.07
|
|
|
10
|
|
$
|
—
|
|
Granted
|
|
2,600
|
|
|
$
|
23.02
|
|
|
|
|
|
Exercised
|
|
(6,475
|
)
|
|
$
|
14.98
|
|
|
|
|
|
Canceled
|
|
(2,875
|
)
|
|
$
|
16.99
|
|
|
|
|
|
Outstanding balance at December 31, 2014
|
|
244,229
|
|
|
$
|
21.27
|
|
|
9
|
|
$
|
2,483
|
|
Outstanding balance at December 31, 2015
|
|
244,229
|
|
|
$
|
21.27
|
|
|
8
|
|
$
|
14
|
|
Outstanding balance at December 31, 2016
|
|
244,229
|
|
|
$
|
21.27
|
|
|
0.1
|
|
$
|
4
|
|
Exercisable at December 31, 2016
|
|
243,079
|
|
|
$
|
21.27
|
|
|
0.1
|
|
$
|
4
|
|
As of December 31,
2016
, the amount of unrecognized compensation expense related to nonvested stock appreciation rights is immaterial. The total fair value of shares vested during
2016
,
2015
and
2014
was immaterial.
The following table summarizes our non-vested stock appreciation rights for
2016
,
2015
and
2014
:
|
|
|
|
|
|
|
|
|
Nonvested Stock Appreciation Rights
|
|
Shares
|
|
Weighted-Average
Value (per Share)
|
Nonvested at January 1, 2014
|
|
248,041
|
|
|
$
|
10.36
|
|
Granted
|
|
2,600
|
|
|
$
|
10.45
|
|
Vested
|
|
(3,537
|
)
|
|
$
|
10.10
|
|
Forfeited
|
|
(2,875
|
)
|
|
$
|
9.66
|
|
Nonvested at December 31, 2014
|
|
244,229
|
|
|
$
|
10.37
|
|
Vested
|
|
(1,250
|
)
|
|
$
|
10.33
|
|
Nonvested at December 31, 2015
|
|
242,979
|
|
|
$
|
10.37
|
|
Vested
|
|
(241,829
|
)
|
|
$
|
10.38
|
|
Nonvested at December 31, 2016
|
|
1,150
|
|
|
$
|
9.88
|
|
Stock and Restricted Stock Unit Information
Under the Omnibus Plans, we grant non-employee members of our Board of Directors shares of stock. The shares granted to Directors are immediately vested and all compensation expense is recognized in our Consolidated Statements of Operations in the year the grants are made. In addition, we grant restricted stock units to select executives and key employees. Compensation expense for restricted stock is measured based on the closing market price of the stock at date of grant less the present value of expected dividends over the vesting period, as dividends are not payable on unvested restricted stock units.
A summary of the activity for stock and restricted stock units under the Omnibus Plans for
2016
,
2015
and
2014
is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except share amounts)
|
|
2016
|
|
2015
|
|
2014
|
Beginning nonvested balance
|
|
315,434
|
|
|
232,824
|
|
|
208,460
|
|
Granted
|
|
298,909
|
|
|
219,010
|
|
|
123,782
|
|
Vested
|
|
(165,372
|
)
|
|
(113,319
|
)
|
|
(92,070
|
)
|
Forfeited
|
|
(165,783
|
)
|
|
(23,081
|
)
|
|
(7,348
|
)
|
Ending nonvested balance
|
|
283,188
|
|
|
315,434
|
|
|
232,824
|
|
|
|
|
|
|
|
|
Weighted-average grant-date fair value per restricted stock unit
|
|
$
|
16.22
|
|
|
$
|
35.93
|
|
|
$
|
24.24
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
$
|
3,019
|
|
|
$
|
4,199
|
|
|
$
|
2,340
|
|
The total fair value for shares vested during the years ended December 31,
2016
,
2015
and
2014
was
$3.0 million
,
$4.2 million
and
$2.2 million
, respectively. As of December 31,
2016
, there was
$2.8 million
of unrecognized compensation cost related to nonvested restricted stock units granted. That cost is expected to be recognized over a weighted average period of
1.8 years
. Shares issued for unrestricted stock and restricted stock unit awards are issued from treasury stock, when available.
Cash Settled Restricted Stock Unit Information
Under the terms of the CEO Retention Award Agreement dated December 16, 2013,
115,687
cash settled restricted stock units were granted during the first quarter of 2014. Accordingly, awards that will be settled in cash are subject to liability accounting and the fair value of these awards will be remeasured at the end of each reporting period until settled. On January 11, 2016, vesting of all unvested retention cash settled restricted stock units otherwise scheduled to vest on December 31, 2018 was accelerated as a result of the departure of our former CEO.
A summary of the activity for cash settled restricted stock units is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands, except share amounts)
|
|
2016
|
|
2015
|
|
2014
|
Beginning nonvested balance
|
|
116,712
|
|
|
115,687
|
|
|
—
|
|
Granted
|
|
16,299
|
|
|
1,025
|
|
|
115,687
|
|
Vested
|
|
(115,944
|
)
|
|
—
|
|
|
—
|
|
Ending nonvested balance
|
|
17,067
|
|
|
116,712
|
|
|
115,687
|
|
|
|
|
|
|
|
|
Weighted-average grant-date fair value per restricted stock unit
|
|
$
|
3.57
|
|
|
$
|
36.96
|
|
|
$
|
23.02
|
|
|
|
|
|
|
|
|
Compensation expense
|
|
$
|
1,504
|
|
|
$
|
317
|
|
|
$
|
616
|
|
During 2016, some equity awards for foreign employees were modified to cash settled restricted stock units. The weighted-average grant-date fair value noted above represents the incremental value at the date of modification. As of December 31,
2016
, the amount of unrecognized compensation cost related to nonvested cash settled restricted stock units granted was immaterial. We paid
$2.3 million
to settle vested cash settled restricted stock units in 2016.
Employee 401(k) Plan Retirement Fund and Non-Qualified Deferred Executive Compensation Plans
We sponsor the Libbey Inc. Salary and Hourly 401(k) plans (the Plans) to provide retirement benefits for our U.S. employees. As allowed under Section 401(k) of the Internal Revenue Code, the Plans provide for tax-deferred wage contributions for eligible employees.
For the Salary Plan, employees can contribute from
1
percent to
50
percent of their annual salary, up to the annual IRS limits. We match
100
percent on the first
6
percent on a per pay basis of pretax contributions. For the Hourly Plan, employees can contribute from
1
percent to
25
percent of their eligible annual pay up to the annual IRS limits. We match
50
percent of the first
6
percent of eligible earnings on a per pay basis that are contributed by employees on a pretax basis. Therefore, the maximum matching contribution that we may allocate to each participant's account did not exceed
$15,900
for the Salary Plan or
$7,950
for the Hourly Plan for the 2016 calendar year due to the
$265,000
annual limit on eligible earnings imposed by the Internal Revenue Code. All matching contributions are invested according to the employees' deferral elections and vest immediately.
Effective January 1, 2009, we have a non-qualified Executive Deferred Compensation Plan (EDCP). Under the EDCP, executives and other members of senior management may elect to defer base salary, annual incentive compensation and equity-based compensation. We provide matching contributions on excess contributions (above the qualified 401(k) plan compensation limits) in the same manner as we provide matching contributions under our 401(k) plan.
Our matching contributions to all Plans totaled
$3.4 million
,
$3.4 million
and
$3.1 million
in
2016
,
2015
and
2014
, respectively.
We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt, commodity price risks associated with forecasted future natural gas requirements and foreign exchange rate risks associated with transactions denominated in a currency other than the U.S. dollar. These derivatives, except for the foreign currency contracts and the natural gas contracts used in our Mexican manufacturing facility, 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 (as is the case for natural gas contracts used in our Mexico manufacturing facility) 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. All of these contracts were accounted for under FASB ASC 815 “Derivatives and Hedging.”
Fair Values
The following table provides the fair values of our derivative financial instruments for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives:
|
(dollars in thousands)
|
|
December 31, 2016
|
|
December 31, 2015
|
Derivatives designated as hedging
instruments under FASB ASC 815:
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
Natural gas contracts
|
|
Prepaid and other current assets
|
|
$
|
702
|
|
|
Prepaid and other current assets
|
|
$
|
—
|
|
Natural gas contracts
|
|
Other assets
|
|
45
|
|
|
Other assets
|
|
—
|
|
Total designated
|
|
|
|
747
|
|
|
|
|
—
|
|
Derivatives not designated as hedging
instruments under FASB ASC 815:
|
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
Prepaid and other current assets
|
|
732
|
|
|
Prepaid and other current assets
|
|
—
|
|
Natural gas contracts
|
|
Other assets
|
|
29
|
|
|
Other assets
|
|
—
|
|
Currency contracts
|
|
Prepaid and other current assets
|
|
—
|
|
|
Prepaid and other current assets
|
|
245
|
|
Total undesignated
|
|
|
|
761
|
|
|
|
|
245
|
|
Total
|
|
|
|
$
|
1,508
|
|
|
|
|
$
|
245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives:
|
(dollars in thousands)
|
|
December 31, 2016
|
|
December 31, 2015
|
Derivatives designated as hedging
instruments under FASB ASC 815:
|
|
Balance Sheet Location
|
|
Fair Value
|
|
Balance Sheet Location
|
|
Fair Value
|
Natural gas contracts
|
|
Derivative liability - current
|
|
$
|
—
|
|
|
Derivative liability - current
|
|
$
|
1,069
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
—
|
|
|
Other long-term liabilities
|
|
34
|
|
Interest rate contract
|
|
Derivative liability - current
|
|
1,928
|
|
|
Derivative liability - current
|
|
2,132
|
|
Interest rate contract
|
|
Other long-term liabilities
|
|
107
|
|
|
Other long-term liabilities
|
|
246
|
|
Total designated
|
|
|
|
2,035
|
|
|
|
|
3,481
|
|
Derivatives not designated as hedging
instruments under FASB ASC 815:
|
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
Derivative liability - current
|
|
—
|
|
|
Derivative liability - current
|
|
1,064
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
—
|
|
|
Other long-term liabilities
|
|
35
|
|
Total undesignated
|
|
|
|
—
|
|
|
|
|
1,099
|
|
Total
|
|
|
|
$
|
2,035
|
|
|
|
|
$
|
4,580
|
|
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, up to
eighteen
months in the future. The fair values of these instruments are determined from market quotes. As of
December 31, 2016
, we had commodity contracts for
2,590,000
million British Thermal Units (BTUs) of natural gas. At
December 31, 2015
, we had commodity contracts for
3,000,000
million BTUs of natural gas.
All of our derivatives for natural gas in the U.S. qualify and are designated as cash flow hedges at
December 31, 2016
. 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 effective portion of the fair value of these hedges are recorded in other comprehensive income (loss). The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in other income. 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 Consolidated Statements of Operations.
During the first nine months of 2014, our natural gas contracts in Mexico were designated and effective cash flow hedges.
Since October 1, 2014, we have not designated our derivatives for natural gas in Mexico as cash flow hedges. All mark-to-market changes relating to these derivatives are being reflected in other income as depicted in the third table below.
We received (paid) additional cash of
$(2.3) million
,
$(4.6) million
and
$0.6 million
in the years ended December 31,
2016
,
2015
and
2014
, respectively, due to the difference between the fixed unit rate of our natural gas contracts and the variable unit rate of our natural gas cost from suppliers. 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
$0.7 million
of gain in our Consolidated Statements of Operations.
The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss) from our natural gas contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Derivatives in Cash Flow Hedging relationships:
|
|
|
|
|
|
|
Natural gas contracts
|
|
$
|
721
|
|
|
$
|
(1,909
|
)
|
|
$
|
(1,392
|
)
|
Total
|
|
$
|
721
|
|
|
$
|
(1,909
|
)
|
|
$
|
(1,392
|
)
|
The following table provides a summary of the effective portion of the derivative reclassified from accumulated other comprehensive loss to the Consolidated Statements of Operations from our natural gas contracts:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
Location:
|
|
2016
|
|
2015
|
|
2014
|
Natural gas contracts
|
|
Cost of sales
|
|
$
|
(1,129
|
)
|
|
$
|
(2,131
|
)
|
|
$
|
573
|
|
Total impact on net income (loss)
|
|
|
|
$
|
(1,129
|
)
|
|
$
|
(2,131
|
)
|
|
$
|
573
|
|
The ineffective portion of derivative gain (loss) related to the de-designated Mexico contracts reclassified from accumulated other comprehensive loss to cost of sales in the Consolidated Statements of Operations was
$0.2 million
of income and an immaterial amount in the years ended
December 31, 2015
and
2014
, respectively.
The following table provides a summary of the gain (loss) recognized in other income in the Consolidated Statements of Operations from our natural gas contracts in Mexico since October 1, 2014:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
De-designated contracts
|
|
$
|
—
|
|
|
$
|
932
|
|
|
$
|
(1,236
|
)
|
Contracts where hedge accounting was not elected
|
|
1,860
|
|
|
(714
|
)
|
|
(81
|
)
|
Total
|
|
$
|
1,860
|
|
|
$
|
218
|
|
|
$
|
(1,317
|
)
|
Interest Rate Swap as Cash Flow Hedge
On April 1, 2015, we executed an interest rate swap on our Term Loan B as part of our risk management strategy to mitigate the risks involved with fluctuating interest rates. The interest rate swap effectively converts
$220.0 million
, or approximately half, of our Term Loan B debt from a variable interest rate to a
4.85 percent
fixed interest rate, thus reducing the impact of interest rate changes on future income. The fixed rate swap became effective in January 2016 and expires in January 2020. This interest rate swap is 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 swap qualifies and is designated as a cash flow hedge at
December 31, 2016
and 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 would be recorded to earnings immediately. Changes in the effective portion of the fair value of these hedges are recorded in other comprehensive income (loss). The ineffective portion, if any, of the change in the fair value of a derivative designated as a cash flow hedge is recognized in other income. Based on our current valuation, we estimate that accumulated losses currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in
$1.9 million
of additional interest expense in our Consolidated Statements of Operations.
The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss) from our interest rate swap:
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
Derivatives in Cash Flow Hedging relationships:
|
|
|
|
|
Interest rate swap
|
|
$
|
(2,056
|
)
|
|
$
|
(2,378
|
)
|
Total
|
|
$
|
(2,056
|
)
|
|
$
|
(2,378
|
)
|
The following table provides a summary of the effective portion of the derivative reclassified from accumulated other comprehensive loss to the Consolidated Statements of Operations from our interest rate swap:
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
Location:
|
|
2016
|
|
2015
|
Interest rate swap
|
|
Interest expense
|
|
$
|
(2,399
|
)
|
|
$
|
—
|
|
Total impact on net income (loss)
|
|
|
|
$
|
(2,399
|
)
|
|
$
|
—
|
|
Interest Rate Swap as Fair Value Hedge
On June 18, 2012, we entered into an interest rate swap agreement with a notional amount of
$45.0 million
that was to mature in 2020. The swap agreement was executed in order to convert a portion of the fixed rate debt under the Senior Secured Notes into floating rate debt and maintain a capital structure containing fixed and floating rate debt. Upon the refinancing of the Senior Secured Notes, the swap was settled at fair value on May 9, 2014, resulting in a payment of
$1.1 million
. The remaining balance of the carrying value adjustment on debt related to the interest rate swap agreement was recognized as a loss in loss on redemption of debt on the Consolidated Statements of Operations. See note 6 for further discussion.
Prior to the 2014 refinancing of the Senior Secured Notes,
$40.5 million
of our interest rate swap agreement was designated and qualified as a fair value hedge. The change in the fair value of the derivative instrument related to the future cash flows (gain or loss on the derivative) and the offsetting change in the fair value of the hedged long-term debt attributable to the hedged risk were recognized in other income. We included the gain or loss on the hedged long-term debt, along with the offsetting loss or gain on the related interest rate swap, in other income, on the Consolidated Statements of Operations.
As of July 1, 2013, we de-designated
10 percent
, or
$4.5 million
, of our interest rate swap. As a result, the subsequent mark-to-market of the
$4.5 million
portion of the swap was recorded in other income on the Consolidated Statement of Operations until settled on May 9, 2014.
The gain or loss on the hedged long-term debt netted with the offsetting gain or loss on the related designated and de-designated interest rate swap was recorded on the Consolidated Statements of Operations as follows:
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2014
|
Loss on redemption of debt
|
|
$
|
(757
|
)
|
Other income (expense)
|
|
70
|
|
Net impact
|
|
$
|
(687
|
)
|
Currency Contracts
Our foreign currency exposure arises from transactions denominated in a currency other than the U.S. dollar primarily associated with our Canadian dollar denominated accounts receivable. From time to time, we enter into a series of foreign currency contracts to sell Canadian dollars. We had
no
contracts outstanding at December 31, 2016 and
C$6.2 million
at December 31, 2015. The fair values of these instruments are determined from market quotes. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change.
Gains (losses) on currency derivatives that were not designated as hedging instruments are recorded in other income as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
Location:
|
|
2016
|
|
2015
|
|
2014
|
Currency contracts
|
|
Other income (expense)
|
|
$
|
(245
|
)
|
|
$
|
(158
|
)
|
|
$
|
403
|
|
Total
|
|
|
|
$
|
(245
|
)
|
|
$
|
(158
|
)
|
|
$
|
403
|
|
We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate swap, natural gas hedges and currency contracts as the counterparties are established financial institutions. The counterparties for the derivative agreements are rated BBB+ or better, as of December 31, 2016, by Standard and Poor’s.
|
|
14.
|
Comprehensive Income (Loss)
|
Accumulated other comprehensive loss, net of tax, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
Foreign Currency Translation
|
|
Derivative Instruments
|
|
Pension and Other Postretirement Benefits
|
|
Total
Accumulated
Comprehensive Loss
|
Balance on December 31, 2013
|
|
$
|
4,554
|
|
|
$
|
1,221
|
|
|
$
|
(78,935
|
)
|
|
$
|
(73,160
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
(13,716
|
)
|
|
(1,392
|
)
|
|
—
|
|
|
(15,108
|
)
|
Actuarial gain (loss)
|
|
—
|
|
|
—
|
|
|
(62,689
|
)
|
|
(62,689
|
)
|
Currency impact
|
|
—
|
|
|
—
|
|
|
4,655
|
|
|
4,655
|
|
Amounts reclassified from accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss
(1)
|
|
—
|
|
|
—
|
|
|
5,331
|
|
|
5,331
|
|
Amortization of prior service cost
(1)
|
|
—
|
|
|
—
|
|
|
2,142
|
|
|
2,142
|
|
Amortization of transition obligation
(1)
|
|
—
|
|
|
—
|
|
|
60
|
|
|
60
|
|
Cost of sales
|
|
—
|
|
|
(573
|
)
|
|
—
|
|
|
(573
|
)
|
Current-period other comprehensive income (loss)
|
|
(13,716
|
)
|
|
(1,965
|
)
|
|
(50,501
|
)
|
|
(66,182
|
)
|
Tax effect
|
|
—
|
|
|
119
|
|
|
776
|
|
|
895
|
|
Balance on December 31, 2014
|
|
(9,162
|
)
|
|
(625
|
)
|
|
(128,660
|
)
|
|
(138,447
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
(13,751
|
)
|
|
(4,287
|
)
|
|
—
|
|
|
(18,038
|
)
|
Actuarial gain (loss)
|
|
—
|
|
|
—
|
|
|
21,438
|
|
|
21,438
|
|
Currency impact
|
|
—
|
|
|
—
|
|
|
4,233
|
|
|
4,233
|
|
Amounts reclassified from accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss
(1)
|
|
—
|
|
|
—
|
|
|
9,426
|
|
|
9,426
|
|
Amortization of prior service cost
(1)
|
|
—
|
|
|
—
|
|
|
4,652
|
|
|
4,652
|
|
Cost of sales
|
|
—
|
|
|
2,357
|
|
|
—
|
|
|
2,357
|
|
Current-period other comprehensive income (loss)
|
|
(13,751
|
)
|
|
(1,930
|
)
|
|
39,749
|
|
|
24,068
|
|
Tax effect
|
|
—
|
|
|
695
|
|
|
(6,548
|
)
|
|
(5,853
|
)
|
Balance on December 31, 2015
|
|
(22,913
|
)
|
|
(1,860
|
)
|
|
(95,459
|
)
|
|
(120,232
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss)
|
|
(6,244
|
)
|
|
(1,335
|
)
|
|
—
|
|
|
(7,579
|
)
|
Actuarial gain (loss)
|
|
—
|
|
|
—
|
|
|
(10,560
|
)
|
|
(10,560
|
)
|
Currency impact
|
|
—
|
|
|
—
|
|
|
1,271
|
|
|
1,271
|
|
Amounts reclassified from accumulated other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
Amortization of actuarial loss
(1)
|
|
—
|
|
|
—
|
|
|
5,088
|
|
|
5,088
|
|
Amortization of prior service cost
(1)
|
|
—
|
|
|
—
|
|
|
196
|
|
|
196
|
|
Cost of sales
|
|
—
|
|
|
1,129
|
|
|
—
|
|
|
1,129
|
|
Interest expense
|
|
—
|
|
|
2,399
|
|
|
—
|
|
|
2,399
|
|
Current-period other comprehensive income (loss)
|
|
(6,244
|
)
|
|
2,193
|
|
|
(4,005
|
)
|
|
(8,056
|
)
|
Tax effect
|
|
1,329
|
|
|
(848
|
)
|
|
2,610
|
|
|
3,091
|
|
Balance on December 31, 2016
|
|
$
|
(27,828
|
)
|
|
$
|
(515
|
)
|
|
$
|
(96,854
|
)
|
|
$
|
(125,197
|
)
|
_________________________
(1)
These accumulated other comprehensive income components are included in the computation of net periodic benefit cost within the cost of sales and selling, general and administrative expenses on the Consolidated Statements of Operations.
FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in measuring fair value into three broad levels as follows:
|
|
•
|
Level 1 — Quoted prices in active markets for identical assets or liabilities.
|
|
|
•
|
Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
|
|
|
•
|
Level 3 — Unobservable inputs based on our own assumptions.
|
The fair value of our derivative financial instruments by level is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at
|
|
Fair Value at
|
Asset / (Liability
(dollars in thousands)
|
|
December 31, 2016
|
|
December 31, 2015
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Commodity futures natural gas contracts
|
|
$
|
—
|
|
|
$
|
1,508
|
|
|
$
|
—
|
|
|
$
|
1,508
|
|
|
$
|
—
|
|
|
$
|
(2,202
|
)
|
|
$
|
—
|
|
|
$
|
(2,202
|
)
|
Currency contracts
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
245
|
|
|
—
|
|
|
245
|
|
Interest rate swap
|
|
—
|
|
|
(2,035
|
)
|
|
—
|
|
|
(2,035
|
)
|
|
—
|
|
|
(2,378
|
)
|
|
—
|
|
|
(2,378
|
)
|
Net derivative asset (liability)
|
|
$
|
—
|
|
|
$
|
(527
|
)
|
|
$
|
—
|
|
|
$
|
(527
|
)
|
|
$
|
—
|
|
|
$
|
(4,335
|
)
|
|
$
|
—
|
|
|
$
|
(4,335
|
)
|
The fair values of our commodity futures natural gas contracts and currency contracts are determined using observable market inputs. The fair value of our interest rate agreement is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instruments are held, the derivatives are classified as Level 2 in the hierarchy. We also evaluate Company and counterparty risk in determining fair values. The commodity futures natural gas contracts, interest rate swap and currency contracts are hedges of either recorded assets or liabilities or anticipated transactions. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the above table.
The total derivative position is recorded on the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
Asset / (Liability
(dollars in thousands)
|
|
December 31, 2016
|
|
December 31, 2015
|
Prepaid and other current assets
|
|
$
|
1,434
|
|
|
$
|
245
|
|
Other assets
|
|
74
|
|
|
—
|
|
Derivative liability
|
|
(1,928
|
)
|
|
(4,265
|
)
|
Other long-term liabilities
|
|
(107
|
)
|
|
(315
|
)
|
Net derivative asset (liability)
|
|
$
|
(527
|
)
|
|
$
|
(4,335
|
)
|
Financial instruments carried at cost on the Consolidated Balance Sheets, as well as the related fair values, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2016
|
|
December 31, 2015
|
(dollars in thousands)
|
|
Fair Value
Hierarchy Level
|
|
Carrying Amount
|
|
Fair Value
|
|
Carrying Amount
|
|
Fair Value
|
Term Loan B
|
|
Level 2
|
|
$
|
409,000
|
|
|
$
|
412,068
|
|
|
$
|
433,400
|
|
|
$
|
425,815
|
|
The fair value of our Term Loan B has been calculated based on quoted market prices for the same or similar issues. The fair value of our other immaterial debt approximates carrying value at
December 31, 2016
and
2015
. The fair value of our cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value due to their short term nature.
Rental expense for all non-cancelable operating leases, primarily for warehouses, was
$17.6 million
,
$17.5 million
and
$19.6 million
for the years ended December 31,
2016
,
2015
and
2014
, respectively.
Future minimum rentals under operating leases are as follows (dollars in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022 and
thereafter
|
|
$14,491
|
|
$13,525
|
|
$12,302
|
|
$11,295
|
|
$8,721
|
|
$35,991
|
|
Items included in other income in the Consolidated Statements of Operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Gain (loss) on currency transactions
|
|
$
|
775
|
|
|
$
|
2,641
|
|
|
$
|
1,905
|
|
Hedge ineffectiveness
|
|
1,860
|
|
|
218
|
|
|
(1,247
|
)
|
Other non-operating income
|
|
727
|
|
|
21
|
|
|
1,693
|
|
Other income
|
|
$
|
3,362
|
|
|
$
|
2,880
|
|
|
$
|
2,351
|
|
Legal Proceedings
From time to time, we are identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and/or similar state laws that impose liability without regard to fault for costs and damages relating to the investigation and clean-up of contamination resulting from releases or threatened releases of hazardous substances. We are also subject to similar laws in some of the countries where our facilities are located. Our environmental, health, and safety department monitors compliance with applicable laws on a global basis.
On October 30, 2009, the United States Environmental Protection Agency ("U.S. EPA") designated Syracuse China Company ("Syracuse China"), our wholly-owned subsidiary, as
one
of
eight
PRPs with respect to the Lower Ley Creek sub-site of the Onondaga Lake Superfund site located near the ceramic dinnerware manufacturing facility that Syracuse China operated from 1995 to 2009 in Syracuse, New York. As a PRP, we may be required to pay a share of the costs of investigation and remediation of the Lower Ley Creek sub-site.
U.S. EPA has completed its Remedial Investigation (RI), Feasibility Study (FS), Risk Assessment (RA) and Proposed Remedial Action Plan (PRAP). U.S. EPA issued its Record of Decision (RoD) on September 30, 2014. The RoD indicates that U.S. EPA's estimate of the undiscounted cost of remediation ranges between approximately
$17.0 million
(assuming local disposal of contaminated sediments is feasible) and approximately
$24.8 million
(assuming local disposal is not feasible). However, the RoD acknowledges that the final cost of the cleanup will depend upon the actual volume of contaminated material, the degree to which it is contaminated, and where the excavated soil and sediment is properly disposed. In connection with the General Motors Corporation bankruptcy, U.S. EPA recovered
$22.0 million
from Motors Liquidation Company (MLC), the successor to General Motors Corporation. If the cleanup costs do not exceed the amount recovered by U.S. EPA from MLC, Syracuse China may suffer
no
loss. If and to the extent the cleanup costs exceed the amount recovered by U.S. EPA from MLC, it is not yet known whether other PRPs will be added to the current group of PRPs or how any excess costs may be allocated among the PRPs.
On March 3, 2015, the EPA issued to the PRPs notices and requests to negotiate performance of the remedial design (RD), work. The notices contemplate that any agreement to perform the RD work would be memorialized in an Administrative Order on Consent (AOC). On July 14, 2016, the PRPs entered into an AOC to perform the RD work. The EPA and PRPs anticipate that the RD work will produce additional information from which the feasibility of a local disposal option and the cleanup costs can be better determined. The EPA has declined to advance the GM Settlement Funds for the RD work, instead conditioning use of those funds to reimburse for the RD work upon the successful completion of the RD work and the finalization of an AOC to perform the remedial action work.
To the extent that Syracuse China has a liability with respect to the Lower Ley Creek sub-site, including without limitation costs to fund the RD work, and to the extent the liability arose prior to our 1995 acquisition of the Syracuse China assets, the liability would be subject to the indemnification provisions contained in the Asset Purchase Agreement between the Company and The Pfaltzgraff Co. (now known as TPC-York, Inc. ("TPC York")) and certain of its subsidiaries. Accordingly, Syracuse China has notified TPC York of its claim for indemnification under the Asset Purchase Agreement.
In connection with the above proceedings, an estimated environmental liability of
$0.9 million
and a recoverable amount of
$0.5 million
in other long term assets have been recorded in the Consolidated Balance Sheet at December 31, 2016. An estimated liability of
$1.1 million
and a recoverable amount of
$0.6 million
in other long term assets have been recorded in the Consolidated Balance Sheet at December 31, 2015. An immaterial amount,
$0.2 million
and
$0.3 million
have been recorded in cost of sales in the Consolidated Statements of Operations for the years ended December 31, 2016, 2015 and 2014, respectively. Although we cannot predict the ultimate outcome of this proceeding, we believe that it will not have a material adverse impact on our financial condition, results of operations or liquidity.
Insurance claim
In September of 2013, Libbey had a furnace malfunction at our manufacturing facility in Toledo, Ohio, resulting in an insurance claim with the final settlement received in the fourth quarter of 2014. The total reimbursement for the claim and related expenses was
$15.7 million
.
$5.0 million
was recognized in 2013 in accounts receivable and received in the first quarter of 2014. The remaining
$10.7 million
was received in the fourth quarter of 2014 and recognized as a reduction to cost of sales in the Consolidated Statements of Operations for business interruption. On the Consolidated Statements of Cash Flows for the year ended December 31, 2014,
$2.4 million
was recorded as an investing activity and
$13.3 million
was recorded as cash from operations.
Income Taxes
The Company and its subsidiaries are subject to examination by various countries' tax authorities. These examinations may lead to proposed or assessed adjustments to our taxes. Please refer to note 8, Income Taxes, for a detailed discussion on tax contingencies.
|
|
19.
|
Segments and Geographic Information
|
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. Sales and Segment EBIT are based 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 including glass products for OEMs that have an end market destination outside of Latin America.
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. We use Segment EBIT, along with net sales and selected cash flow information, to evaluate performance and to allocate resources. Segment EBIT for reportable segments includes an allocation of some corporate expenses based on the costs of services performed.
Certain activities not related to any particular reportable segment are reported within retained corporate costs. These costs include certain headquarter, administrative and facility costs, and other costs that are global in nature and are not allocable to the reporting segments.
The accounting policies of the reportable segments are the same as those described in note 2. We do not have any customers who represent 10 percent or more of total sales. Inter-segment sales are consummated at arm’s length and are reflected at end market reporting below. It is impracticable to provide revenue by product categories.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Net Sales:
|
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
488,162
|
|
|
$
|
497,728
|
|
|
$
|
482,094
|
|
Latin America
|
|
151,406
|
|
|
167,069
|
|
|
190,079
|
|
EMEA
|
|
119,750
|
|
|
122,664
|
|
|
147,587
|
|
Other
|
|
34,102
|
|
|
34,884
|
|
|
32,732
|
|
Consolidated
|
|
$
|
793,420
|
|
|
$
|
822,345
|
|
|
$
|
852,492
|
|
|
|
|
|
|
|
|
Segment EBIT:
|
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
77,916
|
|
|
$
|
80,406
|
|
|
$
|
72,546
|
|
Latin America
|
|
10,731
|
|
|
22,017
|
|
|
32,909
|
|
EMEA
|
|
(1,002
|
)
|
|
1,251
|
|
|
5,726
|
|
Other
|
|
915
|
|
|
4,390
|
|
|
2,378
|
|
Total Segment EBIT
|
|
$
|
88,560
|
|
|
$
|
108,064
|
|
|
$
|
113,559
|
|
|
|
|
|
|
|
|
Reconciliation of Segment EBIT to Net Income:
|
|
|
|
|
|
|
Segment EBIT
|
|
$
|
88,560
|
|
|
$
|
108,064
|
|
|
$
|
113,559
|
|
Retained corporate costs
|
|
(27,265
|
)
|
|
(34,645
|
)
|
|
(30,558
|
)
|
Loss on redemption of debt (note 6)
|
|
—
|
|
|
—
|
|
|
(47,191
|
)
|
Pension settlement charges (note 9)
|
|
(168
|
)
|
|
(21,693
|
)
|
|
(774
|
)
|
Furnace malfunction (note 18)
|
|
—
|
|
|
—
|
|
|
4,782
|
|
Environmental obligation (note 18)
|
|
—
|
|
|
(157
|
)
|
|
(315
|
)
|
Restructuring charges (note 7)
|
|
—
|
|
|
—
|
|
|
(985
|
)
|
Product portfolio optimization
(1)
|
|
(5,693
|
)
|
|
—
|
|
|
—
|
|
Reorganization charges
(2)
|
|
—
|
|
|
(4,316
|
)
|
|
—
|
|
Derivatives
(3)
|
|
1,860
|
|
|
218
|
|
|
(1,247
|
)
|
Work stoppage
(4)
|
|
(4,162
|
)
|
|
—
|
|
|
—
|
|
Executive terminations
|
|
(4,460
|
)
|
|
(870
|
)
|
|
(875
|
)
|
Interest expense
|
|
(20,888
|
)
|
|
(18,484
|
)
|
|
(22,866
|
)
|
(Provision) benefit for income taxes
|
|
(17,711
|
)
|
|
38,216
|
|
|
(8,567
|
)
|
Net income
|
|
$
|
10,073
|
|
|
$
|
66,333
|
|
|
$
|
4,963
|
|
|
|
|
|
|
|
|
Depreciation & Amortization:
|
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
12,748
|
|
|
$
|
12,214
|
|
|
$
|
10,319
|
|
Latin America
|
|
19,068
|
|
|
14,738
|
|
|
12,562
|
|
EMEA
|
|
9,377
|
|
|
8,510
|
|
|
10,061
|
|
Other
|
|
5,588
|
|
|
5,855
|
|
|
6,179
|
|
Corporate
|
|
1,705
|
|
|
1,395
|
|
|
1,267
|
|
Consolidated
|
|
$
|
48,486
|
|
|
$
|
42,712
|
|
|
$
|
40,388
|
|
|
|
|
|
|
|
|
Capital Expenditures:
|
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
10,671
|
|
|
$
|
25,106
|
|
|
$
|
21,927
|
|
Latin America
|
|
11,032
|
|
|
11,944
|
|
|
22,517
|
|
EMEA
|
|
7,571
|
|
|
6,773
|
|
|
6,471
|
|
Other
|
|
2,905
|
|
|
1,855
|
|
|
1,983
|
|
Corporate
|
|
2,425
|
|
|
2,458
|
|
|
1,495
|
|
Consolidated
|
|
$
|
34,604
|
|
|
$
|
48,136
|
|
|
$
|
54,393
|
|
______________________________
(1)
Product portfolio optimization relates to inventory reductions to simplify and improve our operations.
(2)
Management reorganization to support our growth strategy.
(3)
Derivatives relate to hedge ineffectiveness on our natural gas contracts and interest rate swap, as well as, mark-to-market adjustments on our natural gas contracts that have been de-designated and those for which we did not elect hedge accounting.
(4)
Work stoppage relates to the lower production volume impact, shipping costs and other direct incremental expenses associated with the two-week Toledo, Ohio work stoppage in the fourth quarter of 2016.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
(dollars in thousands)
|
|
2016
|
|
2015
|
|
2014
|
Segment Assets
(1)
:
|
|
|
|
|
|
|
U.S. & Canada
|
|
$
|
130,390
|
|
|
$
|
140,840
|
|
|
$
|
129,676
|
|
Latin America
|
|
63,838
|
|
|
68,599
|
|
|
66,726
|
|
EMEA
|
|
44,588
|
|
|
48,924
|
|
|
48,557
|
|
Other
|
|
16,306
|
|
|
14,043
|
|
|
15,975
|
|
Consolidated
|
|
$
|
255,122
|
|
|
$
|
272,406
|
|
|
$
|
260,934
|
|
______________________________
(1)
Segment assets are defined as net accounts receivable plus net inventory.
Net sales to customers and long-lived assets located in the U.S., Mexico, and Other regions for
2016
,
2015
and
2014
are presented below. Intercompany sales to affiliates represent products that are transferred to those geographic areas on a basis intended to reflect as nearly as possible the market value of the products. The long-lived assets include net property, plant and equipment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands)
|
|
United States
|
|
Mexico
|
|
All Other
|
|
Eliminations
|
|
Consolidated
|
2016
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
478,342
|
|
|
$
|
100,829
|
|
|
$
|
214,249
|
|
|
|
|
$
|
793,420
|
|
Intercompany
|
|
57,760
|
|
|
15,563
|
|
|
35,407
|
|
|
$
|
(108,730
|
)
|
|
—
|
|
Total net sales
|
|
$
|
536,102
|
|
|
$
|
116,392
|
|
|
$
|
249,656
|
|
|
$
|
(108,730
|
)
|
|
$
|
793,420
|
|
Long-lived assets
|
|
$
|
91,834
|
|
|
$
|
89,963
|
|
|
$
|
74,595
|
|
|
$
|
—
|
|
|
$
|
256,392
|
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
488,582
|
|
|
$
|
107,386
|
|
|
$
|
226,377
|
|
|
|
|
$
|
822,345
|
|
Intercompany
|
|
68,388
|
|
|
11,573
|
|
|
37,612
|
|
|
$
|
(117,573
|
)
|
|
—
|
|
Total net sales
|
|
$
|
556,970
|
|
|
$
|
118,959
|
|
|
$
|
263,989
|
|
|
$
|
(117,573
|
)
|
|
$
|
822,345
|
|
Long-lived assets
|
|
$
|
94,206
|
|
|
$
|
93,573
|
|
|
$
|
84,755
|
|
|
$
|
—
|
|
|
$
|
272,534
|
|
|
|
|
|
|
|
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
465,820
|
|
|
$
|
126,699
|
|
|
$
|
259,973
|
|
|
|
|
$
|
852,492
|
|
Intercompany
|
|
80,525
|
|
|
14,960
|
|
|
35,058
|
|
|
$
|
(130,543
|
)
|
|
—
|
|
Total net sales
|
|
$
|
546,345
|
|
|
$
|
141,659
|
|
|
$
|
295,031
|
|
|
$
|
(130,543
|
)
|
|
$
|
852,492
|
|
Long-lived assets
|
|
$
|
82,702
|
|
|
$
|
97,960
|
|
|
$
|
97,316
|
|
|
$
|
—
|
|
|
$
|
277,978
|
|
Selected Quarterly Financial Data (unaudited)
The following table presents selected quarterly financial data for the years ended December 31,
2016
and
2015
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands,
except per-share amounts)
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
(a)
|
Net sales
|
|
$
|
182,807
|
|
|
$
|
187,365
|
|
|
$
|
207,902
|
|
|
$
|
214,051
|
|
|
$
|
196,873
|
|
|
$
|
201,784
|
|
|
$
|
205,838
|
|
|
$
|
219,145
|
|
Gross profit
|
|
$
|
39,974
|
|
|
$
|
42,495
|
|
|
$
|
50,411
|
|
|
$
|
56,890
|
|
|
$
|
41,882
|
|
|
$
|
47,691
|
|
|
$
|
34,027
|
|
|
$
|
29,252
|
|
Net income (loss)
|
|
$
|
718
|
|
|
$
|
3,112
|
|
|
$
|
8,695
|
|
|
$
|
14,394
|
|
|
$
|
2,909
|
|
|
$
|
16,719
|
|
|
$
|
(2,249
|
)
|
|
$
|
32,108
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.03
|
|
|
$
|
0.14
|
|
|
$
|
0.40
|
|
|
$
|
0.66
|
|
|
$
|
0.13
|
|
|
$
|
0.77
|
|
|
$
|
(0.10
|
)
|
|
$
|
1.47
|
|
Diluted
|
|
$
|
0.03
|
|
|
$
|
0.14
|
|
|
$
|
0.40
|
|
|
$
|
0.65
|
|
|
$
|
0.13
|
|
|
$
|
0.75
|
|
|
$
|
(0.10
|
)
|
|
$
|
1.45
|
|
|
|
(a)
|
The fourth quarter of 2015 includes a tax benefit of $43.8 million related to management's decision that a valuation allowance against its U.S. deferred tax assets was no longer necessary.
|