LIBBEY INC, 10-Q filed on 5/6/2015
Quarterly Report
Document and Entity Information
3 Months Ended
Mar. 31, 2015
Apr. 30, 2015
Entity Information [Line Items]
 
 
Entity Registrant Name
LIBBEY INC 
 
Entity Central Index Key
0000902274 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2015 
 
Document Fiscal Year Focus
2015 
 
Document Fiscal Period Focus
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
21,843,851 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Net sales
$ 187,365 
$ 181,581 
Freight billed to customers
606 
814 
Total revenues
187,971 
182,395 
Cost of sales
145,476 
150,056 
Gross profit
42,495 
32,339 
Selling, general and administrative expenses
34,399 
28,878 
Income from operations
8,096 
3,461 
Other income (expense)
827 
(322)
Earnings before interest and income taxes
8,923 
3,139 
Interest expense
4,523 
7,701 
Income (loss) before income taxes
4,400 
(4,562)
Provision (benefit) for income taxes
1,288 
(1,178)
Net income (loss)
$ 3,112 
$ (3,384)
Net income (loss) per share:
 
 
Basic
$ 0.14 
$ (0.16)
Diluted
$ 0.14 
$ (0.16)
Dividends declared per share
$ 0.11 
$ 0.00 
Condensed Consolidated Statements of Comprehensive Income (Loss) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Net income (loss)
$ 3,112 
$ (3,384)
Other comprehensive income (loss):
 
 
Pension and other postretirement benefit adjustments, net of tax
4,712 
1,349 
Change in fair value of derivative instruments, net of tax
(242)
138 
Foreign currency translation adjustments
(10,490)
(588)
Other comprehensive income, net of tax
(6,020)
899 
Comprehensive income (loss)
$ (2,908)
$ (2,485)
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2015
Dec. 31, 2014
Assets:
 
 
Cash and cash equivalents
$ 18,616 
$ 60,044 
Accounts receivable - net
94,370 
91,106 
Inventories - net
183,301 
169,828 
Prepaid and other current assets
29,415 
27,701 
Total current assets
325,702 
348,679 
Pension asset
848 
848 
Purchased intangible assets - net
17,125 
17,771 
Goodwill
164,112 
164,112 
Deferred income taxes
5,504 
5,566 
Other assets
14,515 
13,976 
Total other assets
202,104 
202,273 
Property, plant and equipment - net
280,896 
277,978 
Total assets
808,702 
828,930 
Liabilities and Shareholders' Equity:
 
 
Accounts payable
78,760 
82,485 
Salaries and wages
26,524 
29,035 
Accrued liabilities
43,541 
42,638 
Accrued income taxes
393 
2,010 
Pension liability (current portion)
1,460 
1,488 
Non-pension postretirement benefits (current portion)
4,800 
4,800 
Derivative liability
3,151 
2,653 
Deferred income taxes
3,633 
3,633 
Long-term debt due within one year
4,972 
7,658 
Total current liabilities
167,234 
176,400 
Long-term debt
438,320 
436,264 
Pension liability
54,417 
56,462 
Non-pension postretirement benefits
63,334 
63,301 
Deferred income taxes
5,729 
5,893 
Other long-term liabilities
14,104 
13,156 
Total liabilities
743,138 
751,476 
Shareholders' equity:
 
 
Common stock, par value $.01 per share, 50,000,000 shares authorized, 21,843,851 shares issued in 2015 (21,843,851 shares issued in 2014)
218 
218 
Capital in excess of par value
327,435 
331,391 
Treasury Stock, Value
(3,684)
(1,060)
Retained deficit
(113,938)
(114,648)
Accumulated other comprehensive loss
(144,467)
(138,447)
Total shareholders' equity
65,564 
77,454 
Total liabilities and shareholders' equity
$ 808,702 
$ 828,930 
Condensed Consolidated Balance Sheets Parenthetical (USD $)
Mar. 31, 2015
Dec. 31, 2014
Common stock, par value
$ 0.01 
$ 0.01 
Common stock, shares authorized
50,000,000 
50,000,000 
Common stock, shares issued
21,843,851 
21,843,851 
Condensed Consolidated Statement of Shareholders' Equity Statement (USD $)
In Thousands, except Share data, unless otherwise specified
Total
Common Stock
Treasury Stock
Capital in Excess of Par Value
Retained Deficit
Accumulated Other Comprehensive Loss (note 10)
Balance, value at Dec. 31, 2014
$ 77,454 
$ 218 
$ (1,060)
$ 331,391 
$ (114,648)
$ (138,447)
Balance, shares at Dec. 31, 2014
 
21,843,851 
34,985 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
Net income (loss)
3,112 
 
 
 
3,112 
 
Other comprehensive income (loss)
(6,020)
 
 
 
 
(6,020)
Stock compensation expense
1,195 
 
 
1,195 
 
 
Dividends
(2,402)
 
 
 
(2,402)
 
Stock withheld for employee taxes
(489)
 
 
(489)
 
 
Stock issued, value
(1,858)
 
(6,520)
(4,662)
 
 
Stock issued, shares
 
 
195,855 
 
 
 
Purchase of treasury shares, value
(9,144)
 
(9,144)
 
 
 
Purchase of treasury shares, shares
 
 
259,405 
 
 
 
Balance, value at Mar. 31, 2015
$ 65,564 
$ 218 
$ (3,684)
$ 327,435 
$ (113,938)
$ (144,467)
Balance, shares at Mar. 31, 2015
 
21,843,851 
98,535 
 
 
 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Operating activities:
 
 
Net income (loss)
$ 3,112 
$ (3,384)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
 
 
Depreciation and amortization
10,184 
10,676 
Gain (Loss) on asset sales and disposals
(211)
Change in accounts receivable
(5,647)
5,078 
Change in inventories
(16,720)
(11,195)
Change in accounts payable
(2,339)
(5,315)
Accrued interest and amortization of discounts and finance fees
212 
7,256 
Pension & non-pension postretirement benefits
1,003 
1,372 
Restructuring
(243)
Accrued liabilities & prepaid expenses
(2,876)
(12,369)
Income taxes
(1,360)
(3,153)
Share-based compensation expense
2,129 
1,003 
Other operating activities
(1,145)
(95)
Net cash used in operating activities
(13,236)
(10,373)
Investing activities:
 
 
Additions to property, plant and equipment
(16,659)
(9,901)
Proceeds from furnace malfunction insurance recovery
2,350 
Proceeds from asset sales and other
Net cash used in investing activities
(16,659)
(7,547)
Financing activities:
 
 
Borrowing on ABL credit facility
14,100 
Repayments on ABL credit facility
(10,000)
Other repayments
(3,255)
(50)
Repayments on Term Loan B
(1,100)
Stock options exercised
1,848 
336 
Dividends
(2,402)
Treasury shares purchased
(9,144)
Net cash provided by (used in) financing activities
(9,953)
286 
Effect of exchange rate fluctuations on cash
(1,580)
(101)
Increase (decrease) in cash
(41,428)
(17,735)
Cash at beginning of period
60,044 
42,208 
Cash at end of period
18,616 
24,473 
Supplemental disclosure of cash flows information:
 
 
Cash paid during the period for interest, net of capitalized interest
3,929 
184 
Cash paid during the period for income taxes
$ 1,181 
$ 1,816 
Description of the Business
Description of the Business
Description of the Business

Libbey is a leading global manufacturer and marketer of glass tableware products. We believe we have the largest manufacturing, distribution and service network among glass tableware manufacturers in the Western Hemisphere, in addition to supplying to key markets throughout the world. We produce glass tableware in five countries and sell to customers in over 100 countries. We design and market, under our Libbey®, 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 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 the Netherlands (Libbey Holland), Portugal (Libbey Portugal), China (Libbey China) and Mexico (Libbey Mexico). In addition, we import 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 tableware market by offering an extensive product line at competitive prices.

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

Our shares are traded on the NYSE MKT exchange under the ticker symbol LBY.
Significant Accounting Policies
Significant Accounting Policies
Significant Accounting Policies

See our Form 10-K for the year ended December 31, 2014 for a description of significant accounting policies not listed below.

Basis of Presentation

The Condensed Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31st. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.

Condensed Consolidated Statements of Operations

Net sales in our Condensed Consolidated Statements of Operations include revenue earned 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. Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs.

Foreign Currency Translation

Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. The effect of exchange rate changes on transactions denominated in currencies other than the functional currency is recorded in other income (expense).

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. Financial Accounting Standards Board Accounting Standards Codification™ (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 jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. In the United States, Portugal and the Netherlands, we have recorded valuation allowances against our deferred income tax assets. See note 6 for further discussion.

Stock-Based Compensation Expense

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation — Stock Compensation,” and FASB ASC Topic 505-50, “Equity — Equity-Based Payments to Non-Employees”. Stock-based compensation cost is measured based on the fair value of the equity instruments issued. FASB ASC Topics 718 and 505-50 apply to all of our outstanding unvested stock-based payment awards. Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
 
 
Three months ended March 31,
(dollars in thousands)
 
2015
 
2014
Stock-based compensation expense
 
$
2,129

 
$
1,003


Reclassifications

In note 11 Segments, the derivative amount in the prior year financial statements has been excluded from retained corporate costs to conform to the current year presentation.

New Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue From Contracts With Customers" (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, 2016; early adoption is not permitted. In April 2015, the FASB proposed a one-year deferral of the effective date from January 1, 2017 to January 1, 2018 but would allow for early adoption as of January 1, 2017. We are currently assessing the impact that this standard will have on our Condensed 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 to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern in connection with preparing financial statements for each annual and interim reporting period. 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 annual reporting periods ending after December 15, 2016 and for annual and interim periods thereafter; early adoption is permitted. We are currently evaluating the impact that this standard will have on our Condensed Consolidated Financial Statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" (ASU 2015-03), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This update is effective for interim and annual reporting periods beginning after December 15, 2015; early adoption is permitted. We are currently evaluating the impact that this standard will have on our Condensed Consolidated Financial Statements.
Balance Sheet Details
Balance Sheet Details
Balance Sheet Details

The following table provides detail of selected balance sheet items:
(dollars in thousands)
March 31, 2015
 
December 31, 2014
Accounts receivable:
 
 
 
Trade receivables
$
90,274

 
$
87,700

Other receivables
4,096

 
3,406

Total accounts receivable, less allowances of $5,986 and $5,586
$
94,370

 
$
91,106

 
 
 
 
Inventories:
 
 
 
Finished goods
$
165,652

 
$
151,698

Work in process
1,214

 
1,153

Raw materials
4,321

 
4,708

Repair parts
10,950

 
10,840

Operating supplies
1,164

 
1,429

Total inventories, less loss provisions of $4,172 and $4,370
$
183,301

 
$
169,828

 
 
 
 
Prepaid and other current assets
 
 
 
Value added tax
$
15,181

 
$
13,512

Prepaid expenses
6,931

 
6,947

Deferred income taxes
4,883

 
4,888

Prepaid income taxes
1,943

 
1,951

Derivative asset
477

 
403

Total prepaid and other current assets
$
29,415

 
$
27,701

 
 
 
 
Other assets:
 
 
 
Deposits
$
1,263

 
$
890

Finance fees — net of amortization
6,655

 
6,958

Other assets
6,597

 
6,128

Total other assets
$
14,515

 
$
13,976

 
 
 
 
Accrued liabilities:
 
 
 
Accrued incentives
$
18,120

 
$
17,648

Workers compensation
7,134

 
7,121

Medical liabilities
3,817

 
3,887

Interest
3,759

 
3,876

Commissions payable
1,156

 
1,068

Withholdings and other non-income tax accruals
3,615

 
3,078

Other accrued liabilities
5,940

 
5,960

Total accrued liabilities
$
43,541

 
$
42,638

 
 
 
 
Other long-term liabilities:
 
 
 
Deferred liability
$
8,686

 
$
8,081

Derivative liability
338

 
215

Environmental obligation (see note 14)
1,000

 
1,000

Other long-term liabilities
4,080

 
3,860

Total other long-term liabilities
$
14,104

 
$
13,156

Borrowings
Borrowings
Borrowings

On April 9, 2014, we completed the refinancing of substantially all of the existing indebtedness of our wholly-owned subsidiaries Libbey Glass and Libbey Europe B.V. The refinancing included:

the entry into an amended and restated credit agreement with respect to our ABL Facility;
the issuance of $440.0 million in aggregate principal amount of Senior Secured Term Loan B facility of Libbey Glass due 2021 (Term Loan B); and
the repurchase and cancellation 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).

We used the proceeds of the Term Loan B, together with cash on hand and borrowings under the ABL Facility, to repurchase $360.0 million of the Senior Secured Notes, redeem the remaining $45.0 million of the Senior Secured Notes, and pay certain related fees and expenses.

The above 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 second quarter of 2014.

Borrowings consist of the following:
(dollars in thousands)
Interest Rate
 
Maturity Date
March 31,
2015
 
December 31,
2014
Borrowings under ABL Facility
floating
 
April 9, 2019
$
4,100

 
$

Term Loan B
floating
 
April 9, 2021
436,700

 
437,800

RMB Working Capital Loan
6.78%
 
July, 2015

 
3,258

AICEP Loan
0.00%
 
January, 2016 to July 30, 2018
3,434

 
3,846

Total borrowings
 
 
 
444,234

 
444,904

Less — unamortized discount
 
 
 
942

 
982

Total borrowings — net
 
 
 
443,292

 
443,922

Less — long term debt due within one year
 
 
4,972

 
7,658

Total long-term portion of borrowings — net
 
$
438,320

 
$
436,264



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 March 31, 2015. 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 March 31, 2015. 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 Facility 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 borrowings of $4.1 million under the ABL Facility at March 31, 2015. There were no Libbey Glass or Libbey Europe borrowings under the ABL Facility at December 31, 2014. 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 March 31, 2015, the available total borrowing base is offset by a $1.1 million rent reserve and a $3.4 million mark-to-market reserve for natural gas contracts. The ABL Facility also provides for the issuance of up to $30.0 million of letters of credit, which are applied against the $100.0 million limit; at March 31, 2015, $6.8 million in letters of credit were outstanding. Remaining unused availability under the ABL Facility was $79.6 million at March 31, 2015, compared to $82.3 million at December 31, 2014.

Term Loan B and Senior Secured Notes

On April 9, 2014, Libbey Glass consummated its $440.0 million 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 March 31, 2015, and will mature on April 9, 2021. We may voluntarily prepay, in whole or in part, the Term Loan B without premium or penalty but with accrued interest. Although the Credit Agreement does not contain financial covenants, the Credit Agreement contains other covenants that restrict the ability of Libbey Glass and the Guarantors to, among other things:

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

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.

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 Interest Rate Agreement at May 9, 2014, excluding applicable fees, was 5.5 percent. Total remaining Senior Secured Notes not covered by the Interest Rate Agreement had a fixed interest rate of 6.875 percent per year. 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 in the second quarter of 2014, 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 Condensed Consolidated Statements of Operations. See note 9 for further discussion and the net impact recorded on the Condensed Consolidated Statements of Operations.

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 will effectively convert $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 will be effective January 2016 through January 2020. The interest rate swap is designated as a cash flow hedge and will be accounted for under FASB ASC 815 "Derivatives and Hedging".

RMB Working Capital Loan

On July 24, 2014, Libbey China entered into a RMB 20.0 million (approximately $3.3 million) working capital loan with China Construction Bank 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.

AICEP Loan

In July 2012, Libbey Portugal entered into a loan agreement with Agencia para Investmento Comercio Externo de Portugal, EPE (AICEP), the Portuguese Agency for investment and external trade. The amount of the loan is €3.2 million (approximately $3.4 million) at March 31, 2015, and has an interest rate of 0.0 percent. Semi-annual installments of principal are due beginning in January 2016 through the maturity date in July 2018.
Notes Payable
We have an overdraft line of credit for a maximum of €1.0 million. At March 31, 2015, there were no borrowings under the facility, which has an interest rate of 5.80 percent. Interest with respect to the note is paid monthly.

Fair Value of Borrowings

The fair value of our debt has been calculated based on quoted market prices (Level 2 in the fair value hierarchy) for the same or similar issues. The $436.7 million outstanding on the Term Loan B had an estimated fair value of $435.6 million at March 31, 2015 and $430.1 million at December 31, 2014. The fair value of the remainder of our debt at March 31, 2015 approximates carrying value due to variable rate on the borrowings under the ABL facility and other immaterial debt. The fair value of the remainder of our debt at December 31, 2014 approximates carrying value due to the short term nature of the RMB Working Capital Loan and other immaterial debt.

Capital Resources and Liquidity

Historically, cash flows generated from operations, cash on hand and our borrowing capacity under our ABL Facility have enabled us to meet our cash requirements, including capital expenditures and working capital requirements. At March 31, 2015, we had $4.1 million borrowings under our ABL Facility and $6.8 million in letters of credit issued under that facility. As a result, we had $79.6 million of unused availability remaining under the ABL Facility at March 31, 2015, as well as, $18.6 million of cash on hand.

Based on our operating plans and current forecast expectations, we anticipate that our level of cash on hand, cash flows from operations and borrowing capacity under our ABL Facility will provide sufficient cash availability to meet our ongoing liquidity needs.
Restructuring Charges
Restructuring Charges
Restructuring Charges

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 Americas segment and were completed by March 31, 2014. For the three months ended March 31, 2014, we recorded a pretax charge of $1.0 million related to other restructuring expenses. See Form 10-K for the year ended December 31, 2014 for further discussion.
Income Taxes
Income Taxes
Income Taxes

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

Our effective tax rate was 29.3 percent for the quarter ended March 31, 2015, compared to 25.8 percent for the quarter ended March 31, 2014. Our effective tax rate differs from the United States statutory tax rate primarily due to valuation allowances, earnings in countries with differing statutory tax rates, foreign withholding tax, accruals related to uncertain tax positions, and tax planning structures. At March 31, 2015 and December 31, 2014, we had $0.2 million and $0.4 million, respectively, of gross unrecognized tax benefits, exclusive of interest and penalties. During the quarter ended March 31, 2015, we recorded a tax benefit, exclusive of interest and penalties, of $0.2 million.

FASB ASC 740-20, "Income Taxes - Intraperiod Tax Allocation," requires that the provision for income taxes be allocated between continuing operations and other categories of earnings (such as discontinued operations or other comprehensive income) for each tax jurisdiction. For periods in which there is a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, the tax provision is first allocated to the other categories of earnings. A related tax benefit is then recorded in continuing operations. There was no such tax benefit recorded in our income tax provision for the quarter ended March 31, 2015. A tax benefit of $0.6 million was recorded in our income tax provision for quarter ended March 31, 2014.

In the U.S., the Netherlands and Portugal, we have recorded either full or partial valuation allowances against our deferred income tax assets. We review the need for valuation allowances on a quarterly basis in order to assess the likelihood of the realization of our deferred tax assets. In assessing the need for recording or reversing a valuation allowance, we weigh all available 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, prudent and feasible tax planning strategies that could be implemented, and whether there were unusual, infrequent or extraordinary items to be considered.

At March 31, 2015, we continued to record full valuation allowances in the U.S. and the Netherlands of approximately $56.0 million and $10.0 million, respectively. While we have experienced some positive trends recently with our improved financial performance, management continues to conclude that the negative evidence outweighs the positive. If operations in these jurisdictions generate profits and taxable income throughout 2015 and expectations are for continued profitability for 2016 and beyond, we may have sufficient evidence to release all or a portion of our valuation allowances.
Pension and Non-pension Postretirement Benefits
Pension and Non-pension Postretirement Benefits
Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and service for salaried employees and job grade and length of service for hourly employees. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers certain salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees (excluding employees hired at Shreveport after 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 primarily unfunded.

The components of our net pension expense, including the SERP, are as follows:
Three months ended March 31,
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
$
1,161

 
$
1,025

 
$
748

 
$
578

 
$
1,909

 
$
1,603

Interest cost
3,709

 
3,870

 
1,103

 
1,424

 
4,812

 
5,294

Expected return on plan assets
(5,662
)
 
(5,608
)
 
(598
)
 
(632
)
 
(6,260
)
 
(6,240
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
104

 
265

 
(64
)
 
57

 
40

 
322

Loss
1,886

 
1,242

 
406

 
258

 
2,292

 
1,500

Pension expense
$
1,198

 
$
794

 
$
1,595

 
$
1,685

 
$
2,793

 
$
2,479



We have contributed $1.4 million of cash into our pension plans for the three months ended March 31, 2015. Pension contributions for the remainder of 2015 are estimated to be $3.3 million.

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 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are unfunded.

The provision for our non-pension postretirement benefit expense consists of the following:
Three months ended March 31,
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
$
282

 
$
252

 
$

 
$

 
$
282

 
$
252

Interest cost
660

 
710

 
19

 
27

 
679

 
737

Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
35

 
35

 

 

 
35

 
35

Loss / (gain)
196

 
67

 

 

 
196

 
67

Non-pension postretirement benefit expense
$
1,173

 
$
1,064

 
$
19

 
$
27

 
$
1,192

 
$
1,091



Our 2015 estimate of non-pension cash payments is $4.9 million, and we have paid $0.9 million for the three months ended March 31, 2015.
Net Income (Loss) per Share of Common Stock
Net Income per Share of Common Stock
Net Income (Loss) per Share of Common Stock

The following table sets forth the computation of basic and diluted earnings (loss) per share:
 
Three months ended March 31,
(dollars in thousands, except earnings per share)
2015
 
2014
Numerators for earnings per share:
 
 
 
Net income (loss) that is available to common shareholders
$
3,112

 
$
(3,384
)
 
 
 
 
Denominator for basic earnings per share:
 
 
 
Weighted average shares outstanding
21,853,455

 
21,523,077

 
 
 
 
Denominator for diluted earnings per share:
 
 
 
Effect of stock options and restricted stock units
495,159

 

Adjusted weighted average shares and assumed conversions
22,348,614

 
21,523,077

 
 
 
 
Basic earnings (loss) per share
$
0.14

 
$
(0.16
)
 
 
 
 
Diluted earnings (loss) per share
$
0.14

 
$
(0.16
)
 
 
 
 
Shares excluded from diluted earnings (loss) per share due to:
 
 
 
Net loss position (excluded from denominator)

 
418,344

Inclusion would have been anti-dilutive (excluded from calculation)
89,006

 
382,109



When applicable, diluted shares outstanding includes 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.

Derivatives
Derivatives
Derivatives
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 facilities, 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)
 
March 31, 2015
 
December 31, 2014
Derivatives not designated as hedging
instruments under FASB ASC 815:
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Currency contracts
 
Prepaid and other current assets
 
$
477

 
Prepaid and other current assets
 
$
403

Total undesignated
 
 
 
477

 
 
 
403

Total
 
 
 
$
477

 
 
 
$
403

 
 
 
 
 
 
 
 
 
 
 
Liability Derivatives:
(dollars in thousands)
 
March 31, 2015
 
December 31, 2014
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
 
$
1,453

 
Derivative liability - current
 
$
1,222

Natural gas contracts
 
Other long-term liabilities
 
165

 
Other long-term liabilities
 
103

Total designated
 
 
 
1,618

 
 
 
1,325

Derivatives not designated as hedging
instruments under FASB ASC 815:
 
 
 
 
 
 
 
 
Natural gas contracts
 
Derivative liability - current
 
1,698

 
Derivative liability - current
 
1,431

Natural gas contracts
 
Other long-term liabilities
 
173

 
Other long-term liabilities
 
112

Total undesignated
 
 
 
1,871

 
 
 
1,543

Total
 
 
 
$
3,489

 
 
 
$
2,868



Commodity Futures Contracts

We use commodity futures contracts related to forecasted future North American natural gas requirements. The objective of these futures 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 March 31, 2015, we had commodity contracts for 3,370,000 million British Thermal Units (BTUs) of natural gas. At December 31, 2014, we had commodity contracts for 3,850,000 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 March 31, 2015. 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 current earnings. As the natural gas contracts mature, the accumulated gains (losses) for the respective contracts are reclassified from accumulated other comprehensive loss to current expense in cost of sales in our Condensed Consolidated Statement of Operations.

In the three months ended March 31, 2015, we recognized a loss of $0.1 million in other income (expense) in the Condensed Consolidated Statements of Operations related to the marked-to-market change in our de-designated Mexico natural gas derivatives. These natural gas derivatives were de-designated in the fourth quarter of 2014 due to ineffectiveness created by changes in the natural gas price. This ineffectiveness is associated with a fluctuating surcharge initiated by the Mexican government on the price of natural gas. As instructed under FASB ASC 815 "Derivatives and Hedging", all marked-to-market changes on these derivatives are being reflected in current earnings. The accumulated balance in other comprehensive income (loss) for these de-designated contracts will remain until the hedging contracts are utilized or expire. Since we have not elected hedge accounting for any new Mexico natural gas contracts entered into beginning October 1, 2014, all marked-to-market changes on these derivatives are being reflected in other income (expense) in current earnings. We recognized a loss of $0.3 million in other income (expense) in the first quarter of 2015 related to the contracts where hedge accounting was not elected. Going forward, we do not intend to designate our Mexican natural gas contracts as cash flow hedges.

We received (paid) additional cash of $(1.2) million and $0.5 million in the three months ended March 31, 2015 and March 31, 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 losses currently carried in accumulated other comprehensive loss that will be reclassified into earnings over the next twelve months will result in $1.6 million of loss in our Condensed Consolidated Statements of Operations.

The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss):
 
 
Three months ended March 31,
(dollars in thousands)
 
2015
 
2014
Derivatives in Cash Flow Hedging relationships:
 
 
 
 
Natural gas contracts
 
$
(829
)
 
$
630

Total
 
$
(829
)
 
$
630



The following table provides a summary of the effective portion of derivative gain (loss) reclassified from accumulated other comprehensive loss to the Condensed Consolidated Statements of Operations:
 
 
 
Three months ended March 31,
(dollars in thousands)
 
 
2015
 
2014
Derivative:
Location:
 
 
 
 
Natural gas contracts
Cost of sales
 
$
(536
)
 
$
465

Total impact on net income (loss)
 
 
$
(536
)
 
$
465



The ineffective portion of derivative loss related to the de-designated Mexico contracts reclassified from accumulated other comprehensive loss to cost of sales in the Condensed Consolidated Statements of Operations was immaterial.

The following table provides a summary of the gain (loss) recognized in other income (expense) in the Condensed Consolidated Statements of Operations from our natural gas contracts:
 
 
Three months ended March 31,
(dollars in thousands)
 
2015
 
2014
De-designated contracts
 
$
(104
)
 
$

Contracts where hedge accounting was not elected
 
(295
)
 

Total
 
$
(399
)
 
$



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. We enter into a series of foreign currency contracts to sell Canadian dollars. At March 31, 2015 and December 31, 2014, we had C$5.1 million and C$6.3 million in foreign currency contracts, respectively. 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 derivatives that were not designated as hedging instruments are recorded in current earnings as follows:
 
 
 
Three months ended March 31,
(dollars in thousands)
 
 
2015
 
2014
Derivative:
Location:
 
 

 
 

Currency contracts
Other income (expense)
 
$
74

 
$

Total
 
 
$
74

 
$



We do not believe we are exposed to more than a nominal amount of credit risk in our 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 March 31, 2015, by Standard and Poor’s.
Comprehensive Income (Loss)
Comprehensive Income (Loss)
Comprehensive Income (Loss)

Accumulated other comprehensive loss, net of tax, is as follows:
Three months ended March 31, 2015
(dollars in thousands)
 
Foreign Currency Translation
 
Derivative Instruments
 
Pension and Other Postretirement Benefits
 
Total
Accumulated
Comprehensive Loss
Balance on December 31, 2014
 
$
(9,162
)
 
$
(625
)
 
$
(128,660
)
 
$
(138,447
)
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss)
 
(10,490
)
 
(829
)
 

 
(11,319
)
Currency impact
 

 

 
2,291

 
2,291

 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
 
    Amortization of actuarial loss (1)
 

 

 
2,488

 
2,488

    Amortization of prior service cost (1)
 

 

 
75

 
75

    Cost of sales
 

 
607

 

 
607

Current-period other comprehensive income (loss)
 
(10,490
)
 
(222
)
 
4,854

 
(5,858
)
Tax effect
 

 
(20
)
 
(142
)
 
(162
)
Balance on March 31, 2015
 
$
(19,652
)
 
$
(867
)
 
$
(123,948
)
 
$
(144,467
)
 
 
 
 
 
 
 
 
 

Three months ended March 31, 2014
(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)
 
(588
)
 
630

 

 
42

Currency impact
 

 

 
13

 
13

 
 
 
 
 
 
 
 
 
Amounts reclassified from accumulated other comprehensive income (loss):
 
 
 
 
 
 
 
 
    Amortization of actuarial loss (1)
 

 

 
1,567

 
1,567

    Amortization of prior service cost (1)
 

 

 
357

 
357

    Cost of sales
 

 
(465
)
 

 
(465
)
Current-period other comprehensive income (loss)
 
(588
)
 
165

 
1,937

 
1,514

Tax effect
 

 
(27
)
 
(588
)
 
(615
)
Balance on March 31, 2014
 
$
3,966

 
$
1,359

 
$
(77,586
)
 
$
(72,261
)
 
 
 
 
 
 
 
 
 
___________________________
(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 Condensed Consolidated Statements of Operations.
Segments
Segments
Segments

Our reporting segments align with our regionally focused organizational structure, which we believe enables us to better serve customers across the globe. Under this structure, we report financial results for the Americas; Europe, the Middle East and Africa (EMEA); U.S. Sourcing; and Other. In addition, sales and segment EBIT reflect end market reporting pursuant to which sales and related costs are included in segment EBIT 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.

Americas—includes sales of manufactured and sourced glass tableware having an end market destination in North and South America.

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

U.S. Sourcing—includes U.S. sales of sourced ceramic dinnerware, metal tableware, hollowware, and serveware.

Other —includes 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.
 
Three months ended March 31,
(dollars in thousands)
2015
 
2014
Net Sales:
 
 
 
Americas
$
128,372

 
$
121,925

EMEA
28,509

 
34,398

U.S. Sourcing
21,399

 
17,734

Other
9,085

 
7,524

Consolidated
$
187,365

 
$
181,581

 
 
 
 
Segment EBIT:
 
 
 
Americas
$
16,323

 
$
14,989

EMEA
(766
)
 
253

U.S. Sourcing
1,625

 
868

Other
1,870

 
445

Total Segment EBIT
$
19,052

 
$
16,555

 
 
 
 
Reconciliation of Segment EBIT to Net Income (Loss):
 
 
 
Segment EBIT
$
19,052

 
$
16,555

Retained corporate costs
(9,495
)
 
(7,195
)
Furnace malfunction (note 14)

 
(5,306
)
Restructuring charges (note 5)

 
(985
)
Derivatives (1)
(399
)
 
70

Executive retirement
(235
)
 

Interest expense
(4,523
)
 
(7,701
)
Income taxes
(1,288
)
 
1,178

Net income (loss)
$
3,112

 
$
(3,384
)
 
 
 
 
Depreciation & Amortization:
 
 
 
Americas
$
6,071

 
$
5,959

EMEA
2,177

 
2,626

U.S. Sourcing
6

 
7

Other
1,491

 
1,644

Corporate
439

 
440

Consolidated
$
10,184

 
$
10,676

 
 
 
 
Capital Expenditures:
 
 
 
Americas
$
14,518

 
$
7,132

EMEA
1,437

 
1,561

U.S. Sourcing

 

Other
183

 
572

Corporate
521

 
636

Consolidated
$
16,659

 
$
9,901



(1) 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.
Fair Value
Fair Value
Fair Value

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.

 
Fair Value at
 
Fair Value at
Asset / (Liability)
(dollars in thousands)
March 31, 2015
 
December 31, 2014
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Commodity futures natural gas contracts
$

 
$
(3,489
)
 
$

 
$
(3,489
)
 
$

 
$
(2,868
)
 
$

 
$
(2,868
)
Currency contracts

 
477

 

 
477

 

 
403

 

 
403

Net derivative asset (liability)
$

 
$
(3,012
)
 
$

 
$
(3,012
)
 
$

 
$
(2,465
)
 
$

 
$
(2,465
)


The fair values of our commodity futures natural gas contracts and currency contracts are determined using observable market inputs. We evaluate Company and counterparty risk in determining fair values. The commodity futures natural gas contracts 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 Condensed Consolidated Balance Sheets as follows:
Asset / (Liability)
(dollars in thousands)
 
March 31, 2015
 
December 31, 2014
Prepaid and other current assets
 
$
477

 
$
403

Derivative liability
 
(3,151
)
 
(2,653
)
Other long-term liabilities
 
(338
)
 
(215
)
Net derivative asset (liability)
 
$
(3,012
)
 
$
(2,465
)


Other Income (Expense)
Other Income (Expense)
Other Income (Expense)

Items included in other income (expense) in the Condensed Consolidated Statements of Operations are as follows:
 
Three months ended March 31,
(dollars in thousands)
2015
 
2014
Gain (loss) on currency translation
$
1,115

 
$
(275
)
Hedge ineffectiveness
(399
)
 
70

Other non-operating income (expense)
111

 
(117
)
Other income (expense)
$
827

 
$
(322
)


Contingencies
Contingencies
Contingencies

Legal Proceedings

From time to time, we are identified as a "potentially responsible party" (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) and/or similar state laws that impose liability without regard to fault for costs and damages relating to the investigation and 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.

To the extent that Syracuse China has a liability with respect to the Lower Ley Creek sub-site 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 $1.0 million and a recoverable of $0.7 million have been recorded in other long term liabilities and other long term assets, respectively, in the Condensed Consolidated Balance Sheets at March 31, 2015 and December 31, 2014. 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. In conjunction with the final settlement notification received, $2.0 million was re-classed in the first quarter 2014 Condensed Consolidated Statement of Cash Flows from proceeds from furnace malfunction insurance recovery within investing activities to operating activities, as this represented business interruption recovery. See Form 10-K for the year ended December 31, 2014 for further discussion.
Significant Accounting Policies (Policies)
Basis of Presentation

The Condensed Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31st. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.
Condensed Consolidated Statements of Operations

Net sales in our Condensed Consolidated Statements of Operations include revenue earned 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. Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs.
Foreign Currency Translation

Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. The effect of exchange rate changes on transactions denominated in currencies other than the functional currency is recorded in other income (expense).
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. Financial Accounting Standards Board Accounting Standards Codification™ (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 jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. In the United States, Portugal and the Netherlands, we have recorded valuation allowances against our deferred income tax assets. See note 6 for further discussion.
FASB ASC 740-20, "Income Taxes - Intraperiod Tax Allocation," requires that the provision for income taxes be allocated between continuing operations and other categories of earnings (such as discontinued operations or other comprehensive income) for each tax jurisdiction. For periods in which there is a year-to-date pre-tax loss from continuing operations and pre-tax income in other categories of earnings, the tax provision is first allocated to the other categories of earnings. A related tax benefit is then recorded in continuing operations.
We review the need for valuation allowances on a quarterly basis in order to assess the likelihood of the realization of our deferred tax assets. In assessing the need for recording or reversing a valuation allowance, we weigh all available 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, prudent and feasible tax planning strategies that could be implemented, and whether there were unusual, infrequent or extraordinary items to be considered.
Stock-Based Compensation Expense

We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation — Stock Compensation,” and FASB ASC Topic 505-50, “Equity — Equity-Based Payments to Non-Employees”. Stock-based compensation cost is measured based on the fair value of the equity instruments issued. FASB ASC Topics 718 and 505-50 apply to all of our outstanding unvested stock-based payment awards.
New Accounting Standards

In May 2014, the FASB issued Accounting Standards Update No. 2014-09, "Revenue From Contracts With Customers" (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, 2016; early adoption is not permitted. In April 2015, the FASB proposed a one-year deferral of the effective date from January 1, 2017 to January 1, 2018 but would allow for early adoption as of January 1, 2017. We are currently assessing the impact that this standard will have on our Condensed 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 to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern in connection with preparing financial statements for each annual and interim reporting period. 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 annual reporting periods ending after December 15, 2016 and for annual and interim periods thereafter; early adoption is permitted. We are currently evaluating the impact that this standard will have on our Condensed Consolidated Financial Statements.

In April 2015, the FASB issued Accounting Standards Update No. 2015-03, "Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs" (ASU 2015-03), which requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This update is effective for interim and annual reporting periods beginning after December 15, 2015; early adoption is permitted. We are currently evaluating the impact that this standard will have on our Condensed Consolidated Financial Statements.
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. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers certain salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees (excluding employees hired at Shreveport after 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 primarily unfunded.
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 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are unfunded.
When applicable, diluted shares outstanding includes 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.
Derivatives
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 facilities, 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.”

Segments

Our reporting segments align with our regionally focused organizational structure, which we believe enables us to better serve customers across the globe. Under this structure, we report financial results for the Americas; Europe, the Middle East and Africa (EMEA); U.S. Sourcing; and Other. In addition, sales and segment EBIT reflect end market reporting pursuant to which sales and related costs are included in segment EBIT 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.

Americas—includes sales of manufactured and sourced glass tableware having an end market destination in North and South America.

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

U.S. Sourcing—includes U.S. sales of sourced ceramic dinnerware, metal tableware, hollowware, and serveware.

Other —includes 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.
The fair values of our commodity futures natural gas contracts and currency contracts are determined using observable market inputs. We evaluate Company and counterparty risk in determining fair values. The commodity futures natural gas contracts and currency contracts are hedges of either recorded assets or liabilities or anticipated transactions.
Significant Accounting Policies (Tables)
Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]
Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
 
 
Three months ended March 31,
(dollars in thousands)
 
2015
 
2014
Stock-based compensation expense
 
$
2,129

 
$
1,003


Balance Sheet Details (Tables)
Schedule of Other Assets and Other Liabilities [Table Text Block]
The following table provides detail of selected balance sheet items:
(dollars in thousands)
March 31, 2015
 
December 31, 2014
Accounts receivable:
 
 
 
Trade receivables
$
90,274

 
$
87,700

Other receivables
4,096

 
3,406

Total accounts receivable, less allowances of $5,986 and $5,586
$
94,370

 
$
91,106

 
 
 
 
Inventories:
 
 
 
Finished goods
$
165,652

 
$
151,698

Work in process
1,214

 
1,153

Raw materials
4,321

 
4,708

Repair parts
10,950

 
10,840

Operating supplies
1,164

 
1,429

Total inventories, less loss provisions of $4,172 and $4,370
$
183,301

 
$
169,828

 
 
 
 
Prepaid and other current assets
 
 
 
Value added tax
$
15,181

 
$
13,512

Prepaid expenses
6,931

 
6,947

Deferred income taxes
4,883

 
4,888

Prepaid income taxes
1,943

 
1,951

Derivative asset
477

 
403

Total prepaid and other current assets
$
29,415

 
$
27,701

 
 
 
 
Other assets:
 
 
 
Deposits
$
1,263

 
$
890

Finance fees — net of amortization
6,655

 
6,958

Other assets
6,597

 
6,128

Total other assets
$
14,515

 
$
13,976

 
 
 
 
Accrued liabilities:
 
 
 
Accrued incentives
$
18,120

 
$
17,648

Workers compensation
7,134

 
7,121

Medical liabilities
3,817

 
3,887

Interest
3,759

 
3,876

Commissions payable
1,156

 
1,068

Withholdings and other non-income tax accruals
3,615

 
3,078

Other accrued liabilities
5,940

 
5,960

Total accrued liabilities
$
43,541

 
$
42,638

 
 
 
 
Other long-term liabilities:
 
 
 
Deferred liability
$
8,686

 
$
8,081

Derivative liability
338

 
215

Environmental obligation (see note 14)
1,000

 
1,000

Other long-term liabilities
4,080

 
3,860

Total other long-term liabilities
$
14,104

 
$
13,156

Borrowings (Tables)
Schedule of Debt [Table Text Block]
Borrowings consist of the following:
(dollars in thousands)
Interest Rate
 
Maturity Date
March 31,
2015
 
December 31,
2014
Borrowings under ABL Facility
floating
 
April 9, 2019
$
4,100

 
$

Term Loan B
floating
 
April 9, 2021
436,700

 
437,800

RMB Working Capital Loan
6.78%
 
July, 2015

 
3,258

AICEP Loan
0.00%
 
January, 2016 to July 30, 2018
3,434

 
3,846

Total borrowings
 
 
 
444,234

 
444,904

Less — unamortized discount
 
 
 
942

 
982

Total borrowings — net
 
 
 
443,292

 
443,922

Less — long term debt due within one year
 
 
4,972

 
7,658

Total long-term portion of borrowings — net
 
$
438,320

 
$
436,264



Pension and Non-pension Postretirement Benefits (Tables)
The components of our net pension expense, including the SERP, are as follows:
Three months ended March 31,
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
$
1,161

 
$
1,025

 
$
748

 
$
578

 
$
1,909

 
$
1,603

Interest cost
3,709

 
3,870

 
1,103

 
1,424

 
4,812

 
5,294

Expected return on plan assets
(5,662
)
 
(5,608
)
 
(598
)
 
(632
)
 
(6,260
)
 
(6,240
)
Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
104

 
265

 
(64
)
 
57

 
40

 
322

Loss
1,886

 
1,242

 
406

 
258

 
2,292

 
1,500

Pension expense
$
1,198

 
$
794

 
$
1,595

 
$
1,685

 
$
2,793

 
$
2,479

The provision for our non-pension postretirement benefit expense consists of the following:
Three months ended March 31,
U.S. Plans
 
Non-U.S. Plans
 
Total
(dollars in thousands)
2015
 
2014
 
2015
 
2014
 
2015
 
2014
Service cost
$
282

 
$
252

 
$

 
$

 
$
282

 
$
252

Interest cost
660

 
710

 
19

 
27

 
679

 
737

Amortization of unrecognized:
 
 
 
 
 
 
 
 
 
 
 
Prior service cost
35

 
35

 

 

 
35

 
35

Loss / (gain)
196

 
67

 

 

 
196

 
67

Non-pension postretirement benefit expense
$
1,173

 
$
1,064

 
$
19

 
$
27

 
$
1,192

 
$
1,091

Net Income (Loss) per Share of Common Stock (Tables)
Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]
The following table sets forth the computation of basic and diluted earnings (loss) per share:
 
Three months ended March 31,
(dollars in thousands, except earnings per share)
2015
 
2014
Numerators for earnings per share:
 
 
 
Net income (loss) that is available to common shareholders
$
3,112

 
$
(3,384
)
 
 
 
 
Denominator for basic earnings per share:
 
 
 
Weighted average shares outstanding
21,853,455

 
21,523,077

 
 
 
 
Denominator for diluted earnings per share:
 
 
 
Effect of stock options and restricted stock units
495,159

 

Adjusted weighted average shares and assumed conversions
22,348,614

 
21,523,077

 
 
 
 
Basic earnings (loss) per share
$
0.14

 
$
(0.16
)
 
 
 
 
Diluted earnings (loss) per share
$
0.14

 
$
(0.16
)
 
 
 
 
Shares excluded from diluted earnings (loss) per share due to:
 
 
 
Net loss position (excluded from denominator)

 
418,344

Inclusion would have been anti-dilutive (excluded from calculation)
89,006

 
382,109

Derivatives (Tables)
The following table provides the fair values of our derivative financial instruments for the periods presented:
 
 
Asset Derivatives:
(dollars in thousands)
 
March 31, 2015
 
December 31, 2014
Derivatives not designated as hedging
instruments under FASB ASC 815:
 
Balance Sheet Location
 
Fair Value
 
Balance Sheet Location
 
Fair Value
Currency contracts
 
Prepaid and other current assets
 
$
477

 
Prepaid and other current assets
 
$
403

Total undesignated
 
 
 
477

 
 
 
403

Total
 
 
 
$
477

 
 
 
$
403

 
 
 
 
 
 
 
 
 
 
 
Liability Derivatives:
(dollars in thousands)
 
March 31, 2015
 
December 31, 2014
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
 
$
1,453

 
Derivative liability - current
 
$
1,222

Natural gas contracts
 
Other long-term liabilities
 
165

 
Other long-term liabilities
 
103

Total designated
 
 
 
1,618

 
 
 
1,325

Derivatives not designated as hedging
instruments under FASB ASC 815:
 
 
 
 
 
 
 
 
Natural gas contracts
 
Derivative liability - current
 
1,698

 
Derivative liability - current
 
1,431

Natural gas contracts
 
Other long-term liabilities