e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
|
þ |
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2009
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-12084
Libbey Inc.
(Exact name of registrant as specified in its charter)
|
|
|
Delaware
|
|
34-1559357 |
|
|
|
(State or other jurisdiction of incorporation or organization)
|
|
(IRS Employer Identification No.) |
300 Madison Avenue, Toledo, Ohio 43604
(Address of principal executive offices) (Zip Code)
419-325-2100
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
|
|
Large Accelerated Filer o
|
|
Accelerated Filer þ
|
|
Non-Accelerated Filer o
|
|
Smaller reporting company o |
(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
Common Stock, $.01 par value 16,088,705 shares at October 30, 2009.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and all
majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance
with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information
and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, all adjustments (including normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the
three-month and nine-month periods ended September 30, 2009 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2009.
The balance sheet at December 31, 2008 has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by U.S. GAAP for
complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
3
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
Net sales |
|
$ |
186,878 |
|
|
$ |
211,536 |
|
Freight billed to customers |
|
|
419 |
|
|
|
664 |
|
|
|
|
|
|
|
|
Total revenues |
|
|
187,297 |
|
|
|
212,200 |
|
Cost of sales |
|
|
144,337 |
|
|
|
174,266 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
42,960 |
|
|
|
37,934 |
|
Selling, general and administrative expenses |
|
|
24,811 |
|
|
|
23,377 |
|
Special charges |
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
17,849 |
|
|
|
14,557 |
|
Other income (expense) |
|
|
2,703 |
|
|
|
(1,000 |
) |
|
|
|
|
|
|
|
Earnings before interest and income taxes |
|
|
20,552 |
|
|
|
13,557 |
|
Interest expense |
|
|
17,451 |
|
|
|
17,509 |
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
3,101 |
|
|
|
(3,952 |
) |
(Benefit from) provison for income taxes |
|
|
(432 |
) |
|
|
2,006 |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.23 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
Diluted |
|
$ |
0.23 |
|
|
$ |
(0.40 |
) |
|
|
|
|
|
|
|
Dividends per share |
|
$ |
|
|
|
$ |
0.025 |
|
|
|
|
|
|
|
|
See accompanying notes
4
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
Net sales |
|
$ |
540,557 |
|
|
$ |
623,640 |
|
Freight billed to customers |
|
|
1,163 |
|
|
|
1,947 |
|
|
|
|
|
|
|
|
Total revenues |
|
|
541,720 |
|
|
|
625,587 |
|
Cost of sales |
|
|
453,761 |
|
|
|
515,148 |
|
|
|
|
|
|
|
|
Gross profit |
|
|
87,959 |
|
|
|
110,439 |
|
Selling, general and administrative expenses |
|
|
69,699 |
|
|
|
67,687 |
|
Special charges |
|
|
974 |
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
|
17,286 |
|
|
|
42,752 |
|
Other income |
|
|
5,424 |
|
|
|
339 |
|
|
|
|
|
|
|
|
Earnings before interest and income taxes |
|
|
22,710 |
|
|
|
43,091 |
|
Interest expense |
|
|
52,162 |
|
|
|
52,280 |
|
|
|
|
|
|
|
|
Loss before income taxes |
|
|
(29,452 |
) |
|
|
(9,189 |
) |
(Benefit from) provision for income taxes |
|
|
(7,756 |
) |
|
|
2,365 |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
(1.45 |
) |
|
$ |
(0.79 |
) |
|
|
|
|
|
|
|
Diluted |
|
$ |
(1.45 |
) |
|
$ |
(0.79 |
) |
|
|
|
|
|
|
|
Dividends per share |
|
$ |
|
|
|
$ |
0.075 |
|
|
|
|
|
|
|
|
See accompanying notes
5
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
(unaudited) |
|
|
|
|
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and equivalents |
|
$ |
30,648 |
|
|
$ |
13,304 |
|
Accounts receivable net |
|
|
91,119 |
|
|
|
76,072 |
|
Inventories net |
|
|
153,523 |
|
|
|
185,242 |
|
Prepaid and other current assets |
|
|
14,116 |
|
|
|
17,167 |
|
|
|
|
|
|
|
|
Total current assets |
|
|
289,406 |
|
|
|
291,785 |
|
|
|
|
|
|
|
|
|
|
Pension asset |
|
|
10,560 |
|
|
|
9,351 |
|
Purchased intangible assets net |
|
|
25,293 |
|
|
|
26,121 |
|
Goodwill |
|
|
165,023 |
|
|
|
166,736 |
|
Other assets |
|
|
12,033 |
|
|
|
12,714 |
|
|
|
|
|
|
|
|
Total other assets |
|
|
212,909 |
|
|
|
214,922 |
|
Property, plant and equipment net |
|
|
296,862 |
|
|
|
314,847 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
799,177 |
|
|
$ |
821,554 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders Deficit: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable |
|
$ |
1,517 |
|
|
$ |
3,284 |
|
Accounts payable |
|
|
52,087 |
|
|
|
54,428 |
|
Salaries and wages |
|
|
31,703 |
|
|
|
22,597 |
|
Accrued liabilities |
|
|
60,033 |
|
|
|
39,675 |
|
Accrued special charges |
|
|
908 |
|
|
|
4,248 |
|
Pension liability (current portion) |
|
|
1,579 |
|
|
|
1,778 |
|
Non-pension postretirement benefits (current portion) |
|
|
4,684 |
|
|
|
4,684 |
|
Derivative liability |
|
|
10,720 |
|
|
|
17,936 |
|
Deferred income taxes |
|
|
1,791 |
|
|
|
1,279 |
|
Long-term debt due within one year |
|
|
9,152 |
|
|
|
1,117 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
174,174 |
|
|
|
151,026 |
|
|
Long-term debt |
|
|
516,030 |
|
|
|
545,856 |
|
Pension liability |
|
|
99,328 |
|
|
|
109,505 |
|
Non-pension postretirement benefits |
|
|
59,612 |
|
|
|
57,197 |
|
Deferred income taxes |
|
|
3,726 |
|
|
|
3,648 |
|
Other long-term liabilities |
|
|
8,299 |
|
|
|
12,211 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
861,169 |
|
|
|
879,443 |
|
|
Shareholders deficit: |
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share, 50,000,000 shares authorized, 18,697,630
shares issued at September 30, 2009 and at December 31, 2008 |
|
|
187 |
|
|
|
187 |
|
Capital in excess of par value (includes warrants of $1,034 based on 485,309 shares
at September 30, 2009 and at December 31, 2008) |
|
|
310,792 |
|
|
|
309,275 |
|
Treasury stock, at cost, 3,542,070 shares (3,967,486 shares in 2008) |
|
|
(95,184 |
) |
|
|
(106,411 |
) |
Retained deficit |
|
|
(177,339 |
) |
|
|
(145,154 |
) |
Accumulated other comprehensive loss |
|
|
(100,448 |
) |
|
|
(115,786 |
) |
|
|
|
|
|
|
|
Total shareholders deficit |
|
|
(61,992 |
) |
|
|
(57,889 |
) |
|
|
|
|
|
|
|
Total liabilities and shareholders deficit |
|
$ |
799,177 |
|
|
$ |
821,554 |
|
|
|
|
|
|
|
|
See accompanying notes
6
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
Adjustments to reconcile net income (loss) to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
10,629 |
|
|
|
10,899 |
|
Loss on asset sales |
|
|
77 |
|
|
|
159 |
|
Change in accounts receivable |
|
|
864 |
|
|
|
7,109 |
|
Change in inventories |
|
|
(6,196 |
) |
|
|
(5,712 |
) |
Change in accounts payable |
|
|
(3,191 |
) |
|
|
(9,695 |
) |
Accrued interest and amortization of discounts, warrants and finance fees |
|
|
13,447 |
|
|
|
14,749 |
|
Pension & non-pension postretirement benefits |
|
|
(453 |
) |
|
|
(13,252 |
) |
Restructuring charges |
|
|
(1,086 |
) |
|
|
|
|
Accrued liabilities & prepaid expenses |
|
|
8,344 |
|
|
|
5,842 |
|
Accrued income taxes |
|
|
(862 |
) |
|
|
2,900 |
|
Other operating activities |
|
|
1,533 |
|
|
|
6,268 |
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
|
26,639 |
|
|
|
13,309 |
|
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(2,737 |
) |
|
|
(12,390 |
) |
Proceeds from asset sales and other |
|
|
172 |
|
|
|
71 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(2,565 |
) |
|
|
(12,319 |
) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Net repayments on ABL credit facility |
|
|
(16,799 |
) |
|
|
(8,669 |
) |
Other repayments |
|
|
(662 |
) |
|
|
(587 |
) |
Dividends |
|
|
|
|
|
|
(369 |
) |
|
|
|
|
|
|
|
Net cash used in financing activities |
|
|
(17,461 |
) |
|
|
(9,625 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash |
|
|
(47 |
) |
|
|
(529 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
6,566 |
|
|
|
(9,164 |
) |
Cash at beginning of period |
|
|
24,082 |
|
|
|
17,883 |
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
30,648 |
|
|
$ |
8,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
894 |
|
|
$ |
1,721 |
|
Cash refunded during the period for income taxes |
|
$ |
(546 |
) |
|
$ |
(167 |
) |
See accompanying notes
7
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
32,875 |
|
|
|
33,433 |
|
Loss on asset sales |
|
|
109 |
|
|
|
35 |
|
Change in accounts receivable |
|
|
(14,733 |
) |
|
|
(10,351 |
) |
Change in inventories |
|
|
32,050 |
|
|
|
(10,756 |
) |
Change in accounts payable |
|
|
(3,078 |
) |
|
|
(15,607 |
) |
Accrued interest and amortization of discounts, warrants and finance fees |
|
|
14,998 |
|
|
|
16,709 |
|
Pay-in-kind note interest |
|
|
11,916 |
|
|
|
10,216 |
|
Pension & non-pension postretirement benefits |
|
|
2,712 |
|
|
|
(13,982 |
) |
Restructuring charges |
|
|
(1,837 |
) |
|
|
|
|
Payable to Vitro |
|
|
|
|
|
|
(19,575 |
) |
Accrued liabilities & prepaid expenses |
|
|
21,128 |
|
|
|
3,277 |
|
Accrued income taxes |
|
|
(9,499 |
) |
|
|
3,661 |
|
Other operating activities |
|
|
784 |
|
|
|
4,744 |
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities |
|
|
65,729 |
|
|
|
(9,750 |
) |
|
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(12,287 |
) |
|
|
(30,002 |
) |
Proceeds from asset sales and other |
|
|
260 |
|
|
|
117 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(12,027 |
) |
|
|
(29,885 |
) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Net (repayments) borrowings on ABL credit facility |
|
|
(33,488 |
) |
|
|
14,713 |
|
Other repayments |
|
|
(2,785 |
) |
|
|
(1,460 |
) |
Dividends |
|
|
|
|
|
|
(1,098 |
) |
|
|
|
|
|
|
|
Net cash (used in) provided by financing activities |
|
|
(36,273 |
) |
|
|
12,155 |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash |
|
|
(85 |
) |
|
|
(340 |
) |
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
17,344 |
|
|
|
(27,820 |
) |
Cash at beginning of period |
|
|
13,304 |
|
|
|
36,539 |
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
30,648 |
|
|
$ |
8,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
20,897 |
|
|
$ |
23,011 |
|
Cash paid (refunded) during the period for income taxes |
|
$ |
761 |
|
|
$ |
(562 |
) |
See accompanying notes
8
LIBBEY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollars in thousands, except per share data
(unaudited)
1. Description of the Business
Libbey is the leading producer of glass tableware products in the Western Hemisphere, in addition
to supplying key markets throughout the world. We produce glass tableware in five countries and
sell to customers in over 100 countries. We have the largest manufacturing, distribution and
service network among glass tableware manufacturers in the Western Hemisphere and are one of the
largest glass tableware manufacturers in the world. We design and market an extensive line of
high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware, and
plastic items to a broad group of customers in the foodservice, retail and business-to-business
markets. We own and operate two glass tableware manufacturing plants in the United States as well
as glass tableware manufacturing plants in the Netherlands, Portugal, China and Mexico. We also own
and operate a plastics plant in Wisconsin. Until April 9, 2009, we operated a ceramic dinnerware
manufacturing facility in Syracuse, New York. 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 Over the Counter Bulletin Board (OTC BB) under the ticker symbol
LYBI.OB.
2. Significant Accounting Policies
See our Form 10-K for the year ended December 31, 2008 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 managements 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
(expense) income.
9
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and
liabilities are recognized for estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and tax attribute carry-forwards. Deferred income tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those temporary differences
are expected to be recovered or settled. Financial Accounting Standards Board Accounting Standards
Codification (FASB ASC) Topic 740, Income Taxes (formerly FAS No. 109, Accounting for 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 and China, we have
recorded a full valuation allowance against our deferred income tax assets. In addition, partial
valuation allowances have been recorded in the Netherlands, Portugal and Mexico.
Stock-Based Compensation Expense
We account for stock-based compensation in accordance with Financial Accounting Standards Board
Accounting Standards Codification ( FASB ASC) Topic 718, Compensation Stock Compensation and
in FASB ASC 505-50, Equity Equity-Based Payments to Non-Employees (formerly SFAS No. 123-R,
Accounting for Stock-Based Compensation). Stock-based compensation cost is measured based on the
fair value of the equity instruments issued. SFAS No. 123-R applies to all of our outstanding
unvested stock-based payment awards as of January 1, 2006, and all prospective awards using the
modified prospective transition method without restatement of prior periods. Stock-based
compensation expense charged to the Condensed Consolidated Statement of Operations for the three
months and nine months ended September 30, 2009 was $0.5 million and $1.6 million, respectively.
The stock-based compensation expense charged to the Condensed Consolidated Statement of Operations
for the three months and nine months ended September 30, 2008 was $0.7 million and $2.8 million,
respectively.
New Accounting Standards
On July 1, 2009 the FASB Accounting Standards Codification became the single source of
authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities in the
preparation of financial statements in conformity with GAAP. The Codification is not intended to
change U.S. GAAP; instead, it reorganized the various U.S. GAAP pronouncements into approximately
90 accounting Topics, and displays all Topics using a consistent structure. The Codification is
effective for financial statements issued for interim and annual periods ending after September 15,
2009. Accordingly, in our discussion of New Accounting Standards below, we have incorporated
references to the Codification Topics. For further discussion of the Codification, see the
discussion of SFAS No. 168 below.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS 157). SFAS 157
defines fair value, establishes a framework for measuring fair value, and expands disclosure about
fair value measurements. This statement clarifies how to measure fair value as permitted under
other accounting pronouncements but does not require any new fair value measurements. In February
2008, the FASB issued FASB Staff Position 157-2, Effective Date of FASB Statement No. 157
(FSP157-2), which delayed until January 1, 2009 the effective date of SFAS 157 for nonfinancial
assets and liabilities, except for those that are recognized or disclosed at fair value in the
financial statements on a recurring basis. In October 2008, the FASB issued FASB Staff Position
157-3, Determining the Fair Value of a Financial Asset when the Market for That Asset is Not
Active (FSP 157-3), which clarifies the application of SFAS 157 as it relates to the valuation
of financial assets in a market that is not active for those financial assets. FSP 157-3 was
effective upon issuance. In April 2009, the FASB issued FASB Staff Position 157-4 Determining
Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions that are not Orderly (FSP 157-4). This FSP provides
additional guidance for estimating fair value in accordance with SFAS 157 when the volume and level
of activity for the asset or liability have significantly decreased. This FSP also includes
guidance on identifying circumstances that indicate a transaction is not orderly. FSP 157-4 was
effective for financial periods ending after June 15, 2009. We adopted SFAS 157 as of January 1,
2008, but had not applied it to non-recurring, nonfinancial assets and liabilities. The adoption
of SFAS 157 and its related FSPs (FSP 157-2, FSP 157-3 and FSP 157-4) had no impact on our
consolidated results of operations and financial condition. We adopted SFAS 157 for nonfinancial
assets and liabilities as of January 1, 2009. The adoption of SFAS 157 for nonfinancial assets and
liabilities did not have a material impact on our consolidated financial statements. See notes 4,
9 and 13 of the Condensed Consolidated Financial Statements for additional information. The
requirements of SFAS No. 157 and its related FSPs have been incorporated primarily into FASB ASC
820, Fair Value Measurements and Disclosures and FASB ASC 250, Accounting Changes and Error
Corrections.
10
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial
Statements (SFAS 160), which changes the accounting and reporting standards for the
noncontrolling interests in a subsidiary in consolidated financial statements. SFAS 160
re-characterizes minority interests as noncontrolling interests and requires noncontrolling
interests to be classified as a component of shareholders equity. We adopted SFAS 160 as of
January 1, 2009. The adoption of SFAS 160 did not have any impact on our consolidated financial
statements as we currently do not have any noncontrolling interests. The requirements of SFAS No.
160 have been incorporated primarily into FASB ASC 810, Consolidation.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133 (SFAS 161), which requires additional
disclosures about the objectives of the derivative instruments and hedging activities, the method
of accounting for such instruments under SFAS No. 133 and its related interpretations, and a
tabular disclosure of the effects of such instruments and related hedged items on our financial
position, financial performance, and cash flows. SFAS 161 encourages, but does not require,
comparative disclosures for earlier periods at initial adoption. SFAS 161 was effective for Libbey
on January 1, 2009. Since SFAS 161 only requires additional disclosures, adoption of this
statement did not have a material impact on our consolidated financial statements. See note 9 of
the Condensed Consolidated Financial Statements for additional information. The requirements of
SFAS No. 161 have been incorporated primarily into FASB ASC 815, Derivatives and Hedging.
In April 2008, the FASB issued Staff Position No. FAS 142-3, Determination of the Useful Life of
Intangible Assets (FSP 142-3), which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful life of a recognized intangible asset
under FASB Statement No. 142, Goodwill and Other Intangible Assets. FSP 142-3 was effective for
Libbey on January 1, 2009. The adoption of FSP 142-3 did not have a material impact on our
consolidated financial statements. The requirements of FSP 142-3 have been incorporated primarily
into FASB ASC 350-30, Intangibles Goodwill and Other General Intangibles Other than Goodwill
and FASB ASC 275, Risks and Uncertainties.
In June 2008, the FASB ratified EITF Issue No. 07-5, Determining Whether an Instrument (or an
Embedded Feature) Is Indexed to an Entitys Own Stock (EITF 07-5). EITF 07-5 provides that an
entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock, including evaluating the instruments contingent
exercise and settlement provisions. It also clarifies the impact of foreign currency denominated
strike prices and market-based employee stock option valuation instruments on the evaluation. EITF
07-5 was effective for Libbey on January 1, 2009. The adoption of EITF 07-5 did not have any impact
on our consolidated financial statements. The requirements of EITF 07-5 have been incorporated
primarily into FASB ASC 815-40, Derivatives and Hedging Contracts in Entitys Own Equity.
In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities (FSP 03-6-1). FSP
03-6-1 addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the earnings allocation in
computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of
SFAS No. 128, Earnings per Share. FSP 03-6-1 was effective for Libbey on January 1, 2009, and
requires that all prior period EPS data is adjusted retrospectively. The adoption of FSP 03-6-1
did not have a material impact on our consolidated financial statements. The requirements of FSP
03-6-1 have been incorporated primarily into FASB ASC 260, Earnings Per Share.
In December 2008, the FASB issued FASB Staff Position 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets (FSP 132(R)-1). FSP 132(R)-1 amends FASB Statement No. 132
(revised 2003), Employers Disclosures about Pensions and Other Postretirement Benefits, to
provide guidance on an employers disclosures about plan assets of a defined benefit pension or
other postretirement plan. FSP 132(R)-1 is effective for financial statements issued for fiscal
years ending after December 15, 2009. We are currently evaluating the potential impact of the
adoption of FSP 132(R)-1. The requirements of FSP 132(R)-1 have been incorporated primarily into
FASB ASC 715-20, Compensation Retirement Benefits.
In April 2009, the FASB issued FASB Staff Position FAS 107-1 and APB 28-1, Interim Disclosures
about Fair Value of Financial Instruments (FSP 107-1). FSP 107-1 amends FASB statement 107,
Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of
financial instruments for interim reporting periods of publicly traded companies as well as in
annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial information at interim reporting
periods. FSP 107-1 was effective for interim reporting periods ending after June 15, 2009. Since
FSP 107-1 required only additional disclosures, adoption of this statement did not have a material
impact on our consolidated financial statements. See note 4 of the Condensed Consolidated
Financial Statements for additional information. The
requirements of FSP 107-1 have been incorporated primarily into FASB ASC 825, Financial
Instruments.
11
In May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165). SFAS 165 establishes
general standards of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued. SFAS 165 is
effective for interim or annual financial periods ending after June 15, 2009. In accordance with
SFAS 165, we have evaluated and, as necessary, made changes to these unaudited condensed financial
statements for the events through November 9, 2009, the date that the financial statements were
issued. As documented in our filing on Form 8-K on October 29, 2009, we announced a debt exchange
wherein $160.9 million of PIK notes were exchanged for a combination of debt and equity. This is
considered a nonrecognized subsequent event, meaning that we have provided disclosure of the event,
but have not recognized the transaction in the financial statements. Please see note 14 for
further discussion of this subsequent event. The requirements of SFAS 165 have been incorporated
primarily into FASB ASC 855, Subsequent Events.
In June 2009 the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162
(SFAS 168). The objective of SFAS 168 is to replace SFAS No. 162 The Hierarchy of Generally
Accepted Accounting Principles (SFAS 162) and to establish the FASB Accounting Standards
Codification (Codification) as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial statements in
conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission
(SEC) under authority of federal securities laws are also sources of authoritative GAAP for SEC
registrants. All previous existing accounting standards are superseded by the Codification as
described in SFAS 168. All other accounting literature not included in the Codification is
non-authoritative. SFAS 168 is effective for financial statements issued for interim and annual
periods ending after September 15, 2009. The adoption of SFAS 168 did not have a material impact
on our consolidated financial statements. The first update of the Codification was Accounting
Standards Update (ASU) 2009-01, issued in June, 2009. ASU 2009-01 amended the Codification to
include the guidance of SFAS 168 in its entirety.
In August 2009, the FASB issued Accounting Standards Update 2009-5 Fair Value Measurements and
Disclosures (Topic 820) Measuring Liabilities at Fair Value (ASU 2009-5.) The objective of ASU
2009-5 is to provide clarification for the determination of fair value of liabilities in
circumstances in which a quoted price in an active market for the identical liability is not
available. The amendments in this update apply to all entities that measure liabilities at fair
value within the scope of Topic 820. ASU 2009-5 is effective for the first reporting period
(including interim periods) beginning after issuance, which for Libbey would be the fourth quarter
of 2009. We do not expect the adoption of ASU 2009-5 to have a material impact on our consolidated
financial statements.
Reclassifications
Certain amounts in the prior years financial statements may have been reclassified to conform to
the presentation used in the current year financial statements.
12
3. Balance Sheet Details
The following table provides detail of selected balance sheet items:
|
|
|
|
|
|
|
|
|
(Dollars in thousands) |
|
September 30, 2009 |
|
December 31, 2008 |
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Trade receivables |
|
$ |
90,570 |
|
|
$ |
74,393 |
|
Other receivables |
|
|
549 |
|
|
|
1,679 |
|
|
Total accounts receivable, less allowances of $7,362 and $10,479 |
|
$ |
91,119 |
|
|
$ |
76,072 |
|
|
Inventories: |
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
135,594 |
|
|
$ |
163,817 |
|
Work in process |
|
|
1,403 |
|
|
|
2,805 |
|
Raw materials |
|
|
4,745 |
|
|
|
5,748 |
|
Repair parts |
|
|
9,942 |
|
|
|
10,271 |
|
Operating supplies |
|
|
1,839 |
|
|
|
2,601 |
|
|
Total inventories, less allowances of $4,358 and $6,582 |
|
$ |
153,523 |
|
|
$ |
185,242 |
|
|
Prepaid and other current assets: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
11,796 |
|
|
$ |
14,865 |
|
Refundable and prepaid income taxes |
|
|
2,320 |
|
|
|
2,302 |
|
|
Total prepaid and other current assets |
|
$ |
14,116 |
|
|
$ |
17,167 |
|
|
Other assets: |
|
|
|
|
|
|
|
|
Finance fees net of amortization |
|
$ |
7,251 |
|
|
$ |
8,183 |
|
Other |
|
|
4,782 |
|
|
|
4,531 |
|
|
Total other assets |
|
$ |
12,033 |
|
|
$ |
12,714 |
|
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
Accrued incentives |
|
$ |
21,678 |
|
|
$ |
12,760 |
|
Workers compensation |
|
|
9,900 |
|
|
|
9,384 |
|
Medical liabilities |
|
|
2,730 |
|
|
|
2,736 |
|
Interest |
|
|
17,311 |
|
|
|
4,575 |
|
Commissions payable |
|
|
1,209 |
|
|
|
1,135 |
|
Other |
|
|
7,205 |
|
|
|
9,085 |
|
|
Total accrued liabilities |
|
$ |
60,033 |
|
|
$ |
39,675 |
|
|
Other long-term liabilities: |
|
|
|
|
|
|
|
|
Derivative liability (long term portion) |
|
$ |
1,840 |
|
|
$ |
3,693 |
|
Deferred liability |
|
|
1,306 |
|
|
|
1,566 |
|
Other |
|
|
5,153 |
|
|
|
6,952 |
|
|
Total other long-term liabilities |
|
$ |
8,299 |
|
|
$ |
12,211 |
|
|
13
4. Borrowings
On June 16, 2006, Libbey Glass Inc. issued $306.0 million aggregate principal amount of floating
rate senior secured notes (Senior Notes) due June 1, 2011, and $102.0 million aggregate principal
amount of senior subordinated secured pay-in-kind notes (PIK Notes) due December 1, 2011.
Concurrently, Libbey Glass Inc. entered into a $150.0 million Asset Based Loan facility (ABL
Facility) expiring December 16, 2010.
On October 28, 2009, we announced a debt exchange with respect to the PIK Notes. Please see note
14 for a further discussion of this subsequent event.
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
(Dollars in thousands) |
|
Interest Rate |
|
Maturity Date |
|
2009 |
|
2008 |
|
Borrowings under ABL facility |
|
floating |
|
December 16, 2010 |
|
$ |
|
|
|
$ |
34,538 |
|
Senior notes |
|
floating(1) |
|
June 1, 2011 |
|
|
306,000 |
|
|
|
306,000 |
|
PIK notes (2) |
|
16.00% |
|
December 1, 2011 |
|
|
160,862 |
|
|
|
148,946 |
|
Promissory note |
|
6.00% |
|
October, 2009 to September, 2016 |
|
|
1,537 |
|
|
|
1,666 |
|
Notes payable |
|
floating |
|
October, 2009 |
|
|
1,517 |
|
|
|
3,284 |
|
RMB loan contract |
|
floating |
|
July, 2012 to January, 2014 |
|
|
36,675 |
|
|
|
36,675 |
|
RMB working capital loan |
|
floating |
|
March, 2010 |
|
|
7,335 |
|
|
|
7,335 |
|
Obligations under capital leases |
|
floating |
|
May, 2009 |
|
|
|
|
|
|
302 |
|
BES Euro line |
|
floating |
|
December, 2009 to December, 2013 |
|
|
16,051 |
|
|
|
15,507 |
|
Other debt |
|
floating |
|
September, 2009 |
|
|
|
|
|
|
630 |
|
|
Total borrowings |
|
|
|
|
|
|
|
|
|
|
529,977 |
|
|
|
554,883 |
|
Less unamortized discounts and warrants |
|
|
|
|
|
|
|
|
|
|
3,278 |
|
|
|
4,626 |
|
|
Total borrowings net |
|
|
|
|
|
|
|
|
|
|
526,699 |
|
|
|
550,257 |
|
Less long term debt due within one
year and notes payable |
|
|
|
|
|
|
|
|
|
|
10,669 |
|
|
|
4,401 |
|
|
Total long-term portion of borrowings net |
|
|
|
|
|
|
|
|
|
$ |
516,030 |
|
|
$ |
545,856 |
|
|
|
|
|
(1) |
|
See Interest Rate Protection Agreements below. |
|
(2) |
|
Additional PIK Notes were issued each June 1 and December 1, commencing on December 1,
2006, to pay semi-annual interest. During the first three years, interest was payable by
the issuance of additional PIK Notes. |
ABL Facility
The ABL Facility is with a group of six banks and provides for a revolving credit and swing line
facility permitting borrowings for Libbey Glass and Libbey Europe up to an aggregate of $150.0
million, with Libbey Europes borrowings being limited to $75.0 million. Borrowings under the ABL
Facility mature December 16, 2010. Swing line borrowings are limited to $15.0 million, with swing
line borrowings for Libbey Europe being limited to 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 swing line borrowings (Eurocurrency Loans) bear interest
calculated at the Netherlands swing line 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 0.0 percent and 1.75 percent,
respectively, at September 30, 2009. There were no Libbey Glass or Libbey Europe borrowings under
the facility at September 30, 2009. Interest is payable on the last day of the interest period,
which can range from one month to six months.
All borrowings under the ABL Facility are secured by a first priority security interest in (i)
substantially all assets of (a) Libbey Glass and (b) substantially all of Libbey Glasss present
and future direct and indirect domestic subsidiaries, (ii) (a) 100 percent of the stock of Libbey
Glass, (b) 100 percent of the stock of substantially all of Libbey Glasss present and future
direct and indirect domestic subsidiaries, (c) 100 percent of the non-voting stock of substantially
all of Libbey Glasss first-tier present and future foreign subsidiaries and (d) 65 percent of the
voting stock of substantially all of Libbey Glasss first-tier present and future foreign
subsidiaries, and (iii) substantially all proceeds and products of the property and assets
described in clauses (i) and (ii) of this sentence.
14
Additionally, borrowings by Libbey Europe under the ABL Facility are secured by a first priority
security interest in (i) substantially all of the assets of Libbey Europe, the parent of Libbey
Europe and certain of its subsidiaries, (ii) 100 percent of the stock of Libbey Europe and certain
subsidiaries of Libbey Europe, and (iii) substantially all proceeds and products of the property
and assets described in clauses (i) and (ii) of this sentence.
Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the total credit
provided under the Facility. The Commitment Fee varies depending on our aggregate availability. The
Commitment Fee was 0.25 percent at September 30, 2009. No compensating balances are required by the
Agreement. The Agreement does not require compliance with a fixed charge coverage ratio covenant,
unless aggregate unused availability falls below $15.0 million. If our aggregate unused ABL
availability were to fall below $15.0 million, the fixed charge coverage ratio requirement would be
1:10 to 1:00. The fixed charge coverage ratio is defined as the ratio of earnings before interest,
taxes, depreciation, amortization and minority interest (EBITDA) minus capital expenditures to
fixed charges (EBITDA minus capital expenditures / fixed charges). Among the items included in the
calculation of fixed charges are cash interest expense, scheduled principal payments on outstanding
debt and capital lease obligations, taxes paid in cash, dividends paid in cash and required cash
contributions to our pension plans in excess of expense.
The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible
accounts receivable, inventory and fixed assets. The borrowing base is the sum of (a) 85 percent of
eligible accounts receivable, (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, and
(c) the lesser of $25.0 million and the aggregate of (i) 75 percent of the NOLV of eligible
equipment and (ii) 50 percent of the fair market value of eligible real property.
The available total borrowing base is offset by real estate and ERISA reserves totaling $8.2
million and mark-to-market reserves for natural gas and interest rate swaps of $9.1 million. The
ABL Facility also provides for the issuance of up to $30.0 million of letters of credit, which are
applied against the $150.0 million limit. At September 30, 2009, we had $9.9 million in letters of
credit outstanding under the ABL Facility. Remaining unused availability on the ABL Facility was
$81.3 million at September 30, 2009 and $44.6 million at December 31, 2008.
Senior Notes
Libbey Glass and Libbey Inc. entered into a purchase agreement pursuant to which Libbey Glass
agreed to sell $306.0 million aggregate principal amount of floating rate senior secured notes due
June 1, 2011 to the initial purchasers named in a private placement. The net proceeds of these
notes, after deducting a discount and the estimated expenses and fees, were approximately $289.8
million. On February 15, 2007, we exchanged $306.0 million aggregate principal amount of our
floating rate senior secured notes due June 1, 2011, which have been registered under the
Securities Act of 1933, as amended (Senior Notes), for the notes sold in the private placement. The
Senior Notes bear interest at a rate equal to six-month LIBOR plus 7.0 percent and were offered at
a discount of 2 percent of face value. Interest with respect to the Senior Notes is payable
semiannually on June 1 and December 1. The interest rate was 8.26 percent at September 30, 2009.
Neither the Senior Notes nor the indenture governing them contain financial covenants.
We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of
debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements
effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate
debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate
for our borrowings related to the Rate Agreements at September 30, 2009, excluding applicable fees,
is 5.24 percent per year and the total interest rate, including applicable fees, is 12.24 percent
per year. These Rate Agreements expire on December 1, 2009. Total remaining Senior Notes not
covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 8.26
percent per year at September 30, 2009. If the counterparties to these Rate Agreements were to fail
to perform, these Rate Agreements would no longer protect us from interest rate fluctuations.
However, we do not anticipate nonperformance by the counterparties. All interest rate swap
counterparties were rated A+ or better, as of September 30, 2009, by Standard and Poors.
The fair market value for the Rate Agreements at September 30, 2009 was a $4.0 million liability.
The fair values of the Rate Agreements are 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. We do not expect to cancel these agreements and
expect them to expire as originally contracted.
15
The Senior Notes are guaranteed by Libbey Inc. and all of Libbey Glasss existing and future
domestic subsidiaries that guarantee any
of Libbey Glasss debt or debt of any subsidiary guarantor (see Note 11). The Senior Notes and
related guarantees have the benefit of a second-priority lien, subject to permitted liens, on
collateral consisting of substantially all the tangible and intangible assets of Libbey Glass and
its domestic subsidiary guarantors that secure all of the indebtedness under Libbey Glasss ABL
Facility. The Collateral does not include the assets of non-guarantor subsidiaries that secure the
ABL Facility.
PIK Notes
Concurrently with the execution of the purchase agreement with respect to the Senior Notes, Libbey
Glass and Libbey Inc. entered into a purchase agreement (Unit Purchase Agreement) pursuant to which
Libbey Glass agreed to sell, to a purchaser named in the private placement, units consisting of
$102.0 million aggregate principal amount 16 percent senior subordinated secured pay-in-kind notes
due December 1, 2011 (PIK Notes) and detachable warrants to purchase 485,309 shares of Libbey Inc.
common stock (Warrants) exercisable on or after June 16, 2006 and expiring on December 1, 2011. The
warrant holders do not have voting rights. The net proceeds, after deducting a discount and
estimated expenses and fees, were approximately $97.0 million. The proceeds were allocated between
the Warrants and the underlying debt based on their respective fair values at the time of issuance.
The amount allocated to the Warrants has been recorded in equity, with the offset recorded as a
discount on the underlying debt. Each Warrant is exercisable at $11.25. The PIK Notes were offered
at a discount of 2 percent of face value. Interest is payable semiannually on June 1 and December
1, but during the first three years interest was payable by issuance of additional PIK Notes.
Under the terms and conditions in place at September 30, 2009, interest on our PIK Notes would have
been payable in cash beginning December 1, 2009. At September 30, 2009, the total principal amount
of PIK Notes was $160.9 million. Neither the PIK Notes nor the indenture governing them contain
financial covenants.
The obligations of Libbey Glass under the PIK Notes are guaranteed by Libbey Inc. and all of Libbey
Glasss existing and future domestic subsidiaries that guarantee any of Libbey Glasss debt or debt
of any subsidiary guarantor (see Note 11). The PIK Notes and related guarantees are senior
subordinated obligations of Libbey Glass and the guarantors of the PIK Notes and are entitled to
the benefit of a third-priority lien, subject to permitted liens, on the collateral that secures
the Senior Notes.
On October 28, 2009, we announced a debt exchange with respect to the PIK Notes. Please see note
14 for a further discussion of this subsequent event.
Promissory Note
In September 2001, we issued a $2.7 million promissory note in connection with the purchase of our
Laredo, Texas warehouse facility. At September 30, 2009, we had $1.5 million outstanding on the
promissory note. Interest with respect to the promissory note is paid monthly.
Notes Payable
We have overdraft lines of credit for a maximum of 1.1 million. The $1.5 million outstanding at
September 30, 2009 was the U.S. dollar equivalent under the euro-based overdraft line, and the
interest rate was 5.44 percent. Interest with respect to the note payable is paid monthly.
RMB Loan Contract
On January 23, 2006, Libbey Glassware (China) Co., Ltd. (Libbey China), an indirect wholly owned
subsidiary of Libbey Inc., entered into an RMB Loan Contract (RMB Loan Contract) with China
Construction Bank Corporation Langfang Economic Development Area Sub-Branch (CCB). Pursuant to the
RMB Loan Contract, CCB agreed to lend to Libbey China RMB 250.0 million, or the current equivalent
of approximately $36.7 million, for the construction of our production facility in China and the
purchase of related equipment, materials and services. The loan has a term of eight years and bears
interest at a variable rate as announced by the Peoples Bank of China. As of the date of the
initial advance under the Loan Contract, the annual interest rate was 5.51 percent, and as of
September 30, 2009, the annual interest rate was 5.51 percent. As of September 30, 2009, the
outstanding balance was RMB 250.0 million (approximately $36.7 million). Interest is payable
quarterly. Payments of principal in the amount of RMB 30.0 million (approximately $4.4 million) and
RMB 40.0 million (approximately $5.9 million) must be made on July 20, 2012, and December 20, 2012,
respectively, and three payments of principal in the amount of RMB 60.0 million (approximately $8.8
million) each must be made on July 20, 2013, December 20, 2013, and January 20, 2014, respectively.
The obligations of Libbey China are secured by a guarantee executed by Libbey Inc. for the benefit
of CCB and a mortgage lien on the Libbey China facility.
16
RMB Working Capital Loan
In March 2007, Libbey China entered into a RMB 50.0 million working capital loan with China
Construction Bank. The 3-year term loan has a principal payment at maturity on March 14, 2010, has
a current interest rate of 5.40 percent, and is secured by a Libbey Inc. guarantee. At September
30, 2009, the U.S. dollar equivalent on the line was $7.3 million. Interest is payable quarterly.
BES Euro Line
In January 2007, Crisal entered into a seven year, 11.0 million line of credit (approximately
$16.1 million) with BANCO ESPÍRITO SANTO, S.A. (BES). The $16.1 million outstanding at September
30, 2009 was the U.S. dollar equivalent under the line at an interest rate of 3.77 percent. Payment
of principal in the amount of 1.1 million (approximately $1.6 million) is due in December 2009,
payment of 1.6 million (approximately $2.3 million) is due in December 2010, payment of 2.2
million (approximately $3.2 million) is due in December 2011, payment of 2.8 million
(approximately $4.1 million) is due in December 2012 and payment of 3.3 million (approximately
$4.9 million) is due in December 2013. Interest with respect to the line is paid every six months.
Other Debt
The other debt primarily consisted of government-subsidized loans for equipment purchases at
Crisal. At September 30, 2009, other debt was $0.
Fair Value of Borrowings
The fair value of the Companys debt has been calculated based on quoted market prices for the same
or similar issues. Our floating rate $306.0 million Senior Notes due June, 2011 had an estimated
fair value of $273.9 million at September 30, 2009. The $160.9 million PIK Notes have been held by
a single holder since inception, and there is no active market from which a fair value could be
derived. On October 28, 2009, we announced a debt exchange with respect to the PIK Notes. Please
see note 14 for a further discussion of this subsequent event. The value of the remainder of our
debt approximates carrying value at September 30, 2009.
Capital Resources and Liquidity
Historically, cash flows generated from operations and our borrowing capacity under our ABL
facility have allowed us to meet our cash requirements, including capital expenditures and working
capital needs. Remaining unused availability on the ABL Facility was $81.3 million at September
30, 2009 and $44.6 million at December 31, 2008. In addition, our cash and cash equivalents
balance of $30.6 million at September 30, 2009 is available for our short-term operating needs. We
were impacted by recessionary pressures in 2008, especially during the fourth quarter of the year,
and the first nine months of 2009, and we anticipate that the global economic recession will
continue for the fourth quarter of 2009 and perhaps beyond. Under the terms and conditions in
place at September 30, 2009, interest on our PIK Notes would have been payable in cash beginning
December 1, 2009. We began taking a number of steps to enhance our liquidity in 2008, have
continued with further steps in 2009 (including those announced in February, 2009), and have begun
to see the benefits of these measures in our positive cash flow from operations for the first nine
months of 2009. Additionally, as further discussed in Note 14, Subsequent Events, on October 28,
2009, we announced that we had entered into a transaction to exchange the PIK Notes for a
combination of debt and equity which will have the impact of reducing cash paid for interest. The
original requirement for a cash interest payment of $12.9 million on December 1, 2009 has been
canceled. However, if cash generated from operations is insufficient to satisfy our liquidity
requirements, we may seek to sell additional equity or arrange additional debt financing. Global
financial markets and economic conditions have been, and continue to be, volatile. The credit and
capital markets remain challenging. These issues, along with significant write-offs in the
financial services sector, the re-pricing of credit risk and the current weak economic conditions,
have made it difficult, and will likely continue to make it difficult, to obtain funding in future
periods. If cash generated from operations and cash available from our ABL Facility are not
sufficient to meet our needs, we cannot provide assurance that we will be able to obtain additional
financing in sufficient amounts and/or on acceptable terms in the near future or when our debt
obligations reach maturity. Our ABL Facility expires in December 2010, the Senior Notes expire in
June 2011, and the PIK Notes originally were scheduled to expire in December 2011. As mentioned
above, please see note 14 for a discussion of a debt exchange which occurred subsequent to the end
of the third quarter. Based upon our operating plans and current forecast expectations (including expectations that the
global economy will not deteriorate further) and in light of our debt exchange which occurred
subsequent to the quarters end, we anticipate that we will generate positive
cash flow from operations and, if necessary, have sufficient cash availability from our ABL
Facility to meet our ongoing liquidity needs.
17
5. Restructuring Charges
In December 2008, we announced that our Syracuse China manufacturing facility and our Mira Loma,
California distribution center would be shut down in early to mid-2009 in order to reduce costs.
See Form 10-K for the year ended December 31, 2008 for further discussion. We incurred additional
charges of approximately $0.5 million and $3.2 million in the three months and nine months ended
September 30, 2009, respectively, related to these planned closures. The Syracuse China facility
was closed on April 9, 2009 and the Mira Loma distribution center was closed on May 31, 2009.
A charge of $1.1 million was incurred in the first quarter of 2009 to write down certain raw
materials and work in process inventory that could not be converted to finished product.
Approximately $0.1 million of this inventory was subsequently sold in the third quarter of 2009,
resulting in a reversal of this portion of the write-down. A pension
settlement charge of
approximately $0.2 million was recorded in the third quarter related to lump sum distributions
which resulted from the plant closing. These amounts were included in cost of sales on the
Condensed Consolidated Statement of Operations in the North American Other segment.
Additional depreciation expense of $0.7 million was recorded in the first quarter of 2009 to
reflect the shorter remaining useful life of the assets. These amounts were included in cost of
sales on the Condensed Consolidated Statement of Operations in the North American Other segment.
Special charges of $1.0 million and $1.6 million in the three months and nine months ended
September 30, 2009, respectively, included various legal, consulting and employee related costs.
In addition, during the three months ended September 30, 2009, we recorded a charge of $0.1 million
to write down certain fixed assets at our Mira Loma facility, and received cash proceeds of $0.8
million for the sale of certain fixed assets which previously had been written off at our Syracuse
China facility. This resulted in a net charge of $0.6 million related to the write-down of fixed
assets for the nine months ended September 30, 2009. These amounts were included in special
charges on the Condensed Consolidated Statement of Operations in the North American Other and North
American Glass segments.
Other income (expense) on the Condensed Consolidated Statement of Operations included expenses of
an immaterial amount in the third quarter and $0.2 million in the nine months ended September 30,
2009 for the change in fair value of ineffective natural gas hedges related to our Syracuse China
operation. These amounts were included in the North American Other segment.
The following table summarizes the facility closure charges in the third quarter and first nine
months of 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
Nine months ended September 30, 2009 |
|
|
|
North |
|
|
North |
|
|
|
|
|
|
North |
|
|
North |
|
|
|
|
|
|
American |
|
|
American |
|
|
|
|
|
|
American |
|
|
American |
|
|
|
|
(Dollars in thousands) |
|
Glass |
|
|
Other |
|
|
Total |
|
|
Glass |
|
|
Other |
|
|
Total |
|
Inventory write-down |
|
$ |
(1 |
) |
|
$ |
(76 |
) |
|
$ |
(77 |
) |
|
$ |
|
|
|
$ |
1,039 |
|
|
$ |
1,039 |
|
Pension Settlement charges |
|
|
|
|
|
|
239 |
|
|
|
239 |
|
|
|
|
|
|
|
239 |
|
|
|
239 |
|
Fixed asset depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705 |
|
|
|
705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
|
(1 |
) |
|
|
163 |
|
|
|
162 |
|
|
|
|
|
|
|
1,983 |
|
|
|
1,983 |
|
Employee termination cost & other |
|
|
(4 |
) |
|
|
954 |
|
|
|
950 |
|
|
|
(31 |
) |
|
|
1,612 |
|
|
|
1,581 |
|
Fixed asset write-down |
|
|
112 |
|
|
|
(762 |
) |
|
|
(650 |
) |
|
|
112 |
|
|
|
(719 |
) |
|
|
(607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in special charges |
|
|
108 |
|
|
|
192 |
|
|
|
300 |
|
|
|
81 |
|
|
|
893 |
|
|
|
974 |
|
Ineffectiveness of natural gas hedge |
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other income (expense) |
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax expense |
|
$ |
107 |
|
|
$ |
382 |
|
|
$ |
489 |
|
|
$ |
81 |
|
|
$ |
3,089 |
|
|
$ |
3,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
The following reflects the balance sheet activity related to the facility closure charge for
the nine months ended September 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
Balances |
|
|
Total |
|
|
Cash |
|
|
Inventory & |
|
|
|
|
|
|
Balances |
|
|
|
at December 31, |
|
|
Charge to |
|
|
Receipts |
|
|
Fixed asset |
|
|
Non-cash |
|
|
at September 30, |
|
(Dollars in thousands) |
|
2008 |
|
|
Earnings |
|
|
(Payments) |
|
|
Write Downs |
|
|
Utilization |
|
|
2009 |
|
Inventory write-down |
|
$ |
|
|
|
$ |
1,039 |
|
|
$ |
79 |
|
|
$ |
(1,118 |
) |
|
$ |
|
|
|
$ |
|
|
Pension Settlement charges |
|
|
|
|
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
(239 |
) |
|
|
|
|
Fixed asset depreciation |
|
|
|
|
|
|
705 |
|
|
|
|
|
|
|
|
|
|
|
(705 |
) |
|
|
|
|
Fixed asset write-down |
|
|
|
|
|
|
(607 |
) |
|
|
761 |
|
|
|
(154 |
) |
|
|
|
|
|
|
|
|
Employee termination cost & other |
|
|
4,248 |
|
|
|
1,581 |
|
|
|
(4,921 |
) |
|
|
|
|
|
|
|
|
|
|
908 |
|
Ineffectiveness of natural gas hedges |
|
|
|
|
|
|
213 |
|
|
|
|
|
|
|
|
|
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
4,248 |
|
|
$ |
3,170 |
|
|
$ |
(4,081 |
) |
|
$ |
(1,272 |
) |
|
$ |
(1,157 |
) |
|
$ |
908 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The ending balance of $0.9 million at September 30, 2009 was included in accrued special
charges on the Condensed Consolidated Balance Sheets and we expect this to result in cash payments
in 2009 and early 2010. The carrying value of this balance approximates its fair value.
The following reflects the total cumulative expenses to date (incurred from the fourth quarter of
2008 through the Balance Sheet date) related to the facility closure activity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North |
|
|
North |
|
|
Total |
|
|
|
American |
|
|
American |
|
|
Charges |
|
(Dollars in thousands) |
|
Glass |
|
|
Other |
|
|
To Date |
|
Inventory write-down |
|
$ |
192 |
|
|
$ |
10,615 |
|
|
$ |
10,807 |
|
Pension & postretirement welfare |
|
|
|
|
|
|
4,409 |
|
|
|
4,409 |
|
Fixed asset depreciation |
|
|
|
|
|
|
966 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
|
192 |
|
|
|
15,990 |
|
|
|
16,182 |
|
Employee termination cost & other |
|
|
587 |
|
|
|
5,814 |
|
|
|
6,401 |
|
Fixed asset write-down |
|
|
177 |
|
|
|
8,941 |
|
|
|
9,118 |
|
|
|
|
|
|
|
|
|
|
|
Included in special charges |
|
|
764 |
|
|
|
14,755 |
|
|
|
15,519 |
|
Ineffectiveness of natural gas hedge |
|
|
|
|
|
|
(596 |
) |
|
|
(596 |
) |
|
|
|
|
|
|
|
|
|
|
Included in other (expense) income |
|
|
|
|
|
|
(596 |
) |
|
|
(596 |
) |
|
|
|
|
|
|
|
|
|
|
Total pretax expenses to date |
|
$ |
956 |
|
|
$ |
31,341 |
|
|
$ |
32,297 |
|
|
|
|
|
|
|
|
|
|
|
We expect the total expenses for each of these activities to approximate the expenses incurred to
date.
6. Income Taxes
The Companys effective tax rate differs from the United States statutory tax rate primarily due to
changes in the mix of earnings in countries with differing statutory tax rates, changes in accruals
related to uncertain tax positions, tax planning structures and changes in tax laws. At September
30, 2009 and December 31, 2008 we had $1.2 million and $2.3 million, respectively, of gross
unrecognized tax benefits, exclusive of interest and penalties. The decrease of $1.1 million was
primarily attributable to an income tax settlement during the second quarter, offset by additions
based on tax positions related to the current year.
In addition, guidance in FASB ASC 740, Income Taxes (previously SFAS No. 109, Accounting for Income
Taxes) requires that the provision for (benefit from) income taxes be allocated between continuing
operations and other categories of earnings (such as discontinued operations or other comprehensive
income) for each tax jurisdiction. In 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
19
categories of earnings. A related tax benefit is then recorded in continuing operations. Included
in our income tax provision are tax benefits of $1.4 million for the third quarter of 2009 and $5.3
million for the first nine months of 2009 related to these intra-period allocations. Depending
upon the level of our future earnings and losses and their impact on other comprehensive income, it
is possible that these tax adjustments may change or even reverse in future periods.
Further, our current and future provision for (benefit from) income taxes for 2009 is significantly
impacted by valuation allowances. In the United States and China, we have recorded a full
valuation allowance against our deferred income tax assets. In addition, partial valuation
allowances have been recorded in the Netherlands, Portugal and Mexico. In assessing the need for
recording 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, whether there was an unusual,
infrequent, or extraordinary item to be considered. We intend to maintain these allowances until
it is more likely than not that the deferred income tax assets will be realized.
7. Pension and Non-pension Postretirement Benefits
We have pension plans covering the majority of our employees. Benefits generally are based on
compensation 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 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. The non-U.S. pension plans cover the employees of our wholly owned
subsidiaries Royal Leerdam and Crisa. The Crisa plan is not funded.
The components of our net pension expense, including the SERP, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Three months ended September 30, |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Service cost |
|
$ |
1,271 |
|
|
$ |
1,348 |
|
|
$ |
339 |
|
|
$ |
438 |
|
|
$ |
1,610 |
|
|
$ |
1,786 |
|
Interest cost |
|
|
3,878 |
|
|
|
3,908 |
|
|
|
1,037 |
|
|
|
1,182 |
|
|
|
4,915 |
|
|
|
5,090 |
|
Expected return on plan assets |
|
|
(4,383 |
) |
|
|
(4,393 |
) |
|
|
(632 |
) |
|
|
(813 |
) |
|
|
(5,015 |
) |
|
|
(5,206 |
) |
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
560 |
|
|
|
597 |
|
|
|
(23 |
) |
|
|
(18 |
) |
|
|
537 |
|
|
|
579 |
|
Loss |
|
|
227 |
|
|
|
330 |
|
|
|
93 |
|
|
|
73 |
|
|
|
320 |
|
|
|
403 |
|
Settlement charge |
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
687 |
|
|
|
|
|
|
Pension expense |
|
$ |
2,240 |
|
|
$ |
1,790 |
|
|
$ |
814 |
|
|
$ |
862 |
|
|
$ |
3,054 |
|
|
$ |
2,652 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Nine months ended September 30, |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Service cost |
|
$ |
3,761 |
|
|
$ |
4,044 |
|
|
$ |
1,015 |
|
|
$ |
1,314 |
|
|
$ |
4,776 |
|
|
$ |
5,358 |
|
Interest cost |
|
|
11,774 |
|
|
|
11,723 |
|
|
|
3,111 |
|
|
|
3,547 |
|
|
|
14,885 |
|
|
|
15,270 |
|
Expected return on plan assets |
|
|
(13,184 |
) |
|
|
(13,180 |
) |
|
|
(1,897 |
) |
|
|
(2,441 |
) |
|
|
(15,081 |
) |
|
|
(15,621 |
) |
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
1,681 |
|
|
|
1,792 |
|
|
|
(70 |
) |
|
|
(53 |
) |
|
|
1,611 |
|
|
|
1,739 |
|
Loss |
|
|
662 |
|
|
|
989 |
|
|
|
281 |
|
|
|
220 |
|
|
|
943 |
|
|
|
1,209 |
|
Settlement charge |
|
|
3,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,387 |
|
|
|
|
|
|
Pension expense |
|
$ |
8,081 |
|
|
$ |
5,368 |
|
|
$ |
2,440 |
|
|
$ |
2,587 |
|
|
$ |
10,521 |
|
|
$ |
7,955 |
|
|
We incurred pension settlement charges of $0.7 million and $3.4 million during the three
months and nine months ended September 30, 2009, respectively. The pension settlement charges were
triggered by excess lump sum distributions to retirees.
We provide certain retiree health care and life insurance benefits covering our U.S and Canadian
salaried and non-union hourly employees hired before January 1, 2004 and a majority of our union
hourly employees. Employees are generally eligible for benefits
20
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. During the second quarter of
2008, we amended our U.S. non-pension postretirement plans to cover employees and retirees of
Syracuse China previously covered under a multi-employer plan. This plan amendment was effective
September 1, 2008. 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 not funded.
The provision for our non-pension postretirement benefit expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Three months ended September 30, |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Service cost |
|
$ |
333 |
|
|
$ |
274 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
333 |
|
|
$ |
274 |
|
Interest cost |
|
|
946 |
|
|
|
788 |
|
|
|
29 |
|
|
|
32 |
|
|
|
975 |
|
|
|
820 |
|
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service gain |
|
|
(104 |
) |
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
(104 |
) |
|
|
115 |
|
Loss / (Gain) |
|
|
191 |
|
|
|
60 |
|
|
|
(9 |
) |
|
|
(8 |
) |
|
|
182 |
|
|
|
52 |
|
Curtailment credit |
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
Non-pension postretirement benefit expense |
|
$ |
1,272 |
|
|
$ |
1,237 |
|
|
$ |
20 |
|
|
$ |
24 |
|
|
$ |
1,292 |
|
|
$ |
1,261 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Nine months ended September 30, |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Service cost |
|
$ |
999 |
|
|
$ |
824 |
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
1,000 |
|
|
$ |
825 |
|
Interest cost |
|
|
2,838 |
|
|
|
2,215 |
|
|
|
84 |
|
|
|
96 |
|
|
|
2,922 |
|
|
|
2,311 |
|
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
(313 |
) |
|
|
(116 |
) |
|
|
|
|
|
|
|
|
|
|
(313 |
) |
|
|
(116 |
) |
Loss / (Gain) |
|
|
573 |
|
|
|
179 |
|
|
|
(26 |
) |
|
|
(24 |
) |
|
|
547 |
|
|
|
155 |
|
Curtailment credit |
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
Non-pension postretirement benefit expense |
|
$ |
4,003 |
|
|
$ |
3,102 |
|
|
$ |
59 |
|
|
$ |
73 |
|
|
$ |
4,062 |
|
|
$ |
3,175 |
|
|
In 2009, we expect to utilize approximately $18.0 million to fund our pension plans and pay
for non-pension postretirement benefits. Of that amount, $3.6 million and $11.7 million was
utilized in the three months and nine months ended September 30, 2009.
8. Net Income (Loss) per Share of Common Stock
The following table sets forth the computation of basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine months Ended September 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Numerator for earnings per share net income (loss
) that is available to common shareholders |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
|
Denominator for basic earnings per share
weighted average shares outstanding |
|
|
15,152,337 |
|
|
|
14,729,958 |
|
|
|
14,926,422 |
|
|
|
14,651,810 |
|
|
Effect of dilutive securities (1) |
|
|
435,212 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share adjusted
weighted average shares and assumed conversions |
|
|
15,587,549 |
|
|
|
14,729,958 |
|
|
|
14,926,422 |
|
|
|
14,651,810 |
|
|
Basic earnings (loss) per share |
|
$ |
0.23 |
|
|
$ |
(0.40 |
) |
|
$ |
(1.45 |
) |
|
$ |
(0.79 |
) |
|
Diluted earnings (loss) per share |
|
$ |
0.23 |
|
|
$ |
(0.40 |
) |
|
$ |
(1.45 |
) |
|
$ |
(0.79 |
) |
|
|
|
|
(1) |
|
The effect of employee stock options, warrants, restricted stock units and the employee
stock purchase plan (ESPP) (236,265 shares for the nine months ended September 30, 2009, and
107,984 and 331,671 shares for the three months and nine months |
21
|
|
|
|
|
ended September 30, 2008, respectively), was anti-dilutive and thus not included in the earnings
per share calculation. These amounts would have been dilutive if not for the net loss. |
When applicable, diluted shares outstanding include the dilutive impact of in-the-money 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.
9. 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. Most of these derivatives, except for certain natural gas
contracts originally designated to expected purchases at Syracuse China and the foreign currency
contracts, qualify for hedge accounting since the hedges are highly effective, and we have
designated and documented contemporaneously the hedging relationships involving these derivative
instruments. Changes in the effective portion of the fair value of these hedges are recorded in
Other Comprehensive Income (OCI). 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 the
forecasted transactions will occur, the changes in the fair value of the derivatives used as hedges
will be reflected in our earnings. All of these contracts were accounted for under FASB ASC 815
Derivatives and Hedging (formerly FASB Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities).
We use Interest Rate Protection Agreements (Rate Agreements) to manage our exposure to variable
interest rates. These Rate Agreements effectively convert a portion of our borrowings from
variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future
results. These instruments are valued using the market standard methodology of netting the
discounted expected future variable cash receipts and the discounted future fixed cash payments.
The variable cash receipts are based on an expectation of future interest rates derived from
observed market interest rate forward curves.
We also use commodity futures contracts related to forecasted future North American natural gas
requirements. The objective of these futures contracts and other derivatives is to limit the
fluctuations in prices paid due to adverse 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. Certain of our natural gas futures contracts are now classified as
ineffective, as the forecasted transactions are not probable of occurring due to the closure of our
Syracuse China facility in April 2009.
Our foreign currency exposure arises from transactions denominated in a currency other than the
U.S. dollar, primarily associated with anticipated purchases of new equipment or net investment in
a foreign operation. 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.
Notional Amounts
As of September 30, 2009, we had commodity contracts for 3,220,000 million British Thermal Units
(BTUs) of natural gas. We also had Interest Rate Protection Agreements for $200.0 million of our
variable rate debt, as discussed in Note 4. At December 31, 2008, we had Interest Rate Protection
Agreements for $200.0 million of variable rate debt and commodity contracts for 5,280,000 million
BTUs of natural gas. In January 2008, we entered into a series of foreign currency contracts to
sell Canadian dollars. As of September 30, 2008, we had contracts for 2.5 million Canadian
dollars. During April 2007, we entered into a foreign currency contract for 212.0 million pesos
for a contractual payment due to Vitro in January 2008. As of December 31, 2008, all of these
currency contracts had expired.
22
Fair Values
The following table provides the fair values of our derivative financial instruments for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives: |
|
|
|
September 30, 2009 |
|
|
December 31, 2008 |
|
|
|
Balance |
|
|
|
|
|
Balance |
|
|
|
|
|
Sheet |
|
Fair |
|
|
Sheet |
|
Fair |
|
|
|
Location |
|
Value |
|
|
Location |
|
Value |
|
Derivatives designated as hedging instruments under SFAS 133: |
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Derivative liability |
|
$ |
4,029 |
|
|
Derivative liability |
|
$ |
6,761 |
|
Natural gas contracts |
|
Derivative liability |
|
|
6,354 |
|
|
Derivative liability |
|
|
10,908 |
|
Natural gas contracts |
|
Other long term liability |
|
|
1,778 |
|
|
Other long term liability |
|
|
3,500 |
|
|
|
|
|
|
|
|
|
|
|
|
Total designated |
|
|
|
|
12,161 |
|
|
|
|
|
21,169 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives undesignated as hedging instruments under SFAS 133: |
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
|
Derivative liability |
|
|
337 |
|
|
Derivative liability |
|
|
267 |
|
Natural gas contracts |
|
Other long term liability |
|
|
62 |
|
|
Other long term liability |
|
|
193 |
|
|
|
|
|
|
|
|
|
|
|
|
Total undesignated |
|
|
|
|
399 |
|
|
|
|
|
460 |
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
12,560 |
|
|
|
|
$ |
21,629 |
|
|
|
|
|
|
|
|
|
|
|
|
Change in value of derivatives
Most of our derivatives qualify and are designated as cash flow hedges (except certain natural gas
contracts originally designated to expected purchases at Syracuse China) at September 30, 2009.
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. The ineffective portion of the change in the fair value of a derivative designated as
a cash flow hedge is recognized in current earnings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of derivative gain/(loss) recognized in OCI (effective portion) |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Derivatives in Cash Flow Hedging relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
2,023 |
|
|
$ |
114 |
|
|
$ |
4,952 |
|
|
$ |
(60 |
) |
Natural gas contracts |
|
|
285 |
|
|
|
(12,476 |
) |
|
|
(6,476 |
) |
|
|
(4,490 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
2,308 |
|
|
$ |
(12,362 |
) |
|
$ |
(1,524 |
) |
|
$ |
(4,550 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain / (loss) reclassified from Accumulated Other |
|
|
|
|
|
Comprehensive Income (loss) to income (effective portion) |
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Derivative: |
|
Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
Interest expense |
|
$ |
2,021 |
|
|
$ |
1,183 |
|
|
$ |
4,924 |
|
|
$ |
2,134 |
|
Natural gas contracts |
|
Cost of sales |
|
|
(4,006 |
) |
|
|
2,401 |
|
|
|
(12,750 |
) |
|
|
2,854 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on net
income (loss) |
|
|
|
$ |
(1,985 |
) |
|
$ |
3,584 |
|
|
$ |
(7,826 |
) |
|
$ |
4,988 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain of our natural gas futures contracts are now classified as ineffective, as the
forecasted transactions are not probable of occurring due to the closure of our Syracuse China
facility in April 2009 as well as decreased production at some of our plants. As a result, we
recorded an immaterial expense in the three months ended September 30, 2009 and expense of $0.1
million in the nine months ended September 30, 2009. Expenses reclassified from Accumulated Other
Comprehensive Income to earnings as a result of contracts becoming
ineffective during the three and nine months ended September 30, 2009 were
immaterial.
The following table provides the impact on the Condensed Consolidated Statement of Operations from
derivatives no longer designated as cash flow hedges:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income (ineffective portion) |
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Derivative: |
|
Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
|
Other (expense) income |
|
$ |
(27 |
) |
|
$ |
|
|
|
$ |
(136 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
$ |
(27 |
) |
|
$ |
|
|
|
$ |
(136 |
) |
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As the natural gas contracts mature, the accumulated gains (losses) for the respective
contracts are reclassified from accumulated other comprehensive income to current expense in cost
of sales in our Condensed Consolidated Statement of Operations. Similarly, as fixed interest
payments are made pursuant to the interest rate protection agreements, they are recorded together
with the related receipt of variable interest receipts, the payment of contractual interest expense
to the banks and the reclassification of accumulated gains (losses) from accumulated other
comprehensive income related to the interest rate agreements. We paid additional cash interest of
$2.7 million and $0.3 million in the nine months ended September 30, 2009 and 2008, respectively,
due to the difference between the contractual fixed interest rates in our interest rate protection
agreements and the variable interest rates associated with our long-term debt. Based on our current
valuation, we estimate that accumulated losses currently carried in accumulated other comprehensive
income that will be reclassified into earnings over the next twelve months will result in $10.7
million of expense in our Condensed Consolidated Statement of Operations.
Gains and losses for derivatives that were not designated as hedging instruments are recorded in
current earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
|
|
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Derivative: |
|
Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts |
|
Other (expense) income |
|
$ |
|
|
|
$ |
65 |
|
|
$ |
|
|
|
$ |
(218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
|
|
|
$ |
65 |
|
|
$ |
|
|
|
$ |
(218 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We do not believe we are exposed to more than a nominal amount of credit risk in our interest
rate and natural gas hedges, as the counterparties are established financial institutions. The
counterparties are rated A+ or better for the Interest Rate Protection Agreements and BBB+ or
better for the other derivative agreements as of September 30, 2009, by Standard and Poors.
24
10. Comprehensive Income (Loss)
Components of comprehensive income (loss) (net of tax) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Nine months ended |
|
|
|
September 30, |
|
|
September 30, |
|
|
|
2009 |
|
|
2008 |
|
|
2009 |
|
|
2008 |
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in pension and nonpension postretirement liability (1) |
|
|
1,090 |
|
|
|
2,403 |
|
|
|
5,571 |
|
|
|
(728 |
) |
Change in fair value of derivatives (2) |
|
|
4,687 |
|
|
|
(11,311 |
) |
|
|
7,329 |
|
|
|
(6,368 |
) |
Exchange rate fluctuations |
|
|
2,608 |
|
|
|
(7,999 |
) |
|
|
2,438 |
|
|
|
(1,067 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
$ |
11,918 |
|
|
$ |
(22,865 |
) |
|
$ |
(6,358 |
) |
|
$ |
(19,717 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of the following tax amounts for the respective periods |
|
$ |
378 |
|
|
$ |
(1,639 |
) |
|
$ |
(5,938 |
) |
|
$ |
(78 |
) |
|
(2) Net of the following tax amounts for the respective periods |
|
$ |
(1,626 |
) |
|
$ |
3,453 |
|
|
$ |
(3,897 |
) |
|
$ |
1,037 |
|
Accumulated other comprehensive loss (net of tax) is as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
|
|
2009 |
|
|
2008 |
|
Minimum pension liability and intangible pension asset |
|
$ |
(97,836 |
) |
|
$ |
(103,407 |
) |
Derivatives |
|
|
(9,281 |
) |
|
|
(16,610 |
) |
Exchange rate fluctuations |
|
|
6,669 |
|
|
|
4,231 |
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
(100,448 |
) |
|
$ |
(115,786 |
) |
|
|
|
|
|
|
|
11. Condensed Consolidated Guarantor Financial Statements
Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and the issuer of the Senior
Notes and the PIK Notes. The obligations of Libbey Glass under the Senior Notes and the PIK Notes
are fully and unconditionally and jointly and severally guaranteed by Libbey Inc. and by certain
indirect, 100 percent owned domestic subsidiaries of Libbey Inc., as described below. All are
related parties that are included in the Condensed Consolidated Financial Statements for the three
month and nine months periods ended September 30, 2009 and September 30, 2008.
At September 30, 2009, December 31, 2008 and September 30, 2008, Libbey Inc.s indirect, 100
percent owned domestic subsidiaries were Syracuse China Company, World Tableware Inc., LGA4 Corp.,
LGA3 Corp., The Drummond Glass Company, LGC Corp., Traex Company, Libbey.com LLC, LGFS Inc., LGAC
LLC and Crisa Industrial LLC (collectively, the Subsidiary Guarantors). The following tables
contain Condensed Consolidating Financial Statements of (a) the parent, Libbey Inc., (b) the
issuer, Libbey Glass, (c) the Subsidiary Guarantors, (d) the indirect subsidiaries of Libbey Inc.
that are not Subsidiary Guarantors (collectively, Non-Guarantor Subsidiaries), (e) the
consolidating elimination entries, and (f) the consolidated totals.
25
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
92,450 |
|
|
$ |
20,462 |
|
|
$ |
88,058 |
|
|
$ |
(14,092 |
) |
|
$ |
186,878 |
|
Freight billed to customers |
|
|
|
|
|
|
181 |
|
|
|
204 |
|
|
|
34 |
|
|
|
|
|
|
|
419 |
|
|
Total revenues |
|
|
|
|
|
|
92,631 |
|
|
|
20,666 |
|
|
|
88,092 |
|
|
|
(14,092 |
) |
|
|
187,297 |
|
Cost of sales |
|
|
|
|
|
|
69,653 |
|
|
|
15,541 |
|
|
|
73,235 |
|
|
|
(14,092 |
) |
|
|
144,337 |
|
|
Gross profit |
|
|
|
|
|
|
22,978 |
|
|
|
5,125 |
|
|
|
14,857 |
|
|
|
|
|
|
|
42,960 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
14,223 |
|
|
|
2,018 |
|
|
|
8,570 |
|
|
|
|
|
|
|
24,811 |
|
Special charges |
|
|
|
|
|
|
108 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
300 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
8,647 |
|
|
|
2,915 |
|
|
|
6,287 |
|
|
|
|
|
|
|
17,849 |
|
Other income (expense) |
|
|
|
|
|
|
1,258 |
|
|
|
(10 |
) |
|
|
1,455 |
|
|
|
|
|
|
|
2,703 |
|
|
Earnings (loss) before interest and income taxes |
|
|
|
|
|
|
9,905 |
|
|
|
2,905 |
|
|
|
7,742 |
|
|
|
|
|
|
|
20,552 |
|
Interest expense |
|
|
|
|
|
|
15,782 |
|
|
|
1 |
|
|
|
1,668 |
|
|
|
|
|
|
|
17,451 |
|
|
Earnings (loss) before income taxes |
|
|
|
|
|
|
(5,877 |
) |
|
|
2,904 |
|
|
|
6,074 |
|
|
|
|
|
|
|
3,101 |
|
Provision (benefit) for income taxes |
|
|
|
|
|
|
(1,349 |
) |
|
|
(5 |
) |
|
|
922 |
|
|
|
|
|
|
|
(432 |
) |
|
Net income (loss) |
|
|
|
|
|
|
(4,528 |
) |
|
|
2,909 |
|
|
|
5,152 |
|
|
|
|
|
|
|
3,533 |
|
Equity in net income (loss) of subsidiaries |
|
|
3,533 |
|
|
|
8,061 |
|
|
|
|
|
|
|
|
|
|
|
(11,594 |
) |
|
|
|
|
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
3,533 |
|
|
$ |
2,909 |
|
|
$ |
5,152 |
|
|
$ |
(11,594 |
) |
|
$ |
3,533 |
|
|
The following represents the total special charges included in the above Condensed
Consolidated Statement of Operations (see note 5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cost of sales |
|
$ |
|
|
|
$ |
(1 |
) |
|
$ |
163 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
162 |
|
Special charges |
|
|
|
|
|
|
108 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
300 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
Total pretax special charges |
|
$ |
|
|
|
$ |
107 |
|
|
$ |
382 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
489 |
|
|
Special charges net of tax |
|
$ |
|
|
|
$ |
107 |
|
|
$ |
382 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
489 |
|
|
26
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2008 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
100,499 |
|
|
$ |
28,339 |
|
|
$ |
97,354 |
|
|
$ |
(14,656 |
) |
|
$ |
211,536 |
|
Freight billed to customers |
|
|
|
|
|
|
230 |
|
|
|
336 |
|
|
|
98 |
|
|
|
|
|
|
|
664 |
|
|
Total revenues |
|
|
|
|
|
|
100,729 |
|
|
|
28,675 |
|
|
|
97,452 |
|
|
|
(14,656 |
) |
|
|
212,200 |
|
Cost of sales |
|
|
|
|
|
|
83,241 |
|
|
|
23,569 |
|
|
|
82,112 |
|
|
|
(14,656 |
) |
|
|
174,266 |
|
|
Gross profit |
|
|
|
|
|
|
17,488 |
|
|
|
5,106 |
|
|
|
15,340 |
|
|
|
|
|
|
|
37,934 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
10,670 |
|
|
|
2,998 |
|
|
|
9,709 |
|
|
|
|
|
|
|
23,377 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
6,818 |
|
|
|
2,108 |
|
|
|
5,631 |
|
|
|
|
|
|
|
14,557 |
|
Other income (expense) |
|
|
|
|
|
|
(862 |
) |
|
|
(52 |
) |
|
|
(86 |
) |
|
|
|
|
|
|
(1,000 |
) |
|
Earnings (loss) before interest and income taxes |
|
|
|
|
|
|
5,956 |
|
|
|
2,056 |
|
|
|
5,545 |
|
|
|
|
|
|
|
13,557 |
|
Interest expense |
|
|
|
|
|
|
15,560 |
|
|
|
|
|
|
|
1,949 |
|
|
|
|
|
|
|
17,509 |
|
|
Earnings (loss) before income taxes |
|
|
|
|
|
|
(9,604 |
) |
|
|
2,056 |
|
|
|
3,596 |
|
|
|
|
|
|
|
(3,952 |
) |
Provision (benefit) for income taxes |
|
|
|
|
|
|
1,231 |
|
|
|
|
|
|
|
775 |
|
|
|
|
|
|
|
2,006 |
|
|
Net income (loss) |
|
|
|
|
|
|
(10,835 |
) |
|
|
2,056 |
|
|
|
2,821 |
|
|
|
|
|
|
|
(5,958 |
) |
Equity in net income (loss) of subsidiaries |
|
|
(5,958 |
) |
|
|
4,877 |
|
|
|
|
|
|
|
|
|
|
|
1,081 |
|
|
|
|
|
|
Net income (loss) |
|
$ |
(5,958 |
) |
|
$ |
(5,958 |
) |
|
$ |
2,056 |
|
|
$ |
2,821 |
|
|
$ |
1,081 |
|
|
$ |
(5,958 |
) |
|
27
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
277,396 |
|
|
$ |
66,180 |
|
|
$ |
228,874 |
|
|
$ |
(31,893 |
) |
|
$ |
540,557 |
|
Freight billed to customers |
|
|
|
|
|
|
433 |
|
|
|
631 |
|
|
|
99 |
|
|
|
|
|
|
|
1,163 |
|
|
Total revenues |
|
|
|
|
|
|
277,829 |
|
|
|
66,811 |
|
|
|
228,973 |
|
|
|
(31,893 |
) |
|
|
541,720 |
|
Cost of sales |
|
|
|
|
|
|
224,217 |
|
|
|
54,260 |
|
|
|
207,177 |
|
|
|
(31,893 |
) |
|
|
453,761 |
|
|
Gross profit |
|
|
|
|
|
|
53,612 |
|
|
|
12,551 |
|
|
|
21,796 |
|
|
|
|
|
|
|
87,959 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
39,076 |
|
|
|
6,352 |
|
|
|
24,271 |
|
|
|
|
|
|
|
69,699 |
|
Special charges |
|
|
|
|
|
|
81 |
|
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
974 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
14,455 |
|
|
|
5,306 |
|
|
|
(2,475 |
) |
|
|
|
|
|
|
17,286 |
|
Other income (expense) |
|
|
|
|
|
|
3,452 |
|
|
|
(143 |
) |
|
|
2,115 |
|
|
|
|
|
|
|
5,424 |
|
|
Earnings (loss) before interest and income taxes |
|
|
|
|
|
|
17,907 |
|
|
|
5,163 |
|
|
|
(360 |
) |
|
|
|
|
|
|
22,710 |
|
Interest expense |
|
|
|
|
|
|
47,687 |
|
|
|
1 |
|
|
|
4,474 |
|
|
|
|
|
|
|
52,162 |
|
|
Earnings (loss) before income taxes |
|
|
|
|
|
|
(29,780 |
) |
|
|
5,162 |
|
|
|
(4,834 |
) |
|
|
|
|
|
|
(29,452 |
) |
Provision (benefit) for income taxes |
|
|
|
|
|
|
(7,059 |
) |
|
|
249 |
|
|
|
(946 |
) |
|
|
|
|
|
|
(7,756 |
) |
|
Net income (loss) |
|
|
|
|
|
|
(22,721 |
) |
|
|
4,913 |
|
|
|
(3,888 |
) |
|
|
|
|
|
|
(21,696 |
) |
Equity in net income (loss) of subsidiaries |
|
|
(21,696 |
) |
|
|
1,025 |
|
|
|
|
|
|
|
|
|
|
|
20,671 |
|
|
|
|
|
|
Net income (loss) |
|
$ |
(21,696 |
) |
|
$ |
(21,696 |
) |
|
$ |
4,913 |
|
|
$ |
(3,888 |
) |
|
$ |
20,671 |
|
|
$ |
(21,696 |
) |
|
The following represents the total special charges included in the above Condensed
Consolidated Statement of Operations (see note 5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cost of sales |
|
$ |
|
|
|
$ |
|
|
|
$ |
1,983 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,983 |
|
Special charges |
|
|
|
|
|
|
81 |
|
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
974 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
(213 |
) |
|
Total pretax special charges |
|
$ |
|
|
|
$ |
81 |
|
|
$ |
3,089 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,170 |
|
|
Special charges net of tax |
|
$ |
|
|
|
$ |
81 |
|
|
$ |
3,089 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
3,170 |
|
|
28
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2008 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
297,814 |
|
|
$ |
85,042 |
|
|
$ |
282,137 |
|
|
$ |
(41,353 |
) |
|
$ |
623,640 |
|
Freight billed to customers |
|
|
|
|
|
|
597 |
|
|
|
947 |
|
|
|
403 |
|
|
|
|
|
|
|
1,947 |
|
|
Total revenues |
|
|
|
|
|
|
298,411 |
|
|
|
85,989 |
|
|
|
282,540 |
|
|
|
(41,353 |
) |
|
|
625,587 |
|
Cost of sales |
|
|
|
|
|
|
248,329 |
|
|
|
67,988 |
|
|
|
240,184 |
|
|
|
(41,353 |
) |
|
|
515,148 |
|
|
Gross profit |
|
|
|
|
|
|
50,082 |
|
|
|
18,001 |
|
|
|
42,356 |
|
|
|
|
|
|
|
110,439 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
33,979 |
|
|
|
8,706 |
|
|
|
25,002 |
|
|
|
|
|
|
|
67,687 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
16,103 |
|
|
|
9,295 |
|
|
|
17,354 |
|
|
|
|
|
|
|
42,752 |
|
Other income (expense) |
|
|
|
|
|
|
(620 |
) |
|
|
(11 |
) |
|
|
970 |
|
|
|
|
|
|
|
339 |
|
|
Earnings (loss) before interest and income taxes |
|
|
|
|
|
|
15,483 |
|
|
|
9,284 |
|
|
|
18,324 |
|
|
|
|
|
|
|
43,091 |
|
Interest expense |
|
|
|
|
|
|
47,087 |
|
|
|
1 |
|
|
|
5,192 |
|
|
|
|
|
|
|
52,280 |
|
|
Earnings (loss) before income taxes |
|
|
|
|
|
|
(31,604 |
) |
|
|
9,283 |
|
|
|
13,132 |
|
|
|
|
|
|
|
(9,189 |
) |
Provision (benefit) for income taxes |
|
|
|
|
|
|
885 |
|
|
|
563 |
|
|
|
917 |
|
|
|
|
|
|
|
2,365 |
|
|
Net income (loss) |
|
|
|
|
|
|
(32,489 |
) |
|
|
8,720 |
|
|
|
12,215 |
|
|
|
|
|
|
|
(11,554 |
) |
Equity in net income (loss) of subsidiaries |
|
|
(11,554 |
) |
|
|
20,935 |
|
|
|
|
|
|
|
|
|
|
|
(9,381 |
) |
|
|
|
|
|
Net income (loss) |
|
$ |
(11,554 |
) |
|
$ |
(11,554 |
) |
|
$ |
8,720 |
|
|
$ |
12,215 |
|
|
$ |
(9,381 |
) |
|
$ |
(11,554 |
) |
|
29
Libbey Inc.
Condensed Consolidating Balance Sheet
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2009 (unaudited) |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash and equivalents |
|
$ |
|
|
|
$ |
19,846 |
|
|
$ |
306 |
|
|
$ |
10,496 |
|
|
$ |
|
|
|
$ |
30,648 |
|
Accounts receivable net |
|
|
|
|
|
|
35,094 |
|
|
|
5,756 |
|
|
|
50,269 |
|
|
|
|
|
|
|
91,119 |
|
Inventories net |
|
|
|
|
|
|
51,039 |
|
|
|
19,362 |
|
|
|
83,122 |
|
|
|
|
|
|
|
153,523 |
|
Other current assets |
|
|
|
|
|
|
12,392 |
|
|
|
9,026 |
|
|
|
12,760 |
|
|
|
(20,062 |
) |
|
|
14,116 |
|
|
Total current assets |
|
|
|
|
|
|
118,371 |
|
|
|
34,450 |
|
|
|
156,647 |
|
|
|
(20,062 |
) |
|
|
289,406 |
|
Other non-current assets |
|
|
|
|
|
|
11,317 |
|
|
|
|
|
|
|
11,276 |
|
|
|
|
|
|
|
22,593 |
|
Investments in and advances to subsidiaries |
|
|
(61,992 |
) |
|
|
428,435 |
|
|
|
269,628 |
|
|
|
122,455 |
|
|
|
(758,526 |
) |
|
|
|
|
Goodwill and purchased intangible assets net |
|
|
|
|
|
|
26,832 |
|
|
|
15,773 |
|
|
|
147,711 |
|
|
|
|
|
|
|
190,316 |
|
|
Total other assets |
|
|
(61,992 |
) |
|
|
466,584 |
|
|
|
285,401 |
|
|
|
281,442 |
|
|
|
(758,526 |
) |
|
|
212,909 |
|
Property, plant and equipment net |
|
|
|
|
|
|
81,224 |
|
|
|
6,138 |
|
|
|
209,500 |
|
|
|
|
|
|
|
296,862 |
|
|
Total assets |
|
$ |
(61,992 |
) |
|
$ |
666,179 |
|
|
$ |
325,989 |
|
|
$ |
647,589 |
|
|
$ |
(778,588 |
) |
|
$ |
799,177 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
9,508 |
|
|
$ |
1,700 |
|
|
$ |
40,879 |
|
|
$ |
|
|
|
$ |
52,087 |
|
Accrued and other current liabilities |
|
|
|
|
|
|
90,776 |
|
|
|
17,606 |
|
|
|
23,098 |
|
|
|
(20,062 |
) |
|
|
111,418 |
|
Notes payable and long-term debt due within one year |
|
|
|
|
|
|
216 |
|
|
|
|
|
|
|
10,453 |
|
|
|
|
|
|
|
10,669 |
|
|
Total current liabilities |
|
|
|
|
|
|
100,500 |
|
|
|
19,306 |
|
|
|
74,430 |
|
|
|
(20,062 |
) |
|
|
174,174 |
|
Long-term debt |
|
|
|
|
|
|
464,905 |
|
|
|
|
|
|
|
51,125 |
|
|
|
|
|
|
|
516,030 |
|
Other long-term liabilities |
|
|
|
|
|
|
129,990 |
|
|
|
10,578 |
|
|
|
30,397 |
|
|
|
|
|
|
|
170,965 |
|
|
Total liabilities |
|
|
|
|
|
|
695,395 |
|
|
|
29,884 |
|
|
|
155,952 |
|
|
|
(20,062 |
) |
|
|
861,169 |
|
Total shareholders equity |
|
|
(61,992 |
) |
|
|
(29,216 |
) |
|
|
296,105 |
|
|
|
491,637 |
|
|
|
(758,526 |
) |
|
|
(61,992 |
) |
|
Total liabilities and shareholders equity |
|
$ |
(61,992 |
) |
|
$ |
666,179 |
|
|
$ |
325,989 |
|
|
$ |
647,589 |
|
|
$ |
(778,588 |
) |
|
$ |
799,177 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash and equivalents |
|
$ |
|
|
|
$ |
6,453 |
|
|
$ |
413 |
|
|
$ |
6,438 |
|
|
$ |
|
|
|
$ |
13,304 |
|
Accounts receivable net |
|
|
|
|
|
|
32,789 |
|
|
|
6,076 |
|
|
|
37,207 |
|
|
|
|
|
|
|
76,072 |
|
Inventories net |
|
|
|
|
|
|
58,924 |
|
|
|
26,892 |
|
|
|
99,426 |
|
|
|
|
|
|
|
185,242 |
|
Other current assets |
|
|
|
|
|
|
4,731 |
|
|
|
316 |
|
|
|
12,120 |
|
|
|
|
|
|
|
17,167 |
|
|
Total current assets |
|
|
|
|
|
|
102,897 |
|
|
|
33,697 |
|
|
|
155,191 |
|
|
|
|
|
|
|
291,785 |
|
Other non-current assets |
|
|
|
|
|
|
9,462 |
|
|
|
43 |
|
|
|
12,560 |
|
|
|
|
|
|
|
22,065 |
|
Investments in and advances to subsidiaries |
|
|
(57,889 |
) |
|
|
406,812 |
|
|
|
272,761 |
|
|
|
143,459 |
|
|
|
(765,143 |
) |
|
|
|
|
Goodwill and purchased intangible assets net |
|
|
|
|
|
|
28,216 |
|
|
|
15,780 |
|
|
|
148,861 |
|
|
|
|
|
|
|
192,857 |
|
|
Total other assets |
|
|
(57,889 |
) |
|
|
444,490 |
|
|
|
288,584 |
|
|
|
304,880 |
|
|
|
(765,143 |
) |
|
|
214,922 |
|
Property, plant and equipment net |
|
|
|
|
|
|
88,628 |
|
|
|
7,697 |
|
|
|
218,522 |
|
|
|
|
|
|
|
314,847 |
|
|
Total assets |
|
$ |
(57,889 |
) |
|
$ |
636,015 |
|
|
$ |
329,978 |
|
|
$ |
678,593 |
|
|
$ |
(765,143 |
) |
|
$ |
821,554 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
9,370 |
|
|
$ |
2,794 |
|
|
$ |
42,264 |
|
|
$ |
|
|
|
$ |
54,428 |
|
Accrued and other current liabilities |
|
|
|
|
|
|
36,589 |
|
|
|
19,700 |
|
|
|
35,908 |
|
|
|
|
|
|
|
92,197 |
|
Notes payable and long-term debt due within one year |
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
4,186 |
|
|
|
|
|
|
|
4,401 |
|
|
Total current liabilities |
|
|
|
|
|
|
46,174 |
|
|
|
22,494 |
|
|
|
82,358 |
|
|
|
|
|
|
|
151,026 |
|
Long-term debt |
|
|
|
|
|
|
451,772 |
|
|
|
|
|
|
|
94,084 |
|
|
|
|
|
|
|
545,856 |
|
Other long-term liabilities |
|
|
|
|
|
|
140,936 |
|
|
|
14,185 |
|
|
|
27,440 |
|
|
|
|
|
|
|
182,561 |
|
|
Total liabilities |
|
|
|
|
|
|
638,882 |
|
|
|
36,679 |
|
|
|
203,882 |
|
|
|
|
|
|
|
879,443 |
|
Total shareholders equity (deficit) |
|
|
(57,889 |
) |
|
|
(2,867 |
) |
|
|
293,299 |
|
|
|
474,711 |
|
|
|
(765,143 |
) |
|
|
(57,889 |
) |
|
Total
liabilities and shareholders equity (deficit) |
|
$ |
(57,889 |
) |
|
$ |
636,015 |
|
|
$ |
329,978 |
|
|
$ |
678,593 |
|
|
$ |
(765,143 |
) |
|
$ |
821,554 |
|
|
30
Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
3,533 |
|
|
$ |
2,909 |
|
|
$ |
5,152 |
|
|
$ |
(11,594 |
) |
|
$ |
3,533 |
|
Depreciation and amortization |
|
|
|
|
|
|
3,447 |
|
|
|
244 |
|
|
|
6,938 |
|
|
|
|
|
|
|
10,629 |
|
Other operating activities |
|
|
(3,533 |
) |
|
|
1,996 |
|
|
|
(3,060 |
) |
|
|
5,480 |
|
|
|
11,594 |
|
|
|
12,477 |
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
8,976 |
|
|
|
93 |
|
|
|
17,570 |
|
|
|
|
|
|
|
26,639 |
|
Additions to property, plant & equipment |
|
|
|
|
|
|
(833 |
) |
|
|
(53 |
) |
|
|
(1,851 |
) |
|
|
|
|
|
|
(2,737 |
) |
Other investing activities |
|
|
|
|
|
|
(33 |
) |
|
|
5 |
|
|
|
200 |
|
|
|
|
|
|
|
172 |
|
|
|
Net cash (used in) investing activities |
|
|
|
|
|
|
(866 |
) |
|
|
(48 |
) |
|
|
(1,651 |
) |
|
|
|
|
|
|
(2,565 |
) |
Net borrowings |
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(17,413 |
) |
|
|
|
|
|
|
(17,461 |
) |
Other financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
(48 |
) |
|
|
|
|
|
|
(17,413 |
) |
|
|
|
|
|
|
(17,461 |
) |
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47 |
) |
|
|
|
|
|
|
(47 |
) |
|
Increase (decrease) in cash |
|
|
|
|
|
|
8,062 |
|
|
|
45 |
|
|
|
(1,541 |
) |
|
|
|
|
|
|
6,566 |
|
Cash at beginning of period |
|
|
|
|
|
|
11,784 |
|
|
|
261 |
|
|
|
12,037 |
|
|
|
|
|
|
|
24,082 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
19,846 |
|
|
$ |
306 |
|
|
$ |
10,496 |
|
|
$ |
|
|
|
$ |
30,648 |
|
|
|
Three months ended September 30, 2008 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net income (loss) |
|
$ |
(5,958 |
) |
|
$ |
(5,958 |
) |
|
$ |
2,056 |
|
|
$ |
2,821 |
|
|
$ |
1,081 |
|
|
$ |
(5,958 |
) |
Depreciation and amortization |
|
|
|
|
|
|
3,782 |
|
|
|
700 |
|
|
|
6,417 |
|
|
|
|
|
|
|
10,899 |
|
Other operating activities |
|
|
5,958 |
|
|
|
1,150 |
|
|
|
(2,593 |
) |
|
|
4,934 |
|
|
|
(1,081 |
) |
|
|
8,368 |
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
(1,026 |
) |
|
|
163 |
|
|
|
14,172 |
|
|
|
|
|
|
|
13,309 |
|
Additions to property, plant & equipment |
|
|
|
|
|
|
(3,381 |
) |
|
|
(246 |
) |
|
|
(8,763 |
) |
|
|
|
|
|
|
(12,390 |
) |
Other investing activities |
|
|
|
|
|
|
72 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
71 |
|
|
|
Net cash (used in) investing activities |
|
|
|
|
|
|
(3,309 |
) |
|
|
(247 |
) |
|
|
(8,763 |
) |
|
|
|
|
|
|
(12,319 |
) |
Net borrowings |
|
|
|
|
|
|
(4,299 |
) |
|
|
|
|
|
|
(4,957 |
) |
|
|
|
|
|
|
(9,256 |
) |
Other financing activities |
|
|
|
|
|
|
(369 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(369 |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
(4,668 |
) |
|
|
|
|
|
|
(4,957 |
) |
|
|
|
|
|
|
(9,625 |
) |
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(529 |
) |
|
|
|
|
|
|
(529 |
) |
|
Increase (decrease) in cash |
|
|
|
|
|
|
(9,003 |
) |
|
|
(84 |
) |
|
|
(77 |
) |
|
|
|
|
|
|
(9,164 |
) |
Cash at beginning of period |
|
|
|
|
|
|
9,420 |
|
|
|
1,316 |
|
|
|
7,147 |
|
|
|
|
|
|
|
17,883 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
417 |
|
|
$ |
1,232 |
|
|
$ |
7,070 |
|
|
$ |
|
|
|
$ |
8,719 |
|
|
31
Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2009 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net income (loss) |
|
$ |
(21,696 |
) |
|
$ |
(21,696 |
) |
|
$ |
4,913 |
|
|
$ |
(3,888 |
) |
|
$ |
20,671 |
|
|
$ |
(21,696 |
) |
Depreciation and amortization |
|
|
|
|
|
|
11,223 |
|
|
|
1,830 |
|
|
|
19,822 |
|
|
|
|
|
|
|
32,875 |
|
Other operating activities |
|
|
21,696 |
|
|
|
28,135 |
|
|
|
(6,588 |
) |
|
|
31,978 |
|
|
|
(20,671 |
) |
|
|
54,550 |
|
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
17,662 |
|
|
|
155 |
|
|
|
47,912 |
|
|
|
|
|
|
|
65,729 |
|
Additions to property, plant & equipment |
|
|
|
|
|
|
(4,194 |
) |
|
|
(267 |
) |
|
|
(7,826 |
) |
|
|
|
|
|
|
(12,287 |
) |
Other investing activities |
|
|
|
|
|
|
55 |
|
|
|
5 |
|
|
|
200 |
|
|
|
|
|
|
|
260 |
|
|
Net cash (used in) investing activities |
|
|
|
|
|
|
(4,139 |
) |
|
|
(262 |
) |
|
|
(7,626 |
) |
|
|
|
|
|
|
(12,027 |
) |
Net borrowings |
|
|
|
|
|
|
(130 |
) |
|
|
|
|
|
|
(36,143 |
) |
|
|
|
|
|
|
(36,273 |
) |
Other financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
(130 |
) |
|
|
|
|
|
|
(36,143 |
) |
|
|
|
|
|
|
(36,273 |
) |
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(85 |
) |
|
|
|
|
|
|
(85 |
) |
|
Increase (decrease) in cash |
|
|
|
|
|
|
13,393 |
|
|
|
(107 |
) |
|
|
4,058 |
|
|
|
|
|
|
|
17,344 |
|
Cash at beginning of period |
|
|
|
|
|
|
6,453 |
|
|
|
413 |
|
|
|
6,438 |
|
|
|
|
|
|
|
13,304 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
19,846 |
|
|
$ |
306 |
|
|
$ |
10,496 |
|
|
$ |
|
|
|
$ |
30,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2008 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net income (loss) |
|
$ |
(11,554 |
) |
|
$ |
(11,554 |
) |
|
$ |
8,720 |
|
|
$ |
12,215 |
|
|
$ |
(9,381 |
) |
|
$ |
(11,554 |
) |
Depreciation and amortization |
|
|
|
|
|
|
11,301 |
|
|
|
2,211 |
|
|
|
19,921 |
|
|
|
|
|
|
|
33,433 |
|
Other operating activities |
|
|
11,554 |
|
|
|
(9,649 |
) |
|
|
(9,629 |
) |
|
|
(33,286 |
) |
|
|
9,381 |
|
|
|
(31,629 |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
(9,902 |
) |
|
|
1,302 |
|
|
|
(1,150 |
) |
|
|
|
|
|
|
(9,750 |
) |
Additions to property, plant & equipment |
|
|
|
|
|
|
(9,370 |
) |
|
|
(602 |
) |
|
|
(20,030 |
) |
|
|
|
|
|
|
(30,002 |
) |
Other investing activities |
|
|
|
|
|
|
117 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117 |
|
|
|
Net cash (used in) investing activities |
|
|
|
|
|
|
(9,253 |
) |
|
|
(602 |
) |
|
|
(20,030 |
) |
|
|
|
|
|
|
(29,885 |
) |
Net borrowings |
|
|
|
|
|
|
(164 |
) |
|
|
|
|
|
|
13,417 |
|
|
|
|
|
|
|
13,253 |
|
Other financing activities |
|
|
|
|
|
|
(1,098 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,098 |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
(1,262 |
) |
|
|
|
|
|
|
13,417 |
|
|
|
|
|
|
|
12,155 |
|
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(340 |
) |
|
|
|
|
|
|
(340 |
) |
|
Increase (decrease) in cash |
|
|
|
|
|
|
(20,417 |
) |
|
|
700 |
|
|
|
(8,103 |
) |
|
|
|
|
|
|
(27,820 |
) |
Cash at beginning of period |
|
|
|
|
|
|
20,834 |
|
|
|
532 |
|
|
|
15,173 |
|
|
|
|
|
|
|
36,539 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
417 |
|
|
$ |
1,232 |
|
|
$ |
7,070 |
|
|
$ |
|
|
|
$ |
8,719 |
|
|
32
12. Segments
Our segments are described as follows:
|
|
North American Glassincludes sales of glass tableware from subsidiaries throughout the
United States, Canada and Mexico. |
|
|
|
North American Otherincludes sales of ceramic dinnerware; metal tableware, hollowware and
serveware; and plastic items from subsidiaries in the United States. |
|
|
|
Internationalincludes worldwide sales of glass tableware from subsidiaries outside the
United States, Canada and Mexico. |
Some operating segments were aggregated to arrive at the disclosed reportable segments. The
accounting policies of the segments are the same as those described in Note 2 of the Notes to
Condensed Consolidated Financial Statements. We do not have any customers who represent 10 percent
or more of total net sales. We evaluate the performance of our segments based upon net sales and
Earnings Before Interest and Taxes (EBIT). Intersegment sales are consummated at arms length and
are reflected in eliminations in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
128,316 |
|
|
$ |
143,630 |
|
|
$ |
374,803 |
|
|
$ |
426,120 |
|
North American Other |
|
|
20,462 |
|
|
|
28,339 |
|
|
|
66,180 |
|
|
|
85,042 |
|
International |
|
|
40,279 |
|
|
|
42,014 |
|
|
|
103,663 |
|
|
|
120,166 |
|
Eliminations |
|
|
(2,179 |
) |
|
|
(2,447 |
) |
|
|
(4,089 |
) |
|
|
(7,688 |
) |
|
Consolidated |
|
$ |
186,878 |
|
|
$ |
211,536 |
|
|
$ |
540,557 |
|
|
$ |
623,640 |
|
|
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
16,594 |
|
|
$ |
9,695 |
|
|
$ |
19,727 |
|
|
$ |
31,704 |
|
North American Other |
|
|
2,953 |
|
|
|
2,130 |
|
|
|
5,263 |
|
|
|
9,590 |
|
International |
|
|
1,005 |
|
|
|
1,732 |
|
|
|
(2,280 |
) |
|
|
1,797 |
|
|
Consolidated |
|
$ |
20,552 |
|
|
$ |
13,557 |
|
|
$ |
22,710 |
|
|
$ |
43,091 |
|
|
Special Charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
107 |
|
|
$ |
|
|
|
$ |
81 |
|
|
$ |
|
|
North American Other |
|
|
382 |
|
|
|
|
|
|
|
3,089 |
|
|
|
|
|
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
489 |
|
|
$ |
|
|
|
$ |
3,170 |
|
|
$ |
|
|
|
Depreciation & Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
6,074 |
|
|
$ |
6,627 |
|
|
$ |
18,857 |
|
|
$ |
19,605 |
|
North American Other |
|
|
244 |
|
|
|
700 |
|
|
|
1,830 |
|
|
|
2,211 |
|
International |
|
|
4,311 |
|
|
|
3,572 |
|
|
|
12,188 |
|
|
|
11,617 |
|
|
Consolidated |
|
$ |
10,629 |
|
|
$ |
10,899 |
|
|
$ |
32,875 |
|
|
$ |
33,433 |
|
|
Capital Expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
1,714 |
|
|
$ |
5,125 |
|
|
$ |
6,855 |
|
|
$ |
15,817 |
|
North American Other |
|
|
53 |
|
|
|
246 |
|
|
|
267 |
|
|
|
602 |
|
International |
|
|
970 |
|
|
|
7,019 |
|
|
|
5,165 |
|
|
|
13,583 |
|
|
Consolidated |
|
$ |
2,737 |
|
|
$ |
12,390 |
|
|
$ |
12,287 |
|
|
$ |
30,002 |
|
|
Reconciliation of EBIT to Net Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBIT |
|
$ |
20,552 |
|
|
$ |
13,557 |
|
|
$ |
22,710 |
|
|
$ |
43,091 |
|
Interest Expense |
|
|
(17,451 |
) |
|
|
(17,509 |
) |
|
|
(52,162 |
) |
|
|
(52,280 |
) |
Benefit from (provision for) Income Taxes |
|
|
432 |
|
|
|
(2,006 |
) |
|
|
7,756 |
|
|
|
(2,365 |
) |
|
Net Income (Loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
|
33
13. Fair Value
Current accounting rules for Fair Value Accounting under U.S GAAP were issued by the FASB in 2006
under SFAS 157, Fair Value Measurements These rules have been incorporated primarily into FASB
ASC 820, Fair Value Measurements and Disclosures, FASB ASC 815, Derivatives and Hedging, FASB
ASC 270, Interim Reporting and FASB ASC 250, Accounting Changes and Error Corrections. We
adopted these rules for Fair Value Accounting as of January 1, 2008, but we had not applied them to
non-recurring, nonfinancial assets and liabilities. We adopted Fair Value Accounting rules for
nonrecurring, nonfinancial assets and liabilities as of January 1, 2009. The adoption of these
rules had no impact on our fair value measurements. 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, which
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 September 30, 2009 |
|
Fair Value at December 31, 2008 |
Asset / (Liability) |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
Total |
|
|
|
Commodity futures natural gas contracts |
|
$ |
|
|
|
$ |
(8,531 |
) |
|
$ |
|
|
|
$ |
(8,531 |
) |
|
$ |
|
|
|
$ |
(14,868 |
) |
|
$ |
|
|
|
$ |
(14,868 |
) |
Interest rate protection agreements |
|
|
|
|
|
|
(4,029 |
) |
|
|
|
|
|
|
(4,029 |
) |
|
|
|
|
|
|
(6,761 |
) |
|
|
|
|
|
|
(6,761 |
) |
|
|
|
Total derivative liability |
|
$ |
|
|
|
$ |
(12,560 |
) |
|
$ |
|
|
|
$ |
(12,560 |
) |
|
$ |
|
|
|
$ |
(21,629 |
) |
|
$ |
|
|
|
$ |
(21,629 |
) |
|
|
|
The fair values of our interest rate protection agreements are 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. The fair values of our
commodity futures natural gas contracts are determined using observable market inputs. 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 total derivative liability is recorded on the Condensed
Consolidated Balance Sheets with $10.7 million in derivative liability and $1.8 million in other
long-term liabilities as of September 30, 2009. As of December 31, 2008 $17.9 million was recorded
in derivative liability and $3.7 million in other long-term liabilities.
The commodity futures natural gas contracts and interest rate protection agreements 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.
14. Subsequent Event
We announced on October 28, 2009 that Libbey had entered into a transaction with Merrill Lynch PCG,
Inc. (the Investor) to exchange the existing 16 percent Senior Subordinated Secured
Payment-in-Kind Notes (Old PIK Notes) due in December 2011 of the Companys subsidiary, Libbey
Glass Inc. (Libbey Glass), for a combination of debt and equity securities (Exchange
Transaction). Pursuant to the Exchange Transaction, Old PIK Notes having an outstanding principal
balance of approximately $160.9 million have been exchanged for new Senior Subordinated Secured
Notes due in 2021 (the New Notes) having a principal amount of approximately $80.4 million,
together with common stock and warrants in the Company.
New Notes
Pursuant to the Exchange Transaction, Libbey Glass has issued a New Note payable to the Investor in
the principal amount of approximately $80.4 million. Interest under the New Note accrues at zero
percent until the date (FRN Redemption Date) that is the first to occur of (a) December 10, 2010 or
(b) the date on which the Floating Rate Senior Secured Notes due 2011 (FRNs) of Libbey Glass are
redeemed or paid in full. If the New Notes have not been repaid in full on or before the FRN
Redemption Date, interest under the New Notes will accrue at the rate of 16 percent per annum and
be payable semi-annually in cash or in additional New Notes, at the option of Libbey Glass.
The New Notes mature on the earlier to occur of (a) June 1, 2021 or (b) the date that is 180 days
after the maturity date of any part of any debt that refinances the FRNs. In no event, however,
will the New Notes mature prior to September 1, 2011. The New Notes are
34
subordinated to the FRNs and secured by a third-priority lien on collateral in the same manner as
the Old PIK Notes and contain covenants that are substantially similar to the Old PIK Notes.
New Equity
The Company has also issued to the Investor 933,145 shares of Libbey Inc. common stock. In
addition, the Company has issued to the Investor warrants (Series I Warrants) conveying the right
to purchase, for $0.01 per share, an additional 3,466,856 shares of the Companys common stock.
Collectively this represents approximately 22.5 percent of the Companys common stock outstanding
following the Exchange Transaction.
The Company will issue additional warrants to the Investor if:
|
|
The New Notes remain outstanding on the FRN Redemption Date, in
which case the Company will issue to the Investor warrants (Series
II Warrants) conveying the right to purchase, for $0.01 per share,
an additional 10 percent of the Companys common stock then
outstanding (on a fully diluted basis, subject to certain
exceptions). |
|
|
|
The New Notes remain outstanding on the 180th
day, 210th day and/or
240th day after the date of issuance of the
Series II Warrant (Series II Date), in which case the Company will
issue to the Investor on the 180th,
210th and/or 240th day
after the Series II Date, as applicable, additional warrants
(Series III Warrants) conveying the right to purchase, for $0.01
per share, an additional 3.33 percent of the Companys common stock
outstanding (on a fully diluted basis, subject to certain
exceptions) on the Series II Date. |
The percentage of the Companys outstanding common stock that is represented by Series II and
Series III Warrants issuable to the Investor will be reduced on a pro rata basis to the extent the
principal balance of the New Notes has been reduced as of the date of issuance of the warrants. All
warrants issued to the Investor will expire ten years from the date of issuance. Issuance to the
Investor of the Series II Warrants and Series III Warrants will be deferred if and to the extent
that issuance of the Series II Warrants or Series III Warrants would cause the Investors
beneficial ownership of the Companys common stock to exceed 29.5 percent of the Companys then
outstanding common stock (Cap). The Investor would be required to sell down its common stock in
order to receive the remaining portion of the warrants. The Investor is prohibited from attaining
beneficial ownership of the Companys common stock in excess of the Cap. These provisions are
designed so that in no event will the Investors ownership of common stock or warrants trigger a
change of control under Libbeys existing debt and management change in control agreements.
The accounting treatment of this exchange involves complex issues, is subject to valuation
calculations for certain components and is dependent on certain details which were not available
until the closing of the transaction. The recording of this transaction along with a complete discussion of the
accounting treatment will be included in our filing on Form 10-K for the year ended December 31, 2009.
35
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our Condensed Consolidated Financial Statements and the related notes
thereto appearing elsewhere in this report and in our Annual Report filed with the Securities and
Exchange Commission. This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ from those anticipated in these
forward-looking statements as a result of many factors. These factors are discussed in Risk
Factors under Item 1A of Part II Other Information.
Overview
Market conditions continue to be challenging. While comparisons to the sales performance of the
third quarter and first nine months of 2008 show dramatic differences, we continue to see the
results of our cash flow enhancements outlined on February 11, 2009. We have reduced capital
spending, reduced production levels in response to the reduced demand in our markets, reduced our
overall costs and reduced our investment in inventories during the first nine months of the year, a
period which normally would see a buildup of inventories in anticipation of normally higher sales
in the fourth quarter. The decreased production levels have caused pressure on our margins for
most of the year as certain fixed costs could not be reduced to the same extent as sales, but we
have placed a higher priority on liquidity in the near term. Our third quarter results reflect
significant improvements in liquidity, and we have also been able to increase utilization of our
production capacity, resulting in increased margins. Our retail business has continued its strong
performance; however, at this time we still expect that the eventual recovery of our other markets
will occur slowly. We will continue to monitor our customer markets, and as the economy improves
we are prepared to adjust production levels further, which should lead to continued improvements in
profitability as the margin pressures described above should continue to reverse. On October 28,
2009, we announced a debt exchange with respect to the PIK Notes. Please see note 14 for a further
discussion of this subsequent event.
Results of Operations Third Quarter 2009 Compared with Third Quarter 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except percentages and per-share |
|
Three months ended September 30, |
|
Variance |
amounts) |
|
2009 (2) |
|
2008 |
|
In dollars |
|
In percent |
|
Net sales |
|
$ |
186,878 |
|
|
$ |
211,536 |
|
|
$ |
(24,658 |
) |
|
|
(11.7 |
)% |
Gross profit |
|
$ |
42,960 |
|
|
$ |
37,934 |
|
|
$ |
5,026 |
|
|
|
13.2 |
% |
Gross profit margin |
|
|
23.0 |
% |
|
|
17.9 |
% |
|
|
|
|
|
|
|
|
Income from operations (IFO) |
|
$ |
17,849 |
|
|
$ |
14,557 |
|
|
$ |
3,292 |
|
|
|
22.6 |
% |
IFO margin |
|
|
9.6 |
% |
|
|
6.9 |
% |
|
|
|
|
|
|
|
|
|
Earnings before interest and income taxes (EBIT)(1) |
|
$ |
20,552 |
|
|
$ |
13,557 |
|
|
$ |
6,995 |
|
|
|
51.6 |
% |
EBIT margin |
|
|
11.0 |
% |
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization (EBITDA)(1) |
|
$ |
31,181 |
|
|
$ |
24,456 |
|
|
$ |
6,725 |
|
|
|
27.5 |
% |
EBITDA margin |
|
|
16.7 |
% |
|
|
11.6 |
% |
|
|
|
|
|
|
|
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
$ |
9,491 |
|
|
|
159.3 |
% |
Net income (loss) margin |
|
|
1.9 |
% |
|
|
(2.8 |
)% |
|
|
|
|
|
|
|
|
Diluted net income (loss) per share |
|
$ |
0.23 |
|
|
$ |
(0.40 |
) |
|
$ |
0.63 |
|
|
|
157.5 |
% |
|
|
|
|
(1) |
|
We believe that EBIT and EBITDA, non-GAAP financial measures, are useful metrics for
evaluating our financial performance, as they are measures that we use internally to assess
our performance. See Table 1 for a reconciliation of net income (loss) to EBIT and EBITDA and
a further discussion as to the reasons we believe these non-GAAP financial measures are
useful. |
|
(2) |
|
Includes pre-tax restructuring charges of $0.5 million related to the closing of our Syracuse
China manufacturing facility and our Mira Loma distribution center. (See note 5 to the
Condensed Consolidated Financial Statements). |
Net Sales
For the quarter ended September 30, 2009, net sales decreased 11.7 percent to $186.9 million from
third quarter sales of $211.5 million in the year-ago quarter. North American Glass net shipments
decreased 10.7 percent to $128.3 million from $143.6 million in the year-ago quarter. The decrease
in sales was primarily attributable to a 13.7 percent decrease in sales to Crisa customers,
resulting principally from the currency impact of the Mexican peso. Crisa shipments decreased 0.6
percent excluding the currency impact. In
36
addition, an 18.4 percent decline in shipments to U.S. and Canada foodservice glassware customers
was offset by a 9.4 percent increase in shipments to U.S. and Canada retail glassware customers.
North American Other net sales decreased 27.8 percent due to a decline in shipments of World
Tableware, Syracuse China and Traex products. International net sales decreased 4.1 percent
compared to the year-ago quarter, as a 20.0 percent increase in shipments to Libbey China customers
was offset by unfavorable currency impact of the weaker euro when compared to the U.S. dollar.
Excluding the currency impact, International sales decreased 0.4 percent, as shipments to Royal
Leerdam customers increased 1.1 percent and shipments to Crisal glassware customers declined 2.4
percent when compared to the prior-year period.
Gross Profit
For the quarter ended September 30, 2009, gross profit increased by $5.0 million, or 13.2 percent,
to $43.0 million, compared to $37.9 million in the year-ago quarter. Gross profit as a percentage
of net sales increased to 23.0 percent, compared to 17.9 percent in the year-ago quarter.
Reductions in manufacturing costs offset by lower production activity primarily in our
International segment resulted in a $11.7 million improvement in gross profit, as reductions in
natural gas, labor and packaging expenses more than offset the impact of decreased production.
Decreases in distribution costs contributed another $4.3 million of improvement. These
improvements were offset by a $10.8 million impact from unfavorable mix and the lower level of net
sales.
Income From Operations
Income from operations for the quarter ended September 30, 2009 increased $3.3 million, or 22.6
percent, to $17.8 million, compared to $14.6 million in the year-ago quarter. Income from
operations as a percentage of net sales increased to 9.6 percent in the third quarter 2009,
compared to 6.9 percent in the year-ago quarter. The improvement in income from operations is a
result of higher gross profit and gross profit margin (discussed above), offset by a $0.3 million
special charge related primarily to the shutdowns of the Syracuse China manufacturing facility and
Mira Loma distribution center (see Note 5 for more discussion about these charges) and an increase
of $1.4 million in selling, general and administrative expenses. The $1.4 million increase in
selling, general and administrative expenses is mainly due to an increase in expense related to our
annual incentive plan.
Earnings Before Interest and Income Taxes (EBIT)
Earnings before Interest and Income Taxes (EBIT) for the quarter ended September 30, 2009 increased
by $7.0 million, from $13.6 million in 2008, to $20.6 million in 2009. EBIT as a percentage of net
sales increased to 11.0 percent in the third quarter 2009, compared to 6.4 percent in the year-ago
quarter. Key contributors to the increase in EBIT compared to the year-ago quarter are the same as
those discussed above under Income From Operations. In addition, other income increased by $3.7
million primarily related to a favorable swing in foreign currency translation gains versus the
prior year quarter.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA increased by 27.5 percent to $31.2 million in the third quarter of 2009 from $24.5 million
in the year-ago quarter. As a percentage of net sales, EBITDA was 16.7 percent for the third
quarter 2009, compared to 11.6 percent in the year-ago quarter. The key contributors to the
increase in EBITDA were those factors discussed above under Earnings before Interest and Income
Taxes (EBIT). These improvements were slightly offset as EBITDA does not include the benefit of a
$0.3 million decrease in depreciation and amortization expenses which is primarily due to the
shutdown of our Syracuse China operations.
Net Income (Loss) and Diluted Net Income (Loss) Per Share
We recorded net income of $3.5 million, or $0.23 per diluted share, in the third quarter 2009,
compared to a net loss of $(6.0) million, or $(0.40) per diluted share, in the year-ago quarter.
Net income (loss) as a percentage of net sales was 1.9 percent in the third quarter 2009, compared
to (2.8) percent in the year-ago quarter. The improvement in Net Income (Loss) and Diluted Net
Income (Loss) Per Share is generally due to the factors discussed in EBIT above. Furthermore, the
effective tax rate provided a 13.9 percent benefit for the quarter compared to a 50.8 percent
expense in the year-ago quarter, due primarily to a $1.4 million tax benefit related to the
required intra-period tax allocation between income from operations and other comprehensive income
in the U.S. in the current quarter. The Companys effective tax rate also changed from
the year-ago quarter as a result of changes in valuation allowances in the United States, the
Netherlands, and Portugal. Further, changes in the mix of earnings in countries with differing
statutory tax rates, changes in accruals related to uncertain tax positions, tax planning
structures and changes in tax laws have also impacted the effective tax rate, and could cause more
volatility in the future.
37
Results of Operations First Nine Months 2009 Compared with First Nine Months 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except percentages and per-share |
|
Nine months ended September 30, |
|
Variance |
amounts) |
|
2009 (2) |
|
2008 |
|
In dollars |
|
In percent |
|
Net sales |
|
$ |
540,557 |
|
|
$ |
623,640 |
|
|
$ |
(83,083 |
) |
|
|
(13.3 |
)% |
Gross profit |
|
$ |
87,959 |
|
|
$ |
110,439 |
|
|
$ |
(22,480 |
) |
|
|
(20.4 |
)% |
Gross profit margin |
|
|
16.3 |
% |
|
|
17.7 |
% |
|
|
|
|
|
|
|
|
Income from operations (IFO) |
|
$ |
17,286 |
|
|
$ |
42,752 |
|
|
$ |
(25,466 |
) |
|
|
(59.6 |
)% |
IFO margin |
|
|
3.2 |
% |
|
|
6.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest and income taxes (EBIT)(1) |
|
$ |
22,710 |
|
|
$ |
43,091 |
|
|
$ |
(20,381 |
) |
|
|
(47.3 |
)% |
EBIT margin |
|
|
4.2 |
% |
|
|
6.9 |
% |
|
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization (EBITDA)(1) |
|
$ |
55,585 |
|
|
$ |
76,524 |
|
|
$ |
(20,939 |
) |
|
|
(27.4 |
)% |
EBITDA margin |
|
|
10.3 |
% |
|
|
12.3 |
% |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
|
$ |
(10,142 |
) |
|
|
(87.8 |
)% |
Net loss margin |
|
|
(4.0 |
)% |
|
|
(1.9 |
)% |
|
|
|
|
|
|
|
|
Diluted net loss per share |
|
$ |
(1.45 |
) |
|
$ |
(0.79 |
) |
|
$ |
(0.66 |
) |
|
|
(83.5 |
)% |
|
|
|
|
(1) |
|
We believe that EBIT and EBITDA, non-GAAP financial measures, are useful metrics for
evaluating our financial performance, as they are measures that we use internally to assess
our performance. See Table 1 for a reconciliation of net loss to EBIT and EBITDA and a further
discussion as to the reasons we believe these non-GAAP financial measures are useful. |
|
(2) |
|
Includes pre-tax restructuring charges of $3.2 million related to the closing of our Syracuse
China manufacturing facility and our Mira Loma distribution center. (See note 5 to the
Condensed Consolidated Financial Statements). |
Net Sales
For the nine months ended September 30, 2009, net sales decreased 13.3 percent to $540.6 million
from sales of $623.6 million in the year-ago period. North American Glass net sales decreased 12.0
percent to $374.8 million from sales of $426.1 million in the year-ago period, due primarily to a
decrease of 23.4 percent in shipments to Crisa customers and a decline of 9.9 percent in shipments
to U.S. and Canadian foodservice glassware customers. The devaluation of the Mexican peso caused a
sales decline of approximately 13.0 percent at Crisa, representing more than half of the overall
23.4 percent reduction in Crisa sales. Due to continued strength in the third quarter, our U.S.
retail sales were 3.2 percent ahead of last years sales level through the first nine months of the
year, representing a new record for the nine month period. North American Other net sales
decreased 22.2 percent to $66.2 million from sales of $85.0 million in the year-ago period due to a
decline in shipments of World Tableware, Syracuse China and Traex products. International net
sales decreased 13.7 percent to $103.7 million from sales of $120.2 million in the year-ago period,
including 7.5 percent due to unfavorable currency impact resulting primarily from the declining
strength of the euro when compared to the U.S. dollar. Libbey China sales increased 10.5 percent
compared to the year-ago period. Excluding the currency impact, International sales decreased
approximately 6.2 percent, as shipments to Royal Leerdam and Crisal glassware customers declined
when compared to the prior year period.
Gross Profit
For the nine months ended September 30, 2009, gross profit decreased by $22.5 million, or 20.4
percent, to $88.0 million, compared to $110.4 million in the year-ago period. Gross profit as a
percentage of net sales decreased to 16.3 percent, compared to 17.7 percent in the year-ago period.
An unfavorable mix and lower level of net sales, particularly in the U.S., resulted in $20.0
million of the decline in gross profit, and lower production activity offset by reduced
manufacturing costs contributed another $2.3 million to the decrease, as a significant portion of
these expenses are fixed and could not be reduced to the same extent as net sales. Also, an
unfavorable currency impact resulted in $11.9 million of the decline in gross profit. In addition,
the current year included special charges of $1.9 million related to the Syracuse China
manufacturing facility and Mira Loma distribution center shutdowns. These unfavorable items were
offset by a reduction of $12.2 million in our distribution costs.
38
Income From Operations
Income from operations for the nine months ended September 30, 2009 decreased $25.5 million, to
$17.3 million, compared to $42.8 million in the year-ago period. Income from operations as a
percentage of net sales decreased to 3.2 percent in the first nine months of 2009, compared to 6.9
percent in the year-ago period. The decline in income from operations is a result of lower gross
profit (discussed above), combined with a $2.0 million increase in selling, general and
administrative expenses and a $1.0 million special charge primarily related to the Syracuse China
shutdown. The $2.0 million increase in selling, general and administrative expenses was caused by
a $7.6 million increase in expense for our annual incentive plan, a $3.0 million pension settlement
charge arising from lump sum payments to retirees during the first nine months of 2009 and the
one-time 2008 accrual reversal of $1.3 million related to favorable rulings in connection with an
outstanding dispute regarding a warehouse lease in Mexico. These increases in selling general and
administrative expenses were offset by favorable currency impact of $1.7 million and decreases of
$5.9 million and $4.6 million in labor and benefit costs and selling, marketing and other expenses,
respectively.
Earnings Before Interest and Income Taxes (EBIT)
Earnings before Interest and Income Taxes (EBIT) decreased by $20.4 million, from $43.1 million in
2008 to $22.7 million in 2009. EBIT as a percentage of net sales decreased to 4.2 percent in the
first nine months of 2009, compared to 6.9 percent in the year-ago period. Key contributors to the
decrease in EBIT compared to the year-ago period are the same as those discussed above under Income
From Operations, offset by a $5.1 million increase in other income primarily related to a favorable
swing in foreign currency translation gains versus the prior year quarter.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA decreased by 27.4 percent to $55.6 million in the first nine months of 2009 from income of
$76.5 million in the year-ago period. As a percentage of net sales, EBITDA was 10.3 percent for the
first nine months of 2009, compared to 12.3 percent in the year-ago period. The key contributors to
the decrease in EBITDA were those factors discussed above under Earnings before Interest and Income
Taxes (EBIT). In addition, EBITDA does not include the comparative benefit of a $0.6 million
decrease in depreciation and amortization expenses.
Net Loss and Diluted Net Loss Per Share
We recorded a net loss of $(21.7) million, or $(1.45) per diluted share, in the first nine months
of 2009, compared to a net loss of $(11.6) million, or $(0.79) per diluted share, in the year-ago
period. Net loss as a percentage of net sales was (4.0) percent in the first nine months of 2009,
compared to (1.9) percent in the year-ago period. The improvement in Net Income (Loss) and Diluted
Net Income (Loss) Per Share is generally due to the factors discussed in EBIT above. In addition,
the effective tax rate was 26.3 percent for the period compared to negative 25.7 percent in the
year-ago period, due primarily to a $5.3 million tax benefit related to the required intra-period
tax allocation between income from operations and other comprehensive income in the U.S. in the
first nine months of 2009 and a $1.5 million benefit related to adjustments in tax reserves due to
the completion of a U.S. federal income tax examination. The Companys effective tax
rate changed from the year-ago quarter also as a result of changes in valuation allowances in the
United States, the Netherlands, and Portugal. Further, changes in the mix of earnings in countries
with differing statutory tax rates, changes in accruals related to uncertain tax positions, tax
planning structures and changes in tax laws have also impacted the effective tax rate.
Segment Results of Operations
39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
September 30, |
|
Variance |
|
September 30, |
|
Variance |
(Dollars in thousands) |
|
2009 |
|
2008 |
|
In dollars |
|
In percent |
|
2009 |
|
2008 |
|
In dollars |
|
In percent |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
128,316 |
|
|
$ |
143,630 |
|
|
$ |
(15,314 |
) |
|
|
(10.7 |
)% |
|
$ |
374,803 |
|
|
$ |
426,120 |
|
|
$ |
(51,317 |
) |
|
|
(12.0 |
)% |
North American Other |
|
|
20,462 |
|
|
|
28,339 |
|
|
|
(7,877 |
) |
|
|
(27.8 |
)% |
|
|
66,180 |
|
|
|
85,042 |
|
|
|
(18,862 |
) |
|
|
(22.2 |
)% |
International |
|
|
40,279 |
|
|
|
42,014 |
|
|
|
(1,735 |
) |
|
|
(4.1 |
)% |
|
|
103,663 |
|
|
|
120,166 |
|
|
|
(16,503 |
) |
|
|
(13.7 |
)% |
Eliminations |
|
|
(2,179 |
) |
|
|
(2,447 |
) |
|
|
|
|
|
|
|
|
|
|
(4,089 |
) |
|
|
(7,688 |
) |
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
186,878 |
|
|
$ |
211,536 |
|
|
$ |
(24,658 |
) |
|
|
(11.7 |
)% |
|
$ |
540,557 |
|
|
$ |
623,640 |
|
|
$ |
(83,083 |
) |
|
|
(13.3 |
)% |
|
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
16,594 |
|
|
$ |
9,695 |
|
|
$ |
6,899 |
|
|
|
71.2 |
% |
|
$ |
19,727 |
|
|
$ |
31,704 |
|
|
$ |
(11,977 |
) |
|
|
(37.8 |
)% |
North American Other |
|
|
2,953 |
|
|
|
2,130 |
|
|
|
823 |
|
|
|
38.6 |
% |
|
|
5,263 |
|
|
|
9,590 |
|
|
|
(4,327 |
) |
|
|
(45.1 |
)% |
International |
|
|
1,005 |
|
|
|
1,732 |
|
|
|
(727 |
) |
|
|
(42.0 |
)% |
|
|
(2,280 |
) |
|
|
1,797 |
|
|
|
(4,077 |
) |
|
|
(226.9 |
)% |
|
Consolidated |
|
$ |
20,552 |
|
|
$ |
13,557 |
|
|
$ |
6,995 |
|
|
|
51.6 |
% |
|
$ |
22,710 |
|
|
$ |
43,091 |
|
|
$ |
(20,381 |
) |
|
|
(47.3 |
)% |
|
EBIT Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
|
12.9 |
% |
|
|
6.7 |
% |
|
|
|
|
|
|
|
|
|
|
5.3 |
% |
|
|
7.4 |
% |
|
|
|
|
|
|
|
|
North American Other |
|
|
14.4 |
% |
|
|
7.5 |
% |
|
|
|
|
|
|
|
|
|
|
8.0 |
% |
|
|
11.3 |
% |
|
|
|
|
|
|
|
|
International |
|
|
2.5 |
% |
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
(2.2 |
)% |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
Consolidated |
|
|
11.0 |
% |
|
|
6.4 |
% |
|
|
|
|
|
|
|
|
|
|
4.2 |
% |
|
|
6.9 |
% |
|
|
|
|
|
|
|
|
|
Special charges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
107 |
|
|
$ |
|
|
|
$ |
107 |
|
|
|
100.0 |
% |
|
$ |
81 |
|
|
$ |
|
|
|
$ |
81 |
|
|
|
100.0 |
% |
North American Other |
|
|
382 |
|
|
|
|
|
|
|
382 |
|
|
|
100.0 |
% |
|
|
3,089 |
|
|
|
|
|
|
|
3,089 |
|
|
|
100.0 |
% |
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
Consolidated |
|
$ |
489 |
|
|
$ |
|
|
|
$ |
489 |
|
|
|
100.0 |
% |
|
$ |
3,170 |
|
|
$ |
|
|
|
$ |
3,170 |
|
|
|
100.0 |
% |
|
Segment Results of Operations Third Quarter 2009 Compared to Third Quarter 2008
North American Glass
For the quarter ended September 30, 2009, net sales decreased 10.7 percent to $128.3 million from
$143.6 million in the year-ago quarter. Of the decrease in net sales, approximately 5.4 percent was
attributable to decreased shipments to Crisas customers and 7.0 percent was attributable to
decreased shipments to U.S. and Canadian foodservice glassware customers offset by a 2.2 percent
increase in sales to U.S. and Canadian retail glassware customers. Of the 5.4 percent attributable
to decreased shipments of Crisa product, 5.2 percent is related to an unfavorable currency impact.
EBIT increased to $16.6 million for the third quarter 2009, compared to $9.7 million for the
year-ago quarter. EBIT as a percentage of net sales increased to 12.9 percent in the third quarter
2009, compared to 6.7 percent in the year-ago quarter. The key factors in the increase in EBIT
compared to the year-ago quarter were $9.0 million due to lower manufacturing costs offset by
decreased production activity, a $3.3 million decrease in distribution costs and an improvement of
$3.6 million primarily due to favorable foreign currency translation gains. The factors
contributing to the increase in EBIT were partially offset by $7.5 million due to an unfavorable
sales mix, a $1.6 million increase in SG&A costs and an unfavorable currency impact from the
devaluation of the Mexican peso of $0.2 million. The $1.6 million increase in SG&A costs was
caused by a $5.7 million increase in expense for our annual incentive plan offset by a decrease of
$4.2 million in labor and benefit expenses.
North American Other
For the quarter ended September 30, 2009, net sales declined 27.8 percent to $20.5 million from
$28.3 million in the year-ago quarter. Components of the total decrease in net sales were declines
of approximately 16.1 percent in shipments of Syracuse China products related to the closure of the
Syracuse China facility earlier this year and the decision to reduce the Syracuse China product
offering, approximately 5.4 percent in shipments of Traex products and approximately 6.2 percent in
shipments of World Tableware products.
40
EBIT increased by $0.8 million for the third quarter of 2009, compared to the year-ago quarter.
EBIT as a percentage of net sales increased to 14.4 percent in the third quarter of 2009, compared
to 7.5 percent in the year-ago quarter due to lower production and purchasing levels in the
segment. The key contributors to the increased EBIT were decreases of $2.9 million in manufacturing
and purchased product costs, $0.2 million in distribution costs and $1.0 million in SG&A expenses.
These reductions in costs were primarily the result of the April 2009 closure of our Syracuse China
facility, as EBIT for the Syracuse China operations contributed a $1.0 million improvement compared
to the prior year period. This was offset by decreased sales volume and mix, which caused an
unfavorable $3.5 million impact.
International
For the quarter ended September 30, 2009, net sales decreased 4.1 percent to $40.3 million from
$42.0 million in the year-ago quarter. The decrease was primarily the result of a weaker euro,
which caused a 4.4 percent decline. This currency impact was offset by an increase in shipments to
customers of Libbey China, as shipments to Royal Leerdam and Crisal customers were essentially flat
as a component of the total International segment variance.
EBIT declined by $0.7 million for the third quarter of 2009, to $1.0 million from $1.7 million in
the year-ago quarter. EBIT as a percentage of net sales decreased to 2.5 percent in the third
quarter 2009, compared to 4.1 percent in the year-ago quarter. Decreased production activity
offset by lower manufacturing costs were responsible for $0.8 million of the EBIT decline. In
addition, EBIT was negatively affected by an unfavorable currency impact from the euro of $0.2
million and additional depreciation and amortization of $0.7 million. These factors were offset by
a $0.9 million decrease in distribution costs.
Segment Results of Operations First Nine Months 2009 Compared to First Nine Months 2008
North American Glass
For the nine months ended September 30, 2009, net sales decreased 12.0 percent to $374.8 million
from $426.1 million in the year-ago period. Of the total decrease in net sales, approximately 9.1
percent was attributable to decreased shipments to Crisas customers and 4.9 percent was
attributable to decreased shipments to U.S. and Canadian foodservice glassware customers. The
primary offset to these declines was a 0.7 percent increase from the U.S. and Canadian retail
channel, which delivered sales above the performance of the first nine months of 2008. Of the 9.1
percent attributable to decreased shipments of Crisa product, 5.1 percent is related to an
unfavorable currency impact.
EBIT decreased to $19.7 million for the first nine months of 2009, compared to $31.7 million for
the year-ago period. EBIT as a percentage of net sales decreased to 5.3 percent in the first nine
months of 2009, compared to 7.4 percent in the year-ago period. The key factors in the decline in
EBIT compared to the year-ago period were $13.2 million due to an unfavorable sales mix and an
unfavorable currency impact from the devaluation of the Mexican peso of $9.3 million. In addition,
EBIT was negatively impacted by a $4.9 million increase in selling, general and administrative
expense, which resulted primarily from a $3.0 million pension settlement charge arising from lump
sum payments to retirees during the first nine months of 2009 and a one-time reversal of a $1.3
million accrual in the first quarter of 2008 related to favorable rulings in connection with an
outstanding dispute regarding a warehouse lease in Mexico. The factors contributing to the decrease
in EBIT were partially offset by decreases of $9.8 million in distribution costs and favorable
currency translation gains of $4.4 million in other income when compared to the prior year period.
North American Other
For the nine months ended September 30, 2009, net sales declined 22.2 percent to $66.2 million from
$85.0 million in the year-ago period. Components of the total decrease in net sales were declines
of approximately 10.8 percent in shipments of Syracuse China products due to closure of the
manufacturing facility and reduction in the product offering, approximately 6.7 percent in
shipments of World Tableware products and approximately 5.0 percent in shipments of Traex products.
EBIT declined by $4.3 million for the first nine months of 2009, compared to the year-ago period.
EBIT as a percentage of net sales decreased to 8.0 percent in the first nine months of 2009,
compared to 11.3 percent in the year-ago period. The key contributor to the decreased EBIT was
decreased sales, which had an unfavorable $11.6 million impact. Production costs included a $0.7
million special charge due to additional depreciation expenses recorded to reflect the shorter
remaining useful life of the assets at our Syracuse China facility and a $1.0 million write-down of
raw materials and work in process inventory also related to the shutdown of our Syracuse China
facility. This was offset by decreases of $5.1 million in other production costs and purchased
product, $1.6 million in distribution costs, and a decrease of $2.2 million in SG&A expenses driven
by lower selling and marketing expenses. These reductions in costs were primarily the result of
the April 2009 closure of our Syracuse China manufacturing facility.
41
International
For the nine months ended September 30, 2009, net sales decreased 13.7 percent to $103.7 million
from $120.2 million in the year-ago period. Of the total decrease in net sales, 8.5 percent was
related to the currency impact of a weaker euro. The majority of the remaining decrease in net
sales was related to decreased shipments to Royal Leerdam and Crisal customers, offset by an
increase of 1.4 percent attributable to sales to customers of Libbey China.
EBIT declined by $4.1 million for the first nine months of 2009 to $(2.3) million, compared to $1.8
million in the year-ago period. EBIT as a percentage of net sales decreased to (2.2) percent in the
first nine months of 2009, compared to 1.5 percent in the year-ago period. Decreased net sales and
production activity offset by lower manufacturing costs were responsible for $0.1 million and $3.1
million of the EBIT decline, respectively, as we lowered production levels in response to lower
sales and to manage inventory levels. In addition, EBIT was negatively impacted by an unfavorable
currency impact from the euro of $0.9 million.
Capital Resources and Liquidity
Balance Sheet and Cash Flows
Cash and Equivalents
At September 30, 2009, our cash balance was $30.6 million, an increase of $17.3 million from $13.3
million at December 31, 2008. The increase was primarily due to an increase in our free cash flow
offset by payments on our ABL facility.
Working Capital
The following table presents our working capital components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Dollars in thousands, except percentages |
|
|
|
|
|
|
|
|
|
Variance |
and DSO, DIO, DPO and DWC) |
|
September 30, 2009 |
|
December 31, 2008 |
|
In dollars |
|
In percent |
|
Accounts receivable net |
|
$ |
91,119 |
|
|
$ |
76,072 |
|
|
$ |
15,047 |
|
|
|
19.8 |
% |
DSO (1) |
|
|
45.7 |
|
|
|
34.3 |
|
|
|
|
|
|
|
|
|
Inventories net |
|
$ |
153,523 |
|
|
$ |
185,242 |
|
|
$ |
(31,719 |
) |
|
|
(17.1 |
)% |
DIO (2) |
|
|
77.1 |
|
|
|
83.5 |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
52,087 |
|
|
$ |
54,428 |
|
|
$ |
(2,341 |
) |
|
|
(4.3 |
)% |
DPO (3) |
|
|
26.1 |
|
|
|
24.5 |
|
|
|
|
|
|
|
|
|
Working capital (4) |
|
$ |
192,555 |
|
|
$ |
206,886 |
|
|
$ |
(14,331 |
) |
|
|
(6.9 |
)% |
DWC (5) |
|
|
96.7 |
|
|
|
93.3 |
|
|
|
|
|
|
|
|
|
Percentage of net sales |
|
|
26.5 |
% |
|
|
25.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
DSO, DIO, DPO and DWC are calculated using net sales as the denominator and are based on
a 365-day calendar year. |
|
(1) |
|
Days sales outstanding (DSO) measures the number of days it takes to turn receivables into
cash. |
|
(2) |
|
Days inventory outstanding (DIO) measures the number of days it takes to turn inventory into
cash. |
|
(3) |
|
Days payable outstanding (DPO) measures the number of days it takes to pay the balances of
our accounts payable. |
|
(4) |
|
Working capital is defined as net accounts receivable plus net inventories less accounts
payable. See Table 3 for the calculation of this non-GAAP financial measure and for further
discussion as to the reasons we believe this non-GAAP financial measure is useful. |
|
(5) |
|
Days working capital (DWC) measures the number of days it takes to turn our working capital
into cash. |
Working capital (as defined above) was $192.6 million at September 30, 2009, a decrease of $14.3
million from December 31, 2008.
42
This decrease is due primarily to lower inventories, which resulted
from our continued focus on our cash management efforts to increase cash flow through reductions in
working capital, and lower production activity. Partially offsetting our lower inventories is an
increase in accounts receivable. Our DSO also increased compared to the end of the year as sales
in the third quarter of 2009 were heavily weighted towards the end of the quarter, driving up the
quarter-end receivables balance. During the final quarter of 2008, sales declined throughout the
quarter, so the majority of collections for sales in the quarter had occurred before the end of
December. Working capital as a percentage of net sales increased from 25.5 percent from December
31, 2008 to 26.5 percent at September 30, 2009.
43
Borrowings
The following table presents our total borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
(Dollars in thousands) |
|
Interest Rate |
|
Maturity Date |
|
2009 |
|
2008 |
|
Borrowings under ABL facility |
|
floating |
|
December 16, 2010 |
|
$ |
|
|
|
$ |
34,538 |
|
Senior notes |
|
floating (1) |
|
June 1, 2011 |
|
|
306,000 |
|
|
|
306,000 |
|
PIK notes (2) |
|
16.00% |
|
December 1, 2011 |
|
|
160,862 |
|
|
|
148,946 |
|
Promissory note |
|
6.00% |
|
October, 2009 to September, 2016 |
|
|
1,537 |
|
|
|
1,666 |
|
Notes payable |
|
floating |
|
October, 2009 |
|
|
1,517 |
|
|
|
3,284 |
|
RMB loan contract |
|
floating |
|
July, 2012 to January, 2014 |
|
|
36,675 |
|
|
|
36,675 |
|
RMB working capital loan |
|
floating |
|
March, 2010 |
|
|
7,335 |
|
|
|
7,335 |
|
Obligations under capital leases |
|
floating |
|
May, 2009 |
|
|
|
|
|
|
302 |
|
BES Euro line |
|
floating |
|
December, 2009 to December, 2013 |
|
|
16,051 |
|
|
|
15,507 |
|
Other debt |
|
floating |
|
September, 2009 |
|
|
|
|
|
|
630 |
|
|
Total borrowings |
|
|
|
|
|
|
|
|
529,977 |
|
|
|
554,883 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less unamortized discounts and warrants |
|
|
|
|
|
|
|
|
3,278 |
|
|
|
4,626 |
|
|
Total borrowings net (3) |
|
|
|
|
|
|
|
$ |
526,699 |
|
|
$ |
550,257 |
|
|
|
|
|
(1) |
|
See Derivatives below and note 9 to the Condensed Consolidated Financial Statements. |
|
(2) |
|
Additional PIK Notes were issued each June 1 and December 1, commencing on December 1, 2006,
to pay semi-annual interest. During the first three years, interest was payable by the
issuance of additional PIK Notes. |
|
(3) |
|
The total borrowings net include notes payable, long-term debt due within one year and
long-term debt as stated in our Condensed Consolidated Balance Sheets. |
We had total borrowings of $530.0 million at September 30, 2009, compared to total borrowings of
$554.9 million at December 31, 2008. The $24.9 million decrease in borrowings was primarily the
result of the repayment of borrowings under our ABL facility, offset by an increase in our PIK
Notes.
Of our total indebtedness, $167.6 million, or approximately 31.6 percent, is subject to variable
interest rates at September 30, 2009. A change of one percentage point in such rates would result
in a change in interest expense of approximately $1.7 million on an annual basis.
Included in interest expense is the amortization of discounts, warrants and financing fees. These
items amounted to $1.3 million and $3.8 million for the three months and nine months ended
September 30, 2009, respectively, and $1.2 million and $3.7 million for the three months and nine
months ended September 30, 2008, respectively.
Cash Flow
The following table presents key drivers to our free cash flow for the third quarter.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Variance |
(Dollars in thousands, except percentages) |
|
2009 |
|
2008 |
|
In dollars |
|
In percent |
|
Net cash provided by operating activities |
|
$ |
26,639 |
|
|
$ |
13,309 |
|
|
$ |
13,330 |
|
|
|
100.2 |
% |
Capital expenditures |
|
|
(2,737 |
) |
|
|
(12,390 |
) |
|
|
9,653 |
|
|
|
77.9 |
% |
Proceeds from asset sales and other |
|
|
172 |
|
|
|
71 |
|
|
|
101 |
|
|
|
142.3 |
% |
|
Free cash flow (1) |
|
$ |
24,074 |
|
|
$ |
990 |
|
|
$ |
23,084 |
|
|
NM |
|
|
|
|
(1) |
|
We believe that Free Cash Flow [net cash provided by (used in) operating activities, less
capital expenditures, plus proceeds from assets sales and other] is a useful metric for
evaluating our financial performance, as it is a measure we use internally to assess |
44
|
|
|
|
|
performance. See Table 2 for a reconciliation of net cash provided by (used in) operating
activities to free cash flow and a further discussion as to the reasons we believe this non-GAAP
financial measure is useful. |
Our net cash provided by operating activities was $26.6 million in the third quarter of 2009,
compared to net cash provided by operating activities of $13.3 million in the year-ago quarter, or
an improvement of $13.3 million. The major factors impacting cash flow from operations were the
$9.5 million improvement in net income and a $12.8 million decrease in cash utilized for pension
and postretirement benefits. The cash generated from these cash flow improvements was utilized to
pay down debt and increase our cash balance.
Our net cash used in investing activities decreased to $2.6 million in the third quarter of 2009,
compared to $12.3 million in the year-ago period, primarily as a result of decreased capital
expenditures in our North American Glass and International segments.
Net cash used in financing activities was $17.5 million in the third quarter of 2009, compared to
$9.6 million in the year-ago quarter. During the third quarter of 2009, we utilized an additional
$8.3 million to pay down the ABL Facility, offset by a decrease in dividends and other payments.
Our free cash flow was $24.1 million during the third quarter 2009, compared to $1.0 million in the
year-ago quarter, an improvement of $23.1 million. The primary contributors to this change were the
improvement in cash flow from operating activities and reduced capital expenditures in the current
period, as discussed above.
The following table presents key drivers to our free cash flow for the first nine months.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
Variance |
(Dollars in thousands, except percentages) |
|
2009 |
|
2008 |
|
In dollars |
|
In percent |
|
Net cash provided by (used in) operating activities |
|
$ |
65,729 |
|
|
$ |
(9,750 |
) |
|
$ |
75,479 |
|
|
|
774.1 |
% |
Capital expenditures |
|
|
(12,287 |
) |
|
|
(30,002 |
) |
|
|
17,715 |
|
|
|
59.0 |
% |
Proceeds from asset sales and other |
|
|
260 |
|
|
|
117 |
|
|
|
143 |
|
|
|
122.2 |
% |
|
Free cash flow (1) |
|
$ |
53,702 |
|
|
$ |
(39,635 |
) |
|
$ |
93,337 |
|
|
|
235.5 |
% |
|
|
|
|
(1) |
|
We believe that Free Cash Flow [net cash provided by (used in) operating activities, less
capital expenditures, plus proceeds from assets sales and other] is a useful metric for
evaluating our financial performance, as it is a measure we use internally to assess
performance. See Table 2 for a reconciliation of net cash provided by (used in) operating
activities to free cash flow and a further discussion as to the reasons we believe this
non-GAAP financial measure is useful. |
Our net cash provided by operating activities was $65.7 million in the first nine months of 2009,
compared to net cash used by operating activities of $9.8 million in the year-ago period, or an
improvement of $75.5 million. The major factors impacting cash flow from operations were a $51.0
million improvement in working capital performance compared to the prior year period, as cash flow
improvements of $42.8 million from inventory and $12.5 million from accounts payable, partially
offset by a $4.3 million increase in accounts receivable, reflected our efforts to improve
liquidity during the current economic downturn. Further improvement in net cash provided by
operating activities is the result of the final $19.6 million payment to Vitro made in 2008 related
to the 2006 Crisa acquisition and a $16.7 million decrease in cash outlay for pension and
postretirement benefits. These improvements were offset by an increase of $10.1 million in our net
loss. The cash generated by these cash flow improvements was utilized to pay down debt and
increase our cash balance.
Our net cash used in investing activities decreased to $12.0 million in the first nine months of
2009, compared to $29.9 million in the year-ago period, primarily as a result of decreased capital
expenditures in our North American Glass and International segments.
Net cash used in (provided by) financing activities was a use of $36.3 million in the first nine
months of 2009, compared to net cash provided by financing activities of $12.1 million in the
year-ago period, or a swing of $48.4 million. During the first nine months of 2008, we utilized
$14.5 million more of our capacity on the ABL Facility to fund our operating needs, while we made
$33.5 million of repayments on that facility in the first nine months of 2009.
Our free cash flow was $53.7 million during the first nine months 2009, compared to a use of cash
of $39.6 million in the year-ago period, an improvement of $93.3 million. The primary contributor
to this change was the improvement in cash flow from operating activities and reduced capital
expenditures in the current period.
45
Derivatives
We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of
debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements
effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate
debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate
for our borrowings related to the Rate Agreements at September 30, 2009, excluding applicable fees,
is 5.24 percent per year and the total interest rate, including applicable fees, is 12.24 percent
per year. These Rate Agreements expire on December 1, 2009. Total remaining Senior Notes not
covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 8.26
percent per year at September 30, 2009. If the counterparties to these Rate Agreements were to fail
to perform, these Rate Agreements would no longer protect us from interest rate fluctuations.
However, we do not anticipate nonperformance by the counterparties. All counterparties were rated
A+ or better as of September 30, 2009, by Standard and Poors.
The fair market value for the Rate Agreements at September 30, 2009, was a $(4.0) million
liability. At December 31, 2008, the fair market value of these Rate Agreements was a $(6.8)
million liability. The fair value of the Rate Agreements 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. We do not expect to
cancel these agreements and expect them to mature as originally contracted.
We also use commodity futures contracts related to forecasted future North American natural gas
requirements. The objective of these futures contracts is to reduce the effects of fluctuations and
adverse 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. At September 30,
2009, we had commodity futures contracts for 3,220,000 million British Thermal Units (BTUs) of
natural gas with a fair market value of an $(8.5) million liability. We have hedged approximately
42 percent of forecasted transactions through December 2010. At December 31, 2008, we had
commodity futures contracts for 5,280,000 million BTUs of natural gas with a fair market value of a
$(14.9) million liability. The counterparties for these derivatives were rated BBB+ or better as
of September 30, 2009, by Standard & Poors.
Capital Resources and Liquidity
Historically, cash flows generated from operations and our borrowing capacity under our ABL
facility have allowed us to meet our cash requirements, including capital expenditures and working
capital needs. Remaining unused availability on the ABL Facility was $81.3 million at September
30, 2009 and $44.6 million at December 31, 2008. In addition, our cash and cash equivalents
balance of $30.6 million at September 30, 2009 is available for our short term financing needs. We
were impacted by recessionary pressures in 2008, especially during the fourth quarter of the year,
and the first nine months of 2009, and we anticipate that the global economic recession will
continue for the fourth quarter of 2009 and perhaps beyond. Under the terms and conditions in
place at September 30, 2009, interest on our PIK Notes would have been payable in cash beginning
December 1, 2009. We began taking a number of steps to enhance our liquidity in 2008 and have
continued with further steps in 2009 (including those announced in February, 2009). These
initiatives were expected to result in cash flow improvements in the range of $46 million to $50
million for 2009. These initiatives have been implemented, and we are beginning to see the results
in our cash flow. These amounts included a reduction of $22 million to $24 million in capital
expenditures. We are on course to exceed the higher end of that range, as our capital expenditures
are expected to reach $20 million or less for the year, compared to the $45.7 million spent in
2008. Additionally, as further discussed in Note 14, Subsequent Events, on October 28, 2009, we
announced that we had entered into a transaction to exchange the PIK Notes for a combination of
debt and equity which will have the impact of reducing cash paid for interest. The original
requirement for a cash interest payment of $12.9 million on December 1, 2009 has been canceled.
However, if cash generated from operations is insufficient to satisfy our liquidity requirements,
we may seek to sell additional equity or arrange additional debt financing. Global financial
markets and economic conditions as well as the credit and capital markets have been, and continue
to be, volatile. These issues, along with significant write-offs in the financial services sector,
the re-pricing of credit risk and the current weak economic conditions, have made it difficult, and
will likely continue to make it difficult, to obtain funding in future periods. If cash generated
from operations and cash available from our ABL Facility are not sufficient to meet our needs, we
cannot provide assurance that we will be able to obtain additional financing in sufficient amounts
and/or on acceptable terms in the near future or when our debt obligations reach maturity. Our ABL
Facility expires in December 2010, the Senior Notes expire in June 2011, and the PIK Notes
46
originally were scheduled to expire in December 2011. As mentioned above, please see note 14 for a
discussion of a debt exchange that occurred subsequent to the end of the third quarter. Based upon
our operating plans and current forecast expectations (including
expectations that the global economy will not deteriorate further) and in light of our debt
exchange that occurred subsequent to the quarters end, we anticipate that we will generate
positive cash flow from operations and, if necessary, have sufficient cash availability from our
ABL Facility to meet our ongoing liquidity needs.
Reconciliation of Non-GAAP Financial Measures
We sometimes refer to data derived from condensed consolidated financial information but not
required by GAAP to be presented in financial statements. Certain of these data are considered
non-GAAP financial measures under Securities and Exchange Commission (SEC) Regulation G. We
believe that non-GAAP data provide investors with a more complete understanding of underlying
results in our core business and trends. In addition, we use non-GAAP data internally to assess
performance. Although we believe that the non-GAAP financial measures presented enhance investors
understanding of our business and performance, these non-GAAP measures should not be considered an
alternative to GAAP.
Table 1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Nine months ended |
Reconciliation of net income (loss) to EBIT and EBITDA |
|
September 30, |
|
September 30, |
(Dollars in thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net income (loss) |
|
$ |
3,533 |
|
|
$ |
(5,958 |
) |
|
$ |
(21,696 |
) |
|
$ |
(11,554 |
) |
Add: Interest expense |
|
|
17,451 |
|
|
|
17,509 |
|
|
|
52,162 |
|
|
|
52,280 |
|
Add: (Benefit from) provision for income taxes |
|
|
(432 |
) |
|
|
2,006 |
|
|
|
(7,756 |
) |
|
|
2,365 |
|
|
Earnings before interest and income taxes (EBIT) |
|
|
20,552 |
|
|
|
13,557 |
|
|
|
22,710 |
|
|
|
43,091 |
|
Add: Depreciation and amortization |
|
|
10,629 |
|
|
|
10,899 |
|
|
|
32,875 |
|
|
|
33,433 |
|
|
Earnings before interest, taxes, deprecation and amortization (EBITDA) |
|
$ |
31,181 |
|
|
$ |
24,456 |
|
|
$ |
55,585 |
|
|
$ |
76,524 |
|
|
We define EBIT as net income (loss) before interest expense and income taxes. The most
directly comparable U.S. GAAP financial measure is net income.
We believe that EBIT is an important supplemental measure for investors in evaluating operating
performance in that it provides insight into company profitability. Libbeys senior management uses
this measure internally to measure profitability. EBIT also allows for a measure of comparability
to other companies with different capital and legal structures, which accordingly may be subject to
different interest rates and effective tax rates.
The non-GAAP measure of EBIT does have certain limitations. It does not include interest expense,
which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand
operations. Because this is a material and recurring item, any measure that excludes it has a
material limitation. EBIT may not be comparable to similarly titled measures reported by other
companies.
We define EBITDA as net income (loss) before interest expense, income taxes, depreciation and
amortization. The most directly comparable U.S. GAAP financial measure is net income.
We believe that EBITDA is an important supplemental measure for investors in evaluating operating
performance in that it provides insight into company profitability and cash flow. Libbeys senior
management uses this measure internally to measure profitability and to set performance targets for
managers. It also has been used regularly as one of the means of publicly providing guidance on
possible future results. EBITDA also allows for a measure of comparability to other companies with
different capital and legal structures, which accordingly may be subject to different interest
rates and effective tax rates, and to companies that may incur different depreciation and
amortization expenses or impairment charges.
The non-GAAP measure of EBITDA does have certain limitations. It does not include interest expense,
which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand
operations. EBITDA also excludes depreciation and amortization expenses. Because these are material
and recurring items, any measure that excludes them has a material limitation. EBITDA may not be
comparable to similarly titled measures reported by other companies.
47
Table 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net cash provided by (used in) operating |
|
Three months ended |
|
Nine months ended |
activities to free cash flow |
|
September 30, |
|
September 30, |
(Dollars in thousands) |
|
2009 |
|
2008 |
|
2009 |
|
2008 |
|
Net cash provided by (used in) operating activities |
|
$ |
26,639 |
|
|
$ |
13,309 |
|
|
$ |
65,729 |
|
|
$ |
(9,750 |
) |
Capital expenditures |
|
|
(2,737 |
) |
|
|
(12,390 |
) |
|
|
(12,287 |
) |
|
|
(30,002 |
) |
Proceeds from asset sales and other |
|
|
172 |
|
|
|
71 |
|
|
|
260 |
|
|
|
117 |
|
|
Free cash flow |
|
$ |
24,074 |
|
|
$ |
990 |
|
|
$ |
53,702 |
|
|
$ |
(39,635 |
) |
|
We define free cash flow as net cash provided by (used in) operating activities less capital
expenditures adjusted for proceeds from asset sales and other. The most directly comparable U.S.
GAAP financial measure is net cash provided by (used in) operating activities.
We believe that free cash flow is important supplemental information for investors in evaluating
cash flow performance in that it provides insight into the cash flow available to fund such things
as discretionary debt service, acquisitions and other strategic investment opportunities. It is a
measure of performance we use to internally evaluate the overall performance of the business.
Free cash flow is used in conjunction with and in addition to results presented in accordance with
U.S. GAAP. Free cash flow is neither intended to represent nor be an alternative to the measure of
net cash provided by (used in) operating activities recorded under U.S. GAAP. Free cash flow may
not be comparable to similarly titled measures reported by other companies.
Table 3
|
|
|
|
|
|
|
|
|
Reconciliation of working capital |
|
September 30, |
|
December 31, |
(Dollars in thousands) |
|
2009 |
|
2008 |
|
Accounts receivable (net) |
|
$ |
91,119 |
|
|
$ |
76,072 |
|
Plus: Inventories (net) |
|
|
153,523 |
|
|
|
185,242 |
|
Less: Accounts payable |
|
|
52,087 |
|
|
|
54,428 |
|
|
Working capital |
|
$ |
192,555 |
|
|
$ |
206,886 |
|
|
We define working capital as net accounts receivable plus net inventories less accounts
payable.
We believe that working capital is important supplemental information for investors in evaluating
liquidity in that it provides insight into the availability of net current resources to fund our
ongoing operations. Working capital is a measure used by management in internal evaluations of cash
availability and operational performance.
Working capital is used in conjunction with and in addition to results presented in accordance with
U.S. GAAP. Working capital is neither intended to represent nor be an alternative to any measure of
liquidity and operational performance recorded under U.S. GAAP. Working capital may not be
comparable to similarly titled measures reported by other companies.
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Currency
We are exposed to market risks due to changes in currency values, although the majority of our
revenues and expenses are denominated in U.S. dollars. The currency market risks include
devaluations and other major currency fluctuations relative to the U.S. dollar, euro, RMB or
Mexican peso that could reduce the cost competitiveness of our products compared to foreign
competition.
Interest Rates
We are exposed to market risks associated with changes in interest rates on our floating debt and
have entered into Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0
million of debt as a means to manage our exposure to fluctuating interest rates. The Rate
Agreements effectively convert this portion of our long-term borrowings from variable rate debt to
fixed-rate
48
debt, thus reducing the impact of interest rate changes on future income. We had $167.6 million of
debt subject to fluctuating interest rates at September 30, 2009. A change of one percentage point
in such rates would result in a change in interest expense of approximately $1.7 million on an
annual basis. If the counterparties to these Rate Agreements were to fail to perform, we would no
longer be protected from interest rate fluctuations by these Rate Agreements. However, we do not
anticipate nonperformance by the counterparties. All interest rate swap counterparties were rated
A+ or better as of September 30, 2009, by Standard and Poors.
Natural Gas
We are also exposed to market risks associated with changes in the price of natural gas. We use
commodity futures contracts related to forecasted future North American natural gas requirements of
our manufacturing operations. The objective of these futures contracts is to limit the fluctuations
in prices paid and potential losses in earnings or cash flows from adverse price movements in the
underlying natural gas commodity. We consider the forecasted natural gas requirements of our
manufacturing operations 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. For our natural gas requirements that are not hedged, we are subject
to changes in the price of natural gas, which affect our earnings. If the counterparties to these
futures contracts were to fail to perform, we would no longer be protected from natural gas
fluctuations by the futures contracts. However, we do not anticipate nonperformance by these
counterparties. All counterparties were rated BBB+ or better by Standard and Poors as of September
30, 2009.
Retirement Plans
We are exposed to market risks associated with changes in the various capital markets. Changes in
long-term interest rates affect the discount rate that is used to measure our benefit obligations
and related expense. Changes in the equity and debt securities markets affect the performance of
our pension plans asset performance and related pension expense. Sensitivity to these key market
risk factors is as follows:
|
|
|
A change of 1 percent in the discount rate would change our total annual expense by
approximately $1.9 million. |
|
|
|
|
A change of 1 percent in the expected long-term rate of return on plan assets would
change annual pension expense by approximately $2.2 million. |
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Securities Exchange Act of 1934 (the Exchange Act) reports are
recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commissions rules and forms and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well-designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures
as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level.
There has been no change in our controls over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.
49
PART II OTHER INFORMATION
This document and supporting schedules contain statements that are not historical facts and
constitute projections, forecasts or forward-looking statements. These forward-looking statements
reflect only our best assessment at this time, and may be identified by the use of words or phrases
such as anticipate, believe, expect, intend, may, planned, potential, should,
will, would or similar phrases. Such forward-looking statements involve risks and uncertainty;
actual results may differ materially from such statements, and undue reliance should not be placed
on such statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially and adversely from those expressed in any
forward-looking statements. We undertake no obligation to revise or update any forward-looking
statements for any reason.
Item 1A. Risk Factors
The following factors are the most significant factors that can impact period-to-period comparisons
and may affect the future performance of our businesses. New risks may emerge, and management
cannot predict those risks or estimate the extent to which they may affect our financial
performance.
|
|
|
Our cost-reduction projects may not result in anticipated savings in operating costs. |
|
|
|
|
Slowdowns in the retail, travel, restaurant and bar, or entertainment industries, such as
those caused by general economic downturns, terrorism, health concerns or strikes or
bankruptcies within those industries, could reduce our revenues and production activity
levels. |
|
|
|
|
If we have a fair value impairment in a business segment, net earnings and net worth
could be materially adversely affected by a write down of goodwill or intangible assets. |
|
|
|
|
We face intense competition and competitive pressures that could adversely affect our
results of operations and financial condition. |
|
|
|
|
International economic and political factors could affect demand for imports and exports,
and our financial condition and results of operations could be adversely impacted as a
result. |
|
|
|
|
We may not be able to effectively integrate future businesses we acquire. |
|
|
|
|
We may not be able to achieve the international growth contemplated by our strategic
plan. |
|
|
|
|
Natural gas, the principal fuel we use to manufacture our products, is subject to
fluctuating prices; fluctuations in natural gas prices could adversely affect our results of
operations and financial condition. |
|
|
|
|
If we are unable to obtain sourced products or materials at favorable prices, our
operating performance may be adversely affected. |
|
|
|
|
Charges related to our employee pension and postretirement welfare plans resulting from
market risk and headcount realignment may adversely affect our results of operations and
financial condition. |
|
|
|
|
Our business requires significant capital investment and maintenance expenditures that we
may be unable to fulfill. |
|
|
|
|
Our business requires us to maintain a large fixed cost base that can affect our
profitability. |
|
|
|
|
Unexpected equipment failures may lead to production curtailments or shutdowns. |
|
|
|
|
If our investments in new technology and other capital expenditures do not yield expected
returns, our results of operations could be reduced. |
|
|
|
|
We rely on increasingly complex information systems for management of our manufacturing,
distribution, sales and other functions. If our information systems fail to perform these
functions adequately or if we experience an interruption in their operation, our business
and results of operations could suffer. |
50
|
|
|
We may not be able to renegotiate collective bargaining agreements successfully when they
expire; organized strikes or work stoppages by unionized employees may have an adverse effect on our operating performance. |
|
|
|
|
We are subject to risks associated with operating in foreign countries. These risks could
adversely affect our results of operations and financial condition. |
|
|
|
|
High levels of inflation and high interest rates in Mexico could adversely affect the
operating results and cash flows of Crisa. |
|
|
|
|
Fluctuation of the currencies in which we conduct operations could adversely affect our
financial condition and results of operations. |
|
|
|
|
Fluctuations in the value of the foreign currencies in which we operate relative to the
U.S. dollar could reduce the cost competitiveness of our products or those of our
subsidiaries. |
|
|
|
|
Devaluation or depreciation of, or governmental conversion controls over, the foreign
currencies in which we operate could affect our ability to convert the earnings of our
foreign subsidiaries into U.S. dollars. |
|
|
|
|
If our hedges do not qualify as highly effective or if we do not believe that forecasted
transactions would occur, the changes in the fair value of the derivatives used as hedges
would be reflected in our earnings. |
|
|
|
|
We are subject to various environmental legal requirements and may be subject to new
legal requirements in the future; these requirements could have a material adverse effect on
our operations. |
|
|
|
|
We received notice from the New York Stock Exchange (NYSE) that our stock was delisted
before the start of trading on April 20, 2009. Our shares are now traded on the Over the
Counter Bulletin Board (OTC BB). There can be no assurance that we may be able to regain
our listing on the NYSE or any other exchange. |
|
|
|
|
Our failure to protect our intellectual property or prevail in any intellectual property
litigation could materially and adversely affect our competitive position, reduce revenue or
otherwise harm our business. |
|
|
|
|
Our business may suffer if we do not retain our senior management. |
|
|
|
|
Payment of severance or retirement benefits earlier than anticipated could strain our
cash flow. |
|
|
|
|
We may face a risk when we return to the market to refinance our debt as a result of the
June, 2009 downgrade of the Companys debt by Moodys Investor Service. |
|
|
|
|
Our facilities may be impacted by the outbreak of certain public health
issues, including epidemics, pandemics and other contagious diseases such as the H1N1
influenza virus, commonly referred to as the swine flu. If a severe outbreak were to
occur where we have facilities, it could adversely impact our results of
operations and financial condition. |
|
|
|
|
Our RMB Working Capital Loan is scheduled to mature in March, 2010. If the China
Construction Bank does not agree to extend or refinance the loan, or if the loan is called,
our liquidity and financial condition may be adversely impacted. |
|
|
|
|
Our high level of debt, as well as incurrence of additional debt, may limit our
operating flexibility, which could adversely affect our results of operations and
financial condition and prevent us from fulfilling our obligations. |
|
|
|
|
We have a high degree of financial leverage. As of September 30, 2009, we had $526.7 million
of debt outstanding, net of discounts and warrants. Of that amount: |
|
|
|
approximately $0.0 million consisted of debt under our ABL
Facility, which is secured by a first-priority lien on our assets; |
|
|
|
|
approximately $306.0 million consisted of the Senior
Secured Notes, which are secured by a second-priority lien on our
collateral; |
|
|
|
|
approximately $160.9 million consisted of the PIK Notes,
which are secured by a third-priority lien on our collateral (see note
14 for a discussion of our October 28, 2009 announcement of a debt
exchange with respect to the PIK Notes); |
51
|
|
|
RMB 250 million (approximately $36.7 million) consisted of
a loan made by China Construction Bank Corporation Langfang Economic
Development Area Sub-Branch (CCBC), the entire proceeds of which we
used to finance the construction of our Greenfield manufacturing
facility in China that began operations in early 2007; |
|
|
|
|
RMB 50 million (approximately $7.3 million) consisted of a
loan, which is fully drawn, made by CCBC to finance the working
capital needs of our China facility; and |
|
|
|
|
11 million euro (approximately $16.1 million) consisted of
a loan, which is fully drawn, made by Banco Espirito Santo, S.A. (BES
Euro Line) to finance operational improvements associated with our
Portuguese operations. |
Our ABL Facility provides for borrowings up to $150.0 million by Libbey Glass and Libbey
Europe B.V. (a non-guarantor subsidiary). As a result of borrowing base limitations, the
remaining unused availability under the ABL Facility at September 30, 2009 was $81.3 million.
Since we issued the PIK Notes in 2006, interest has been payable semi-annually through the
issuance of additional PIK Notes. Commencing December 1, 2009, interest on the PIK Notes will
be payable semi-annually in cash. Under the terms and conditions in place at September 30,
2009, the semi-annual cash interest payment that we were obligated to make on the PIK Notes on
December 1, 2009 was approximately $12.9 million. Please see note 14 for a discussion of our
October 28, 2009 announcement of a debt exchange with respect to the PIK Notes.
Our loan agreements, including our agreements governing the ABL Facility, the indenture
governing the Senior Secured Notes and the indenture governing the PIK Notes, require us to
comply with certain covenants. For example, our ABL Facility requires us to maintain a
minimum fixed charge coverage ratio if the remaining unused availability under our ABL
Facility is less than $15.0 million.
Although the respective indentures governing the Senior Secured Notes and the PIK Notes do not
contain financial covenants, they do contain other covenants that limit our operational and
financial flexibility, such as by limiting the additional indebtedness that we may incur,
limiting certain business activities, investments and payments, and limiting our ability to
dispose of certain assets.
Our agreements governing the ABL Facility, the Senior Secured Notes and the PIK Notes limit
the additional indebtedness that we may incur, but we are permitted, subject to certain
limitations, to incur additional debt in the future.
Our high degree of leverage, as well as the incurrence of additional debt, could have
important consequences for our business, such as:
|
|
|
making it more difficult for us to satisfy our financial
obligations, including with respect to the Senior Secured Notes and
the PIK Notes; |
|
|
|
|
limiting our ability to make capital investments in order
to expand our business; |
|
|
|
|
limiting our ability to obtain additional debt or equity
financing for working capital, capital expenditures, product
development, debt service requirements, acquisitions or other
purposes; |
|
|
|
|
limiting our ability to invest operating cash flow in our
business and future business opportunities, because we use a
substantial portion of these funds to service debt and because our
covenants restrict the amount of our investments; and |
|
|
|
|
limiting our ability to withstand business and economic
downturns and/or place us at a competitive disadvantage compared to
our competitors that have less debt, because of the high percentage of
our operating cash flow that is dedicated to servicing our debt. |
Although we have taken a number of steps to enhance our liquidity to date in 2009 (including
those announced in February 2009), if cash generated from operations is insufficient to
satisfy our liquidity requirements, if we cannot service our debt or if we fail to meet our
covenants, we could have substantial liquidity problems. In those circumstances, we might have
to sell assets, delay planned investments, obtain additional equity capital or restructure our
debt. Global financial markets and economic conditions have been, and continue to be
volatile. The credit and capital markets remain challenging. These issues
may make it difficult to obtain funding in future periods. If cash from operations and cash
available from our ABL Facility are
52
not sufficient to meet our needs, which would have
included our obligation to pay the cash interest on the PIK Notes that was payable on December
1, 2009, (please see note 14 for a discussion of our October 28, 2009 announcement of a debt
exchange with respect to the PIK Notes), we cannot provide assurance that we will be able to
obtain additional financing in sufficient amounts and/or on acceptable terms in the future or
when our ABL Facility matures in December 2010.
In addition, our failure to comply with the covenants contained in our loan agreements could
result in an event of default that, if not cured or waived, could result in the acceleration
of all of our indebtedness.
For further information concerning our borrowings, see Managements Discussion and Analysis;
Capital Resources and Liquidity Borrowings and Note 4 to our Consolidated Financial
Statements.
53
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuers Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Maximum Number of |
|
|
|
|
|
|
Part of Publicly |
|
Shares that May Yet Be |
|
|
Total Number of |
|
Average Price |
|
Announced Plans or |
|
Purchased Under the |
Period |
|
Shares Purchased |
|
Paid per Share |
|
Programs |
|
Plans or Programs (1) |
|
July 1 to July 31, 2009
|
|
|
|
|
|
|
|
|
1,000,000 |
|
August 1 to August 31, 2009
|
|
|
|
|
|
|
|
|
1,000,000 |
|
September 1 to September 30, 2009
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
Total
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
|
|
(1) |
|
We announced on December 10, 2002, that our Board of Directors authorized the purchase of up
to 2,500,000 shares of our common stock in the open market and negotiated purchases. There is
no expiration date for this plan. In 2003, 1,500,000 shares of our common stock were purchased
for $38.9 million. No additional shares were purchased in 2008, 2007, 2006, 2005 or 2004. Our
ABL Facility and the indentures governing the Senior Secured Notes and the PIK Notes
significantly restrict our ability to repurchase additional shares. |
Item 5. Other Information
(b) |
|
There has been no material change to the procedures by which security holders may recommend
nominees to the Companys board of directors. |
54
Item 6. Exhibits
Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as part of this report.
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
3.1 |
|
|
Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrants Quarterly
Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). |
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.01 to Registrants Form 8-K filed
February 7, 2005 and incorporated herein by reference). |
|
|
|
|
|
|
4.1 |
|
|
Credit Agreement, dated June 16, 2006, among Libbey Glass Inc. and Libbey Europe B.V., Libbey Inc.,
the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., J.P.
Morgan Europe Limited, LaSalle Bank Midwest National Association, Wells Fargo Foothill, LLC, Fifth
Third Bank, and J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger. (filed as
Exhibit 4.1 to Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference. The
schedules to such Credit Agreement were filed as Exhibit 4.1 to Registrants Form 10-Q filed August
7, 2009 and incorporated herein by reference. The Exhibits to such Credit Agreement are filed
herein.) |
|
|
|
|
|
|
4.2 |
|
|
Indenture, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors
party thereto and The Bank of New York Trust Company, N.A., as trustee. (filed as Exhibit 4.5 to
Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.3 |
|
|
Form of Floating Rate Senior Secured Note due 2011. (filed as Exhibit 4.4 to Libbey Glass Inc.s
Registration Statement on Form S-4; File No. 333-139358). |
|
|
|
|
|
|
4.4 |
|
|
Registration Rights Agreement, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the
Subsidiary Guarantors party thereto and the Initial Purchasers named therein. (filed as Exhibit 4.4
to Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.5 |
|
|
Amended
and Restated Indenture, dated October 28, 2009, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors
party thereto and Merrill Lynch PCG, Inc. (filed as Exhibit 4.1
to Registrants Form 8-K filed October 29, 2009 and incorporated herein by reference). |
|
|
|
|
|
|
4.6 |
|
|
Form
of 16% Senior Subordinated Secured Note due 2021. (filed as
Exhibit 4.5 to
Registrants Form 8-K filed October 29, 2009 and incorporated herein by reference). |
|
|
|
|
|
|
4.7 |
|
|
Warrant, issued June 16, 2006. (filed as Exhibit 4.7 to Registrants Form 8-K filed June 21, 2006
and incorporated herein by reference). |
|
|
|
|
|
|
4.8 |
|
|
Amended
and Restated Registration Rights Agreement, dated October 28,
2009, among Libbey Inc. and Merrill Lynch PCG, Inc.
(filed as Exhibit 4.4 to Registrants Form 8-K filed
October 29, 2009 and incorporated herein by
reference). |
|
|
|
|
|
|
4.9 |
|
|
Intercreditor Agreement, dated June 16, 2006, among Libbey Glass Inc., JPMorgan Chase Bank, N.A.,
The Bank of New York Trust Company, N.A., Merrill Lynch PCG, Inc. and the Loan Parties party
thereto. (filed as Exhibit 4.9 to Registrants Form 8-K filed June 21, 2006 and incorporated herein
by reference). |
|
|
|
|
|
|
4.10 |
|
|
Amendment and Waiver, dated November 7, 2008, among Libbey Glass Inc. and Libbey Europe B.V., Libbey
Inc., the other loan parties thereto, JPMorgan Chase Bank, N.A., J.P. Morgan Europe Limited, Bank of
America, N.A. (f/k/a LaSalle Bank Midwest National Association), Wells Fargo Foothill, LLC, Fifth
Third Bank, and J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger (filed as
Exhibit 4.10 to Libbey Incs Quarterly Report on Form 10-Q for the quarter ended September 30, 2008
and incorporated herein by reference). |
|
|
|
|
|
|
4.11 |
|
|
Series I Warrant, issued October 28, 2009 (filed as
Exhibit 4.3 to Registrants Form 8-K filed October 29,
2009 and incorporated herein by reference).
|
|
|
|
|
|
|
4.12 |
|
|
Reaffirmation Agreement, dated October 28, 2009 (filed as
Exhibit 4.2 to Registrants Form 8-K filed October 29, 2009
and incorporated herein by reference). |
|
|
|
|
|
|
4.12 |
|
|
Amendment and Waiver No. 2, dated October 27, 2009, among Libbey
Glass Inc. and Libbey Europe B.V., J.P. Morgan Chase Bank, N.A., J.P.
Morgan Europe Limited, Wells Fargo Foothill, LLC, Fifth Third Bank,
Bank of America, N.A. and GE Business Financial Services, Inc. (filed
as Exhibit 10.2 to Registrants Form 8-K filed October 29, 2009
and incorporated herein by reference).
|
|
|
|
|
|
|
10.1 |
|
|
Pension and Savings Plan Agreement dated as of June 17, 1993 between Owens-Illinois, Inc. and Libbey
Inc. (filed as Exhibit 10.4 to Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended
June 30, 1993 and incorporated herein by reference). |
|
|
|
|
|
|
10.2 |
|
|
Cross-Indemnity Agreement dated as of June 24, 1993 between Owens-Illinois, Inc. and Libbey Inc.
(filed as Exhibit 10.5 to Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30,
1993 and incorporated herein by reference). |
|
|
|
|
|
|
10.3 |
|
|
The Amended and Restated Libbey Inc. Stock Option Plan for Key Employees (filed as Exhibit 10.14 to
Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated
herein by reference). |
|
|
|
|
|
|
10.4 |
|
|
Libbey Inc. Guarantee dated as of October 10, 1995 in favor of The Pfaltzgraff Co., The Pfaltzgraff
Outlet Co. and Syracuse China Company of Canada Ltd. guaranteeing certain obligations of
LG Acquisition Corp. and Libbey Canada Inc. under the Asset Purchase Agreement for the Acquisition
of Syracuse China (Exhibit 2.0) in the event certain contingencies occur (filed as Exhibit 10.17 to
Libbey Inc.s Current Report on Form 8-K dated October 10, 1995 and incorporated herein by
reference). |
|
|
|
|
|
|
10.5 |
|
|
Susquehanna Pfaltzgraff Co. Guarantee dated as of October 10, 1995 in favor of LG Acquisition Corp.
and Libbey Canada Inc. guaranteeing certain obligations of The Pfaltzgraff Co., The Pfaltzgraff
Outlet Co. and Syracuse China Company of Canada, Ltd. under the Asset Purchase Agreement for the
Acquisition of Syracuse China (Exhibit 2.0) in the event certain |
55
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
contingencies occur (filed as
Exhibit 10.18 to Libbey Inc.s Current Report on Form 8-K dated October 10, 1995 and incorporated
herein by reference). |
|
|
|
|
|
|
10.6 |
|
|
First Amended and Restated Libbey Inc. Executive Savings Plan (filed as Exhibit 10.23 to
Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated
herein by reference). |
|
|
|
|
|
|
10.7 |
|
|
Form of Non-Qualified Stock Option Agreement between Libbey Inc. and certain key employees
participating in The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.69 to
Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and
incorporated herein by reference). |
|
|
|
|
|
|
10.8 |
|
|
The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.67 to Libbey Inc.s Annual
Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). |
|
|
|
|
|
|
10.9 |
|
|
Stock Promissory Sale and Purchase Agreement between VAA Vista Alegre Atlantis SGPS, SA and Libbey
Europe B.V. dated January 10, 2005 (filed as Exhibit 10.76 to Libbey Inc.s Annual Report on
Form 10-K for the year ended December 31, 2004 and incorporated herein by reference). |
|
|
|
|
|
|
10.10 |
|
|
RMB Loan Contract between Libbey Glassware (China) Company Limited and China Construction Bank
Corporation Langfang Economic Development Area Sub-branch entered into January 23, 2006 (filed as
exhibit 10.75 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2005 and
incorporated herein by reference). |
|
|
|
|
|
|
10.11 |
|
|
Guarantee Contract executed by Libbey Inc. for the benefit of China Construction Bank Corporation
Langfang Economic Development Area Sub-branch (filed as exhibit 10.76 to Libbey Inc.s Annual Report
on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference). |
|
|
|
|
|
|
10.12 |
|
|
Guaranty, dated May 31, 2006, executed by Libbey Inc. in favor of Fondo Stiva S.A. de C.V. (filed as
exhibit 10.2 to Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and
incorporated herein by reference). |
|
|
|
|
|
|
10.13 |
|
|
Guaranty Agreement, dated June 16, 2006, executed by Libbey Inc. in favor of Vitro, S.A. de C.V.
(filed as exhibit 10.3 to Libbey Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30,
2006 and incorporated herein by reference). |
|
|
|
|
|
|
10.14 |
|
|
Transition Services Agreement, dated June 16, 2006, among Crisa Libbey S.A. de C.V., Vitrocrisa
Holding, S. de R.L. de C.V., Vitrocrisa S. de R.L. de C.V., Vitrocrisa Comercial, S. de R.L. de
C.V., Crisa Industrial, L.L.C. and Vitro S.A. de C.V. (filed as exhibit 10.1 to Libbey Inc.s
Current Report on Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
10.15 |
|
|
2006 Omnibus Incentive Plan of Libbey Inc. (filed as Exhibit 10.1 to Registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
10.16 |
|
|
Libbey Inc. Amended and Restated Deferred Compensation Plan for Outside Directors (incorporated by
reference to Exhibit 10.61 to Libbey Glass Inc.s Registration Statement on Form S-4; File
No. 333-139358). |
|
|
|
|
|
|
10.17 |
|
|
Form of Registered Global Floating Rate Senior Secured Note, Series B, due 2011 (filed as exhibit
10.55 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2006 and
incorporated herein by reference). |
|
|
|
|
|
|
10.18 |
|
|
2009 Director Deferred Compensation Plan (filed as Exhibit 10.51 to Libbey Incs Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.19 |
|
|
Executive Deferred Compensation Plan (filed as Exhibit 10.52 to Libbey Incs Quarterly Report on
Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.20 |
|
|
Amended and Restated Employment Agreement dated as of December 31, 2008 between Libbey Inc. and John
F. Meier (filed as exhibit 10.29 to Libbey Inc.s Annual Report on Form 10-K for the year ended
December 31, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.21 |
|
|
Amended and Restated Employment Agreement dated as of December 31, 2008 between Libbey Inc. and
Richard I. Reynolds (filed as exhibit 10.30 to Libbey Inc.s Annual Report on Form 10-K for the year
ended December 31, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.22 |
|
|
Amended and Restated Employment Agreement dated as of December 31, 2008 between Libbey Inc. and
Gregory T. Geswein (filed as exhibit 10.31 to Libbey Inc.s Annual Report on Form 10-K for the year
ended December 31, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.23 |
|
|
Form of Amended and Restated Employment Agreement dated as of December 31, 2008 between Libbey Inc.
and the respective executive officers identified on Appendix 1 thereto (filed as exhibit 10.32 to
Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated
herein by reference). |
|
|
|
|
|
|
10.24 |
|
|
Amended and restated change in control agreement dated as of December 31, 2008 between Libbey Inc.
and John F. Meier (filed as exhibit 10.33 to Libbey Inc.s Annual Report on Form 10-K for the year
ended December 31, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.25 |
|
|
Form of amended and restated change in control agreement dated as of December 31, 2008 between
Libbey Inc. and the respective executive officers identified on Appendix 1 thereto (filed as exhibit
10.34 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2008 and
incorporated herein by reference). |
|
|
|
|
|
|
10.26 |
|
|
Form of amended and restated change in control agreement dated as of December 31, 2008 between
Libbey Inc. and the |
56
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
respective individuals identified on Appendix 1 thereto (filed as exhibit 10.35
to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated
herein by reference). |
|
|
|
|
|
|
10.27 |
|
|
Form of Amended and Restated Indemnity Agreement dated as of December 31, 2008 between Libbey Inc.
and the respective officers identified on Appendix 1 thereto (filed as exhibit 10.36 to Libbey
Inc.s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by
reference). |
|
|
|
|
|
|
10.28 |
|
|
Form of Amended and Restated Indemnity Agreement dated as of December 31, 2008 between Libbey Inc.
and the respective outside directors identified on Appendix 1 thereto (filed as exhibit 10.37 to
Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated
herein by reference). |
|
|
|
|
|
|
10.29 |
|
|
Amended and Restated Libbey Inc. Supplemental Retirement Benefit Plan effective December 31, 2008
(filed as exhibit 10.38 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31,
2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.30 |
|
|
Amendment to the First Amended and Restated Libbey Inc. Executive Savings Plan effective December
31, 2008 (filed as exhibit 10.39 to Libbey Inc.s Annual Report on Form 10-K for the year ended
December 31, 2008 and incorporated herein by reference). |
|
|
|
|
|
|
10.31 |
|
|
Debt
Exchange Agreement, dated October 28, 2009, among Libbey Inc.,
Libbey Glass
Inc. and Merrill Lynch PCG, Inc. (filed as Exhibit 10.1 to
Registrants Form 8-K filed October 29, 2009 and incorporated herein by reference). |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
|
|
|
|
|
|
32.1 |
|
|
Chief Executive Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein). |
|
|
|
|
|
|
32.2 |
|
|
Chief Financial Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein). |
57
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
LIBBEY INC.
|
|
Date: November 9, 2009 |
By |
/s/ Gregory T. Geswein
|
|
|
Gregory T. Geswein, |
|
|
Vice President, Chief Financial Officer |
|
|
58