e10vq
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2010
OR
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o |
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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)
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Delaware
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34-1559357 |
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(State or other jurisdiction of incorporation or organization)
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(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.
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Large Accelerated Filer o
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Accelerated Filer o
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Non-Accelerated Filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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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, $.01 par value 19,679,232 shares at October 29, 2010.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and all
majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance
with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information
and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by U.S. GAAP for complete financial
statements. In the opinion of management, all adjustments (including normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the
three-month and nine-month periods ended September 30, 2010 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2010.
The balance sheet at December 31, 2009 has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by U.S. GAAP for
complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2009.
3
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)
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Three months ended September 30, |
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2010 |
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2009 |
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Net sales |
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$ |
200,007 |
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$ |
186,878 |
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Freight billed to customers |
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457 |
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419 |
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Total revenues |
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200,464 |
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187,297 |
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Cost of sales |
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158,779 |
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144,337 |
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Gross profit |
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41,685 |
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42,960 |
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Selling, general and administrative expenses |
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25,335 |
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24,811 |
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Restructuring charges |
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700 |
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300 |
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Income from operations |
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15,650 |
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17,849 |
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Other income |
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23 |
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2,703 |
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Earnings before interest and income taxes |
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15,673 |
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20,552 |
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Interest expense |
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11,855 |
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17,451 |
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Income before income taxes |
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3,818 |
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3,101 |
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Provision for (benefit from) income taxes |
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1,472 |
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(432 |
) |
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Net income |
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$ |
2,346 |
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$ |
3,533 |
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Net income per share: |
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Basic |
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$ |
0.13 |
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$ |
0.23 |
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Diluted |
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$ |
0.12 |
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$ |
0.23 |
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Dividends per share |
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$ |
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$ |
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See accompanying notes
4
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)
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Nine months ended September 30, |
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2010 |
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2009 |
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Net sales |
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$ |
576,947 |
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$ |
540,557 |
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Freight billed to customers |
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1,311 |
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1,163 |
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Total revenues |
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578,258 |
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541,720 |
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Cost of sales |
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454,665 |
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453,761 |
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Gross profit |
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123,593 |
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87,959 |
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Selling, general and administrative expenses |
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72,878 |
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69,699 |
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Restructuring charges |
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1,088 |
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974 |
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Income from operations |
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49,627 |
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17,286 |
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Gain on redemption of debt |
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56,792 |
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Other income |
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916 |
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5,424 |
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Earnings before interest and income taxes |
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107,335 |
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22,710 |
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Interest expense |
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33,243 |
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52,162 |
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Income (loss) before income taxes |
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74,092 |
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(29,452 |
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Provision for (benefit from) income taxes |
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6,769 |
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(7,756 |
) |
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Net income (loss) |
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$ |
67,323 |
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$ |
(21,696 |
) |
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Net income (loss) per share: |
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Basic |
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$ |
3.98 |
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$ |
(1.45 |
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Diluted |
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$ |
3.26 |
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$ |
(1.45 |
) |
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Dividends per share |
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$ |
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$ |
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See accompanying notes
5
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
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September 30, 2010 |
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December 31, 2009 |
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(unaudited) |
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Assets: |
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Cash and cash equivalents |
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$ |
35,568 |
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$ |
55,089 |
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Accounts receivable net |
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110,574 |
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82,424 |
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Inventories net |
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159,374 |
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144,015 |
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Prepaid and other current assets |
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12,374 |
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11,783 |
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Total current assets |
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317,890 |
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293,311 |
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Pension asset |
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10,700 |
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9,454 |
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Purchased intangible assets net |
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23,594 |
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24,861 |
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Goodwill |
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168,320 |
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168,320 |
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Other assets |
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21,556 |
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8,854 |
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Total other assets |
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224,170 |
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211,489 |
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Property, plant and equipment net |
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272,723 |
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290,013 |
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Total assets |
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$ |
814,783 |
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$ |
794,813 |
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Liabilities and Shareholders Equity (Deficit): |
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Notes payable |
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$ |
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$ |
672 |
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Accounts payable |
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58,937 |
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58,838 |
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Salaries and wages |
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29,328 |
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34,064 |
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Accrued liabilities |
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48,532 |
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35,699 |
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Accrued restructuring charges |
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921 |
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1,016 |
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Pension liability (current portion) |
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2,031 |
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1,984 |
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Non-pension postretirement benefits (current portion) |
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4,363 |
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4,363 |
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Derivative liability |
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5,730 |
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3,346 |
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Deferred income taxes |
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3,511 |
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3,559 |
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Long-term debt due within one year |
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9,878 |
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9,843 |
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Total current liabilities |
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163,231 |
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153,384 |
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Long-term debt |
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446,224 |
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504,724 |
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Pension liability |
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113,314 |
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119,727 |
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Non-pension postretirement benefits |
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65,447 |
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64,780 |
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Deferred income taxes |
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6,196 |
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6,226 |
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Other long-term liabilities |
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12,018 |
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12,879 |
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Total liabilities |
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806,430 |
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861,720 |
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Shareholders equity (deficit): |
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Common stock, par value $.01 per share, 50,000,000
shares authorized, 19,678,152
shares issued at September 30, 2010 and
18,697,630 shares at December 31, 2009 |
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197 |
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187 |
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Capital in excess of par value (includes warrants of
$1,034 based on 485,309 shares
at September 30, 2010 and and $15,560 based on
3,952,165 at December 31, 2009) |
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299,719 |
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324,272 |
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Treasury stock, at cost, 0 shares at September 30,
2010 and 2,599,769 shares in 2009 |
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(70,298 |
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Accumulated deficit |
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(181,439 |
) |
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(205,344 |
) |
Accumulated other comprehensive loss |
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(110,124 |
) |
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(115,724 |
) |
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Total shareholders equity (deficit) |
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8,353 |
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(66,907 |
) |
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Total liabilities and shareholders equity (deficit) |
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$ |
814,783 |
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$ |
794,813 |
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See accompanying notes
6
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
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Three months ended September 30, |
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2010 |
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2009 |
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Operating activities: |
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Net income |
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$ |
2,346 |
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$ |
3,533 |
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Adjustments to reconcile net income to net cash (used in) provided by
operating activities: |
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Depreciation and amortization |
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10,040 |
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10,629 |
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Loss on asset disposals |
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78 |
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77 |
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Change in accounts receivable |
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(15,355 |
) |
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|
864 |
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Change in inventories |
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(2,418 |
) |
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(6,196 |
) |
Change in accounts payable |
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77 |
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(3,191 |
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Accrued interest and amortization of discounts, warrants and finance fees |
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(8,996 |
) |
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13,447 |
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Pension & non-pension postretirement benefits |
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917 |
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(453 |
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Restructuring charges |
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627 |
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(1,086 |
) |
Accrued liabilities & prepaid expenses |
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7,007 |
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8,344 |
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Accrued income taxes |
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1,129 |
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(862 |
) |
Other operating activities |
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|
1,768 |
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1,533 |
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Net cash (used in) provided by operating activities |
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(2,780 |
) |
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|
26,639 |
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Investing activities: |
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Additions to property, plant and equipment |
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(7,743 |
) |
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(2,737 |
) |
Proceeds from asset sales and other |
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172 |
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Net cash used in investing activities |
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(7,743 |
) |
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(2,565 |
) |
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Financing activities: |
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Net repayments on ABL credit facility |
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(16,799 |
) |
Other repayments |
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(878 |
) |
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(662 |
) |
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Net cash used in financing activities |
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(878 |
) |
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(17,461 |
) |
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Effect of exchange rate fluctuations on cash |
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796 |
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(47 |
) |
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(Decrease) increase in cash |
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(10,605 |
) |
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6,566 |
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Cash at beginning of period |
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46,173 |
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|
24,082 |
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Cash at end of period |
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$ |
35,568 |
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$ |
30,648 |
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Supplemental disclosure of cash flows information: |
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Cash paid during the period for interest |
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$ |
21,765 |
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$ |
894 |
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Cash refunded during the period for income taxes |
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$ |
(243 |
) |
|
$ |
(546 |
) |
See accompanying notes
7
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
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Nine months ended September 30, |
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|
2010 |
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|
2009 |
|
Operating activities: |
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|
|
|
|
|
|
Net income (loss) |
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
30,994 |
|
|
|
32,875 |
|
Loss on asset disposals |
|
|
343 |
|
|
|
109 |
|
Change in accounts receivable |
|
|
(28,967 |
) |
|
|
(14,733 |
) |
Change in inventories |
|
|
(17,218 |
) |
|
|
32,050 |
|
Change in accounts payable |
|
|
914 |
|
|
|
(3,078 |
) |
Accrued interest and amortization of discounts, warrants and finance fees |
|
|
6,795 |
|
|
|
14,998 |
|
Accrual of interest on PIK notes |
|
|
|
|
|
|
11,916 |
|
Gain on redemption of PIK notes |
|
|
(70,193 |
) |
|
|
|
|
Payment of interest on PIK notes |
|
|
(29,400 |
) |
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|
|
|
Call premium on floating rate notes |
|
|
8,415 |
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|
Write-off of bank fees & discounts on old ABL and floating rate notes |
|
|
4,986 |
|
|
|
|
|
Pension & non-pension postretirement benefits |
|
|
3,788 |
|
|
|
2,712 |
|
Restructuring charges |
|
|
3,023 |
|
|
|
(1,837 |
) |
Accrued liabilities & prepaid expenses |
|
|
4,494 |
|
|
|
21,128 |
|
Accrued income taxes |
|
|
890 |
|
|
|
(9,499 |
) |
Other operating activities |
|
|
2,980 |
|
|
|
784 |
|
|
|
|
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|
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|
Net cash (used in) provided by operating activities |
|
|
(10,833 |
) |
|
|
65,729 |
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|
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Investing activities: |
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|
|
|
|
|
|
|
Additions to property, plant and equipment |
|
|
(19,122 |
) |
|
|
(12,287 |
) |
Call premium on floating rate notes |
|
|
(8,415 |
) |
|
|
|
|
Proceeds from asset sales and other |
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(27,537 |
) |
|
|
(12,027 |
) |
|
|
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Net repayments on ABL credit facility |
|
|
|
|
|
|
(33,488 |
) |
Other repayments |
|
|
(969 |
) |
|
|
(2,785 |
) |
Other borrowings |
|
|
215 |
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Floating rate note payments |
|
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(306,000 |
) |
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|
PIK note payment |
|
|
(51,031 |
) |
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|
Proceeds from senior secured notes |
|
|
392,328 |
|
|
|
|
|
Debt issuance costs and other |
|
|
(15,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
19,055 |
|
|
|
(36,273 |
) |
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash |
|
|
(206 |
) |
|
|
(85 |
) |
|
|
|
|
|
|
|
(Decrease) increase in cash |
|
|
(19,521 |
) |
|
|
17,344 |
|
Cash at beginning of period |
|
|
55,089 |
|
|
|
13,304 |
|
|
|
|
|
|
|
|
Cash at end of period |
|
$ |
35,568 |
|
|
$ |
30,648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information: |
|
|
|
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
27,905 |
|
|
$ |
20,897 |
|
Cash paid during the period for income taxes |
|
$ |
4,459 |
|
|
$ |
761 |
|
Supplemental disclosure of non-cash financing activities:
At December 31, 2009 our borrowings included a $70.2 million liability representing carrying value
in excess of the principal amount for our PIK notes (see notes 6 and 20 to our report on Form 10-K
for 2009). During the first quarter of 2010, the PIK notes were redeemed, resulting in the
recognition of a gain of $70.2 million. The gain was offset by $13.4 million of expenses related
to the transaction, resulting in a net gain of $56.8 million on the Condensed Consolidated
Statement of Operations. See note 4 for further information on this transaction.
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. Prior to April 2009, we owned and operated a ceramic
dinnerware plant in New York (see note 5 for information on closure costs). In addition, we import
products from overseas in order to complement our line of manufactured items. The combination of
manufacturing and procurement allows us to compete in the global tableware market by offering an
extensive product line at competitive prices.
Our website can be found at www.libbey.com. We make available, free of charge, at this
website all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of Securities
Exchange Act of 1934, including our Annual Report on Form 10-K, our quarterly reports on Form 10-Q,
our current reports on Form 8-K, as well as amendments to those reports. These reports are made
available on our website as soon as reasonably practicable after their filing with, or furnishing
to, the Securities and Exchange Commission and can also be found at www.sec.gov.
Our shares are traded on the NYSE Amex exchange under the ticker symbol LBY.
2. Significant Accounting Policies
See our Form 10-K for the year ended December 31, 2009 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
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 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 and
Portugal.
Stock-Based Compensation Expense
We account for stock-based compensation expense in accordance with FASB ASC Topic 718,
Compensation Stock Compensation and FASB ASC Topic 505-50, Equity Equity-Based Payments to
Non-Employees. Stock-based compensation cost is measured based on the fair value of the equity
instruments issued. FASB ASC Topics 718 and 505-50 apply to all of our outstanding unvested
stock-based payment awards. Stock-based compensation expense charged to the Condensed Consolidated
Statement of Operations for the three months and nine months ended September 30, 2010 was $0.7
million and $2.6 million, respectively. 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.
New Accounting Standards
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 was effective for the first reporting period
(including interim periods) beginning after issuance, which for Libbey was the fourth quarter of
2009. The adoption of ASU 2009-5 did not have a material impact on our Condensed Consolidated
Financial Statements.
In January 2010, the FASB issued Accounting Standards Update 2010-06 Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements (ASU 2010-06). ASU
2010-06 requires new disclosures regarding the amounts transferring between the various Levels
within the fair value hierarchy, and increased disclosures regarding the activities impacting the
balance of items classified in Level 3 of the fair value hierarchy. In addition, ASU 2010-06
clarifies increases in existing disclosure requirements for classes of assets and liabilities
carried at fair value, and regarding the inputs and valuation techniques used to arrive at the fair
value measurements for items classified as Level 2 or Level 3 in the fair value hierarchy. The new
disclosure requirements of ASU 2010-06 were effective for Libbey in the first quarter of 2010,
except for certain disclosures regarding the activities within Level 3 fair value measurements,
which are effective for Libbey in the first quarter of 2011. The adoption of ASU 2010-06 did not
have a material impact on our Condensed 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.
10
3. Balance Sheet Details
The following table provides detail of selected balance sheet items:
|
|
|
|
|
|
|
|
|
(dollars in thousands) |
|
September 30, 2010 |
|
|
December 31, 2009 |
|
|
Accounts receivable: |
|
|
|
|
|
|
|
|
Trade receivables |
|
$ |
109,998 |
|
|
$ |
81,032 |
|
Other receivables |
|
|
576 |
|
|
|
1,392 |
|
|
Total accounts receivable, less allowances of $6,618 and $7,457 |
|
$ |
110,574 |
|
|
$ |
82,424 |
|
|
Inventories: |
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
143,065 |
|
|
$ |
126,858 |
|
Work in process |
|
|
762 |
|
|
|
1,255 |
|
Raw materials |
|
|
4,701 |
|
|
|
4,201 |
|
Repair parts |
|
|
9,599 |
|
|
|
9,933 |
|
Operating supplies |
|
|
1,247 |
|
|
|
1,768 |
|
|
Total inventories, less allowances of $4,794 and $4,528 |
|
$ |
159,374 |
|
|
$ |
144,015 |
|
|
Prepaid and other current assets: |
|
|
|
|
|
|
|
|
Value added tax |
|
$ |
6,383 |
|
|
$ |
4,946 |
|
Prepaid expenses |
|
|
5,729 |
|
|
|
6,362 |
|
Derivative asset |
|
|
147 |
|
|
|
|
|
Refundable and prepaid income taxes and other |
|
|
115 |
|
|
|
475 |
|
|
Total prepaid and other current assets |
|
$ |
12,374 |
|
|
$ |
11,783 |
|
|
Other assets: |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
895 |
|
|
$ |
583 |
|
Finance fees net of amortization |
|
|
13,571 |
|
|
|
4,056 |
|
Derivative asset (long-term portion) |
|
|
3,228 |
|
|
|
|
|
Other assets |
|
|
3,862 |
|
|
|
4,215 |
|
|
Total other assets |
|
$ |
21,556 |
|
|
$ |
8,854 |
|
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
Accrued incentives |
|
$ |
20,621 |
|
|
$ |
13,790 |
|
Workers compensation |
|
|
9,384 |
|
|
|
8,834 |
|
Medical liabilities |
|
|
3,778 |
|
|
|
2,948 |
|
Interest |
|
|
5,034 |
|
|
|
1,998 |
|
Commissions payable |
|
|
1,070 |
|
|
|
1,134 |
|
Other accrued liabilities |
|
|
8,645 |
|
|
|
6,995 |
|
|
Total accrued liabilities |
|
$ |
48,532 |
|
|
$ |
35,699 |
|
|
Other long-term liabilities: |
|
|
|
|
|
|
|
|
Derivative liability (long term portion) |
|
$ |
497 |
|
|
$ |
2,061 |
|
Deferred liability |
|
|
4,158 |
|
|
|
3,350 |
|
Other long-term liabilities |
|
|
7,363 |
|
|
|
7,468 |
|
|
Total other long-term liabilities |
|
$ |
12,018 |
|
|
$ |
12,879 |
|
|
11
4. Borrowings
On February 8, 2010, we completed the refinancing of substantially all of the existing indebtedness
of our wholly-owned subsidiaries Libbey Glass and Libbey Europe B.V. The refinancing included:
|
|
the entry into an amended and restated credit agreement with respect to our ABL Facility; |
|
|
|
the issuance of $400.0 million in aggregate principal amount of 10.0 percent Senior Secured
Notes of Libbey Glass due 2015; |
|
|
|
the repurchase and cancellation of all of Libbey Glasss then outstanding $306.0 million in
aggregate principal amount of floating rate notes; and |
|
|
|
the redemption of all of Libbey Glasss then outstanding $80.4 million in aggregate
principal amount 16.0 percent PIK notes. |
We used the proceeds of the offering of the Senior Secured Notes, together with cash on hand, to
fund the repurchase of the floating rate notes, the redemption of the PIK notes and to pay certain
related fees and expenses. Upon completion of the refinancing, we recorded a gain of $70.2 million
related to the redemption of the PIK notes. This gain was partially offset by $13.4 million
representing a write-off of bank fees, discounts and a call premium on the floating rate notes,
resulting in a net gain of $56.8 million as shown on the Condensed Consolidated Statement of
Operations.
As part of an exchange transaction last year involving our PIK notes, 933,145 shares were issued to
Merrill Lynch PCG, Inc. in October, 2009 along with warrants conveying the right to purchase, for
$0.01 per share, an additional 3,466,856 shares of our common stock. Please see note 6 to our
Annual Report on Form 10-K for the year ended December 31, 2009 for further information on this
transaction. The additional 3.5 million shares were issued in August, 2010 as the warrant holder
chose to exercise these warrants, and on August 18, 2010, we announced the closing of a secondary
offering of these 4.4 million shares of our common stock on behalf of Merrill Lynch PCG, Inc., the
selling stockholder, at a price to the public of $10.25 per share. The total offering size reflects
the underwriters exercise of their option to purchase an additional 573,913 shares of common
stock, on the same terms and conditions, to cover over-allotments. We did not receive any proceeds
from the offering. The fees of approximately $1.1 million related to this transaction were recorded
as Selling, General and Administrative expense in the Condensed Consolidated Statement of
Operations and were reflected in our North American Glass segment in the third quarter.
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(dollars in thousands) |
|
Interest Rate |
|
|
Maturity Date |
|
|
2010 |
|
|
2009 |
|
|
Borrowings under ABL facility |
|
floating |
|
April 8, 2014 |
|
$ |
|
|
|
$ |
|
|
Senior Secured Notes |
|
|
10.00% |
(1) |
|
February 15, 2015 |
|
|
400,000 |
|
|
|
|
|
Floating rate notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,000 |
|
PIK notes (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,431 |
|
Promissory note |
|
|
6.00 |
% |
|
October, 2010 to September, 2016 |
|
|
1,355 |
|
|
|
1,492 |
|
Notes payable |
|
floating |
|
October, 2010 |
|
|
|
|
|
|
672 |
|
RMB loan contract |
|
floating |
|
July, 2012 to January, 2014 |
|
|
37,425 |
|
|
|
36,675 |
|
RMB working capital loan |
|
floating |
|
January, 2011 |
|
|
7,485 |
|
|
|
7,335 |
|
BES Euro line |
|
floating |
|
December, 2010 to December, 2013 |
|
|
13,476 |
|
|
|
14,190 |
|
|
Total borrowings |
|
|
|
|
|
|
|
|
|
|
459,741 |
|
|
|
446,795 |
|
Less unamortized discount |
|
|
|
|
|
|
|
|
|
|
6,689 |
|
|
|
1,749 |
|
Plus carrying value adjustment on debt related to the Interest Rate Agreement (1) |
|
|
3,050 |
|
|
|
|
|
Plus carrying value in excess of principal on PIK notes (2) |
|
|
|
|
|
|
70,193 |
|
|
Total borrowings net |
|
|
|
|
|
|
|
|
|
|
456,102 |
|
|
|
515,239 |
|
Less long term debt due within one year and notes payable |
|
|
9,878 |
|
|
|
10,515 |
|
|
Total long-term portion of
borrowings net |
|
$ |
446,224 |
|
|
$ |
504,724 |
|
|
|
|
|
(1) |
|
See Interest Rate Agreements under Senior Secured Notes below and in note 9. |
|
(2) |
|
On October 28, 2009, we exchanged approximately $160.9 million of Old PIK Notes for
approximately $80.4 million of New PIK Notes and additional common stock and warrants to
purchase common stock of Libbey Inc. Under U.S. GAAP, we were required to record the New
PIK Notes at their carrying value of approximately $150.6 million instead of their face
value of $80.4 million. During the first quarter of 2010, we redeemed the New PIK Notes in
conjunction with the refinancing |
12
|
|
|
|
|
discussed above and recognized the $70.2 million gain in gain on redemption of debt on the
Condensed Consolidated Statement of Operations. |
Amended and Restated ABL Credit Agreement
Pursuant to the refinancing, Libbey Glass and Libbey Europe entered into an Amended and Restated
Credit Agreement, dated as of February 8, 2010 (ABL Facility), with a group of five financial
institutions. The ABL Facility replaces the previous ABL Facility and provides for borrowings of up
to $110.0 million, subject to certain borrowing base limitations, reserves and outstanding letters
of credit.
All borrowings under the ABL Facility are secured by:
|
|
a first-priority security interest in substantially all of the existing and future real and
personal property of Libbey Glass and its domestic subsidiaries (the Credit Agreement
Priority Collateral); |
|
|
|
a first-priority security interest in: |
|
|
|
100 percent of the stock of Libbey Glass and 100 percent of the stock of
substantially all of Libbey Glasss present and future direct and indirect domestic
subsidiaries; |
|
|
|
|
100 percent of the non-voting stock of substantially all of Libbey Glasss
first-tier present and future foreign subsidiaries; and |
|
|
|
|
65 percent of the voting stock of substantially all of Libbey Glasss first-tier present and future foreign subsidiaries |
|
|
a first priority security interest in substantially all proceeds and products of the property and assets described above; and |
|
|
|
a second-priority security interest in substantially all of the owned real property, equipment and fixtures in the United States
of Libbey Glass and its domestic subsidiaries, subject to certain exceptions and permitted liens (the New Notes Priority
Collateral). |
Additionally, borrowings by Libbey Europe under the ABL Facility are secured by:
|
|
a first-priority lien on substantially all of the existing and future real and personal property of Libbey Europe and its Dutch
subsidiaries; and |
|
|
|
a first-priority security interest in: |
|
|
|
100 percent of the stock of Libbey Europe and 100 percent of the stock of
substantially all of the Dutch subsidiaries; and |
|
|
|
|
100 percent (or a lesser percentage in certain circumstances) of the outstanding
stock issued by the first tier foreign subsidiaries of Libbey Europe and its Dutch
subsidiaries. |
Swing line borrowings are limited to $15.0 million, with swing line borrowings for Libbey Europe
being limited to the US equivalent of $7.5 million. Loans comprising each CBFR (CB Floating Rate)
Borrowing, including each Swingline Loan, bear interest at the CB Floating Rate plus the Applicable
Rate, and euro-denominated 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 2.5 percent and 3.5 percent, respectively, at
September 30, 2010. Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the
total credit provided under the ABL Facility. The Commitment Fee was 0.75 percent at September 30,
2010. No financial covenants or compensating balances are required by the Agreement. There were no
Libbey Glass or Libbey Europe borrowings under the facility at September 30, 2010 or at December
31, 2009. Interest is payable on the last day of the interest period, which can range from one
month to six months.
The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible
accounts receivable and inventory. The borrowing base is the sum of (a) 85 percent of eligible
accounts receivable and (b) the lesser of (i) 85 percent of the net orderly liquidation value
(NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million.
The available total borrowing base is offset by ERISA, rent and tax reserves totaling $3.4 million
and mark-to-market reserves for natural gas contracts of $4.9 million. The ABL Facility also
provides for the issuance of $30.0 million of letters of credit, which are applied against the
$110.0 million limit. At September 30, 2010, we had $18.4 million in letters of credit outstanding
under the ABL Facility. Remaining unused availability on the new ABL Facility was $69.6 million at
September 30, 2010 compared to $79.2 million under the old ABL Facility at December 31, 2009.
13
Senior Secured Notes
On February 8, 2010, Libbey Glass closed its offering of the $400.0 million Senior Secured Notes.
The net proceeds of the offering of Senior Secured Notes were approximately $379.8 million, after
the 1.918 percent original issue discount of $7.7 million, $10.0 million of commissions payable to
the initial purchasers and $2.5 million of fees related to the offering. These fees will be
amortized to interest expense over the life of the notes.
The Senior Secured Notes were issued pursuant to an Indenture, dated February 8, 2010 (the New
Notes Indenture), between Libbey Glass, the Company, the domestic subsidiaries of Libbey Glass
listed as guarantors therein (the Subsidiary Guarantors and together with the Company, the
Guarantors), and The Bank of New York Mellon Trust Company, N.A., as trustee (the New Notes
Trustee), and collateral agent. Under the terms of the New Notes Indenture, the Senior Secured
Notes bear interest at a rate of 10.0 percent per year and will mature on February 15, 2015. The
New Notes Indenture contains covenants that restrict the ability of Libbey Glass and the Guarantors
to, among other things:
|
|
|
incur or guarantee additional indebtedness; |
|
|
|
|
pay dividends, make certain investments or other restricted payments; |
|
|
|
|
create liens; |
|
|
|
|
enter into affiliate transactions; |
|
|
|
|
merge or consolidate, or otherwise dispose of all or substantially all the assets of
Libbey Glass and the Guarantors; and |
|
|
|
|
transfer or sell assets. |
The New Notes Indenture provides for customary events of default. In the case of an event of
default arising from specified events of bankruptcy or insolvency, all outstanding Senior Secured
Notes will become due and payable immediately without further action or notice. If any other event
of default under the Indenture occurs or is continuing, the New Notes Trustee or holders of at
least 25 percent in aggregate principal amount of the then outstanding Senior Secured Notes may
declare all the Senior Secured Notes to be due and payable immediately.
The Senior Secured Notes and the related guarantees under the New Notes Indenture are secured by
(i) first priority liens on the New Notes Priority Collateral and (ii) second priority liens on the
Credit Agreement Priority Collateral.
In connection with the sale of the Senior Secured Notes, Libbey Glass and the Guarantors entered
into a registration rights agreement, dated February 8, 2010 (the Registration Rights Agreement),
under which they agreed to make an offer to exchange the Senior Secured Notes and the related
guarantees for registered, publicly tradable notes and guarantees that have substantially identical
terms to the Senior Secured Notes and the related guarantees, and in certain limited circumstances,
to file a shelf registration statement that would allow certain holders of Senior Secured Notes to
resell their respective Senior Secured Notes to the public.
Prior to August 15, 2012, we may redeem in the aggregate up to 35 percent of the original principal
amount Senior Secured Notes with the net cash proceeds of one or more equity offerings at a
redemption price of 110 percent of the principal amount, provided that at least 65 percent of the
original principal amount of the Senior Secured Notes must remain outstanding after each redemption
and that each redemption occurs within 90 days of the closing of the equity offering. In addition,
prior to August 15, 2012, but not more than once in any twelve-month period, we may redeem in the
aggregate up to 10 percent of the Senior Secured Notes at a redemption price of 103 percent plus
accrued and unpaid interest. The Senior Secured Notes are redeemable at our option, in whole or in
part, at any time on or after August 15, 2012 at set redemption prices together with accrued and
unpaid interest.
We have an Interest Rate Agreement (Rate Agreement) in place with respect to $90.0 million of debt
as a means to manage our fixed to variable interest rate ratio. Of the original $100 million
agreement, $10 million was called in August, 2010 for a premium of $0.3 million, at the
counterpartys option. The Rate Agreement effectively converts this portion of our long-term
borrowings from fixed rate debt to variable rate debt. The variable interest rate for our
borrowings related to the Rate Agreement at September 30, 2010, excluding applicable fees, is 7.66
percent. This Rate Agreement expires on February 15, 2015. Total remaining Senior Secured Notes not
covered by the Rate Agreement have a fixed interest rate of 10.0 percent per year through February
15, 2015. If the counterparty to this Rate Agreement were to fail to perform, this Rate Agreement
would no longer afford us a variable rate. However, we do not anticipate non-performance by the
counterparty. The interest rate swap counterparty was rated AA-, as of September 30, 2010, by
Standard and Poors.
14
The fair market value for the Rate Agreement at September 30, 2010 was a $3.2 million asset. An
adjustment of $3.0 million was recorded to increase the carrying value of the related long-term
debt. The net impact of $0.2 million expense and $0.2 million income is recorded in other income
on the Condensed Consolidated Statement of Operations for the three months and nine months ended
September 30, 2010, respectively. The fair value of the Rate Agreement is based on the market
standard methodology of netting the discounted expected future fixed cash receipts and the
discounted future variable cash payments. The variable cash payments are based on an expectation of
future interest rates derived from observed market interest rate forward curves. We expect this
agreement to expire as originally contracted.
Promissory Note
In September 2001, we issued a $2.7 million promissory note at an interest rate of 6.0 percent in
connection with the purchase of our Laredo, Texas warehouse facility. At September 30, 2010, we had
$1.4 million outstanding on the promissory note. Interest with respect to the promissory note is
paid monthly.
Notes Payable
We have an overdraft line of credit at our Crisal facility for a maximum of 1.1 million. There
were no borrowings under the facility at September 30, 2010, which has an interest rate of 5.80
percent.
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 equivalent of
approximately $37.4 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, 2010, the annual interest rate was 5.35 percent. As of September 30, 2010, the
outstanding balance was RMB 250.0 million (approximately $37.4 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 $6.0 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 $9.0
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.
RMB Working Capital Loan
In March 2007, Libbey China entered into a RMB 50.0 million working capital loan with CCB. The
three-year term loan is secured by a Libbey Inc. guarantee and had an original principal payment at
maturity on March 14, 2010. On February 25, 2010, the terms of the working capital loan were
extended. Under the new terms, the loan matures in January, 2011 and is secured by a letter of
credit. At September 30, 2010, the U.S. dollar equivalent on the line was $7.5 million at a current
interest rate of 5.31 percent. Interest is payable quarterly.
BES Euro Line
In January 2007, Crisal entered into a seven year, 11.0 million line of credit (approximately
$15.0 million) with Banco Espírito Santo, S.A. (BES). The $13.5 million outstanding at September
30, 2010 was the U.S. dollar equivalent of the 9.9 million outstanding under the line at an
interest rate of 3.77 percent. Payment of principal in the amount of 1.6 million (approximately
$2.2 million) is due in December 2010, payment of 2.2 million (approximately $3.0 million) is due
in December 2011, payment of 2.8 million (approximately $3.8 million) is due in December 2012 and
payment of 3.3 million (approximately $4.5 million) is due in December 2013. Interest with respect
to the line is paid every six months.
Fair Value of Borrowings
The fair value of our debt has been calculated based on quoted market prices for the same or
similar issues. Our $400.0 million senior secured notes due February 15, 2015 had an estimated
fair value of $430.0 million at September 30, 2010. The fair value of the remainder of our debt
approximates carrying value at September 30, 2010.
15
Capital Resources and Liquidity
Historically, cash flows generated from operations and our borrowing capacity under our ABL
Facility have enabled us to meet our cash requirements, including capital expenditures and working
capital requirements. As of September 30, 2010 we had no amounts outstanding under our ABL
Facility, although we had $18.4 million of letters of credit issued under that facility. As a
result, we had $69.6 million of unused availability remaining under the ABL Facility at September
30, 2010. In addition, we had $35.6 million of cash on hand at September 30, 2010.
On February 8, 2010, we used the proceeds of a debt offering of $400.0 million of Senior Secured
Notes due 2015, together with cash on hand, to redeem the $80.4 million face amount of PIK notes
that were outstanding at that date and to repurchase the $306.0 million of floating rate notes due
2011. We also amended and restated our ABL Facility to, among other things, extend the maturity to
2014 and reduce the amount that we can borrow under that facility from $150.0 million to $110.0
million. In addition, effective February 25, 2010, we extended the maturity of our RMB 50.0 million
working capital loan from March 2010 to January 2011.
Based on our operating plans and current forecast expectations (including expectations that the
global economy will not deteriorate further), we anticipate that our level of cash on hand, cash
flows from operations and our borrowing capacity under our amended and restated ABL Facility will
provide sufficient cash availability to meet our ongoing liquidity needs.
5. Restructuring Charges
Facility Closures
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.
The Syracuse China facility was closed on April 9, 2009 and the Mira Loma distribution center was
closed on May 31, 2009. See Form 10-K for the year ended December 31, 2009 for further discussion.
There were no additional charges related to these closures in the three months ended September 30,
2010. We incurred additional charges of approximately $0.5 million in the nine months ended
September 30, 2010, related to these closures, including charges of $0.4 million primarily related
to employee termination and building site clean up costs. These amounts were included in
restructuring charges on the Condensed Consolidated Statement of Operations in the North American
Other and North American Glass segments as detailed in the tables below.
Other income on the Condensed Consolidated Statement of Operations included a charge of immaterial
amounts for the three months ending September 30, 2010 and the three months ending September 30,
2009 and $0.1 million and $0.2 million for the first nine months of 2010 and 2009, respectively,
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.
We incurred charges of approximately $0.5 million and $3.2 million related to these closures in the
three months and nine months ended September 30, 2009, respectively. This included a charge of $1.1
million 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. An immaterial amount of this
inventory was subsequently sold in the second and third quarters of 2009, resulting in a reversal
of a portion of this write-down. A pension settlement charge of approximately $0.2 million was
recorded in the third quarter of 2009 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. This amount was included in cost of sales
on the Condensed Consolidated Statement of Operations in the North
American Other segment.
Charges of $1.0 million and $1.6 million recorded during the three months and nine months ended
September 30, 2009, respectively, included various legal, consulting and employee severance 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
16
were included in restructuring charges on the Condensed Consolidated Statement of Operations in the
North American Other segment.
The following table summarizes the facility closure charges in the third quarter of 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2010 |
|
|
Three 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 |
) |
Pension settlement charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239 |
|
|
|
239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
163 |
|
|
|
162 |
|
Employee termination cost & other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
954 |
|
|
|
950 |
|
Building site clean-up & fixed
asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
write-down |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112 |
|
|
|
(762 |
) |
|
|
(650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in restructuring charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108 |
|
|
|
192 |
|
|
|
300 |
|
Ineffectiveness of natural gas
hedge |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other (expense)
income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax charge |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
107 |
|
|
$ |
382 |
|
|
$ |
489 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes the facility closure charges in the first nine months of 2010 and
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010 |
|
|
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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
1,039 |
|
|
$ |
1,039 |
|
Pension settlement charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239 |
|
|
|
239 |
|
Fixed asset depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705 |
|
|
|
705 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,983 |
|
|
|
1,983 |
|
Employee termination cost & other |
|
|
29 |
|
|
|
76 |
|
|
|
105 |
|
|
|
(31 |
) |
|
|
1,612 |
|
|
|
1,581 |
|
Building site clean-up & fixed
asset |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
write-down |
|
|
|
|
|
|
283 |
|
|
|
283 |
|
|
|
112 |
|
|
|
(719 |
) |
|
|
(607 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in restructuring charges |
|
|
29 |
|
|
|
359 |
|
|
|
388 |
|
|
|
81 |
|
|
|
893 |
|
|
|
974 |
|
Ineffectiveness of natural gas
hedge |
|
|
|
|
|
|
(130 |
) |
|
|
(130 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other (expense)
income |
|
|
|
|
|
|
(130 |
) |
|
|
(130 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax charge |
|
$ |
29 |
|
|
$ |
489 |
|
|
$ |
518 |
|
|
$ |
81 |
|
|
$ |
3,089 |
|
|
$ |
3,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reflects the balance sheet activity related to the facility closure charge for the
period ended September 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
Balances |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
Balances |
|
|
|
at December 31, |
|
|
Charge to |
|
|
Cash |
|
|
Non-cash |
|
|
at September 30, |
|
(dollars in thousands) |
|
2009 |
|
|
Earnings |
|
|
Payments |
|
|
Utilization |
|
|
2010 |
|
Building site clean-up & fixed
asset write-down |
|
$ |
306 |
|
|
$ |
283 |
|
|
$ |
(538 |
) |
|
$ |
|
|
|
$ |
51 |
|
Employee termination cost & other |
|
|
710 |
|
|
|
105 |
|
|
|
(224 |
) |
|
|
|
|
|
|
591 |
|
Ineffectiveness of natural gas
hedges |
|
|
|
|
|
|
130 |
|
|
|
|
|
|
|
(130 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
1,016 |
|
|
$ |
518 |
|
|
$ |
(762 |
) |
|
$ |
(130 |
) |
|
$ |
642 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
The ending balance of $0.6 million at September 30, 2010 was included in accrued restructuring
charges on the Condensed Consolidated Balance Sheet and we expect this to result in cash payments in the remainder of 2010
and 2011. 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 |
|
|
$ |
10,553 |
|
|
$ |
10,745 |
|
Pension & postretirement welfare |
|
|
|
|
|
|
4,448 |
|
|
|
4,448 |
|
Fixed asset depreciation |
|
|
|
|
|
|
966 |
|
|
|
966 |
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales |
|
|
192 |
|
|
|
15,967 |
|
|
|
16,159 |
|
Employee termination cost & other |
|
|
549 |
|
|
|
6,033 |
|
|
|
6,582 |
|
Building site clean-up & fixed asset
write-down |
|
|
177 |
|
|
|
9,805 |
|
|
|
9,982 |
|
|
|
|
|
|
|
|
|
|
|
Included in restructuring charges |
|
|
726 |
|
|
|
15,838 |
|
|
|
16,564 |
|
Ineffectiveness of natural gas hedge |
|
|
|
|
|
|
745 |
|
|
|
745 |
|
|
|
|
|
|
|
|
|
|
|
Included in other income |
|
|
|
|
|
|
745 |
|
|
|
745 |
|
|
|
|
|
|
|
|
|
|
|
Total pretax charge to date |
|
$ |
918 |
|
|
$ |
32,550 |
|
|
$ |
33,468 |
|
|
|
|
|
|
|
|
|
|
|
We expect the total expenses for each of these activities to approximate the expenses incurred to
date.
Fixed Asset and Inventory Write-down
In August 2010, we wrote down decorating assets in our Shreveport, Louisiana facility as a result
of our decision to outsource our U.S. decorating business. In the third quarter of 2010, a charge
of $0.6 million was recorded to write down inventory and spare machine parts. This amount was
included in cost of sales on the Condensed Consolidated Statement of Operations in the North
American Glass segment. Charges of $0.7 million were recorded in the third quarter of 2010 for
site cleanup and fixed assets write down. This amount was included in restructuring charges on the
Condensed Consolidated Statement of Operations in the North American Glass segment. No employee
related costs were incurred, as all employees will be reassigned into the facility.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve |
|
|
|
Balances |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
Balances |
|
|
|
at December 31, |
|
|
Charge to |
|
|
Cash |
|
|
Non-cash |
|
|
at September 30, |
|
(dollars in thousands) |
|
2009 |
|
|
Earnings |
|
|
Payments |
|
|
Utilization |
|
|
2010 |
|
Inventory write-down |
|
$ |
|
|
|
$ |
578 |
|
|
$ |
|
|
|
$ |
(578 |
) |
|
$ |
|
|
Building site clean-up &
fixed asset write-down |
|
|
|
|
|
|
700 |
|
|
|
9 |
|
|
|
(430 |
) |
|
|
279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
1,278 |
|
|
$ |
9 |
|
|
$ |
(1,008 |
) |
|
$ |
279 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The ending balance of $0.3 million at September 30, 2010 was included in accrued restructuring
charges on the Condensed Consolidated Balance Sheet and we expect this to result in cash payments
in the remainder of 2010.
During the second quarter of 2010, we wrote down certain after-processing equipment within our
International segment. The non-cash charge of $2.7 million was included in cost of sales on the
Consolidated Statements of Operations.
18
Summary of Total Charges
The following table summarizes the charges mentioned above and their classifications in the
Condensed Consolidated Statements of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Cost of sales |
|
$ |
578 |
|
|
$ |
162 |
|
|
$ |
3,265 |
|
|
$ |
1,983 |
|
Restructuring charges |
|
|
700 |
|
|
|
300 |
|
|
|
1,088 |
|
|
|
974 |
|
Other income |
|
|
|
|
|
|
27 |
|
|
|
130 |
|
|
|
213 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
1,278 |
|
|
$ |
489 |
|
|
$ |
4,483 |
|
|
$ |
3,170 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and changes in tax laws. At September 30, 2010 and December 31,
2009 we had $1.3 million and $1.0 million, respectively, of gross unrecognized tax benefits,
exclusive of interest and penalties.
Further, our current and future provision for income taxes for 2010 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 and Portugal. During the first quarter of 2010, we released a
valuation allowance of $1.1 million in 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 and 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.
In March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and
Affordability Reconciliation Act (the Acts) were signed into law. The Acts contain provisions that
eliminate the tax-free status of the Part D subsidy beginning in 2013. The affect of this change
was a $0.7 million reduction to our gross deferred income tax asset related to retiree medical
benefits. However, since we have a valuation allowance against our U.S. net deferred income tax
asset, there was no impact to the Condensed Consolidated Balance Sheet or the Condensed
Consolidated Statements of Operations.
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.
Except for the Crisa plan, 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 (excluding employees hired at
Shreveport after 2008 and employees hired at Toledo after September 30, 2010). The non-U.S.
pension plans cover the employees of our wholly owned subsidiaries Royal Leerdam and Crisa. The
Crisa plan is not funded.
19
The components of our net pension expense, including the SERP, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
U.S. Plans |
|
|
Non-U.S. Plans |
|
|
Total |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Service cost |
|
$ |
1,106 |
|
|
$ |
1,271 |
|
|
$ |
383 |
|
|
$ |
339 |
|
|
$ |
1,489 |
|
|
$ |
1,610 |
|
Interest cost |
|
|
3,800 |
|
|
|
3,878 |
|
|
|
1,103 |
|
|
|
1,037 |
|
|
|
4,903 |
|
|
|
4,915 |
|
Expected return on plan assets |
|
|
(4,141 |
) |
|
|
(4,383 |
) |
|
|
(612 |
) |
|
|
(632 |
) |
|
|
(4,753 |
) |
|
|
(5,015 |
) |
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
582 |
|
|
|
560 |
|
|
|
30 |
|
|
|
(23 |
) |
|
|
612 |
|
|
|
537 |
|
Loss |
|
|
760 |
|
|
|
227 |
|
|
|
98 |
|
|
|
93 |
|
|
|
858 |
|
|
|
320 |
|
Settlement charge |
|
|
|
|
|
|
687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
687 |
|
|
Pension expense |
|
$ |
2,107 |
|
|
$ |
2,240 |
|
|
$ |
1,002 |
|
|
$ |
814 |
|
|
$ |
3,109 |
|
|
$ |
3,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
U.S. Plans |
|
|
Non-U.S. Plans |
|
|
Total |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Service cost |
|
$ |
4,006 |
|
|
$ |
3,761 |
|
|
$ |
1,184 |
|
|
$ |
1,015 |
|
|
$ |
5,190 |
|
|
$ |
4,776 |
|
Interest cost |
|
|
11,922 |
|
|
|
11,774 |
|
|
|
3,348 |
|
|
|
3,111 |
|
|
|
15,270 |
|
|
|
14,885 |
|
Expected return on plan assets |
|
|
(12,513 |
) |
|
|
(13,184 |
) |
|
|
(1,795 |
) |
|
|
(1,897 |
) |
|
|
(14,308 |
) |
|
|
(15,081 |
) |
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
1,746 |
|
|
|
1,681 |
|
|
|
92 |
|
|
|
(70 |
) |
|
|
1,838 |
|
|
|
1,611 |
|
Loss |
|
|
2,716 |
|
|
|
662 |
|
|
|
308 |
|
|
|
281 |
|
|
|
3,024 |
|
|
|
943 |
|
Settlement charge |
|
|
|
|
|
|
3,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,387 |
|
|
Pension expense |
|
$ |
7,877 |
|
|
$ |
8,081 |
|
|
$ |
3,137 |
|
|
$ |
2,440 |
|
|
$ |
11,014 |
|
|
$ |
10,521 |
|
|
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. Lump sum distributions to retirees during the first
nine months of 2010 have not been large enough to trigger settlement charges thus far during 2010.
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 (excluding employees hired at Shreveport after 2008 and employees hired at Toledo
after September 30, 2010). Employees are generally eligible for benefits upon retirement and
completion of a specified number of years of creditable service. Benefits for most hourly retirees
are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly
and salaried U.S.-based employees of Libbey. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
U.S. Plans |
|
|
Non-U.S. Plans |
|
|
Total |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Service cost |
|
$ |
242 |
|
|
$ |
333 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
242 |
|
|
$ |
333 |
|
Interest cost |
|
|
877 |
|
|
|
946 |
|
|
|
30 |
|
|
|
29 |
|
|
|
907 |
|
|
|
975 |
|
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
296 |
|
|
|
(104 |
) |
|
|
|
|
|
|
|
|
|
|
296 |
|
|
|
(104 |
) |
Loss / (gain) |
|
|
299 |
|
|
|
191 |
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
291 |
|
|
|
182 |
|
Curtailment credit |
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
Non-pension postretirement benefit
expense |
|
$ |
1,714 |
|
|
$ |
1,272 |
|
|
$ |
22 |
|
|
$ |
20 |
|
|
$ |
1,736 |
|
|
$ |
1,292 |
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
U.S. Plans |
|
|
Non-U.S. Plans |
|
|
Total |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Service cost |
|
$ |
1,020 |
|
|
$ |
999 |
|
|
$ |
1 |
|
|
$ |
1 |
|
|
$ |
1,021 |
|
|
$ |
1,000 |
|
Interest cost |
|
|
2,713 |
|
|
|
2,838 |
|
|
|
92 |
|
|
|
84 |
|
|
|
2,805 |
|
|
|
2,922 |
|
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (gain) |
|
|
292 |
|
|
|
(313 |
) |
|
|
|
|
|
|
|
|
|
|
292 |
|
|
|
(313 |
) |
Loss / (gain) |
|
|
771 |
|
|
|
573 |
|
|
|
(21 |
) |
|
|
(26 |
) |
|
|
750 |
|
|
|
547 |
|
Curtailment credit |
|
|
|
|
|
|
(94 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94 |
) |
|
Non-pension postretirement benefit
expense |
|
$ |
4,796 |
|
|
$ |
4,003 |
|
|
$ |
72 |
|
|
$ |
59 |
|
|
$ |
4,868 |
|
|
$ |
4,062 |
|
|
In 2010, we expect to utilize approximately $19.1 million to fund our pension plans and pay for
non-pension postretirement benefits. Of that amount, $5.3 million and $13.8 million were utilized
in the three months and nine months ended September 30, 2010, respectively.
In March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and
Affordability Reconciliation Act (the Acts) were signed into law. The Acts contain provisions
which could impact our accounting for retiree medical benefits in future periods. However, the
extent of that impact, if any, cannot be determined until additional interpretations of the Acts
become available. Based on the analysis to date, the impact of provisions in the Acts which are
reasonably determinable is not expected to have a material impact on our postretirement benefit
plans. Accordingly, a re-measurement of our postretirement benefit obligation is not required at
this time. We will continue to assess the provisions of the Acts and may consider plan amendments
in future periods to better align these plans with the provisions of the Acts.
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, |
|
(dollars in thousands, except earnings per share) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Numerators for earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) that is available to common
shareholders |
|
$ |
2,346 |
|
|
$ |
3,533 |
|
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
|
Denominator for basic earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding |
|
|
18,148,127 |
|
|
|
15,152,337 |
|
|
|
16,927,812 |
|
|
|
14,926,422 |
|
|
Effect of stock options and restricted stock units |
|
|
391,486 |
|
|
|
435,212 |
|
|
|
424,602 |
|
|
|
|
|
|
Effect of warrants |
|
|
1,746,983 |
|
|
|
|
|
|
|
3,305,639 |
|
|
|
|
|
|
Total effect of dilutive securities (1) |
|
|
2,138,469 |
|
|
|
435,212 |
|
|
|
3,730,241 |
|
|
|
|
|
|
Denominator for diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted weighted average shares and assumed
conversions |
|
|
20,286,596 |
|
|
|
15,587,549 |
|
|
|
20,658,053 |
|
|
|
14,926,422 |
|
|
Basic earnings (loss) per share: |
|
$ |
0.13 |
|
|
$ |
0.23 |
|
|
$ |
3.98 |
|
|
$ |
(1.45 |
) |
|
Diluted earnings (loss) per share: |
|
$ |
0.12 |
|
|
$ |
0.23 |
|
|
$ |
3.26 |
|
|
$ |
(1.45 |
) |
|
|
|
|
(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), was
anti-dilutive and thus not included in the earnings per share calculation. This amount would
have been dilutive if not for the net loss for the nine month period ended September 30, 2009. |
When applicable, diluted shares outstanding include the dilutive impact of warrants and restricted
stock units. Diluted shares also include the 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.
21
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 hedge 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. While we intend to continue to meet the conditions for hedge accounting, if hedges do
not qualify as highly effective or if we do not believe that forecasted transactions would occur,
the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.
All of these contracts were accounted for under FASB ASC 815 Derivatives and Hedging.
Fair Values
The following table provides the fair values of our derivative financial instruments for the
periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives: |
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
|
|
Balance |
|
|
|
|
|
|
Balance |
|
|
|
|
|
|
Sheet |
|
|
Fair |
|
|
Sheet |
|
|
Fair |
|
(dollars in thousands) |
|
Location: |
|
|
Value |
|
|
Location: |
|
|
Value |
|
Derivatives designated as
hedging instruments
under FASB ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contract |
|
Other assets |
|
$ |
3,228 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total designated |
|
|
|
|
|
|
3,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as
hedging instruments
under FASB ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts |
|
Prepaid and other current assets |
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undesignated |
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
3,375 |
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives: |
|
|
|
September 30, 2010 |
|
|
December 31, 2009 |
|
|
|
Balance |
|
|
|
|
|
|
Balance |
|
|
|
|
|
|
Sheet |
|
|
Fair |
|
|
Sheet |
|
|
Fair |
|
(dollars in thousands) |
|
Location |
|
|
Value |
|
|
Location |
|
|
Value |
|
Derivatives designated as
hedging instruments
under FASB ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
|
Derivative liability |
|
$ |
5,601 |
|
|
Derivative liability |
|
$ |
3,129 |
|
Natural gas contracts |
|
Other long-term liabilities |
|
|
497 |
|
|
Other long-term liabilities |
|
|
1,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total designated |
|
|
|
|
|
|
6,098 |
|
|
|
|
|
|
|
5,111 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not
designated as
hedging instruments
under FASB ASC 815: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts |
|
Derivative liability |
|
|
129 |
|
|
Derivative liability |
|
|
217 |
|
Natural gas contracts |
|
Other long-term liabilities |
|
|
|
|
|
Other long-term liabilities |
|
|
79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undesignated |
|
|
|
|
|
|
129 |
|
|
|
|
|
|
|
296 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
6,227 |
|
|
|
|
|
|
$ |
5,407 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps as Fair Value Hedges
In the first quarter of 2010, we entered into an interest rate swap agreement with a notional
amount of $100.0 million that is to mature
22
in 2015. The swap was executed in order to convert a portion of the Senior Secured Note fixed rate
debt into floating rate debt and maintain a capital structure containing appropriate amounts of
fixed and floating rate debt. In August 2010, $10.0 million of the swap
was called for a premium of $0.3 million.
Our fixed-to-floating interest rate swap is designated and qualifies as a fair value hedge. The
change in the fair value of the derivative instrument related to the future cash flows (gain or
loss on the derivative), as well as the offsetting change in the fair value of the hedged long-term
debt attributable to the hedged risk are recognized in current earnings. We include the gain or
loss on the hedged long-term debt in other income along with the offsetting loss or gain on the
related interest rate swap.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of gain (loss) recognized in other income |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Interest rate swap |
|
$ |
1,740 |
|
|
$ |
|
|
|
$ |
3,229 |
|
|
$ |
|
|
Related long-term debt |
|
|
(1,977 |
) |
|
|
|
|
|
|
(3,050 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact on other
expense |
|
$ |
(237 |
) |
|
$ |
|
|
|
$ |
179 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity Futures Contracts and Interest Rate Swaps Designated as Cash Flow Hedges
We 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 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. As of September 30, 2010, we had commodity contracts for 3,120,000 million
British Thermal Units (BTUs) of natural gas. At December 31, 2009, we had commodity contracts for
3,610,000 million BTUs of natural gas.
Most of our natural gas derivatives qualify and are designated as cash flow hedges (except certain
contracts originally designated to expected purchases at Syracuse China) at September 30, 2010.
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. 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. We paid cash of $2.1 million and $4.4 million in the three months ended September 30,
2010 and 2009, respectively, and $9.1 million and $18.8 million in the nine months ended September
30, 2010 and 2009, respectively, due to the difference between the fixed unit rate of our natural
gas contracts and the variable unit rate of our natural gas cost from suppliers. Based on our
current valuation, we estimate that accumulated losses currently carried in accumulated other
comprehensive loss that will be reclassified into earnings over the next twelve months will result
in $6.1 million of expense in our Condensed Consolidated Statement of Operations.
We also used Interest Rate Protection Agreements to manage our exposure to variable interest rates.
These Interest Rate Protection Agreements effectively converted 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 were 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 were based on an expectation of future interest rates derived from
observed market interest rate forward curves. These agreements expired in December 2009.
As fixed interest payments were made pursuant to the interest rate protection agreements, they were
classified together with the related receipt of variable interest, 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.
23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of derivative gain/(loss) recognized in OCI (effective portion) |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Derivatives in Cash
Flow Hedging
relationships: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts |
|
$ |
|
|
|
$ |
2,021 |
|
|
$ |
|
|
|
$ |
4,950 |
|
Natural gas contracts |
|
|
(2,667 |
) |
|
|
(31 |
) |
|
|
(8,919 |
) |
|
|
(7,056 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(2,667 |
) |
|
$ |
1,990 |
|
|
$ |
(8,919 |
) |
|
$ |
(2,106 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain / (loss) reclassified from Accumulated Other Comprehensive Income (Loss) to income (effective portion) |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Derivative: Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts Cost of sales |
|
$ |
(2,097 |
) |
|
$ |
(4,422 |
) |
|
$ |
(8,550 |
) |
|
$ |
(18,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on net income (loss) |
|
$ |
(2,097 |
) |
|
$ |
(4,422 |
) |
|
$ |
(8,550 |
) |
|
$ |
(18,783 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides the impact on the Condensed Consolidated Statement of Operations from
derivatives no longer designated as cash flow hedges, primarily related to the closure of our
Syracuse China facility:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (loss) recognized in income |
|
(ineffective portion and amount excluded from effectiveness testing) |
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Derivative: Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts Other income (expense) |
|
$ |
(30 |
) |
|
$ |
(27 |
) |
|
$ |
(131 |
) |
|
$ |
(136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(30 |
) |
|
$ |
(27 |
) |
|
$ |
(131 |
) |
|
$ |
(136 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency Contracts
Our foreign currency exposure arises from transactions denominated in a currency other than the
U.S. dollar, primarily associated with our Canadian dollar denominated accounts receivable. 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. In April, 2010, we entered into a series of foreign currency contracts to sell Canadian
dollars. As of September 30, 2010, we had contracts for $8.0 million Canadian dollars.
Gains and losses for derivatives which were not designated as hedging instruments are recorded in
current earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Derivative: Location: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Currency contracts Other income (expense) |
|
$ |
(491 |
) |
|
$ |
|
|
|
$ |
148 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
(491 |
) |
|
$ |
|
|
|
$ |
148 |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 counterparty is rated AA- for the
Interest Rate Agreement and BBB+ or better for the counterparties to the other derivative
agreements as of September 30, 2010, 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, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
Net income (loss) |
|
$ |
2,346 |
|
|
$ |
3,533 |
|
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in pension and nonpension
postretirement liability (1) |
|
|
7,420 |
|
|
|
1,090 |
|
|
|
11,330 |
|
|
|
5,571 |
|
Change in fair value of derivatives (2) |
|
|
(573 |
) |
|
|
4,687 |
|
|
|
(289 |
) |
|
|
7,329 |
|
Exchange rate fluctuations |
|
|
10,221 |
|
|
|
2,608 |
|
|
|
(5,441 |
) |
|
|
2,438 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss) |
|
$ |
19,414 |
|
|
$ |
11,918 |
|
|
$ |
72,923 |
|
|
$ |
(6,358 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Net of the following tax amounts
for the respective periods |
|
$ |
(117 |
) |
|
$ |
378 |
|
|
$ |
(92 |
) |
|
$ |
(5,938 |
) |
(2) Net of the following tax amounts
for the respective periods |
|
$ |
(62 |
) |
|
$ |
(1,626 |
) |
|
$ |
(145 |
) |
|
$ |
(3,897 |
) |
Accumulated other comprehensive loss (net of tax) is as follows:
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
Minimum pension liability and intangible pension asset |
|
$ |
(105,556 |
) |
|
$ |
(116,886 |
) |
Derivatives |
|
|
(4,459 |
) |
|
|
(4,170 |
) |
Exchange rate fluctuations |
|
|
(109 |
) |
|
|
5,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at end of period |
|
$ |
(110,124 |
) |
|
$ |
(115,724 |
) |
|
|
|
|
|
|
|
11. Condensed Consolidated Guarantor Financial Statements
Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and the issuer of the Senior
Secured Notes. The obligations of Libbey Glass under the Senior Secured 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-month periods ended September 30, 2010 and September 30, 2009.
At September 30, 2010, December 31, 2009 and September 30, 2009, 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, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Net sales |
|
$ |
|
|
|
$ |
97,576 |
|
|
$ |
20,768 |
|
|
$ |
99,919 |
|
|
$ |
(18,256 |
) |
|
$ |
200,007 |
|
Freight billed to
customers |
|
|
|
|
|
|
146 |
|
|
|
212 |
|
|
|
99 |
|
|
|
|
|
|
|
457 |
|
|
Total revenues |
|
|
|
|
|
|
97,722 |
|
|
|
20,980 |
|
|
|
100,018 |
|
|
|
(18,256 |
) |
|
|
200,464 |
|
Cost of sales |
|
|
|
|
|
|
80,221 |
|
|
|
15,739 |
|
|
|
81,075 |
|
|
|
(18,256 |
) |
|
|
158,779 |
|
|
Gross profit |
|
|
|
|
|
|
17,501 |
|
|
|
5,241 |
|
|
|
18,943 |
|
|
|
|
|
|
|
41,685 |
|
Selling, general
and administrative
expenses |
|
|
|
|
|
|
15,118 |
|
|
|
2,424 |
|
|
|
7,793 |
|
|
|
|
|
|
|
25,335 |
|
Restructuring
charges |
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700 |
|
|
Income (loss) from
operations |
|
|
|
|
|
|
1,683 |
|
|
|
2,817 |
|
|
|
11,150 |
|
|
|
|
|
|
|
15,650 |
|
Other income
(expense) |
|
|
|
|
|
|
418 |
|
|
|
(16 |
) |
|
|
(379 |
) |
|
|
|
|
|
|
23 |
|
|
Earnings (loss)
before interest and
income taxes |
|
|
|
|
|
|
2,101 |
|
|
|
2,801 |
|
|
|
10,771 |
|
|
|
|
|
|
|
15,673 |
|
Interest expense |
|
|
|
|
|
|
10,542 |
|
|
|
|
|
|
|
1,313 |
|
|
|
|
|
|
|
11,855 |
|
|
Earnings (loss)
before income taxes |
|
|
|
|
|
|
(8,441 |
) |
|
|
2,801 |
|
|
|
9,458 |
|
|
|
|
|
|
|
3,818 |
|
Provision (benefit)
for income taxes |
|
|
|
|
|
|
502 |
|
|
|
18 |
|
|
|
952 |
|
|
|
|
|
|
|
1,472 |
|
|
Net income (loss) |
|
|
|
|
|
|
(8,943 |
) |
|
|
2,783 |
|
|
|
8,506 |
|
|
|
|
|
|
|
2,346 |
|
Equity in net
income (loss) of
subsidiaries |
|
|
2,346 |
|
|
|
11,289 |
|
|
|
|
|
|
|
|
|
|
|
(13,635 |
) |
|
|
|
|
|
Net income (loss) |
|
$ |
2,346 |
|
|
$ |
2,346 |
|
|
$ |
2,783 |
|
|
$ |
8,506 |
|
|
$ |
(13,635 |
) |
|
$ |
2,346 |
|
|
The following represents the total special items included in the above Condensed Consolidated
Statement of Operations (see notes 4 and 5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Cost of sales |
|
$ |
|
|
|
$ |
578 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
578 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
1,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,096 |
|
Restructuring charges |
|
|
|
|
|
|
700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
700 |
|
|
Total pretax special items |
|
$ |
|
|
|
$ |
2,374 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,374 |
|
|
Special items net of tax |
|
$ |
|
|
|
$ |
2,374 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,374 |
|
|
26
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 |
|
Restructuring 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 items 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 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
255 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
255 |
|
Restructuring charges |
|
|
|
|
|
|
108 |
|
|
|
192 |
|
|
|
|
|
|
|
|
|
|
|
300 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
|
|
|
|
|
|
|
|
|
(27 |
) |
|
Total pretax special items |
|
$ |
|
|
|
$ |
362 |
|
|
$ |
382 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
744 |
|
|
Special items net of tax |
|
$ |
|
|
|
$ |
362 |
|
|
$ |
382 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
744 |
|
|
27
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Net sales |
|
$ |
|
|
|
$ |
287,273 |
|
|
$ |
63,488 |
|
|
$ |
272,714 |
|
|
$ |
(46,528 |
) |
|
$ |
576,947 |
|
Freight billed to customers |
|
|
|
|
|
|
471 |
|
|
|
641 |
|
|
|
199 |
|
|
|
|
|
|
|
1,311 |
|
|
Total revenues |
|
|
|
|
|
|
287,744 |
|
|
|
64,129 |
|
|
|
272,913 |
|
|
|
(46,528 |
) |
|
|
578,258 |
|
Cost of sales |
|
|
|
|
|
|
230,569 |
|
|
|
46,081 |
|
|
|
224,543 |
|
|
|
(46,528 |
) |
|
|
454,665 |
|
|
Gross profit |
|
|
|
|
|
|
57,175 |
|
|
|
18,048 |
|
|
|
48,370 |
|
|
|
|
|
|
|
123,593 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
41,369 |
|
|
|
7,012 |
|
|
|
24,497 |
|
|
|
|
|
|
|
72,878 |
|
Restructuring charges |
|
|
|
|
|
|
729 |
|
|
|
359 |
|
|
|
|
|
|
|
|
|
|
|
1,088 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
15,077 |
|
|
|
10,677 |
|
|
|
23,873 |
|
|
|
|
|
|
|
49,627 |
|
Other income (expense) |
|
|
|
|
|
|
56,809 |
|
|
|
(158 |
) |
|
|
1,057 |
|
|
|
|
|
|
|
57,708 |
|
|
Earnings (loss) before
interest and income taxes |
|
|
|
|
|
|
71,886 |
|
|
|
10,519 |
|
|
|
24,930 |
|
|
|
|
|
|
|
107,335 |
|
Interest expense |
|
|
|
|
|
|
29,676 |
|
|
|
(6 |
) |
|
|
3,573 |
|
|
|
|
|
|
|
33,243 |
|
|
Earnings (loss) before
income taxes |
|
|
|
|
|
|
42,210 |
|
|
|
10,525 |
|
|
|
21,357 |
|
|
|
|
|
|
|
74,092 |
|
Provision (benefit) for
income taxes |
|
|
|
|
|
|
(241 |
) |
|
|
76 |
|
|
|
6,934 |
|
|
|
|
|
|
|
6,769 |
|
|
Net income (loss) |
|
|
|
|
|
|
42,451 |
|
|
|
10,449 |
|
|
|
14,423 |
|
|
|
|
|
|
|
67,323 |
|
Equity in net income (loss)
of subsidiaries |
|
|
67,323 |
|
|
|
24,872 |
|
|
|
|
|
|
|
|
|
|
|
(92,195 |
) |
|
|
|
|
|
Net income (loss) |
|
$ |
67,323 |
|
|
$ |
67,323 |
|
|
$ |
10,449 |
|
|
$ |
14,423 |
|
|
$ |
(92,195 |
) |
|
$ |
67,323 |
|
|
The following represents the total special items included in the above Condensed Consolidated
Statement of Operations (see notes 4 and 5):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Cost of sales |
|
$ |
|
|
|
$ |
(367 |
) |
|
$ |
|
|
|
$ |
2,687 |
|
|
$ |
|
|
|
$ |
2,320 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
1,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,096 |
|
Restructuring charges |
|
|
|
|
|
|
729 |
|
|
|
359 |
|
|
|
|
|
|
|
|
|
|
|
1,088 |
|
Other expense (income) |
|
|
|
|
|
|
(56,792 |
) |
|
|
130 |
|
|
|
|
|
|
|
|
|
|
|
(56,662 |
) |
|
Total pretax special items |
|
$ |
|
|
|
$ |
(55,334 |
) |
|
$ |
489 |
|
|
$ |
2,687 |
|
|
$ |
|
|
|
$ |
(52,158 |
) |
|
Special items net of tax |
|
$ |
|
|
|
$ |
(55,334 |
) |
|
$ |
489 |
|
|
$ |
2,687 |
|
|
$ |
|
|
|
$ |
(52,158 |
) |
|
28
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 |
|
Restructuring 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 items 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 |
|
Selling, general and
administrative expenses |
|
|
|
|
|
|
2,955 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,955 |
|
Restructuring charges |
|
|
|
|
|
|
81 |
|
|
|
893 |
|
|
|
|
|
|
|
|
|
|
|
974 |
|
Other income (expense) |
|
|
|
|
|
|
|
|
|
|
(213 |
) |
|
|
|
|
|
|
|
|
|
|
(213 |
) |
|
Total pretax special items |
|
$ |
|
|
|
$ |
3,036 |
|
|
$ |
3,089 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,125 |
|
|
Special items net of tax |
|
$ |
|
|
|
$ |
3,036 |
|
|
$ |
3,089 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
6,125 |
|
|
29
Libbey Inc.
Condensed Consolidating Balance Sheet
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2010 (unaudited) |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Cash and equivalents |
|
$ |
|
|
|
$ |
19,118 |
|
|
$ |
368 |
|
|
$ |
16,082 |
|
|
$ |
|
|
|
$ |
35,568 |
|
Accounts receivable net |
|
|
|
|
|
|
41,031 |
|
|
|
6,300 |
|
|
|
63,243 |
|
|
|
|
|
|
|
110,574 |
|
Inventories net |
|
|
|
|
|
|
60,487 |
|
|
|
19,315 |
|
|
|
79,572 |
|
|
|
|
|
|
|
159,374 |
|
Other current assets |
|
|
|
|
|
|
(6,189 |
) |
|
|
14,739 |
|
|
|
16,232 |
|
|
|
(12,408 |
) |
|
|
12,374 |
|
|
Total current assets |
|
|
|
|
|
|
114,447 |
|
|
|
40,722 |
|
|
|
175,129 |
|
|
|
(12,408 |
) |
|
|
317,890 |
|
Other non-current assets |
|
|
|
|
|
|
6,638 |
|
|
|
2,779 |
|
|
|
41,603 |
|
|
|
(18,764 |
) |
|
|
32,256 |
|
Investments in and
advances to subsidiaries |
|
|
8,353 |
|
|
|
382,730 |
|
|
|
274,712 |
|
|
|
(746 |
) |
|
|
(665,049 |
) |
|
|
|
|
Goodwill and purchased
intangible assets net |
|
|
|
|
|
|
26,833 |
|
|
|
15,764 |
|
|
|
149,317 |
|
|
|
|
|
|
|
191,914 |
|
|
Total other assets |
|
|
8,353 |
|
|
|
416,201 |
|
|
|
293,255 |
|
|
|
190,174 |
|
|
|
(683,813 |
) |
|
|
224,170 |
|
Property, plant and
equipment net |
|
|
|
|
|
|
74,149 |
|
|
|
5,500 |
|
|
|
193,074 |
|
|
|
|
|
|
|
272,723 |
|
|
Total assets |
|
$ |
8,353 |
|
|
$ |
604,797 |
|
|
$ |
339,477 |
|
|
$ |
558,377 |
|
|
$ |
(696,221 |
) |
|
$ |
814,783 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
12,460 |
|
|
$ |
3,023 |
|
|
$ |
43,454 |
|
|
$ |
|
|
|
$ |
58,937 |
|
Accrued and other
current liabilities |
|
|
|
|
|
|
40,138 |
|
|
|
29,332 |
|
|
|
37,354 |
|
|
|
(12,408 |
) |
|
|
94,416 |
|
Notes payable and
long-term debt due
within one year |
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
9,663 |
|
|
|
|
|
|
|
9,878 |
|
|
Total current liabilities |
|
|
|
|
|
|
52,813 |
|
|
|
32,355 |
|
|
|
90,471 |
|
|
|
(12,408 |
) |
|
|
163,231 |
|
Long-term debt |
|
|
|
|
|
|
397,501 |
|
|
|
|
|
|
|
48,723 |
|
|
|
|
|
|
|
446,224 |
|
Other long-term
liabilities |
|
|
|
|
|
|
126,589 |
|
|
|
22,480 |
|
|
|
67,040 |
|
|
|
(19,134 |
) |
|
|
196,975 |
|
|
Total liabilities |
|
|
|
|
|
|
576,903 |
|
|
|
54,835 |
|
|
|
206,234 |
|
|
|
(31,542 |
) |
|
|
806,430 |
|
Total shareholders
equity (deficit) |
|
|
8,353 |
|
|
|
27,894 |
|
|
|
284,642 |
|
|
|
352,143 |
|
|
|
(664,679 |
) |
|
|
8,353 |
|
|
Total liabilities and
shareholders equity
(deficit) |
|
$ |
8,353 |
|
|
$ |
604,797 |
|
|
$ |
339,477 |
|
|
$ |
558,377 |
|
|
$ |
(696,221 |
) |
|
$ |
814,783 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Cash and equivalents |
|
$ |
|
|
|
$ |
37,386 |
|
|
$ |
419 |
|
|
$ |
17,284 |
|
|
$ |
|
|
|
$ |
55,089 |
|
Accounts receivable net |
|
|
|
|
|
|
36,173 |
|
|
|
5,125 |
|
|
|
41,126 |
|
|
|
|
|
|
|
82,424 |
|
Inventories net |
|
|
|
|
|
|
48,493 |
|
|
|
18,024 |
|
|
|
77,498 |
|
|
|
|
|
|
|
144,015 |
|
Other current assets |
|
|
|
|
|
|
13,840 |
|
|
|
946 |
|
|
|
12,382 |
|
|
|
(15,385 |
) |
|
|
11,783 |
|
|
Total current assets |
|
|
|
|
|
|
135,892 |
|
|
|
24,514 |
|
|
|
148,290 |
|
|
|
(15,385 |
) |
|
|
293,311 |
|
Other non-current assets |
|
|
|
|
|
|
(4,912 |
) |
|
|
3,535 |
|
|
|
38,819 |
|
|
|
(19,134 |
) |
|
|
18,308 |
|
Investments in and advances to
subsidiaries |
|
|
(66,907 |
) |
|
|
403,403 |
|
|
|
276,755 |
|
|
|
140,289 |
|
|
|
(753,540 |
) |
|
|
|
|
Goodwill and purchased intangible
assets net |
|
|
|
|
|
|
26,833 |
|
|
|
15,771 |
|
|
|
150,577 |
|
|
|
|
|
|
|
193,181 |
|
|
Total other assets |
|
|
(66,907 |
) |
|
|
425,324 |
|
|
|
296,061 |
|
|
|
329,685 |
|
|
|
(772,674 |
) |
|
|
211,489 |
|
Property, plant and equipment net |
|
|
|
|
|
|
79,773 |
|
|
|
5,990 |
|
|
|
204,250 |
|
|
|
|
|
|
|
290,013 |
|
|
Total assets |
|
$ |
(66,907 |
) |
|
$ |
640,989 |
|
|
$ |
326,565 |
|
|
$ |
682,225 |
|
|
$ |
(788,059 |
) |
|
$ |
794,813 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
13,503 |
|
|
$ |
3,289 |
|
|
$ |
42,046 |
|
|
$ |
|
|
|
$ |
58,838 |
|
Accrued and other current liabilities |
|
|
|
|
|
|
48,440 |
|
|
|
9,375 |
|
|
|
35,064 |
|
|
|
(8,848 |
) |
|
|
84,031 |
|
Notes payable and long-term debt due
within one year |
|
|
|
|
|
|
215 |
|
|
|
|
|
|
|
10,300 |
|
|
|
|
|
|
|
10,515 |
|
|
Total current liabilities |
|
|
|
|
|
|
62,158 |
|
|
|
12,664 |
|
|
|
87,410 |
|
|
|
(8,848 |
) |
|
|
153,384 |
|
Long-term debt |
|
|
|
|
|
|
456,152 |
|
|
|
|
|
|
|
48,572 |
|
|
|
|
|
|
|
504,724 |
|
Other long-term liabilities |
|
|
|
|
|
|
151,754 |
|
|
|
15,618 |
|
|
|
61,911 |
|
|
|
(25,671 |
) |
|
|
203,612 |
|
|
Total liabilities |
|
|
|
|
|
|
670,064 |
|
|
|
28,282 |
|
|
|
197,893 |
|
|
|
(34,519 |
) |
|
|
861,720 |
|
Total shareholders equity (deficit) |
|
|
(66,907 |
) |
|
|
(29,075 |
) |
|
|
298,283 |
|
|
|
484,332 |
|
|
|
(753,540 |
) |
|
|
(66,907 |
) |
|
Total liabilities and shareholders
equity (deficit) |
|
$ |
(66,907 |
) |
|
$ |
640,989 |
|
|
$ |
326,565 |
|
|
$ |
682,225 |
|
|
$ |
(788,059 |
) |
|
$ |
794,813 |
|
|
30
Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Net income (loss) |
|
$ |
2,346 |
|
|
$ |
2,346 |
|
|
$ |
2,783 |
|
|
$ |
8,506 |
|
|
$ |
(13,635 |
) |
|
$ |
2,346 |
|
Depreciation and amortization |
|
|
|
|
|
|
3,571 |
|
|
|
184 |
|
|
|
6,285 |
|
|
|
|
|
|
|
10,040 |
|
Other operating activities |
|
|
(2,346 |
) |
|
|
(16,818 |
) |
|
|
(2,783 |
) |
|
|
(6,854 |
) |
|
|
13,635 |
|
|
|
(15,166 |
) |
|
Net cash provided by (used
in) operating activities |
|
|
|
|
|
|
(10,901 |
) |
|
|
184 |
|
|
|
7,937 |
|
|
|
|
|
|
|
(2,780 |
) |
Additions to property, plant
& equipment |
|
|
|
|
|
|
(3,278 |
) |
|
|
(62 |
) |
|
|
(4,403 |
) |
|
|
|
|
|
|
(7,743 |
) |
Other investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing
activities |
|
|
|
|
|
|
(3,278 |
) |
|
|
(62 |
) |
|
|
(4,403 |
) |
|
|
|
|
|
|
(7,743 |
) |
Net borrowings |
|
|
|
|
|
|
160 |
|
|
|
|
|
|
|
(1,038 |
) |
|
|
|
|
|
|
(878 |
) |
Other financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used
in) financing activities |
|
|
|
|
|
|
160 |
|
|
|
|
|
|
|
(1,038 |
) |
|
|
|
|
|
|
(878 |
) |
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
796 |
|
|
|
|
|
|
|
796 |
|
|
Increase (decrease) in cash |
|
|
|
|
|
|
(14,019 |
) |
|
|
122 |
|
|
|
3,292 |
|
|
|
|
|
|
|
(10,605 |
) |
Cash at beginning of period |
|
|
|
|
|
|
33,137 |
|
|
|
246 |
|
|
|
12,790 |
|
|
|
|
|
|
|
46,173 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
19,118 |
|
|
$ |
368 |
|
|
$ |
16,082 |
|
|
$ |
|
|
|
$ |
35,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
31
Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2010 |
|
|
|
Libbey |
|
|
Libbey |
|
|
|
|
|
|
Non- |
|
|
|
|
|
|
|
|
|
Inc. |
|
|
Glass |
|
|
Subsidiary |
|
|
Guarantor |
|
|
|
|
|
|
|
|
|
(Parent) |
|
|
(Issuer) |
|
|
Guarantors |
|
|
Subsidiaries |
|
|
Eliminations |
|
|
Consolidated |
|
|
Net income (loss) |
|
$ |
67,323 |
|
|
$ |
67,323 |
|
|
$ |
10,449 |
|
|
$ |
14,423 |
|
|
$ |
(92,195 |
) |
|
$ |
67,323 |
|
Depreciation and amortization |
|
|
|
|
|
|
11,282 |
|
|
|
570 |
|
|
|
19,142 |
|
|
|
|
|
|
|
30,994 |
|
Other operating activities |
|
|
(67,323 |
) |
|
|
(102,014 |
) |
|
|
(10,994 |
) |
|
|
(21,014 |
) |
|
|
92,195 |
|
|
|
(109,150 |
) |
|
Net cash provided by (used in)
operating activities |
|
|
|
|
|
|
(23,409 |
) |
|
|
25 |
|
|
|
12,551 |
|
|
|
|
|
|
|
(10,833 |
) |
Additions to property, plant &
equipment |
|
|
|
|
|
|
(6,322 |
) |
|
|
(76 |
) |
|
|
(12,724 |
) |
|
|
|
|
|
|
(19,122 |
) |
Other investing activities |
|
|
|
|
|
|
(8,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,415 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities |
|
|
|
|
|
|
(14,737 |
) |
|
|
(76 |
) |
|
|
(12,724 |
) |
|
|
|
|
|
|
(27,537 |
) |
Net borrowings |
|
|
|
|
|
|
35,366 |
|
|
|
|
|
|
|
(823 |
) |
|
|
|
|
|
|
34,543 |
|
Other financing activities |
|
|
|
|
|
|
(15,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(15,488 |
) |
|
Net cash provided by (used in)
financing activities |
|
|
|
|
|
|
19,878 |
|
|
|
|
|
|
|
(823 |
) |
|
|
|
|
|
|
19,055 |
|
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(206 |
) |
|
|
|
|
|
|
(206 |
) |
|
Increase (decrease) in cash |
|
|
|
|
|
|
(18,268 |
) |
|
|
(51 |
) |
|
|
(1,202 |
) |
|
|
|
|
|
|
(19,521 |
) |
Cash at beginning of period |
|
|
|
|
|
|
37,386 |
|
|
|
419 |
|
|
|
17,284 |
|
|
|
|
|
|
|
55,089 |
|
|
Cash at end of period |
|
$ |
|
|
|
$ |
19,118 |
|
|
$ |
368 |
|
|
$ |
16,082 |
|
|
$ |
|
|
|
$ |
35,568 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
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. No customer represents more than 10 percent 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, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
| | | | |
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
137,101 |
|
|
$ |
128,316 |
|
|
$ |
404,083 |
|
|
$ |
374,803 |
|
North American Other |
|
|
20,768 |
|
|
|
20,462 |
|
|
|
63,488 |
|
|
|
66,180 |
|
International |
|
|
45,245 |
|
|
|
40,279 |
|
|
|
118,381 |
|
|
|
103,663 |
|
Eliminations |
|
|
(3,107 |
) |
|
|
(2,179 |
) |
|
|
(9,005 |
) |
|
|
(4,089 |
) |
|
Consolidated |
|
$ |
200,007 |
|
|
$ |
186,878 |
|
|
$ |
576,947 |
|
|
$ |
540,557 |
|
|
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
9,182 |
|
|
$ |
16,594 |
|
|
$ |
98,423 |
|
|
$ |
19,727 |
|
North American Other |
|
|
2,831 |
|
|
|
2,953 |
|
|
|
10,598 |
|
|
|
5,263 |
|
International |
|
|
3,660 |
|
|
|
1,005 |
|
|
|
(1,686 |
) |
|
|
(2,280 |
) |
|
Consolidated |
|
$ |
15,673 |
|
|
$ |
20,552 |
|
|
$ |
107,335 |
|
|
$ |
22,710 |
|
|
Special Items (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
2,374 |
|
|
$ |
362 |
|
|
$ |
(55,334 |
) (1) |
|
$ |
3,036 |
|
North American Other |
|
|
|
|
|
|
382 |
|
|
|
489 |
|
|
|
3,089 |
|
International |
|
|
|
|
|
|
|
|
|
|
2,687 |
|
|
|
|
|
|
Consolidated |
|
$ |
2,374 |
|
|
$ |
744 |
|
|
$ |
(52,158 |
) |
|
$ |
6,125 |
|
|
Depreciation & Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
5,968 |
|
|
$ |
6,074 |
|
|
$ |
18,250 |
|
|
$ |
18,857 |
|
North American Other |
|
|
184 |
|
|
|
244 |
|
|
|
570 |
|
|
|
1,830 |
|
International |
|
|
3,888 |
|
|
|
4,311 |
|
|
|
12,174 |
|
|
|
12,188 |
|
|
Consolidated |
|
$ |
10,040 |
|
|
$ |
10,629 |
|
|
$ |
30,994 |
|
|
$ |
32,875 |
|
|
Capital Expenditures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
5,054 |
|
|
$ |
1,714 |
|
|
$ |
11,685 |
|
|
$ |
6,855 |
|
North American Other |
|
|
62 |
|
|
|
53 |
|
|
|
76 |
|
|
|
267 |
|
International |
|
|
2,627 |
|
|
|
970 |
|
|
|
7,361 |
|
|
|
5,165 |
|
|
Consolidated |
|
$ |
7,743 |
|
|
$ |
2,737 |
|
|
$ |
19,122 |
|
|
$ |
12,287 |
|
|
Reconciliation of EBIT to Net Income (Loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBIT |
|
$ |
15,673 |
|
|
$ |
20,552 |
|
|
$ |
107,335 |
|
|
$ |
22,710 |
|
Interest Expense |
|
|
(11,855 |
) |
|
|
(17,451 |
) |
|
|
(33,243 |
) |
|
|
(52,162 |
) |
Benefit from (provision for) Income Taxes |
|
|
(1,472 |
) |
|
|
432 |
|
|
|
(6,769 |
) |
|
|
7,756 |
|
|
Net Income (Loss) |
|
$ |
2,346 |
|
|
$ |
3,533 |
|
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
|
|
|
|
(1) |
|
Includes a $56,792 gain on redemption of debt and $1,096 of expenses from the secondary stock
offering as discussed in note 4, $29 of restructuring charges, $945 from an insurance recovery and
$1,278 of costs related to the write-off of decorating assets at our Shreveport, Louisiana facility
as discussed in note 5. |
33
13. Fair Value
FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to
transfer a liability in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants at the measurement date. FASB ASC 820 establishes a
fair value hierarchy, 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. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset / (Liability) |
|
Fair Value at September 30, 2010 |
|
|
Fair Value at December 31, 2009 |
|
(dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
|
|
|
|
|
Commodity futures natural gas contracts |
|
$ |
|
|
|
$ |
(6,227 |
) |
|
$ |
|
|
|
$ |
(6,227 |
) |
|
$ |
|
|
|
$ |
(5,407 |
) |
|
$ |
|
|
|
$ |
(5,407 |
) |
Currency contracts |
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate agreements |
|
|
|
|
|
|
3,228 |
|
|
|
|
|
|
|
3,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative liability |
|
$ |
|
|
|
$ |
(2,852 |
) |
|
$ |
|
|
|
$ |
(2,852 |
) |
|
$ |
|
|
|
$ |
(5,407 |
) |
|
$ |
|
|
|
$ |
(5,407 |
) |
|
|
|
|
|
The fair values of our commodity futures natural gas contracts and currency contracts are
determined using observable market inputs. The fair value of our interest rate agreement is based
on the market standard methodology of netting the discounted expected future fixed cash receipts
and the discounted future variable cash payments. The variable cash payments are based on an
expectation of future interest rates derived from observed market interest rate forward curves.
Since these inputs are observable in active markets over the terms that the instruments are held,
the derivatives are classified as Level 2 in the hierarchy. We also evaluate Company and
counterparty risk in determining fair values. The total derivative position is recorded on the
Condensed Consolidated Balance Sheets with $0.1 million in prepaid and other current assets, $3.2
million in other assets, $5.7 million in derivative liability and $0.5 million in other long-term
liabilities as of September 30, 2010. As of December 31, 2009 $3.3 million was recorded in
derivative liability and $2.1 million in other long-term liabilities.
The commodity futures natural gas contracts, interest rate agreements and currency contracts are
hedges of either recorded assets or liabilities or anticipated transactions. Changes in values of
the underlying hedged assets and liabilities or anticipated transactions are not reflected in the
above table.
34
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
Compared to the three months ended September 30, 2009,
our net sales increased during the three months ended September 30, 2010, with our U.S. and Canadian retail business as well as
our International segment continuing their strong performances. Although net sales in our U.S. and Canadian foodservice business
increased in the third quarter of 2010 compared to the same quarter of 2009, that business continues to be impacted by a slow
recovery in general market conditions. As a result of the refinancing of most of our debt during the first quarter of 2010,
we already have benefited from lower interest rates and reduced borrowings. In addition, during the third quarter of 2010 we
completed a secondary offering of 4.4 million shares of our stock on behalf of Merrill Lynch, PCG, Inc., the selling stockholder,
but we incurred $1.1 million of costs (which are included in selling, general and administrative costs in our Condensed Consolidated
Statement of Operations) in connection with that offering. Please see note 4 to the Condensed Consolidated Financial Statements for a
further discussion of the refinancing and secondary offering transaction.
Results of Operations Third Quarter 2010 Compared with Third Quarter 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except percentages and per-share |
|
Three months ended September 30, |
|
|
Variance |
|
amounts) |
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
| | | | |
Net sales |
|
$ |
200,007 |
|
|
$ |
186,878 |
|
|
$ |
13,129 |
|
|
|
7.0 |
% |
Gross profit (2) |
|
$ |
41,685 |
|
|
$ |
42,960 |
|
|
$ |
(1,275 |
) |
|
|
(3.0 |
)% |
Gross profit margin |
|
|
20.8 |
% |
|
|
23.0 |
% |
|
|
|
|
|
|
|
|
Income from operations (IFO) (2)(3) |
|
$ |
15,650 |
|
|
$ |
17,849 |
|
|
$ |
(2,199 |
) |
|
|
(12.3 |
)% |
IFO margin |
|
|
7.8 |
% |
|
|
9.6 |
% |
|
|
|
|
|
|
|
|
Earnings before interest and income taxes
(EBIT)(1)(2)(3) |
|
$ |
15,673 |
|
|
$ |
20,552 |
|
|
$ |
(4,879 |
) |
|
|
(23.7 |
)% |
EBIT margin |
|
|
7.8 |
% |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and
amortization (EBITDA)(1)(2)(3) |
|
$ |
25,713 |
|
|
$ |
31,181 |
|
|
$ |
(5,468 |
) |
|
|
(17.5 |
)% |
EBITDA margin |
|
|
12.9 |
% |
|
|
16.7 |
% |
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
28,087 |
|
|
$ |
31,925 |
|
|
$ |
(3,838 |
) |
|
|
(12.0 |
)% |
Adjusted EBITDA margin |
|
|
14.0 |
% |
|
|
17.1 |
% |
|
|
|
|
|
|
|
|
Net income (2)(3) |
|
$ |
2,346 |
|
|
$ |
3,533 |
|
|
$ |
(1,187 |
) |
|
|
(33.6 |
)% |
Net income margin |
|
|
1.2 |
% |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
Diluted net income per share |
|
$ |
0.12 |
|
|
$ |
0.23 |
|
|
$ |
(0.11 |
) |
|
|
(47.8 |
)% |
|
NM = Not Meaningful
|
|
|
(1) |
|
We believe that EBIT, EBITDA and Adjusted 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,
EBITDA and Adjusted EBITDA and a further discussion as to the reasons we believe these
non-GAAP financial measures are useful. |
|
(2) |
|
Includes a pretax asset write-down of $0.6 million in 2010 related to the write-off of our
decorating assets in our North American Glass segment and $0.2 million of write-downs related
to a facility closure in our North American Other segment in 2009. (See note 5 to the
Condensed Consolidated Financial Statements). |
|
(3) |
|
In addition to item (2) above, includes pre-tax fees of $1.1 million related to our secondary
stock offering and restructuring charges of $0.7 million related to the write-off of our
decorating assets in our North American Glass segment in 2010, charges of $0.3 million in 2009
related to the closing of our Syracuse China manufacturing facility and our Mira Loma
distribution center, and $0.3 million in 2009 related to pension settlement charges. (See
notes 4, 5 and 7 to the Condensed Consolidated Financial Statements). |
35
Net Sales
For the quarter ended September 30, 2010, net sales increased 7.0 percent to $200.0 million from
third quarter sales of $186.9 million in the year-ago quarter. The improvement was primarily
attributable to our North American Glass operations, where net sales increased 6.8 percent to
$137.1 million from $128.3 million in the year-ago quarter. The increase in sales was mainly
attributable to a 14.6 percent increase in sales to Crisa customers, which included a 1.6 percent
increase from the currency impact of the Mexican peso. Sales to U.S. and Canadian retail customers
increased 4.9 percent while sales to our U.S. and Canadian foodservice glassware customers
increased 1.3 percent, as the full service restaurant sector into which our products are primarily
sold continues to face inconsistent traffic trends. North American Other net sales increased 1.5
percent, due to a 3.4 percent increase in sales to World Tableware customers and a 7.6 percent
increase in sales to Traex customers when compared to the third quarter of 2009. These increases
were partially offset by a 5.6 percent decline in sales of Syracuse China products. International
net sales increased 12.3 percent compared to the year-ago quarter. Excluding the impact of
currency exchange, sales growth was 22.2 percent compared to the prior-year quarter. This increase
in International sales resulted from an 11.4 percent increase in sales to Royal Leerdam customers,
an increase of 27.3 percent in sales to Libbey China customers and a 16.3 percent increase in sales
to Crisal customers.
Gross Profit
For the quarter ended September 30, 2010, gross profit decreased by $1.3 million, or 3.0 percent,
to $41.7 million, compared to $43.0 million in the year-ago quarter. Gross profit as a percentage
of net sales decreased to 20.8 percent, compared to 23.0 percent in the year-ago quarter. The
major reasons for the decline in gross profit were increased sales of lower margin products in the
retail market and a $2.8 million increase in packaging costs compared to the prior-year period.
Restructuring charges for the three months ended September 30, 2010 were $0.6 million primarily due
to costs related to the write-off of the decorating assets at our Shreveport, Louisiana facility.
Restructuring charges for the quarter ended September 30, 2009 were $0.2 million primarily due to
costs related to the Syracuse China facility closure. These were offset by higher sales levels.
Income From Operations
Income from operations for the quarter ended September 30, 2010 decreased $2.2 million, or 12.3
percent, to $15.7 million, compared to $17.8 million in the year-ago quarter. Income from
operations as a percentage of net sales declined to 7.8 percent in the third quarter of 2010,
compared to 9.6 percent in the year-ago quarter. The decrease in income from operations is a result
of lower gross profit and gross profit margin (discussed above), increased workers compensation
expense of $1.0 million related to a facility in California which was closed in 2005 and $1.1
million of finance fees related to the secondary stock offering completed in August 2010. This was
partially offset by a $0.9 million reduction in other selling, general and administrative expenses
(primarily labor and benefits). In addition, the $0.3 million of pension settlement charges that
we incurred in the third quarter of 2009 did not recur in the current period.
Earnings Before Interest and Income Taxes (EBIT)
Earnings before Interest and Income Taxes (EBIT) for the quarter ended September 30, 2010 decreased
by $4.9 million, or 23.7 percent, to $15.7 million in 2010 from $20.6 million in 2009. EBIT as a
percentage of net sales decreased to 7.8 percent in the third quarter of 2010, compared to 11.0
percent in the year-ago quarter. Key contributors to the decrease in EBIT compared to the year-ago
quarter are the same as those discussed above under Income From Operations, together with a $2.9
million translation gain included in other income in the third quarter of 2009, which did not
repeat in 2010.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA decreased by $5.5 million in the third quarter of 2010, to $25.7 million, compared to $31.2
million in the year-ago quarter. As a percentage of net sales, EBITDA decreased to 12.9 percent for
the third quarter of 2010, from 16.7 percent in the year-ago quarter. The key contributors to the
change in EBITDA were those factors discussed above under Earnings Before Interest and Income Taxes
(EBIT).
Adjusted EBITDA
Adjusted EBITDA decreased by $3.8 million in the third quarter of 2010, to $28.1 million, compared
to $31.9 million in the year-ago quarter. As a percentage of net sales, Adjusted EBITDA was 14.0
percent for the third quarter of 2010, compared to 17.1 percent in
36
the year-ago quarter. The key
contributors to the change in Adjusted EBITDA were those factors discussed above under Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA), the exclusion of $1.1 million of
finance fees related to the secondary stock offering and a $1.3 million charge related to the
write-down of the decorating assets at our Shreveport, Louisiana facility in 2010, and $0.5 million
related to facility closure costs and a $0.3 million pension settlement charge in 2009.
Net Income and Diluted Net Income Per Share
We recorded net income of $2.3 million, or $0.12 per diluted share, in the third quarter of 2010,
compared to $3.5 million, or $0.23 per diluted share, in the year-ago quarter. Net income as a
percentage of net sales was 1.2 percent in the third quarter of 2010, compared to 1.9 percent in
the year-ago quarter. The decline in net income and diluted net income per share is generally due
to the factors discussed in EBIT above and a $5.6 million reduction in interest expense offset by a
$1.9 million increase in provision for (benefit from) income taxes. The reduction in interest
expense is driven by lower debt levels and the impact of the debt refinancing completed in February
2010. The effective tax rate was a 38.6 percent expense for the quarter compared to a 13.9 percent
benefit in the year-ago quarter. 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 and changes in tax
laws.
Results of Operations First Nine Months 2010 Compared with First Nine Months 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except percentages and per-share |
|
Nine months ended September 30, |
|
|
Variance |
|
amounts) |
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
|
Net sales |
|
$ |
576,947 |
|
|
$ |
540,557 |
|
|
$ |
36,390 |
|
|
|
6.7 |
% |
Gross profit (2) |
|
$ |
123,593 |
|
|
$ |
87,959 |
|
|
$ |
35,634 |
|
|
|
40.5 |
% |
Gross profit margin |
|
|
21.4 |
% |
|
|
16.3 |
% |
|
|
|
|
|
|
|
|
Income from operations (IFO)(2)(3) |
|
$ |
49,627 |
|
|
$ |
17,286 |
|
|
$ |
32,341 |
|
|
|
187.1 |
% |
IFO margin |
|
|
8.6 |
% |
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
Earnings before interest and income taxes
(EBIT)(1)(2)(3)(4) |
|
$ |
107,335 |
|
|
$ |
22,710 |
|
|
$ |
84,625 |
|
|
|
372.6 |
% |
EBIT margin |
|
|
18.6 |
% |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and
amortization (EBITDA)(1)(2)(3)(4) |
|
$ |
138,329 |
|
|
$ |
55,585 |
|
|
$ |
82,744 |
|
|
|
148.9 |
% |
EBITDA margin |
|
|
24.0 |
% |
|
|
10.3 |
% |
|
|
|
|
|
|
|
|
Adjusted EBITDA(1) |
|
$ |
86,171 |
|
|
$ |
61,005 |
|
|
$ |
25,166 |
|
|
|
41.3 |
% |
Adjusted EBITDA margin |
|
|
14.9 |
% |
|
|
11.3 |
% |
|
|
|
|
|
|
|
|
Net income (loss)(2)(3)(4) |
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
|
$ |
89,019 |
|
|
|
410.3 |
% |
Net income (loss) margin |
|
|
11.7 |
% |
|
|
(4.0 |
)% |
|
|
|
|
|
|
|
|
Diluted net income (loss) per share |
|
$ |
3.26 |
|
|
$ |
(1.45 |
) |
|
$ |
4.71 |
|
|
|
324.8 |
% |
|
|
|
|
(1) |
|
We believe that EBIT, EBITDA and Adjusted 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,
EBITDA and Adjusted EBITDA and for further discussion as to the reasons we believe these
non-GAAP financial measures are useful. |
|
(2) |
|
Includes a pre-tax fixed asset write-down of $2.7 million related to after-processing equipment
in our International segment and $0.6 million related to the write-off of decorating assets at
our Shreveport, Louisiana facility in 2010. Also includes pre-tax restructuring charges of
$2.0 million in 2009 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). |
|
(3) |
|
In addition to item (2) above, includes a $1.1 million charge related to fees for the secondary
stock offering and $0.7 million related to the write-off of decorating assets at our
Shreveport, Louisiana facility in 2010, pre-tax restructuring charges of $0.4 million in 2010
and $1.0 million in 2009 related to the closing of our Syracuse China manufacturing facility
and our Mira Loma distribution center and $3.0 million in 2009 related to pension settlement
charges. (See notes 4, 5 and 7 to the Condensed Consolidated Financial Statements). |
|
(4) |
|
In addition to item (3) above, includes pre-tax income of $56.8 million in 2010 related to the
gain on redemption of the PIK Notes and pre-tax restructuring charges of $0.1 million in 2010
and $0.2 million in 2009 related to the closing of our Syracuse China manufacturing facility
and our Mira Loma distribution center. (See notes 4 and 5 to the Condensed Consolidated
Financial Statements). |
37
Net Sales
For the nine months ended September 30, 2010, net sales increased 6.7 percent to $576.9 million
from $540.6 million in the year-ago period. The improvement was primarily attributable to our
North American Glass operations, where net sales increased 7.8 percent to $404.1 million from
$374.8 million in the year-ago period. The increase in net sales was mainly attributable to a 24.4
percent increase in sales to Crisa customers. The increase in net sales to Crisa customers
included a 4.2 percent increase from the currency impact of the Mexican peso. Sales to U.S. and
Canadian retail customers increased 10.0 percent. These increases were partially offset by a 2.4
percent decline in sales to our U.S. and Canadian foodservice glassware customers. North American
Other net sales decreased 4.1 percent, primarily due to a 21.5 percent decline in sales of Syracuse
China products related to the April 2009 closure of the Syracuse China production facility and the
decision to reduce the Syracuse China product offering. Sales to World Tableware customers
increased 5.5 percent when compared to the first nine months of 2009, while sales to Traex
customers were 0.5 percent below sales for the comparable period in 2009. International net sales
increased 14.2 percent compared to the year-ago period, resulting primarily from a 15.5 percent
increase in sales to Royal Leerdam customers. Increases of 29.0 percent in sales to Libbey China
customers and 11.6 percent in sales to Crisal customers also contributed to the International sales
improvement. Excluding the currency impact, International sales increased approximately 18.6
percent.
Gross Profit
For the nine months ended September 30, 2010, gross profit increased by $35.6 million, or 40.5
percent, to $123.6 million, compared to $88.0 million in the year-ago period. Gross profit as a
percentage of net sales increased to 21.4 percent, compared to 16.3 percent in the year-ago period.
The major reason for the improvement in gross profit was increased production activity that
resulted in a $28.2 million benefit, net of cost increases inherent with the higher level of
activity. Favorable currency impact contributed another $8.8 million to the margin, primarily from
movement in the Mexican peso. Higher levels of net sales and favorable mix contributed another
$2.0 million to gross profit, while restructuring charges related to facility closures decreased by
$2.0 million. These improvements were offset by a $2.9 million increase in distribution costs due
to increased sales and a $2.7 million fixed asset write-down in 2010 related to after-processing
equipment in our International segment.
Income From Operations
Income from operations for the nine months ended September 30, 2010 increased $32.3 million, to
$49.6 million, compared to $17.3 million in the year-ago period. Income from operations as a
percentage of net sales increased to 8.6 percent in the first nine months of 2010, compared to 3.2
percent in the year-ago period. The improvement in income from operations is a result of higher
gross profit and gross profit margin (discussed above), offset by a $3.2 million increase in
selling, general and administrative expenses and a $0.1 million increase in items on the
restructuring charges line. The increase in selling, general and administrative expenses included
$1.1 million in fees related to the secondary stock offering in 2010 and increases of $3.2 million
in labor and benefits (which includes the $1.0 million workers compensation charge and $2.0 million
of other benefit cost increases), $0.9 million in legal and professional fees and $0.7 million in
supplies and other costs, offset by $3.0 million of pension settlement expenses in 2009 that did
not recur in 2010.
Earnings Before Interest and Income Taxes (EBIT)
Earnings before Interest and Income Taxes (EBIT) for the nine months ended September 30, 2010
increased by $84.6 million, to $107.3 million in 2010 from $22.7 million in 2009. EBIT as a
percentage of net sales increased to 18.6 percent in the first nine months of 2010, compared to 4.2
percent in the year-ago period. Key contributors to the increase in EBIT compared to the year-ago
period are the same as those discussed above under Income From Operations. In addition, we
recorded a $56.8 million gain on redemption of debt in 2010, net of certain transaction expenses.
See note 4 for further discussion of this gain. Other income decreased by $4.5 million primarily
related to an unfavorable swing in foreign currency translation gains versus the prior-year period
and a decrease in miscellaneous income.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA increased by $82.7 million, or 148.9 percent in the first nine months of 2010, to $138.3
million, compared to $55.6 million in the year-ago period. As a percentage of net sales, EBITDA for
the first nine months of 2010 was 24.0 percent, compared to 10.3 percent in the year-ago period.
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 $1.2
38
million decrease in depreciation and amortization expenses primarily
due to the shutdown of our Syracuse China operations.
Adjusted EBITDA
Adjusted EBITDA increased by $25.2 million, or 41.3 percent in the first nine months of 2010, to
$86.2 million, compared to $61.0 million in the year-ago period. As a percentage of net sales,
Adjusted EBITDA was 14.9 percent for the first nine months of 2010, compared to 11.3 percent in the
year-ago period. The key contributors to the increase in Adjusted EBITDA were those factors
discussed above under Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).
Negatively impacting Adjusted EBITDA for the first nine months of 2010 were the exclusion of a
$56.8 million gain on redemption of debt and a $0.9 million insurance claim recovery in 2010, a
$1.1 million charge for fees related to a secondary equity offering in 2010, a $2.7 million fixed
asset write down of after-processing equipment in our International segment in 2010, a $1.3 million
charge to write off decorating assets at our Shreveport, Louisiana facility in 2010 and a $0.5
million facility closure charge in 2010. Negatively impacting Adjusted EBITDA in the first nine
months of 2009 were pension settlement charges of $3.0 million and facility closure charges of $3.2
million less $0.7 million of accelerated depreciation included in those charges in 2009.
Net Income (Loss) and Diluted Net Income (Loss) Per Share
We recorded net income of $67.3 million, or $3.26 per diluted share, in the first nine months of
2010, compared to a net loss of $(21.7) million, or $(1.45) per diluted share, in the year-ago
period. Net income (loss) as a percentage of net sales was 11.7 percent in the first nine months of
2010, compared to (4.0) 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,
together with an $18.9 million reduction in interest expense offset by a $14.5 million increase in
provision for (benefit from) income taxes. The reduction in interest expense is driven by lower
debt levels and the impact of the debt refinancing completed in February 2010. The effective tax
rate was a 9.1 percent expense for the current nine-month period compared to a 26.3 percent benefit
in the year-ago period, primarily due to changes in the mix of earnings in countries with differing
statutory tax rates, changes in accruals related to uncertain tax positions and changes in tax
laws.
Segment Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
|
|
|
|
|
|
Nine months ended |
|
|
|
|
|
|
September 30, |
|
|
Variance |
|
|
September 30, |
|
|
Variance |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
137,101 |
|
|
$ |
128,316 |
|
|
$ |
8,785 |
|
|
|
6.8 |
% |
|
$ |
404,083 |
|
|
$ |
374,803 |
|
|
$ |
29,280 |
|
|
|
7.8 |
% |
North American Other |
|
|
20,768 |
|
|
|
20,462 |
|
|
|
306 |
|
|
|
1.5 |
% |
|
|
63,488 |
|
|
|
66,180 |
|
|
|
(2,692 |
) |
|
|
(4.1 |
)% |
International |
|
|
45,245 |
|
|
|
40,279 |
|
|
|
4,966 |
|
|
|
12.3 |
% |
|
|
118,381 |
|
|
|
103,663 |
|
|
|
14,718 |
|
|
|
14.2 |
% |
Eliminations |
|
|
(3,107 |
) |
|
|
(2,179 |
) |
|
|
|
|
|
|
|
|
|
|
(9,005 |
) |
|
|
(4,089 |
) |
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
200,007 |
|
|
$ |
186,878 |
|
|
$ |
13,129 |
|
|
|
7.0 |
% |
|
$ |
576,947 |
|
|
$ |
540,557 |
|
|
$ |
36,390 |
|
|
|
6.7 |
% |
|
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
9,182 |
|
|
$ |
16,594 |
|
|
$ |
(7,412 |
) |
|
|
(44.7 |
)% |
|
$ |
98,423 |
|
|
$ |
19,727 |
|
|
$ |
78,696 |
|
|
|
398.9 |
% |
North American Other |
|
|
2,831 |
|
|
|
2,953 |
|
|
|
(122 |
) |
|
|
(4.1 |
)% |
|
|
10,598 |
|
|
|
5,263 |
|
|
|
5,335 |
|
|
|
101.4 |
% |
International |
|
|
3,660 |
|
|
|
1,005 |
|
|
|
2,655 |
|
|
|
264.2 |
% |
|
|
(1,686 |
) |
|
|
(2,280 |
) |
|
|
594 |
|
|
|
26.1 |
% |
|
Consolidated |
|
$ |
15,673 |
|
|
$ |
20,552 |
|
|
$ |
(4,879 |
) |
|
|
(23.7 |
)% |
|
$ |
107,335 |
|
|
$ |
22,710 |
|
|
$ |
84,625 |
|
|
|
372.6 |
% |
|
EBIT Margin: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
|
6.7 |
% |
|
|
12.9 |
% |
|
|
|
|
|
|
|
|
|
|
24.4 |
% |
|
|
5.3 |
% |
|
|
|
|
|
|
|
|
North American Other |
|
|
13.6 |
% |
|
|
14.4 |
% |
|
|
|
|
|
|
|
|
|
|
16.7 |
% |
|
|
8.0 |
% |
|
|
|
|
|
|
|
|
International |
|
|
8.1 |
% |
|
|
2.5 |
% |
|
|
|
|
|
|
|
|
|
|
(1.4 |
)% |
|
|
(2.2 |
)% |
|
|
|
|
|
|
|
|
Consolidated |
|
|
7.8 |
% |
|
|
11.0 |
% |
|
|
|
|
|
|
|
|
|
|
18.6 |
% |
|
|
4.2 |
% |
|
|
|
|
|
|
|
|
|
Special items (income) expense: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
2,374 |
|
|
$ |
362 |
|
|
$ |
2,012 |
|
|
|
555.8 |
% |
|
$ |
(55,334 |
) |
|
$ |
3,036 |
|
|
$ |
(58,370 |
) |
|
NM |
North American Other |
|
|
|
|
|
|
382 |
|
|
|
(382 |
) |
|
|
(100.0 |
)% |
|
|
489 |
|
|
|
3,089 |
|
|
|
(2,600 |
) |
|
|
(84.2 |
)% |
International |
|
|
|
|
|
|
|
|
|
|
|
|
|
NM |
|
|
2,687 |
|
|
|
|
|
|
|
2,687 |
|
|
NM |
|
Consolidated |
|
$ |
2,374 |
|
|
$ |
744 |
|
|
$ |
1,630 |
|
|
|
219.1 |
% |
|
$ |
(52,158 |
) |
|
$ |
6,125 |
|
|
$ |
(58,283 |
) |
|
NM |
|
NM = Not Meaningful
39
Segment Results of Operations Third Quarter 2010 Compared to Third Quarter 2009
North American Glass
For the quarter ended September 30, 2010, net sales increased 6.8 percent to $137.1 million from
$128.3 million in the year-ago
quarter. Of the increase in net sales, approximately 5.5 percent was attributable to increased
sales to Crisa customers and 1.4 percent was attributable to increased sales to U.S. and Canadian
retail glassware customers. Of the 5.5 percent attributable to increased sales to Crisa customers,
0.6 percent was related to a favorable currency impact.
EBIT decreased to $9.2 million for the third quarter of 2010, compared to $16.6 million for the
year-ago quarter. EBIT as a percentage of net sales decreased to 6.7 percent in the third quarter
of 2010, compared to 12.9 percent in the year-ago quarter. The key factors in the decrease in EBIT
compared to the year-ago quarter were a $2.2 million decline due to higher manufacturing costs
offset by higher production activity, a $1.0 million workers compensation expense related to a
facility in California that we closed in 2005, a $1.1 million charge for fees related to the
secondary equity offering, $1.3 million of charges related to the write-off of decorating assets at
our Shreveport, Louisiana facility and a $3.1 million decrease in other income due to unfavorable
movement in currency translation. Selling, general and administrative costs were favorable due to
a $1.2 million decrease in labor and benefit costs and a $0.3 million pension settlement charge in
2009 that did not repeat in 2010. These were offset by increases of $0.5 million in legal and
professional fees, $0.2 million of repairs and other costs and $0.1 million in selling and
marketing expense.
North American Other
For the quarter ended September 30, 2010, net sales increased 1.5 percent to $20.8 million from
$20.5 million in the year-ago quarter. Components of the total increase in net sales were increases
of approximately 1.7 percent and 1.5 percent in sales of World Tableware and Traex products,
respectively, offset by declines of 1.4 percent in sales of Syracuse China products. EBIT decreased
by $0.1 million, or 4.1 percent, to $2.8 million for the third quarter of 2010, compared to $3.0
million in the year-ago quarter. EBIT as a percentage of net sales decreased to 13.6 percent in the
third quarter of 2010, compared to 14.4 percent in the year-ago quarter. The key contributors to
the decreased EBIT were $1.2 million in increased costs primarily related to increased purchases of
finished products and a $0.4 million increase in selling, general and administrative expenses.
These increased costs were offset by an improvement of $0.8 million due to improved sales volume
and mix, a $0.3 million reduction in distribution costs and a $0.4 million decrease in special
charges.
International
For the quarter ended September 30, 2010, net sales increased 12.3 percent to $45.2 million from
$40.3 million in the year-ago quarter. Components of the increase were increases of 6.3 percent,
5.0 percent and 4.9 percent in sales to customers of Royal Leerdam, Libbey China, and Crisal,
respectively. These increases in net sales included a 10.5 percent reduction in sales due to a
weaker euro.
EBIT improved by $2.7 million to $3.7 million in the third quarter of 2010 from $1.0 million in the
year-ago quarter. EBIT as a percentage of net sales improved to 8.1 percent in the third quarter of
2010, compared to 2.5 percent in the year-ago quarter. An improvement from higher production
activity offset by higher manufacturing costs contributed $2.4 million, while improved sales volume
and mix produced a $0.9 million favorable impact and other income increased $0.4 million due to
higher currency translation gains. These improvements were offset by an increase of $0.9 million
in distribution costs.
Segment Results of Operations First Nine Months 2010 Compared to First Nine Months 2009
North American Glass
For the nine months ended September 30, 2010, net sales increased 7.8 percent to $404.1 million
from $374.8 million in the year-ago period. Of the increase in net sales, approximately 6.1 percent
was attributable to increased sales to Crisa customers and 2.6 percent was attributable to
increased sales to U.S. and Canadian retail glassware customers, offset by a 0.5 percent decline in
sales to U.S. and Canadian foodservice glassware customers. Of the 8.3 percent attributable to
increased sales to Crisa customers, 1.4 percent was related to a favorable currency impact.
40
EBIT increased $78.7 million or 398.9 percent to $98.4 million for the first nine months of 2010,
compared to $19.7 million for the year-ago period. EBIT as a percentage of net sales increased to
24.4 percent in the first nine months 2010, compared to 5.3 percent in the year-ago period. The key
factors in the increase in EBIT compared to the year-ago period were a $56.8 million gain on
redemption of debt, $28.2 million due to higher production activity offset by higher manufacturing
costs and $8.5 million due to favorable currency exchange movement. Selling, general and
administrative costs included a $1.1 million charge for fees related to the secondary equity
offering in 2010, offset by a $2.7 million pension settlement charge in 2009 that did not recur in
2010. Excluding the impact of these two items, selling, general and administrative expenses
increased $3.6 million in the first nine months of 2010 due
primarily to higher labor and benefit costs, including a $1.0 million charge in workers
compensation related to a facility in California that we closed in 2005, and legal and professional
fees. Distribution costs increased $1.3 million, unfavorable changes in sales and sales mix,
excluding currency exchange impact, caused a $7.5 million impact and other income decreased $3.8
million related to an unfavorable swing in foreign currency translation gains versus the prior-year
period.
North American Other
For the nine months ended September 30, 2010, net sales declined 4.1 percent to $63.5 million from
$66.2 million in the year-ago period. Components of the total decrease in net sales were declines
of approximately 5.9 percent in sales of Syracuse China products related to the closure of the
Syracuse China facility in April 2009 and the decision to reduce the Syracuse China product
offering and approximately 0.1 percent in sales of Traex products. These declines were offset by
an increase of 2.7 percent in sales of products to World Tableware customers.
EBIT increased by $5.3 million, or 101.4 percent, to $10.6 million for the first nine months of
2010, compared to $5.3 million in the year-ago period. EBIT as a percentage of net sales increased
to 16.7 percent in the first nine months of 2010, compared to 8.0 percent in the year-ago period.
The key contributors to the increased EBIT were a decrease of $1.9 million in special charges and
an improvement of $4.1 million due to improved sales volume and mix. These improvements were
primarily the result of the April 2009 closure of our Syracuse China production facility. These
improvements were offset by an increase of $0.7 million in selling, general and administrative
expenses.
International
For the nine months ended September 30, 2010, net sales increased 14.2 percent to $118.4 million
from $103.7 million in the year-ago period. Components of the increase were increases of 8.0
percent, 5.0 percent and 4.1 percent in sales to customers of Royal Leerdam, Libbey China, and
Crisal, respectively. These improvements include an offsetting impact of movement in the euro
which caused a 4.7 percent decline for the segment.
EBIT improved by $0.6 million to a loss of $(1.7) million in the first nine months of 2010 from a
loss of $(2.3) million in the year-ago period. EBIT as a percentage of net sales improved to (1.4)
percent in the first nine months of 2010, compared to (2.2) percent in the year-ago period.
Improved sales volume and mix produced a $5.3 million favorable impact, while currency impact
contributed an additional $0.3 million improvement and production costs declined by $0.4 million
net of production activity. These improvements were offset by a fixed asset write-down on certain
after-processing equipment of $2.7 million, an increase of $0.7 million in selling, general and
administrative costs, an increase of $1.4 million in distribution costs related to the higher sales
volume and $0.7 million in other expense.
Capital Resources and Liquidity
Balance Sheet and Cash Flows
Cash and Equivalents
At September 30, 2010 our cash balance was $35.6 million, a decrease of $19.5 million from $55.1
million at December 31, 2009. The decrease was primarily due to our utilization of a portion of
our cash on hand to complete the refinancing of our indebtedness in February, 2010, to pay interest
on our senior secured notes in August, 2010 and to fund the seasonal increases in working capital.
41
Working Capital
The following table presents our working capital components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(dollars in thousands, except percentages |
|
|
|
|
|
|
|
|
|
Variance |
|
and DSO, DIO, DPO and DWC) |
|
September 30, 2010 |
|
|
December 31, 2009 |
|
|
In dollars |
|
|
In percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable net |
|
$ |
110,574 |
|
|
$ |
82,424 |
|
|
$ |
28,150 |
|
|
|
34.2 |
% |
DSO (1) |
|
|
51.4 |
|
|
|
40.2 |
|
|
|
|
|
|
|
|
|
Inventories net |
|
$ |
159,374 |
|
|
$ |
144,015 |
|
|
$ |
15,359 |
|
|
|
10.7 |
% |
DIO (2) |
|
|
74.1 |
|
|
|
70.2 |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
$ |
58,937 |
|
|
$ |
58,838 |
|
|
$ |
99 |
|
|
|
0.2 |
% |
DPO (3) |
|
|
27.4 |
|
|
|
28.7 |
|
|
|
|
|
|
|
|
|
Working capital (4) |
|
$ |
211,011 |
|
|
$ |
167,601 |
|
|
$ |
43,410 |
|
|
|
25.9 |
% |
DWC (5) |
|
|
98.1 |
|
|
|
81.7 |
|
|
|
|
|
|
|
|
|
Percentage of net sales |
|
|
26.9 |
% |
|
|
22.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 $211.0 million at September 30, 2010, an increase of $43.4
million from December 31, 2009. This increase is primarily due to higher inventories and accounts
receivable, as we continue to experience the effects of both higher sales and production levels.
In addition, a portion of the inventory increase was the result of normal seasonal trends and our
normal practice of building inventory in preparation for a potential work stoppage associated with
the scheduled September 30, 2010 expiration of collective bargaining agreements relating to our
Toledo, Ohio facility. The collective bargaining agreements were extended, and new contracts were
ratified, subsequent to the end of the quarter, with no resulting work stoppages. The increase in
our accounts receivable balance reflects higher late-quarter sales when compared to the end of the
year. Our days sales outstanding also increased compared to the end of the year as increased
collections will typically lag any increase in sales volume. While the balance in accounts payable
is comparable to the balance at December 31, 2009, we also experienced a decrease in days payable
outstanding when compared to the end of 2009, as cash payments typically are slower during the
final weeks of the year due to holidays. As a result of the factors above, working capital as a
percentage of net sales increased to 26.9 percent at September 30, 2010 from 22.4 percent at
December 31, 2009. Working capital as a percentage of net sales at September 30, 2010 is
comparable to that of 26.5 percent at September 30, 2009.
42
Borrowings
The following table presents our total borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
|
December 31, |
|
(dollars in thousands) |
|
Interest Rate |
|
|
Maturity Date |
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings under ABL facility |
|
floating |
|
|
April 8, 2014 |
|
$ |
|
|
|
$ |
|
|
Senior Secured Notes |
|
|
10.0 |
%(1) |
|
February 15, 2015 |
|
|
400,000 |
|
|
|
|
|
Floating rate notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
306,000 |
|
PIK Notes (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80,431 |
|
Promissory note |
|
|
6.00 |
% |
|
October, 2010 to September, 2016 |
|
|
1,355 |
|
|
|
1,492 |
|
Notes payable |
|
floating |
|
|
October, 2010 |
|
|
|
|
|
|
672 |
|
RMB loan contract |
|
floating |
|
|
July, 2012 to January, 2014 |
|
|
37,425 |
|
|
|
36,675 |
|
RMB working capital loan |
|
floating |
|
|
January, 2011 |
|
|
7,485 |
|
|
|
7,335 |
|
BES Euro line |
|
floating |
|
|
December, 2010 to December, 2013 |
|
|
13,476 |
|
|
|
14,190 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings |
|
|
|
|
|
|
|
|
|
|
459,741 |
|
|
|
446,795 |
|
Less unamortized discount |
|
|
|
|
|
|
|
|
|
|
6,689 |
|
|
|
1,749 |
|
Plus Carrying value adjustment on debt related to the Interest Rate Agreement (1) |
|
|
3,050 |
|
|
|
|
|
Plus Carrying value in excess of principal on PIK Notes (2) |
|
|
|
|
|
|
70,193 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings net (3) |
|
|
|
|
|
|
|
|
|
$ |
456,102 |
|
|
$ |
515,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Derivatives below and note 9 to the Condensed Consolidated Financial Statements. |
|
(2) |
|
On October 28, 2009, we exchanged approximately $160.9 million of Old PIK Notes for
approximately $80.4 million of New PIK Notes and additional common stock and warrants to
purchase common stock of Libbey Inc. Under U.S. GAAP, we were required to record the New PIK
Notes at their carrying value of approximately $150.6 million instead of their face value of
$80.4 million. During the first quarter of 2010, we redeemed the New PIK Notes in conjunction
with the refinancing of the senior floating rate notes and recognized the $70.2 million gain
in gain on redemption of debt on the Condensed Consolidated Statement of Operations. |
|
(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 $459.7 million at September 30, 2010, compared to total borrowings of
$446.8 million at December 31, 2009. The $12.9 million increase in borrowings was the result of the
debt refinancing completed on February 8, 2010. In connection with that refinancing, we used the
proceeds of a $400.0 million debt offering and cash on hand to redeem the PIK notes and repurchase
the $306.0 million Floating Rate notes. We also amended and restated the credit agreement relating
to our ABL facility. See note 4 to the Condensed Consolidated Financial Statements.
Of our total borrowings, $148.4 million, or approximately 32.3 percent, was subject to
variable interest rates at September 30, 2010. A
change of one percentage point in such rates would result in a change in interest expense of
approximately $1.5 million on an annual basis.
Included in interest expense is the amortization of discounts, warrants and financing fees. These
items amounted to $1.1 million and $1.3 million for the three months ended September 30, 2010 and
2009, respectively, and $3.2 million and $3.8 million for the nine months ended September 30, 2010
and 2009, respectively.
43
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) |
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
operating activities |
|
$ |
(2,780 |
) |
|
$ |
26,639 |
|
|
$ |
(29,419 |
) |
|
|
(110.4 |
)% |
Capital expenditures |
|
|
(7,743 |
) |
|
|
(2,737 |
) |
|
|
(5,006 |
) |
|
|
(182.9 |
)% |
Proceeds from asset sales and other |
|
|
|
|
|
|
172 |
|
|
|
(172 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow (1) |
|
$ |
(10,523 |
) |
|
$ |
24,074 |
|
|
$ |
(34,597 |
) |
|
|
(143.7 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We believe that Free cash flow [net cash (used in) provided by 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 (used in) provided by 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 used in operating activities was $(2.8) million in the third quarter of 2010, compared
to net cash provided by operating activities of $26.6 million in the year-ago quarter, or a
decrease of $29.4 million. The major factors causing the decline in cash flow from operations were
$1.2 million from decreased net income, $22.4 million from changes in accrued interest and
amortization of discounts, warrants and finance fees as the interest payment in 2010 was made in
August while in 2009 the interest payment was made in June, and unfavorable cash flow impact of
$9.2 million due to increased working capital related to increased sales and production, offset by
favorable impact of $1.7 million and $2.0 million from changes in restructuring charges and accrued
income taxes, respectively.
Our net cash used in investing activities increased to $7.7 million in the third quarter of 2010,
compared to $2.6 million in the year-ago period, primarily as a result of the $5.0 million increase
in capital expenditures compared to the prior-year third quarter.
Net cash used in financing activities was $0.9 million in the third quarter of 2010, compared to
$17.5 million in the year-ago quarter. During the third quarter of 2009, we utilized $16.8 million
for repayments on our ABL credit facility, while there were no borrowings or repayments on this
facility for the first nine months of 2010.
Our free cash flow was $(10.5) million during the third quarter of 2010, compared to $24.1 million
in the year-ago quarter, a decrease of $34.6 million. The primary contributors to this change were
the decrease in cash flow from operating activities and increased 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) |
|
2010 |
|
|
2009 |
|
|
In dollars |
|
|
In percent |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by
operating activities |
|
$ |
(10,833 |
) |
|
$ |
65,729 |
|
|
$ |
(76,562 |
) |
|
|
(116.5 |
)% |
Capital expenditures |
|
|
(19,122 |
) |
|
|
(12,287 |
) |
|
|
(6,835 |
) |
|
|
(55.6 |
)% |
Proceeds from asset sales and other |
|
|
|
|
|
|
260 |
|
|
|
(260 |
) |
|
|
(100.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free cash flow (1) |
|
$ |
(29,955 |
) |
|
$ |
53,702 |
|
|
$ |
(83,657 |
) |
|
|
(155.8 |
)% |
Payment of interest on PIK Notes |
|
|
29,400 |
|
|
|
|
|
|
|
29,400 |
|
|
NM |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Free cash flow (1) |
|
$ |
(555 |
) |
|
$ |
53,702 |
|
|
$ |
(54,257 |
) |
|
|
(101.0 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We believe that Free cash flow and Adjusted free cash flow [net cash (used in) provided by
operating activities, less capital expenditures, plus proceeds from assets sales and other;
further adjusted for payment of interest on PIK notes in the case of Adjusted free cash flow]
are useful metrics for evaluating our financial performance, as they are measures we use
internally to assess performance. See Table 2 for a reconciliation of net cash (used in)
provided by operating activities to Free cash flow and Adjusted free cash flow and a further
discussion as to the reasons we believe these non-GAAP financial measures are useful. |
Our net cash used in operating activities was $(10.8) million in the first nine months of 2010,
compared to net cash provided by operating activities of $65.7 million in the year-ago period, or a
decrease of $76.6 million. The major factors impacting cash flow
44
from operations were the $89.0 million improvement in net income (loss) and $4.9 million
improvement from special charge activity, offset by $8.2 million from changes in accrued interest
and amortization of discounts, warrants and finance fees, $86.2 million of items related to our
debt refinancing, unfavorable cash flow impact of $59.5 million from increased working capital
related to increased sales and production and $16.6 million from a decrease in accrued liabilities
net of prepaid expenses primarily the result of incentive compensation payments in the first
quarter of 2010.
Our net cash used in investing activities increased to $27.5 million in the first nine months of
2010, compared to $12.0 million in the year-ago period, primarily as a result of the $8.4 million
payment of call premiums on our floating rate notes as part of our debt refinancing and an increase
of $6.8 million in capital expenditures compared to the prior-year period.
Net cash provided by (used in) financing activities was $19.1 million in the first nine months of
2010, compared to a use of cash of $(36.3) million in the year-ago period. During the first nine
months of 2010, our proceeds from the Senior Secured Notes were only partially offset by the
repurchase of our floating rate notes, the redemption of the PIK notes and payment of debt issuance
costs. The increase in cash provided by financing activities, along with cash on hand, was used to
pay interest on the PIK notes and the call premium on the floating rate notes.
Our Free cash flow was $(30.0) million during the first nine months of 2010, compared to $53.7
million in the year-ago period, a decrease of $83.7 million. The primary contributors to this
change were the decrease in cash flow from operating activities, which included payment of interest
on the PIK Notes, and increased capital expenditures in the current period, as discussed above.
Our Adjusted free cash flow was $(0.6) million during the first nine months of 2010, compared to
$53.7 million in the year-ago period, a decrease of $54.3 million. The primary contributors to
this change were the decrease in cash flow from operating activities excluding payment of interest
on the PIK Notes, and increased capital expenditures in the current period.
Derivatives
We have an Interest Rate Agreement (Rate Agreement) with respect to $90.0 million of debt in order
to convert a portion of the Senior Secured Note fixed rate debt into floating rate debt and
maintain a capital structure containing appropriate amounts of fixed and floating rate debt. The
interest rate for our borrowings related to the Rate Agreement at September 30, 2010 is 7.66
percent per year. This Rate Agreement expires on February 15, 2015. Total remaining Senior
Secured Notes not covered by the Rate Agreement have a fixed interest rate of 10.0 percent. If the
counterparty to this Rate Agreement was to fail to perform, the Rate Agreement would no longer
provide the desired results. However, we do not anticipate nonperformance by the counterparty. The
counterparty was rated AA- as of September 30, 2010, by Standard and Poors.
The fair market value for the Rate Agreement at September 30, 2010, was a $3.2 million asset. The
fair value of the Rate Agreement is based on the market standard methodology of netting the
discounted expected future fixed cash receipts and the discounted future variable cash payments.
The variable cash payments are based on an expectation of future interest rates derived from
observed market interest rate forward curves. We do not expect to cancel this agreement and expect
it 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
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, 2010, we had
commodity futures contracts for 3,120,000 million British Thermal Units (BTUs) of natural gas with
a fair market value of a $(6.2) million liability. We have hedged approximately 54.0 percent of
forecasted transactions through December 2010. At December 31, 2009, we had commodity futures
contracts for 3,610,000 million BTUs of natural gas with a fair market value of a $(5.4) million
liability. The counterparties for these derivatives were rated BBB+ or better as of September 30,
2010, by Standard & Poors.
We use foreign currency contracts to manage our currency exposure, which arises from transactions
denominated in a currency other than the U.S. dollar, primarily associated with our Canadian dollar
denominated accounts receivable. 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. In April, 2010, we entered into a series of foreign currency
contracts to sell Canadian dollars. As of September 30, 2010, we had contracts for $8.0 million
Canadian dollars.
45
Capital Resources and Liquidity
Historically, cash flows generated from operations and our borrowing capacity under our ABL
Facility have enabled us to meet our cash requirements, including capital expenditures and working
capital requirements. As of September 30, 2010 we had no amounts outstanding under our ABL
Facility, although we had $18.4 million of letters of credit issued under that facility. As a
result, we had $69.6 million of unused availability remaining under the ABL Facility at September
30, 2010. In addition, we had $35.6 million of cash on hand at September 30, 2010.
On February 8, 2010, we used the proceeds of a debt offering of $400.0 million of Senior Secured
Notes due 2015, together with cash on hand, to redeem the $80.4 million face amount of PIK notes
that were outstanding at that date and to repurchase the $306.0 million of floating rate notes due
2011. We also amended and restated our ABL Facility to, among other things, extend the maturity to
2014 and reduce the amount that we can borrow under that facility from $150.0 million to $110.0
million. In addition, effective February 25, 2010, we extended the maturity of our RMB 50.0 million
working capital loan from March 2010 to January 2011.
Based on our operating plans and current forecast expectations (including expectations that the
global economy will not deteriorate further), we anticipate that our level of cash on hand, cash
flows from operations and our borrowing capacity under our amended and restated ABL Facility will
provide sufficient cash availability to meet our ongoing liquidity needs.
46
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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net income (loss) to EBIT, EBITDA and |
|
Three months ended |
|
|
Nine months ended |
|
adjusted EBITDA |
|
September 30, |
|
|
September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Net income (loss) |
|
$ |
2,346 |
|
|
$ |
3,533 |
|
|
$ |
67,323 |
|
|
$ |
(21,696 |
) |
Add: Interest expense |
|
|
11,855 |
|
|
|
17,451 |
|
|
|
33,243 |
|
|
|
52,162 |
|
Add: provision for (benefit from) income taxes |
|
|
1,472 |
|
|
|
(432 |
) |
|
|
6,769 |
|
|
|
(7,756 |
) |
|
Earnings before interest and income taxes (EBIT) |
|
|
15,673 |
|
|
|
20,552 |
|
|
|
107,335 |
|
|
|
22,710 |
|
Add: Depreciation and amortization |
|
|
10,040 |
|
|
|
10,629 |
|
|
|
30,994 |
|
|
|
32,875 |
|
|
Earnings before interest, taxes, deprecation and
amortization (EBITDA) |
|
|
25,713 |
|
|
|
31,181 |
|
|
|
138,329 |
|
|
|
55,585 |
|
Add: Special items before interest and taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on redemption of debt (see note 4) |
|
|
|
|
|
|
|
|
|
|
(56,792 |
) |
|
|
|
|
Pension settlement charges (see note 7) |
|
|
|
|
|
|
255 |
|
|
|
|
|
|
|
2,955 |
|
Facility closure charges (see note 5) |
|
|
|
|
|
|
489 |
|
|
|
518 |
|
|
|
3,170 |
|
Fixed asset write-down (see note 5) |
|
|
|
|
|
|
|
|
|
|
2,687 |
|
|
|
|
|
Write-off of Shreveport decorating assets (see note 5) |
|
|
1,278 |
|
|
|
|
|
|
|
1,278 |
|
|
|
|
|
Expenses of secondary stock offering (see note 4) |
|
|
1,096 |
|
|
|
|
|
|
|
1,096 |
|
|
|
|
|
Insurance claim recovery |
|
|
|
|
|
|
|
|
|
|
(945 |
) |
|
|
|
|
Less: Depreciation expense included in special charges
and also in depreciation and amortization above |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(705 |
) |
|
Adjusted EBITDA |
|
$ |
28,087 |
|
|
$ |
31,925 |
|
|
$ |
86,171 |
|
|
$ |
61,005 |
|
|
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 (loss).
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 (loss).
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.
47
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.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our
performance across reporting periods on a consistent basis by excluding items that we do not
believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA
internally to measure profitability and to set performance targets for managers.
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
|
|
|
Adjusted EBITDA does not reflect our cash expenditures or future requirements for
capital expenditures or contractual commitments; |
|
|
|
|
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working
capital needs; |
|
|
|
|
Adjusted EBITDA does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments, on our debts; |
|
|
|
|
although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and Adjusted
EBITDA does not reflect any cash requirements for such replacements; |
|
|
|
|
Adjusted EBITDA does not reflect the impact of certain cash charges resulting from
matters we consider not to be indicative of our ongoing operations; and |
|
|
|
|
other companies in our industry may calculate Adjusted EBITDA differently than we do,
limiting its usefulness as a comparative measure. |
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a
substitute for performance measures calculated in accordance with GAAP.
Table 2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of net cash (used in) provided by operating |
|
Three months ended |
|
|
Nine months ended |
|
activities to free cash flow and adjusted free cash flow |
|
September 30, |
|
|
September 30, |
|
(dollars in thousands) |
|
2010 |
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
Net cash (used in) provided by operating activities |
|
$ |
(2,780 |
) |
|
$ |
26,639 |
|
|
$ |
(10,833 |
) |
|
$ |
65,729 |
|
Capital expenditures |
|
|
(7,743 |
) |
|
|
(2,737 |
) |
|
|
(19,122 |
) |
|
|
(12,287 |
) |
Proceeds from asset sales and other |
|
|
|
|
|
|
172 |
|
|
|
|
|
|
|
260 |
|
|
Free cash flow |
|
|
(10,523 |
) |
|
|
24,074 |
|
|
|
(29,955 |
) |
|
|
53,702 |
|
Payment of interest on PIK Notes |
|
|
|
|
|
|
|
|
|
|
29,400 |
|
|
|
|
|
|
Adjusted free cash flow |
|
$ |
(10,523 |
) |
|
$ |
24,074 |
|
|
$ |
(555 |
) |
|
$ |
53,702 |
|
|
We define Free cash flow as net cash (used in) provided by 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 (used in) provided by 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 (used in) provided by operating activities recorded under U.S. GAAP. Free cash flow may
not be comparable to similarly titled measures reported by other companies.
48
We present Adjusted free cash flow because we believe it assists investors and analysts in
comparing our performance across reporting periods on a consistent basis by excluding items that we
do not believe are indicative of our core operating performance. In addition, we use Adjusted free
cash flow internally to measure profitability and to set performance targets for managers.
Adjusted free cash flow is used in conjunction with and in addition to results presented in
accordance with U.S. GAAP. Adjusted free cash flow is neither intended to represent nor be an
alternative to the measure of net cash (used in) provided by operating activities recorded under
U.S. GAAP. Adjusted 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) |
|
2010 |
|
|
2009 |
|
|
Accounts receivable (net) |
|
$ |
110,574 |
|
|
$ |
82,424 |
|
Plus: Inventories (net) |
|
|
159,374 |
|
|
|
144,015 |
|
Less: Accounts payable |
|
|
58,937 |
|
|
|
58,838 |
|
|
Working capital |
|
$ |
211,011 |
|
|
$ |
167,601 |
|
|
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 the U.S. dollar. 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 have an Interest Rate Agreement (Rate Agreement) with respect to $90.0 million of debt in order
to convert a portion of the Senior Secured Note fixed rate debt into floating rate debt and
maintain a capital structure containing appropriate amounts of fixed and floating rate debt. The
interest rate for our borrowings related to the Rate Agreement at September 30, 2010 is 7.66
percent per year. The Rate Agreement expires on February 15, 2015. Total remaining Senior Secured
Notes not covered by the Rate Agreement have a fixed interest rate of 10.0 percent. If the
counterparty to the Rate Agreement was to fail to perform, the Rate Agreement would no longer
provide the desired results. However, we do not anticipate nonperformance by the counterparty. The
counterparty was rated AA- as of September 30, 2010, 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 volatility in earnings or cash flows from 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
49
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, 2010.
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 1.0 percent in the discount rate would change our total annual pension and
nonpension postretirement expense by approximately $3.6 million. |
|
|
|
|
A change of 1.0 percent in the expected long-term rate of return on plan assets would
change annual pension expense by approximately $2.4 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.
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.
|
|
|
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. |
50
|
|
|
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. |
We have a high degree of financial leverage. As of September 30, 2010, we had $459.7 million
aggregate principal amount of debt outstanding. Of that amount:
|
|
|
$400.0 million consisted of our Senior Secured Notes, which were secured by a
first-priority lien on substantially all of the owned real property, equipment and
fixtures in the United States of Libbey Glass and its domestic subsidiaries, subject to
certain exceptions and permitted liens and a second-priority lien on substantially all of
the existing and future real and personal property (including without limitation tangible
and intangible assets) of Libbey Glass and its domestic subsidiaries (other than certain
real property and equipment located in the United States and certain general intangibles,
instruments, books and records and supporting obligations related to such real property
and equipment, and certain proceeds of the foregoing); |
|
|
|
|
we had no debt outstanding under our amended and restated ABL Facility, which was
secured by a first-priority lien on certain inventories and receivables, although we had
$18.4 million of letters of credit issued under that facility; |
|
|
|
|
RMB 250 million (approximately $37.4 million at September 30, 2010) consisted of a
loan made by China Construction Bank Corporation Langfang Economic Development Area
Sub-branch, or CCBC. We used the proceeds of this loan to finance the construction of
our manufacturing facility in China that began operations in early 2007; |
|
|
|
|
RMB 50 million (approximately $7.5 million at September 30, 2010) consisted of a loan,
which is fully drawn, made by CCBC to finance the working capital needs of our China
facility; |
|
|
|
|
9.9 million (approximately $13.5 million at September 30, 2010) consisted of a loan
made by Banco Espirito Santo, S.A., or the BES Euro Line, to finance operational
improvements associated with our Portuguese operations; |
|
|
|
|
$1.4 million consisted of amounts we owed under a promissory note related to the
purchase of our Laredo, Texas
warehouse; and |
Although neither our amended and restated ABL Facility nor the indenture governing our Senior
Secured Notes contains 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. These covenants may limit our ability to engage in
activities that may be in our long-term best interests. Our failure to comply with those
covenants could result in an event of default that, if not cured or waived, could result in
the acceleration of all of our debt.
We are permitted, subject to limitations contained in the agreements relating to our existing
debt, 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:
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making it more difficult for us to satisfy our financial obligations; |
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limiting our ability to make capital investments in order to expand our
business; |
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limiting our ability to obtain additional debt or equity financing for
working capital, capital expenditures, product development, debt service
requirements, acquisitions or other purposes; |
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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; |
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limiting our ability to withstand business and economic downturns and/or
placing 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; and |
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limiting our ability to pay dividends. |
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,
51
delay planned
investments, obtain additional equity capital or restructure our debt. Depending on the
circumstances at the time, we may not be able to accomplish any of these actions on favorable
terms or at all.
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.
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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. |
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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. |
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Fluctuation of the currencies in which we conduct operations could adversely affect our
financial condition and results of operations or reduce the cost competitiveness of our
products or those of our subsidiaries. |
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Our business requires us to maintain a large fixed cost base that can affect our
profitability. |
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We may not be able to achieve the international growth contemplated by our strategy. |
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We face intense competition and competitive pressures, which could adversely affect our
results of operations and financial condition. |
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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. |
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The inability to extend or refinance debt of our foreign subsidiaries, or the calling of
that debt before scheduled maturity, could adversely impact our liquidity and financial
condition. |
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Our cost-reduction projects may not result in anticipated savings in operating costs. |
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We are subject to risks associated with operating in foreign countries. These risks could
adversely affect our results of operations and financial condition. |
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If we have a fair value impairment in a business segment, our net earnings and net worth
could be materially and adversely affected by a write-down of goodwill, intangible assets or
fixed assets. |
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A severe outbreak, epidemic or pandemic of the H1N1 virus or other contagious disease in
a location where we have a facility could adversely impact our results of operations and
financial condition. |
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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. |
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If we are unable to obtain sourced products or materials at favorable prices, our
operating performance may be adversely affected. |
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Unexpected equipment failures may lead to production curtailments or shutdowns. |
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High levels of inflation and high interest rates in Mexico could adversely affect the
operating results and cash flows of Crisa. In addition, similar issues could impact China
in the future. |
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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. |
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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. |
52
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Our business may suffer if we do not retain our senior management. |
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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. |
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We may not be able to effectively integrate future businesses we acquire or joint
ventures we enter into. |
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Our business requires significant capital investment and maintenance expenditures that we
may be unable to fulfill. |
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If our investments in new technology and other capital expenditures do not yield expected
returns, our results of operations could be reduced. |
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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. |
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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. |
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Payment of severance or retirement benefits earlier than anticipated could strain our
cash flow. |
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We are involved in litigation from time to time in the ordinary course of business. |
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Our products are subject to various health and safety requirements and may be subject to
new health and safety requirements in the future; these requirements could have a material
adverse effect on our operations. |
Our glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware and
plastic products are subject to certain legal requirements relating to health and
safety. These legal requirements frequently change and vary among jurisdictions.
Compliance with these requirements, or the failure to comply with these requirements,
may have a material adverse effect on our operations. If any of our products becomes
subject to new regulations, or if any of our products becomes specifically regulated
by additional governmental or other regulatory entities, the cost of compliance could
be material. For example, the U.S. Consumer Product Safety Commission (CPSC)
regulates many consumer products, including glass tableware products that are
externally decorated with certain ceramic enamels. New regulations or policies by the
CPSC could require us to change our manufacturing processes, which could materially
raise our manufacturing costs. Furthermore, a significant order or judgment against
us by any such governmental or regulatory entity relating to health or safety matters,
or the imposition of a significant fine relating to such matters, may have a material
adverse effect on our operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuers Purchases of Equity Securities
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Total Number of |
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Shares Purchased as |
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Maximum Number of |
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Part of Publicly |
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Shares that May Yet Be |
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Total Number of |
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Average Price |
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Announced Plans or |
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Purchased Under the |
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Period |
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Shares Purchased |
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Paid per Share |
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Programs |
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Plans or Programs (1) |
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July 1 to July 31, 2010 |
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1,000,000 |
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August 1 to August 31, 2010 |
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1,000,000 |
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September 1 to September 30, 2010 |
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1,000,000 |
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Total |
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1,000,000 |
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(1) |
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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 2009, 2008, 2007, 2006, 2005 or 2004
or during the first nine months of 2010. Our ABL Facility and the indentures governing the
Senior Secured Notes significantly restrict our ability to repurchase additional shares. |
53
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
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Exhibit |
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Number |
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Description |
3.1
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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
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Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.2 to Libbey Inc.s Quarterly Report
on Form 10-Q for the quarter ended June 30, 1993, as amended as set forth in Exhibit 3.01 to Libbey
Inc.s Form 8-K filed February 7, 2005, both of which filings are incorporated herein by reference). |
4.1
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Warrant, issued June 16, 2006. (filed as Exhibit 4.7 to Registrants Form 8-K filed June 21, 2006
and incorporated herein by reference). |
4.2
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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). |
4.3
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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). |
4.4
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Amendment and Restated Credit Agreement, dated February 8, 2010, among Libbey Glass Inc. and Libbey
Europe B.V., as borrowers, Libbey Inc., as a loan guarantor, the other loan parties party thereto as
guarantors, JPMorgan Chase Bank, N.A., as administrative agent with respect to the U.S. loans, J.P.
Morgan Europe Limited, as administrative agent with respect to the Netherlands loans, Bank of
America, N.A. and Barclays Capital, as Co-Syndication Agents, Wells Fargo Capital Finance, LLC, as
Documentation Agent and the other lenders and agents party thereto (filed as Exhibit 4.1 to Libbey
Inc.s Current Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference). |
4.5
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New Notes Indenture, dated February 8, 2010, among Libbey Glass Inc., Libbey Inc., the domestic
subsidiaries of Libbey Glass Inc. listed as guarantors therein, and The Bank of New York Mellon
Trust Company, N.A., as trustee and collateral agent (filed as Exhibit 4.2 to Libbey Inc.s Current
Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference). |
4.6
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Registration Rights Agreement, dated February 8, 2010, among Libbey Glass Inc., Libbey Inc., and the
domestic subsidiaries of Libbey Glass Inc. listed as guarantors (filed as Exhibit 4.4 to Libbey
Inc.s Current Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference). |
4.7
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Intercreditor Agreement, dated February 8, 2010, among Libbey Glass Inc., Libbey Inc., and the
domestic subsidiaries of Libbey Glass Inc. listed as guarantors (filed as Exhibit 4.5 to Libbey
Inc.s Current Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference). |
10.1
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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
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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
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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). |
10.4
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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 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). |
10.5
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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). |
10.6
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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). |
10.7
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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). |
55
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Exhibit |
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Number |
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Description |
10.8
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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). |
10.9
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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). |
10.10
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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). |
10.11
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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). |
10.12
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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). |
10.13
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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). |
10.14
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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). |
10.15
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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). |
10.16
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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). |
10.17
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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). |
10.18
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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). |
10.19
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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). |
10.20
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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). |
10.21
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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). |
10.22
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Form of amended and restated change in control agreement dated as of December 31, 2008 between
Libbey Inc. and the 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). |
10.23
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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). |
10.24
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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). |
10.25
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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). |
10.26
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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). |
10.27
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Employment Agreement dated as of January 1, 2010 between Libbey Inc. and Roberto B. Rubio (filed as
exhibit 10.39 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31, 2009 and
incorporated herein by reference). |
10.28
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Change in control agreement dated as of January 1, 2010 between Libbey Inc. and Roberto B. Rubio
(filed as exhibit 10.40 to Libbey Inc.s Annual Report on Form 10-K for the year ended December 31,
2009 and incorporated herein by |
56
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Exhibit |
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Number |
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Description |
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reference). |
10.29
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Amended and Restated 2006 Omnibus Incentive Plan (filed herein). |
31.1
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Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
31.2
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Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
32.1
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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
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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.
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LIBBEY INC.
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Date: November 5, 2010 |
By |
/s/ Richard I. Reynolds
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Richard I. Reynolds, |
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Executive Vice President, Chief Financial Officer |
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58