e10vk
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Form 10-K
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(Mark One)
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended
December 31,
2010
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or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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.)
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300 Madison Avenue, Toledo, Ohio
(Address of Principal
Executive Offices)
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43604
(Zip
Code)
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(419) 325-2100
(Registrants telephone
number, including area code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of Each Class
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Name of Each Exchange on Which Registered
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Common Stock, $.01 par value
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NYSE AMEX
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o No þ
Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o No þ
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 if disclosure of delinquent filers
pursuant to Item 405 of
Regulation S-K
(§ 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K
or any amendment to this
Form 10-K. þ
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in Rule
12b-2 of the
Exchange Act. (Check one):
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Large
accelerated
filer o
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Accelerated
filer þ
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Non-accelerated
filer o
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Smaller
reporting
company o
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(Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company
(as defined in
Rule 12b-2
of the
Act). Yes o No þ
The aggregate market value (based on the consolidated tape
closing price on June 30, 2010) of the voting stock
beneficially held by non-affiliates of the registrant was
approximately $202,506,432. For the sole purpose of making this
calculation, the term non-affiliate has been
interpreted to exclude directors and executive officers of the
registrant. Such interpretation is not intended to be, and
should not be construed to be, an admission by the registrant or
such directors or executive officers that any such persons are
affiliates of the registrant, as that term is
defined under the Securities Act of 1934.
The number of shares of common stock, $.01 par value, of
the registrant outstanding as of February 28, 2011 was
19,728,383.
DOCUMENTS
INCORPORATED BY REFERENCE
Certain information required by Items 10, 11, 12, 13 and 14
of
Form 10-K
is incorporated by reference into Part III hereof from the
registrants Proxy Statement for the Annual Meeting of
Shareholders to be held May 19, 2011 (Proxy
Statement).
Certain information required by Part II of this
Form 10-K
is incorporated by reference from registrants 2010 Annual
Report to Shareholders where indicated.
This Annual Report on
Form 10-K,
including Managements Discussion and Analysis of
Financial Condition and Results of Operations, contains
forward-looking statements regarding future events and future
results that are subject to the safe harbors created under the
Securities Act of 1933 and the Securities Exchange Act of 1934.
Libbey desires to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995. These statements are based on current expectations,
estimates, forecasts and projections, and the beliefs and
assumptions of our management. Words such as expect,
anticipate, target, believe,
intend, may, planned,
potential, should, will,
would, variations of such words, and similar
expressions are intended to identify these forward-looking
statements. In addition, any statements that refer to
projections of our future financial performance, our anticipated
growth and trends in our businesses, and other characterizations
of future events or circumstances, are forward-looking
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.
PART I
General
Libbey Inc. (Libbey or the Company) is the leading producer of
glass tableware products in the Western Hemisphere, in addition
to supplying to key markets throughout the world. 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 produce glass tableware in five countries and sell to over
100 countries. We design and market, under our
LIBBEY®,
Crisa®,
Royal
Leerdam®,
World®
Tableware,
Syracuse®
China and
Traex®
brand names, an extensive line of high-quality glass tableware,
ceramic dinnerware, metal flatware, hollowware and serveware,
and plastic items for sale primarily in the foodservice, retail
and
business-to-business
markets. Our global sales force presents our products to the
global marketplace in a coordinated fashion. We are the largest
glass tableware manufacturer in Latin America through our
subsidiary Crisa Libbey Commercial, S. de R.L. de C.V. (Crisa)
which goes to market under the
Crisa®
brand name. Through our subsidiary Libbey Glassware (China),
Co., Ltd. (Libbey China) we have a
state-of-the-art
glass tableware manufacturing facility in China that has been
operational since the first quarter of 2007. Through our
subsidiary B.V. Koninklijke Nederlandsche Glasfabriek Leerdam
(Royal Leerdam), we manufacture high-quality glass stemware
under the Royal
Leerdam®
brand name. Through our subsidiary Crisal-Cristalaria
Automática S.A. (Crisal), we manufacture glass tableware in
Portugal for our worldwide customer base. We import and market
ceramic dinnerware under the
Syracuse®
China brand name through our subsidiary Syracuse China Company
(Syracuse China). Through our World Tableware Inc. (World
Tableware) subsidiary, we import metal flatware, hollowware,
serveware and ceramic dinnerware for resale. We design,
manufacture and distribute an extensive line of plastic items
for the foodservice industry under the
Traex®
brand name through our subsidiary Traex Company (Traex). See
note 17 to the Consolidated Financial Statements for
segment information.
Libbey was incorporated in Delaware in 1987, but traces its
roots back to The W. L. Libbey & Son Company, an Ohio
corporation formed in 1888, when it began operations in Toledo,
Ohio.
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
the Securities Exchange Act of 1934, including our annual report
on
Form 10-K,
our quarterly reports on
Form 10-Q
and 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.
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Growth
Strategy
Our strategic vision is to be the premier provider of glass
tableware and related products worldwide. We seek to continue to
increase our share of our core North American market in the
foodservice, retail and
business-to-business
channels through our diverse product offering by leveraging our
brands and leading market positions in the foodservice and
retail channels, superior product development capabilities,
consistently high customer service levels and broad distribution
network. In International markets, we seek to increase our
presence in all trade areas of the European glass tableware
market; foodservice, retail and business-to-business, with
specific emphasis on a broadened reach in the
business-to-business sector. We also believe that we have
significant opportunities for continued growth in China and
throughout the Pacific Rim due to our state of the art
manufacturing facility in China as well as our growing sales
force and distribution network.
In addition to our focus on top-line growth, the concurrent
improvement in profitability and cash flow generation is a key
element of our strategy. To this end, we continue to focus on a
number of initiatives aimed at creating additional operating
efficiencies, including eliminating waste, reducing working
capital and instilling a culture of continuous improvement in
all aspects of our operations. We also believe that by
leveraging all of our production capabilities, particularly in
low-cost countries such as Mexico, China and Portugal, our
business can achieve greater profitability and generate
increased cash flow through our ability to sell our products at
price points that enable us to compete more profitably.
We expect that the period of 2011 through 2012 will continue to
present a fragile and challenged world marketplace, and, as a
result, recovery will be modest at best. Accordingly, Libbey
will maintain its focus during that time on strengthening our
balance sheet, with an eye to refinancing in the latter part of
2012 with the goal of lowering our interest expense and
extending the maturities.
We view the period from 2013 through 2015 as presenting
increased opportunity for growth, and we expect various
expansion opportunities in some key global markets. We expect
that, by strengthening our balance sheet and refinancing our
debt before then, we will be positioned to avail ourselves of
some of those strategic opportunities when they arise.
Products
Our tableware products consist of glass tableware (including
casual glass beverageware), ceramic dinnerware, metal flatware,
hollowware and serveware and plastic items. Our glass tableware
includes tumblers, stemware (including wine glasses), mugs,
bowls, ashtrays, bud vases, salt and pepper shakers, shot
glasses, canisters, candleholders and various other items. Royal
Leerdam produces high-quality stemware. Crisal produces glass
tableware, mainly tumblers, stemware and glassware accessories.
Crisas glass tableware product assortment includes the
product types produced by Libbey, as well as glass bakeware and
handmade glass tableware. In addition, Crisas products
include blender jars, washing machine windows and other glass
products sold principally to original equipment manufacturers
(OEMs). Through our Syracuse China and World Tableware
subsidiaries, we offer a wide range of ceramic dinnerware
products. These include plates, bowls, platters, cups, saucers
and other tableware accessories. Our World Tableware subsidiary
provides an extensive selection of metal flatware, including
knives, forks, spoons and serving utensils. In addition, World
Tableware sells metal hollowware, including serving trays,
chafing dishes, pitchers and other metal tableware accessories,
as well as an extensive line of dinnerware. Through our Traex
subsidiary, we produce and sell a wide range of plastic
products, including tabletop warewashing and storage racks,
trays, dispensers and organizers, to the foodservice industry.
Our global sales force presents all of our products to the
global marketplace in a coordinated fashion.
We also have an agreement to be the exclusive distributor of
Luigi Bormioli glassware in the United States, Canada and Mexico
to foodservice users. Luigi Bormioli, based in Italy, is a
highly regarded supplier of high-end glassware used in many of
the finest eating and drinking establishments.
Customers
The customers for our tableware products include approximately
500 foodservice distributors in the United States and
Canada. In the retail channel, we sell to mass merchants,
department stores, retail distributors,
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national retail chains and specialty housewares stores. In
addition, our
business-to-business
channel primarily includes customers that use glass containers
for candle and floral applications, gourmet food packaging
companies, and various OEM applications. In Mexico, we sell to
retail mass merchants and wholesale distributors, as well as
candle and food packers, and various OEM users of custom molded
glass. In Europe, we market glassware to retailers, distributors
and decorators that service the retail, foodservice and highly
developed
business-to-business
channel, which includes large breweries and distilleries, for
which products are decorated with company logos for promotional
and resale purposes. We also have other customers who use our
products for promotional or other private uses. In China, we
sell to distributors and wholesalers. No single customer
accounts for 10 percent or more of our sales, although the
loss of any of our major customers could have a meaningful
effect on us.
Sales,
Marketing and Distribution
In 2010, approximately 75 percent of our sales were to
customers located in North America, and approximately
25 percent of our sales were to customers located outside
of North America. We sell our products to over 100 countries
around the world, competing in the tableware markets of Latin
America, Asia and Europe, as well as North America.
We have our own sales staff of professionals who call on
customers and distributors. In addition, we retain the services
of manufacturing representative organizations to assist in
selling our products in select countries.
We also have marketing staff located at our corporate
headquarters in Toledo, Ohio, as well as in Mexico, Portugal,
the Netherlands and China. They engage in developing strategies
relating to product development, pricing, distribution,
advertising and sales promotion.
We operate distribution centers located at or near each of our
manufacturing facilities (see Properties section).
In addition, we operate distribution centers for our products
produced in Mexico in Laredo, Texas, and for our
Syracuse®
China,
World®
Tableware and
Traex®
products in West Chicago, Illinois. The glass tableware
manufacturing and distribution centers are strategically located
to enable us to supply significant quantities of our product to
virtually all of our customers on a timely and cost effective
basis.
The majority of our sales are in the foodservice, retail and
business-to-business
channels, which are further detailed below.
Foodservice
We have, according to our estimates, the leading market share in
glass tableware sales in the U.S. and Canadian foodservice
channel. Our
Syracuse®
China,
World®
Tableware and
Traex®
brands are long-established brands of high-quality ceramic
dinnerware, metal flatware, hollowware and serveware, and
plastic items, respectively. We are among the leading suppliers
of these product categories to foodservice end users. Our glass
tableware manufacturing facility in China has experienced
significant growth in this market channel as it supplies
products to key markets worldwide. A significant majority of our
tableware sales to foodservice end users are made through a
network of foodservice distributors. The distributors in turn
sell to a wide variety of foodservice establishments, including
national and regional hotel chains, national and regional
restaurant chains, independently owned bars and restaurants and
casinos.
Retail
Our primary customers in the retail channel include national and
international mass merchants. In recent years, we have increased
our retail sales by increasing our sales to specialty housewares
stores and value-oriented retailers. In 2011, we were recognized
by the Retail Tracking Services of NPD Group for increasing our
overall U.S. market share in the casual glass beverageware
market in 2010 to approximately 47 percent from
approximately 42 percent in 2009. Royal Leerdam and Crisa
sell to similar retail customers in Europe and Mexico, while
Crisal is increasingly positioned with retailers on the Iberian
Peninsula. With this retail representation, we are positioned to
successfully introduce profitable new products. We also operate
outlet stores located at or near the majority of our
manufacturing locations. In addition, we sell selected items in
the United States on the internet at www.libbey.com.
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Business-to-Business
Royal Leerdam and Crisal supply glassware to the
business-to-business
channel of distribution in Europe. Customers in this channel
include marketers who decorate our glassware with company logos
and resell these products to large breweries and distilleries,
which redistribute the glassware for promotional purposes and
resale. Our
business-to-business
channel in North America includes candle and floral
applications, blender jars and washing machine windows. The
craft industries and gourmet food-packing companies are also
business-to-business
consumers of glassware.
Seasonality
Primarily due to the impact of consumer buying patterns and
production activity, our sales and operating income, excluding
special items, tends to be stronger in the second half and
weaker in the first half of each year. In addition, our cash
flow from operating activities tends to be stronger in the
second half of the year and weaker in the first half of the year
due to these seasonal working capital trends. In particular, our
inventory levels typically reach their highest levels in the
third quarter of the year, and decrease in the following quarter
due to seasonally higher sales that typically peak in the fourth
quarter of the year. In addition, our receivables typically peak
during the third and early fourth quarters and begin to decrease
by the end of the year as cash collections continue through the
end of December, but limited shipments occur during the final
week of the year. Our payables normally peak during the third
and fourth quarters of the year as a result of our increased
production levels going into those quarters, but are not
significant enough to provide relief for total working capital
needs caused by increased investment in inventories.
Accordingly, our overall investment in working capital will
normally reach higher levels through the summer months as we
build inventory during slower sales periods in order to allow
for optimum customer service and timely delivery during the
higher sales periods in the second half of the year, when sales
typically exceed short-term production capabilities. Although
little information with respect to our competitors is publicly
available, we believe that our experience with working capital
is generally consistent with the experience for the industry as
a whole.
Backlog
As of December 31, 2010, our backlog was approximately
$62.8 million, compared to approximately $54.9 million
at December 31, 2009. The increase was caused by increased
demand by our customers, as orders have reached more traditional
levels due to the continuing economic recovery. Backlog includes
orders confirmed with a purchase order for products scheduled to
be shipped to customers in a future period. Because orders may
be changed
and/or
cancelled, we do not believe that our backlog is necessarily
indicative of actual sales for any future period.
Manufacturing
and Sourcing
In North America, we currently own and operate three glass
tableware manufacturing plants - two in the United States (one
in Toledo, Ohio and one in Shreveport, Louisiana) and one in
Monterrey, Mexico. We also own and operate one facility in Dane,
Wisconsin that produces plastic products for the foodservice
industry. In Europe, we own and operate two glass tableware
manufacturing plants one in Leerdam, the
Netherlands, and the other in Marinha Grande, Portugal. In Asia,
we own and operate a glass tableware production facility in
Langfang, China.
The manufacture of our tableware products involves the use of
automated processes and technologies. We design much of our
glass tableware production machinery, and we continuously refine
it to incorporate technological advances to create a competitive
advantage. We believe that our production machinery and
equipment continues to be adequate for our needs in the
foreseeable future, but we continue to invest in ways to further
improve our product offering and production efficiencies and
reduce our cost profile.
Our glass tableware products generally are produced using one of
two manufacturing methods or, in the case of certain stemware, a
combination of such methods. Most of our tumblers, stemware and
other glass tableware products are produced by forming molten
glass in molds with the use of compressed air. These products
are known as blown glass products. Our other glass
tableware products and the stems of certain stemware are
pressware products, which are produced by pressing
molten glass into the desired product shape.
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Ceramic dinnerware is imported primarily from Asia. We source
metal flatware and metal hollowware through our World Tableware
subsidiary, primarily from Asia. Plastic products are also
produced through the injection molding of raw materials into the
desired shape and are manufactured at our Dane, Wisconsin
production facility or imported primarily from Asia.
To assist in the manufacturing process, we employ a team of
engineers whose responsibilities include efforts to improve and
upgrade our manufacturing facilities, equipment and processes.
In addition, they provide engineering required to manufacture
new products and implement the large number of innovative
changes continuously being made to our product designs, sizes
and shapes. See Research and Development below for
additional information.
Materials
Our primary materials are sand, lime, soda ash, corrugated
packaging, resins and colorants. Historically, these materials
have been available in adequate supply from multiple sources.
However, there may be temporary shortages of certain materials
due to weather or other factors, including disruptions in supply
caused by material transportation or production delays. Such
shortages have not previously had, and are not expected in the
future to have, a material adverse effect on our operations.
Natural gas is the primary source of energy in most of our
production processes, and periodic variability in the price for
natural gas has had and could continue to have an impact on our
profitability. Historically, we have used natural gas hedging
contracts for a portion of our expected purchases to partially
mitigate this impact. In addition, resins are a primary source
of materials for our Traex operation, and historically the price
for resins has fluctuated, directly impacting our profitability.
We also experience fluctuations in the cost to deliver materials
to our facilities, and such changes may affect our earnings and
cash flow.
Research
and Development
Our core competencies include our engineering excellence and
world-class manufacturing techniques. Our focus is to increase
the quality of our products and enhance the profitability of our
business through research and development. We will continue to
invest in strategic research and development projects that will
further enhance our ability to compete in our core business.
We employ a team of engineers, in addition to external
consultants, to conduct research and development. Our
expenditures on research and development activities related to
new and/or
improved products and processes were $2.6 million in 2010,
$2.0 million in 2009 and $1.7 million in 2008. These
costs were expensed as incurred.
Patents,
Trademarks and Licenses
Based upon market research and surveys, we believe that our
trade names and trademarks, as well as our product shapes and
styles, enjoy a high degree of consumer recognition and are
valuable assets. We believe that the
Libbey®,
Syracuse®
China,
World®
Tableware,
Crisa®,
Royal
Leerdam®,
Crisal
Glass®
and
Traex®
trade names and trademarks are material to our business.
We have rights under a number of patents that relate to a
variety of products and processes. However, we do not consider
that any patent or group of patents relating to a particular
product or process is of material importance to our business as
a whole.
Competitors
Our business is highly competitive, with the principal
competitive factors being customer service, price, product
quality, new product development, brand name, delivery time and
breadth of product offerings.
Competitors in glass tableware include, among others:
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Arc International (a French company), which manufactures and
distributes glass tableware to retail, foodservice and
business-to-business
customers worldwide;
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Paşabahçe (a unit of Şişecam, a Turkish
company), which manufactures glass tableware at various sites
throughout the world and sells to retail, foodservice and
business-to-business
customers worldwide;
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Anchor Hocking Company (a U.S. company), which manufactures
and distributes glass beverageware, industrial products and
bakeware primarily to retail, industrial and foodservice
channels in the U.S. and Canada;
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Bormioli Rocco Group (an Italian company), which manufactures
glass tableware in Europe, where the majority of its sales are
to retail and foodservice customers;
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various manufacturers in China; and
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various sourcing companies.
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Other materials such as plastics also compete with glassware.
Competitors in U.S. ceramic dinnerware include, among
others:
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Homer Laughlin;
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Oneida Ltd.;
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Steelite; and
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various sourcing companies.
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Competitors in metalware include:
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Oneida Ltd.;
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Walco, Inc.; and
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various sourcing companies.
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Competitors in plastic products are, among others:
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Cambro Manufacturing Company;
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Carlisle Companies Incorporated; and
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various sourcing companies.
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Environmental
Matters
Our operations, in common with those of industry generally, are
subject to numerous existing laws and governmental regulations
designed to protect the environment, particularly regarding
plant wastes and emissions and solid waste disposal and
remediation of contaminated sites. We believe that we are in
material compliance with applicable federal, state and local
environmental laws, and we are not aware of any regulatory
initiatives that we expect will have a material effect on our
products or operations. See Risk Factors We
are subject to various environmental legal requirements and may
be subject to new legal requirements in the future; these
requirements could have a material adverse effect on our
operations.
We have shipped, and we continue to ship, waste materials for
off-site disposal. However, we are not named as a potentially
responsible party with respect to any waste disposal site
matters pending prior to June 24, 1993, the date of
Libbeys initial public offering and separation from
Owens-Illinois, Inc. (Owens-Illinois). Owens-Illinois has been
named as a potentially responsible party or other participant in
connection with certain waste disposal sites to which we also
may have shipped wastes prior to June 24, 1993. We may bear
some responsibility in connection with those shipments. Pursuant
to an indemnification agreement between Owens-Illinois and
Libbey, Owens-Illinois has agreed to defend and hold us harmless
against any costs or liabilities we may incur in connection with
any such matters identified and pending as of June 24,
1993, and to indemnify us for any liability that results from
these matters in excess of $3 million. We believe that if
it is necessary to draw upon this indemnification, collection is
probable.
Pursuant to the indemnification agreement referred to above,
Owens-Illinois is defending us with respect to the King Road
landfill. In January 1999, the Board of Commissioners of Lucas
County, Ohio instituted a lawsuit against Owens-Illinois, Libbey
and numerous other defendants in the U.S. District Court
for the Northern District of Ohio
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to recover costs incurred to address contamination from the King
Road landfill formerly operated by the County. The Board of
Commissioners dismissed the lawsuit without prejudice in October
2000. In view of the uncertainty as to any re-filing of the
suit, the remedy, and the number of potentially responsible
parties and potential defenses, we are unable to quantify our
exposure with respect to the King Road landfill.
On October 10, 1995, Syracuse China Company, our
wholly-owned subsidiary, acquired from The Pfaltzgraff Co. and
certain of its subsidiary corporations, the assets operated by
them as Syracuse China. The Pfaltzgraff Co. and the New York
State Department of Environmental Conservation, which we refer
to as the DEC, entered into an Order on Consent effective
November 1, 1994 that required Pfaltzgraff to develop a
remedial action plan for and to remediate a landfill, as well as
wastewater sludge ponds and adjacent wetlands located on
property that Syracuse China Company purchased. Although
Syracuse China was not a party to the Order on Consent, as part
of the Asset Purchase Agreement with The Pfaltzgraff Co., which
we refer to as the APA, Syracuse China agreed to share a part of
the remediation and related expense up to the lesser of
50 percent of such costs or $1.35 million. The
approved remedy has been implemented and Syracuse Chinas
payment obligation under the APA has been satisfied.
In addition, Syracuse China has been named as a potentially
responsible party by reason of its potential ownership of
certain property that adjoins its plant and that has been
designated a
sub-site of
the Onondaga Lake Superfund Site. We believe that any
contamination of the
sub-site was
caused by and will be remediated by owners of this site at no
cost to Syracuse China. We believe that, even if Syracuse China
were deemed to be responsible for any expense in connection with
the contamination of the
sub-site, it
is likely that a portion of the expense would be paid by
Pfaltzgraff pursuant to the APA.
By letter dated October 31, 2008, the DEC and
U.S. Environmental Protection Agency, which we refer to as
the EPA, made a demand upon Syracuse China and several other
companies for recovery of approximately $12.5 million of
direct and indirect costs allegedly expended by the DEC and EPA
in connection with the
clean-up of
the Onondaga Lake Superfund Site. By letter dated
October 30, 2009, the EPA notified Syracuse China and
several other companies that they are potentially responsible
parties in connection with the Lower Ley Creek
sub-site of
the Onondaga Lake Superfund Site. At this time it is not certain
that there is a nexus between Syracuse China and the Superfund
Site. Under the APA, we and The Pfaltzgraff Co. will share any
costs for off-premise liability of this kind up to an aggregate
of $7.5 million. We have no reason to believe that the
indemnification would not be honored if it were to become
necessary for us to draw upon that indemnification.
We regularly review the facts and circumstances of the various
environmental matters affecting us, including those covered by
indemnification. Although not free of uncertainties, we do not
expect, based upon the number of parties involved at the sites
and the estimated cost of undisputed work necessary for
remediation based upon known technology and the experience of
others, to incur material loss for new matters in the future.
There can be no assurance, however, that indemnification
agreements will be performed or our future expenditures for
environmental matters will not have a material adverse effect on
our financial position or results of operations.
In addition, occasionally the federal government and various
state authorities have investigated possible health issues that
may arise from the use of lead or other ingredients in enamels
such as those used by us on the exterior surface of our
decorated products. In that connection, Libbey Glass Inc. and
numerous other glass tableware manufacturers, distributors and
importers entered into a consent judgment on August 31,
2004 in connection with an action, Leeman v. Arc
International North America, Inc. et al, Case
No. CGC-003-418025
(Superior Court of California, San Francisco County)
brought under Californias so-called Proposition
65. Proposition 65 requires businesses with ten or more
employees to give a clear and reasonable warning
prior to exposing any person to a detectable amount of a
chemical listed by the state as covered by this statute. Lead is
one of the chemicals covered by that statute. Pursuant to the
consent judgment, Libbey Glass Inc. and the other defendants
(including Anchor Hocking and Arc International North America,
Inc.) agreed, over a period of time, to reformulate the enamels
used to decorate the external surface of certain glass tableware
items to reduce the lead content of those enamels. We have
complied with this requirement.
Although we have modified and continue to modify our
manufacturing processes and technologies in an effort to reduce
our emissions and increase energy efficiency, capital
expenditures for property, plant and equipment for environmental
control activities were not material during 2010 or 2009 and are
not expected to increase significantly in 2011.
9
Employees
Our employees are vital to achieving our vision to be the
premier provider of tabletop glassware and related products
worldwide and our mission to create value by
delivering quality products, great service and strong financial
results through the power of our people worldwide. We
strive to achieve our vision and mission through our values of
customer focus, performance, continuous improvement, teamwork,
respect and development.
We employed 7,005 persons at December 31, 2010.
Approximately 66 percent of our employees are employed
outside the U.S., and the majority of our employees are paid
hourly and covered by collective bargaining agreements. Royal
Leerdams collective bargaining agreement with its
unionized employees expires on July 1, 2011. The agreement
with our unionized employees in Shreveport, Louisiana expires on
December 15, 2011. Agreements with our unionized employees
in Toledo, Ohio expire on September 30, 2013. Crisas
collective bargaining agreements with its unionized employees
have no expiration, but wages are reviewed annually and benefits
are reviewed every two years. Crisal does not have a written
collective bargaining agreement with its unionized employees but
does have an oral agreement that is revisited annually.
EXECUTIVE
OFFICERS OF THE REGISTRANT
Our executive officers have a wealth of business knowledge,
experience and commitment to Libbey. In 2011, each of
Mr. Meier, Chairman of the Board and Chief Executive
Officer, and Mr. Reynolds, Executive Vice President and
Chief Financial Officer, will celebrate 41 years of service
with Libbey. In addition, the average years of industry
experience of all of our executive officers is 22 years.
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Name and Title
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Professional Background
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John F. Meier
Chairman and Chief
Executive Officer
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Mr. Meier, 63 has been Chairman of the Board and Chief Executive
Officer of Libbey Inc. since the Company went public in June
1993. Since joining the Company in 1970, Mr. Meier has served
in various marketing positions, including a five-year assignment
with Durobor, S.A., Belgium. In 1990, Mr. Meier was named
General Manager of Libbey and a corporate Vice President of
Owens-Illinois, Inc., Libbeys former parent company. Mr.
Meier is a member of the Board of Directors of Cooper Tire
& Rubber Company (NYSE: CTB) and Applied Industrial
Technologies (NYSE: AIT). Mr. Meier has been a director of
the Company since 1987. Mr. Meier recently announced his
plans to retire by the end of 2011.
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Richard I. Reynolds
Executive Vice President
and Chief Financial Officer
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Mr. Reynolds, 64, has served as Libbeys Executive Vice
President and Chief Financial Officer since June, 2010. Mr.
Reynolds also served as Vice President and Chief Financial
Office from June 1993 to 1995. In addition, Mr. Reynolds was
Libbeys Executive Vice President and Chief Operating
Officer from 1995 to June, 2010. From 1989 to June 1993, Mr.
Reynolds was Director of Finance and Administration.
Mr. Reynolds has been with Libbey since 1970 and has been a
director of the Company since 1993.
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Gregory T. Geswein
Vice President, Strategic Planning
and Business Development
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Mr. Geswein, 56, has served as Libbeys Vice President,
Strategic Planning and Business Development since June, 2010.
Mr. Geswein served as Libbeys Vice President, Chief
Financial Officer from May 23, 2007, when he joined Libbey
until June, 2010. Prior to joining Libbey, Mr. Geswein was
Senior Vice President, Chief Financial Officer of Reynolds
& Reynolds Company in Dayton, Ohio, from 2005 through April
2007. Before joining Reynolds & Reynolds, Mr. Geswein was
Senior Vice President, Chief Financial Officer for Diebold, Inc.
from 2000 to August 12, 2005 and Senior Vice President, Chief
Financial Officer of Pioneer-Standard Electronics Inc. from 1999
to 2000. Prior to joining Pioneer-
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Name and Title
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Professional Background
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Standard Electronics, Mr. Geswein spent 14 years at Mead
Corporation (now MeadWestvaco) in successive financial
management positions, including Vice President and Controller,
and Treasurer. On June 2, 2010, the Securities and Exchange
Commission filed a civil complaint against Mr. Geswein and
certain other individuals previously or currently employed by
Diebold, Inc. The allegations contained in the civil complaint
relate to Mr. Gesweins prior employment as Chief Financial
Officer of Diebold, Inc. None of the allegations involves Libbey
or Libbey Inc.
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Kenneth A. Boerger
Vice President
and Treasurer
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Mr. Boerger, 52, has been Vice President and Treasurer of Libbey
Inc. since July 1999. From 1994 to July 1999, Mr. Boerger was
Corporate Controller and Assistant Treasurer. Since joining the
Company in 1984, Mr. Boerger has held various financial and
accounting positions. He has been involved in the Companys
financial matters since 1980, when he joined Owens-Illinois,
Inc., Libbeys former parent company.
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Jonathan S. Freeman
Vice President, Global Supply
Chain
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Mr. Freeman, 49, joined Libbey Inc. as Vice President, Global
Supply Chain on May 7, 2007. Prior to joining Libbey, Mr.
Freeman was with Delphi Corporation and Packard Electric
Systems, a division of General Motors (the former parent of
Delphi), since 1985, serving most recently as Director of Global
Logistics. Mr. Freeman has worked in a wide range of operations
and supply chain assignments in the United States, Mexico and
Europe.
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Daniel P. Ibele
Vice President,
Global Sales and Marketing
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Mr. Ibele, 50, has served as Libbey Inc.s Vice President,
Global Sales and Marketing since June, 2010. Mr. Ibele was Vice
President, General Sales Manager, North America from June 2006
to June 2010. From March 2002 to June 2006 he was Vice
President, General Sales Manager of the Company. Previously, Mr.
Ibele had been Vice President, Marketing and Specialty
Operations since September 1997. Mr. Ibele was Vice President
and Director of Marketing at Libbey from 1995 to September
1997. From the time he joined Libbey in 1983 until 1995, Mr.
Ibele held various marketing and sales positions.
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Susan A. Kovach
Vice President,
General Counsel and Secretary
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Ms. Kovach, 51, has been Vice President, General Counsel and
Secretary of Libbey Inc. since July 2004. She joined Libbey in
December 2003 as Vice President, Associate General Counsel and
Assistant Secretary. Prior to joining Libbey, Ms. Kovach was Of
Counsel to Dykema Gossett PLLC from 2001 through November 2003.
She served from 1997 to 2001 as Vice President, General Counsel
and Corporate Secretary of Omega Healthcare Investors, Inc.
(NYSE: OHI). From 1998 to 2000 she held the same position for
Omega Worldwide, Inc., a NASDAQ-listed firm providing management
services and financing to the aged care industry in the United
Kingdom and Australia. Prior to joining Omega Healthcare
Investors, Inc., Ms. Kovach was a partner in Dykema Gossett PLLC
from 1995 through November 1997 and an associate in Dykema
Gossett PLLC from 1985 to 1995.
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Name and Title
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Professional Background
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Timothy T. Paige
Vice President,
Administration
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Mr. Paige, 53, has been Vice President-Administration of Libbey
Inc. since December 2002. From January 1997 until December 2002,
Mr. Paige was Vice President and Director of Human
Resources of the Company. From May 1995 to January 1997, Mr.
Paige was Director of Human Resources of the Company. Prior to
joining the Company, Mr. Paige was employed by Frito-Lay,
Inc. in human resources management positions.
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Scott M. Sellick
Vice President and
Chief Accounting Officer
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Mr. Sellick, 48, has served as Vice President, Chief Accounting
Officer of Libbey Inc. since May 2007. From May 2003 to
May 2007, Mr. Sellick served as Vice President, Chief
Financial Officer of the Company, and from May 2002 to May 2003,
Mr. Sellick was Libbeys Director of Tax and
Accounting. From August 1997 to May 2002, he served as Director
of Taxation. Before joining the Company in August 1997, Mr.
Sellick was Tax Director for Stant Corporation and worked in
public accounting for Deloitte & Touche in the audit and
tax areas.
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Roberto B. Rubio
Vice President,
Global Manufacturing and Engineering
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Mr. Rubio, 55, has served as Vice President, Global
Manufacturing and Engineering since June 2010. Mr. Rubio was
Vice President, General Manager, International Operations of
Libbey Inc. from November 2009 until June 2010. He joined the
Company in July 2009 as Vice President, Managing Director,
Libbey Mexico. Prior to joining Libbey, Mr. Rubio was employed
by Vitro S.A.B. de C.V., which he joined in 1980. While
employed by Vitro, Mr. Rubio progressed through numerous
positions of increasing scope and responsibility. In 1996, Mr.
Rubio was named President of Vitrocrisa, the glass tableware
division of Vitro that is now wholly owned by Libbey. In 1999,
Mr. Rubio was named President of the glass container division of
Vitro, and in 2001 Mr. Rubio was named President of Vitros
flat glass division. In 2003, Mr. Rubio assumed operations
responsibility for both the glass container division and the
glass tableware division, including Vitrocrisa. From the time
of Libbeys acquisition in 2006 of the remaining
51 percent interest in Vitrocrisa (which Libbey renamed
Crisa) that it did not previously own until July 2009, Mr. Rubio
led Crisa, while at the same time carrying out other senior
management responsibilities for Vitro. At the time of his
retirement from Vitro in June 2009, Mr. Rubio was serving as
President of Vitros flat glass division.
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The following factors are the most significant factors that can
impact
year-to-year
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 or political or social unrest, health concerns or
strikes or bankruptcies within those industries, could reduce
our revenues and production activity levels.
Our business is affected by the health of the retail, travel,
restaurant and bar or entertainment industries. Expenditures in
these industries are sensitive to business and personal
discretionary spending levels and may decline during general
economic downturns. Additionally, travel is sensitive to safety
concerns, and thus may decline after incidents of terrorism,
during periods of geopolitical conflict in which travelers
become concerned
12
about safety issues, or when travel might involve health-related
risks. For example, demand for our products in the foodservice
industry, which is critical to our success, was significantly
impacted by the global economic recession beginning in the third
quarter of 2008. Similarly, the increase in violent crime caused
by infighting among, and the Mexican governments crackdown
on, drug cartels in Mexico may impact the health of the
restaurant and bar and tourism industries in Mexico.
Ongoing volatility in financial markets and the weak national
and global economic conditions could materially and adversely
impact our operations, financial results
and/or
liquidity, including as follows:
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the financial stability of our customers or suppliers may be
compromised, which could result in additional bad debts for us
or non-performance by suppliers;
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it may become more costly or difficult to obtain financing or
refinance our debt in the future;
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the value of our assets held in pension plans may decline; and/or
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our assets may be impaired or subject to write-down or write-off.
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Uncertainty about current global economic conditions may cause
consumers of our products to postpone spending in response to
tighter credit, negative financial news
and/or
declines in income or asset values. This could have a material
adverse impact on the demand for our products and on our
financial condition and operating results. A further
deterioration in economic conditions would likely exacerbate
these adverse effects and could result in a wide-ranging and
prolonged impact on general business conditions, thereby
negatively impacting our operations, financial results
and/or
liquidity.
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
December 31, 2010, we had $450.2 million aggregate
principal amount of debt outstanding. Of that amount:
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approximately $400.0 million consisted of the 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);
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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 $10.4 million
of letters of credit issued under that facility;
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RMB 250 million (approximately $37.9 million at
December 31, 2010) consisted of a loan made by China
Construction Bank Corporation Langfang Economic Development Area
Sub-branch,
which we refer to as CCB. We used the proceeds of this loan to
finance the construction of our manufacturing facility in China
that began operations in early 2007;
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8.3 million (approximately $10.9 million at
December 31, 2010) consisted of a loan made by Banco
Espirito Santo, S.A., which we refer to as the BES Euro Line, to
finance operational improvements associated with our Portuguese
operations; and
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approximately $1.3 million consisted of amounts we owed
under a promissory note related to the purchase of our Laredo,
Texas warehouse.
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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,
13
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.
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If cash generated from operations is insufficient to satisfy our
liquidity requirements, if we cannot service our debt, or if we
fail to meet our covenants, we could have substantial liquidity
problems. In those circumstances, we might have to sell assets,
delay planned investments, obtain additional equity capital or
restructure our debt. 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.
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.
Our operations may be affected by actions of foreign governments
and global or regional economic developments. Global economic
events, such as changes in foreign import/export policy, the
cost of complying with environmental regulations or currency
fluctuations, could also affect the level of U.S. imports
and exports, thereby affecting our sales. Foreign subsidies,
foreign trade agreements and each countrys adherence to
the terms of these agreements can raise or lower demand for our
products. National and international boycotts and embargoes of
other countries or U.S. imports
and/or
exports, together with the raising or lowering of tariff rates,
could affect the level of competition between our foreign
competitors and us. Foreign competition has, in the past, and
may, in the future, result in increased low-cost imports that
drive prices downward. The World Trade Organization met in
November 2001 in Doha, Qatar, where members launched new
multilateral trade negotiations aimed at improving market access
and substantially reducing trade-distorting domestic support.
These negotiations are ongoing and may result in further
agreements in the future. As of December 31, 2010, the
trade-weighted tariff rate applicable to glass tableware
products that are imported into the United States and are of the
type we manufacture in North America was approximately
21 percent. However, any changes to international
agreements that lower duties or improve access to
U.S. markets for our competitors, particularly changes
arising out of the ongoing World Trade Organizations Doha
round of negotiations, could have an adverse effect on our
financial condition and results of operations. As we execute our
strategy of acquiring manufacturing platforms in lower cost
regions and increasing our volume of sales in overseas markets,
our dependence on international markets and our ability to
effectively manage these risks has increased and will continue
to increase significantly.
14
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.
Changes in the value, relative to the U.S. dollar, of the
various currencies in which we conduct operations, including the
euro, the Mexican peso and the Chinese yuan, which we refer to
as the RMB, may result in significant changes in the
indebtedness of our
non-U.S. subsidiaries.
Currency fluctuations between the U.S. dollar and the
currencies of our
non-U.S. subsidiaries
affect our results as reported in U.S. dollars,
particularly the earnings of Crisa as expressed under GAAP, and
will continue to affect our financial income and expense and our
revenues from international settlements.
Major fluctuations in the value of the euro, the Mexican peso or
the RMB relative to the U.S. dollar and other major
currencies could also reduce the cost competitiveness of our
products or those of our subsidiaries, as compared to foreign
competition. For example, if the U.S. dollar appreciates
against the euro, the Mexican peso or the RMB, the purchasing
power of those currencies effectively would be reduced compared
to the U.S. dollar, making our
U.S.-manufactured
products more expensive in the euro zone, Mexico and China,
respectively, compared to the products of local competitors and
making products manufactured by our foreign competitors in those
locations more cost-competitive with our U.S. manufactured
products. An appreciation of the U.S. dollar against the
euro, the Mexican peso or the RMB also would increase the cost
of U.S. dollar-denominated purchases for our operations in
the euro zone, Mexico and China, respectively, including raw
materials. We would be forced to deduct these cost increases
from our profit margin or attempt to pass them along to
consumers. These fluctuations could adversely affect our results
of operations and financial condition.
Our
business requires us to maintain a large fixed-cost base that
can affect our profitability.
The high levels of fixed costs of operating glass production
plants encourage high levels of output, even during periods of
reduced demand, which can lead to excess inventory levels and
exacerbate the pressure on profit margins. Our profitability is
dependent, in part, on our ability to spread fixed costs over an
increasing number of products sold and shipped, and if we reduce
our rate of production, as we did in 2009, our costs per unit
increase, negatively impacting our gross margins. Decreased
demand or the need to reduce inventories can lower our ability
to absorb fixed costs and materially impact our results of
operations.
We may
not be able to achieve the international growth contemplated by
our strategy.
Our strategy contemplates growth in international markets in
which we have significantly less experience than we do in North
America. Since we intend to benefit from our international
initiatives primarily by expanding our sales in the local
markets of other countries, our success depends on continued
growth in these markets, including Europe, Latin America and
Asia-Pacific.
We
face intense competition and competitive pressures, which could
adversely affect our results of operations and financial
condition.
Our business is highly competitive, with the principal
competitive factors being customer service, price, product
quality, new product development, brand name, delivery time and
breadth of product offerings. Advantages or disadvantages in any
of these competitive factors may be sufficient to cause the
customer to consider changing manufacturers.
Competitors in glass tableware include, among others:
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Arc International (a French company), which manufactures and
distributes glass tableware worldwide;
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Paşabahçe (a unit of Şişecam, a Turkish
company), which manufactures glass tableware at various sites
throughout the world and sells to retail, foodservice and
business-to-business
customers worldwide;
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Anchor Hocking Company (a U.S. company), which manufactures
and distributes glass beverageware, industrial products and
bakeware primarily to retail, industrial and foodservice
channels in the United States and Canada;
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Bormioli Rocco Group (an Italian company), which manufactures
glass tableware in Europe, where the majority of its sales are
to retail and foodservice customers;
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various manufacturers in China; and
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various sourcing companies.
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In addition, makers of tableware produced with other materials
such as plastics compete to a certain extent with glassware
manufacturers.
Some of our competitors have greater financial and capital
resources than we do and continue to invest heavily to achieve
increased production efficiencies. Competitors may have
incorporated more advanced technology in their manufacturing
processes, including more advanced automation techniques. Our
labor and energy costs also may be higher than those of some
foreign producers of glass tableware. We may not be successful
in managing our labor and energy costs or gaining operating
efficiencies that may be necessary to remain competitive. In
addition, our products may be subject to competition from
low-cost imports that intensify the price competition we face in
our markets. Finally, we may need to increase incentive payments
in our marketing incentive program in order to remain
competitive. Increases in these payments would adversely affect
our operating margins.
Competitors in the U.S. market for ceramic dinnerware
include, among others: Homer Laughlin; Oneida Ltd.; Steelite;
and various sourcing companies. Competitors in metalware
include, among others: Oneida Ltd.; Walco, Inc.; and various
sourcing companies. Competitors in plastic products include,
among others: Cambro Manufacturing Company; Carlisle Companies
Incorporated; and various sourcing companies. In Mexico, where a
larger portion of our sales are in the retail market, our
primary competitors include imports from foreign manufacturers
located in countries such as China, France, Italy and Colombia,
as well as Vidriera Santos and Vitro Par in the candle category.
Competitive pressures from these competitors and producers could
adversely affect our results of operations and financial
condition.
We
conduct significant operations at our facility in Monterrey,
Mexico, which could be materially adversely affected as a result
of the increased levels of drug-related violence in that
city.
To date, the drug-related violence in Mexico has had little
effect on our operations. Recently, however, fighting among
rival drug cartels has led to unprecedented levels of violent
crime in Monterrey, Mexico despite increased law-enforcement
efforts by the Mexican government. This situation presents
several risks to our operations, including, among others, that
our employees may be directly affected by the violence, that our
employees may elect to relocate out of the Monterrey region in
order to avoid the risk of violent crime to themselves or their
families, that other multi-national companies who have withdrawn
their expatriate employees from their operations in the
Monterrey vicinity may attempt to lure our Monterrey-based
executives with tempting job offers, and that our customers may
become increasingly reluctant to visit our Monterrey facility,
which could delay new business opportunities and other important
aspects of our business. If any of these risks materializes, our
business may be materially adversely affected.
We may
not be able to renegotiate collective bargaining agreements
successfully when they expire; organized strikes or work
stoppages by unionized employees may have an adverse effect on
our operating performance.
We are party to collective bargaining agreements that cover most
of our manufacturing employees. Royal Leerdams collective
bargaining agreement with its unionized employees expires on
July 1, 2011. The agreement with our unionized employees in
Shreveport, Louisiana expires on December 15, 2011, and the
agreements with our unionized employees in Toledo, Ohio expire
on September 30, 2013. Crisas collective bargaining
agreements with its unionized employees have no expiration, but
wages are reviewed annually and benefits are reviewed every two
years. Crisal does not have a written collective bargaining
agreement with its unionized employees but does have an oral
agreement that is revisited annually.
We may not be able to successfully negotiate new collective
bargaining agreements without any labor disruption. If any of
our unionized employees were to engage in a strike or work
stoppage prior to expiration of their existing collective
bargaining agreements, or if we are unable in the future to
negotiate acceptable agreements with
16
our unionized employees in a timely manner, we could experience
a significant disruption of operations. In addition, we could
experience increased operating costs as a result of higher wages
or benefits paid to union members upon the execution of new
agreements with our labor unions. We also could experience
operating inefficiencies as a result of preparations for
disruptions in production, such as increasing production and
inventories. Finally, companies upon which we are dependent for
raw materials, transportation or other services could be
affected by labor difficulties. These factors and any such
disruptions or difficulties could have an adverse impact on our
operating performance and financial condition.
In addition, we are dependent on the cooperation of our largely
unionized workforce to implement and adopt Lean initiatives that
are critical to our ability to improve our production
efficiency. The effect of strikes and other slowdowns may
adversely affect the degree and speed with which we can adopt
Lean optimization objectives and the success of that program.
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.
Our subsidiaries in Portugal and China have outstanding debt
under credit facilities provided to them by local financial
institutions. As of December 31, 2010, our subsidiary in
China had an RMB 250 million (approximately
$37.9 million at December 31, 2010) construction
loan extended by CCB, and our subsidiary in Portugal had an
8.3 million (approximately $10.9 million at
December 31, 2010) line of credit extended by Banco
Espirito Santo, S.A.. If CCB were to call the construction loan
before maturity, or if Banco Espirito Santo, S.A. were to call
the BES Euro line before maturity, our liquidity and financial
condition may be adversely impacted.
If either CCB or Banco Espirito Santo, S.A. were to call these
loans for repayment prior to their respective scheduled
maturities, we may be required to pursue one or more alternative
strategies to repay these loans, such as selling assets,
refinancing or restructuring these loans or selling additional
debt or equity securities. We may not, however, be able to
refinance these loans or sell additional debt or equity
securities on favorable terms, if at all, and if we are required
to sell our assets, it may negatively affect our ability to
generate revenues.
Our
cost-reduction projects may not result in anticipated savings in
operating costs.
We may not be able to achieve anticipated cost reductions. Our
ability to achieve cost savings and other benefits within
expected time frames is subject to many estimates and
assumptions. These estimates and assumptions are subject to
significant economic, competitive and other uncertainties, some
of which are beyond our control. If these estimates and
assumptions are incorrect, if we experience delays, or if other
unforeseen events occur, our business, financial condition and
results of operations could be adversely impacted.
We are
subject to risks associated with operating in foreign countries.
These risks could adversely affect our results of operations and
financial condition.
We operate manufacturing and other facilities throughout the
world. As a result of our International operations, we are
subject to risks associated with operating in foreign countries,
including:
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political, social and economic instability;
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war, civil disturbance or acts of terrorism;
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taking of property by nationalization or expropriation without
fair compensation;
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changes in government policies and regulations;
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devaluations and fluctuations in currency exchange rates;
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imposition of limitations on conversions of foreign currencies
into dollars or remittance of dividends and other payments by
foreign subsidiaries;
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imposition or increase of withholding and other taxes on
remittances and other payments by foreign subsidiaries;
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17
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ineffective intellectual property protection;
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hyperinflation in certain foreign countries; and
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impositions or increase of investment and other restrictions or
requirements by foreign governments.
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The risks associated with operating in foreign countries may
have a material adverse effect on our results of operations and
financial condition.
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.
We have recorded a significant amount of goodwill, which
represents the excess of cost over the fair value of the net
assets of the business acquired; other identifiable intangible
assets, including trademarks and trade names; and fixed assets.
Impairment of goodwill, identifiable intangible assets or fixed
assets may result from, among other things, deterioration in our
performance, adverse market conditions, adverse changes in
applicable laws or regulations, including changes that restrict
the activities of or affect the products sold by our business,
and a variety of other factors. Under U.S. GAAP, we are
required to charge the amount of any impairment immediately to
operating income. In 2010 and 2009, we did not have an
impairment related to goodwill or intangible assets. During
2010, we further wrote down the carrying value of the Syracuse
land, fixed assets related to our decision to outsource our
U.S. decorating business and certain after-processing
equipment totaling $3.7 million. During 2009, we did not
have an impairment related to fixed assets. In 2008, we wrote
down goodwill and other identifiable intangible assets by
$11.9 million related to the decline in the capital
markets, and we wrote down fixed assets by $9.7 million
related to the announcement of the closure of our Syracuse China
manufacturing facility and our Mira Loma, California
distribution center. After that adjustment, as of
December 31, 2008, we had goodwill and other identifiable
intangible assets of $192.9 million and net fixed assets of
$314.8 million. As of December 31, 2010, we had
goodwill and other identifiable intangible assets of
$192.5 million and net fixed assets of $270.4 million.
We conduct an impairment analysis at least annually related to
goodwill and other indefinite lived intangible assets. This
analysis requires our management to make significant judgments
and estimates, primarily regarding expected growth rates, the
terminal value calculation for cash flow and the discount rate.
We determine expected growth rates based on internally developed
forecasts considering our future financial plans. We establish
the terminal cash flow value based on expected growth rates,
capital spending trends and investment in working capital to
support anticipated sales growth. We estimate the discount rate
used based on an analysis of comparable company weighted average
costs of capital that considered market assumptions obtained
from independent sources. The estimates that our management uses
in this analysis could be materially impacted by factors such as
specific industry conditions, changes in cash flow from
operations and changes in growth trends. In addition, the
assumptions our management uses are managements best
estimates based on projected results and market conditions as of
the date of testing. Significant changes in these key
assumptions could result in indicators of impairment when
completing the annual impairment analysis. We assess our fixed
assets for possible impairment whenever events or changes in
circumstances indicate that the carrying value of these assets
may not be recoverable. We remain subject to future financial
statement risk in the event that goodwill, other identifiable
intangible assets or fixed assets become further impaired. For
further discussion of key assumptions in our critical accounting
estimates, see Managements Discussion and Analysis
of Financial Condition and Results of Operations
Critical Accounting Estimates.
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.
Our facilities may be impacted by the outbreak of certain public
health issues, including epidemics, pandemics and other
contagious diseases such as the H1N1 virus, commonly referred to
as the swine flu. If a severe outbreak were to occur
where we have facilities, it could adversely impact our results
of operations and financial condition.
18
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.
Our operations and properties, both in the United States and
abroad, are subject to extensive laws, ordinances, regulations
and other legal requirements relating to environmental
protection, including legal requirements governing investigation
and clean-up
of contaminated properties as well as water discharges, air
emissions, waste management and workplace 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 operations.
We have incurred, and expect to incur, costs to comply with
environmental legal requirements, including requirements
limiting greenhouse gas emissions, and these costs could
increase in the future. Many environmental legal requirements
provide for substantial fines, orders (including orders to cease
operations) and criminal sanctions for violations. Also, certain
environmental laws impose strict liability and, under certain
circumstances, joint and several liability on current and prior
owners and operators of these sites, as well as persons who sent
waste to them, for costs to investigate and remediate
contaminated sites. These legal requirements may apply to
conditions at properties that we presently or formerly owned or
operated, as well as at other properties for which we may be
responsible, including those at which wastes attributable to us
were disposed. A significant order or judgment against us, the
loss of a significant permit or license or the imposition of a
significant fine may have a material adverse effect on
operations.
If we
are unable to obtain raw materials or sourced products or
utilities at favorable prices, or at all, our operating
performance may be adversely affected.
Sand, soda ash, lime, corrugated packaging materials and resin
are the principal materials we use. We also rely on natural gas,
electricity, water and other utilities. In addition, we obtain
glass tableware, ceramic dinnerware, metal flatware and
hollowware and select plastic products from third parties. We
may experience temporary shortages due to disruptions in supply
caused by weather, transportation, production delays or other
factors. In addition, resins are a primary material for our
Traex operation and historically the price for resins has
fluctuated with the price of oil, directly impacting our
profitability. If we experience shortages in raw materials or
sourced products, we may be forced to procure sourced products
or materials from alternative suppliers, and we may not be able
to do so on terms as favorable as our current terms or at all.
In addition, material increases in the cost of any of these
items on an industry-wide basis would have an adverse impact on
our operating performance and cash flows if we were unable to
pass on these increased costs to our customers.
Unexpected
equipment failures may lead to production curtailments or
shutdowns.
Our manufacturing processes are dependent upon critical
glass-producing equipment, such as furnaces, forming machines
and lehrs. This equipment may incur downtime as a result of
unanticipated failures, accidents, natural disasters or other
force majeure events. We may in the future experience
facility shutdowns or periods of reduced production as a result
of such failures or events. Unexpected interruptions in our
production capabilities would adversely affect our productivity
and results of operations for the affected period. We also may
face shutdowns if we are unable to obtain enough energy in the
peak heating seasons.
High
levels of inflation and high interest rates in Mexico and China
could adversely affect the operating results and cash flows of
our operations there.
Although the annual rate of inflation in Mexico, as measured by
changes in the Mexican National Consumer Price Index, was only
4.4 percent for the year ended December 31, 2010 and
6.53 percent for the year ended December 31, 2009,
Mexico historically has experienced high levels of inflation and
high domestic interest rates. If Mexico experiences high levels
of inflation, Crisas operating results and cash flows
could be adversely affected, and, more generally, high inflation
might result in lower demand or lower growth in demand for our
products, thereby adversely affecting our results of operations
and financial condition. The annual rate of inflation in China,
as measured by changes in the Consumer Price Index, has shown
volatility. While inflation during 2010 was less
19
than 4.0 percent, it has steadily increased. If this trend
were to continue, our China facilitys operating results
and cash flows could be adversely affected, thereby adversely
affecting our results of operations and financial condition.
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.
In connection with our employee pension and postretirement
welfare 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 obligations and related expense. Our total pension and
postretirement welfare expense, including pension settlement and
curtailment charges, for all U.S. and
non-U.S. plans
was $21.2 million and $18.7 million for the fiscal
years ended December 31, 2010 and 2009, respectively. We
expect our total pension and postretirement welfare expense for
all U.S. and
non-U.S. plans
to increase to $24.0 million in 2011. Volatility in the
capital markets affects the performance of our pension plan
asset performance and related pension expense. Based on
2010 year-end data, sensitivity to these key market risk
factors is as follows:
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A change of 1 percent in the discount rate would change our
total pension and postretirement welfare expense by
approximately $4.5 million.
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A change of 1 percent in the expected long-term rate of
return on plan assets would change total pension expense by
approximately $2.4 million.
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As part of our pension expense, we incurred pension settlement
charges of $3.7 million during 2009. These charges were
triggered by excess lump sum distributions to retirees. For
further discussion of these charges, see note 9 to our
Consolidated Financial Statements. To the extent that we
experience additional headcount shifts or changes, we may incur
further expenses related to our employee pension and
postretirement welfare plans, which could have a material
adverse effect on our results of operations and financial
condition.
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.
In order to mitigate the variation in our operating results due
to commodity price fluctuations, we have derivative financial
instruments that hedge certain commodity price risks associated
with forecasted future natural gas requirements. The results of
our hedging practices could be positive, neutral or negative in
any period depending on price changes of the hedged exposures.
We account for derivatives in accordance with Financial
Accounting Standards Board Accounting Standards Codification
Topic 815, Derivatives and Hedging. These
derivatives qualify for hedge accounting if the hedges are
highly effective and we have designated and documented
contemporaneously the hedging relationships involving these
derivative instruments. 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 will impact our results of operations and could
significantly impact our earnings.
If
counterparties to our hedge agreements fail to perform, the
hedge agreements would not protect us from fluctuations in
certain commodity pricing.
We utilize derivative financial instruments to protect us from
fluctuations in currency exchange, interest rates and the price
of natural gas. The objective of the currency and natural gas
agreements is to limit the fluctuations in prices paid for the
underlying commodity. If the counterparties to these agreements
were to fail to perform, we would no longer be protected from
fluctuations in the pricing of these commodities and the impact
of pricing fluctuations would impact our results of operations
and financial condition.
Our
business may suffer if we do not retain our senior
management.
We depend on our senior management. The loss of services of any
of the members of our senior management team for any reason,
including resignation or retirement, could adversely affect our
business until a suitable replacement can be found. There may be
a limited number of persons with the requisite skills to serve
in these positions, and we may be unable to locate or employ
such qualified personnel on acceptable terms. In June 2010, the
Securities and Exchange Commission filed a civil complaint
against Gregory Geswein, our Vice President,
20
Strategic Planning and Business Development. The allegations
contained in the complaint relate solely to one of
Mr. Gesweins prior employers, Diebold, Inc. and do
not involve Libbey. If the civil action were determined
adversely to Mr. Geswein, it is possible that we could lose
his services.
In addition, John Meier, our Chairman and CEO, recently
announced his plans to retire after 41 years of service to
Libbey. His retirement is expected to occur by the end of 2011.
Our Board of Directors, assisted by an internationally
recognized executive search firm, has begun a comprehensive
search process to determine Mr. Meiers successor,
with both internal and external candidates being considered.
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.
All of our major operations, including manufacturing,
distribution, sales and accounting are dependent upon our
complex information systems. Our information systems are
vulnerable to damage or interruption from:
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earthquake, fire, flood, hurricane and other natural disasters;
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power loss, computer systems failure, internet and
telecommunications or data network failure; and
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hackers, computer viruses, software bugs or glitches.
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Any damage or significant disruption in the operation of such
systems or the failure of our information systems to perform as
expected could disrupt our business; result in decreased sales,
increased overhead costs, excess inventory and product
shortages; and otherwise adversely affect our operations,
financial performance and condition. We take significant steps
to mitigate the potential impact of each of these risks, but
there can be no assurance that these procedures would be
completely successful.
We may
not be able to effectively integrate future businesses we
acquire or joint ventures we enter into.
Any future acquisitions that we might make or joint ventures
into which we might enter are subject to various risks and
uncertainties, including:
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the inability to integrate effectively the operations, products,
technologies and personnel of the acquired companies (some of
which may be spread out in different geographic regions) and to
achieve expected synergies;
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the potential disruption of existing business and diversion of
managements attention from
day-to-day
operations;
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the inability to maintain uniform standards, controls,
procedures and policies or correct deficient standards,
controls, procedures and policies, including internal controls
and procedures sufficient to satisfy regulatory requirements of
a public company in the United States;
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the incurrence of contingent obligations that were not
anticipated at the time of the acquisitions;
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the failure to obtain necessary transition services such as
management services, information technology services and others;
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the need or obligation to divest portions of the acquired
companies; and
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the potential impairment of relationships with customers.
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In addition, we cannot provide assurance that the integration
and consolidation of newly acquired businesses or joint ventures
will achieve any anticipated cost savings and operating
synergies. The inability to integrate and consolidate operations
and improve operating efficiencies at newly acquired businesses
or joint ventures could have a material adverse effect on our
business, financial condition and results of operations.
21
Our
business requires significant capital investment and maintenance
expenditures that we may be unable to fulfill.
Our operations are capital intensive, requiring us to maintain a
large fixed cost base. Our total capital expenditures were
$28.2 million and $17.0 million for the years ended
December 31, 2010 and 2009, respectively.
Our business may not generate sufficient operating cash flow and
external financing sources may not be available in an amount
sufficient to enable us to make anticipated capital expenditures.
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.
Natural gas is the primary source of energy in most of our
production processes. We do not have long-term contracts for
natural gas and therefore are subject to market variables and
widely fluctuating prices. Consequently, our operating results
are strongly linked to the cost of natural gas. As of
December 31, 2010, we had fixed price contracts in place
for approximately 63.0 percent of our estimated 2011
natural gas needs with respect to our North American
manufacturing facilities and approximately 22.0 percent of
our estimated 2011 natural gas needs with respect to our
International manufacturing facilities. For the years ended
December 31, 2010 and 2009, we spent $47.3 million and
$53.4 million, respectively, on natural gas. We have no way
of predicting to what extent natural gas prices will rise in the
future. To the extent that we are not able to offset increases
in natural gas prices, such as by passing along the cost to our
customers, these increases could adversely impact our margins
and operating performance.
If our
investments in new technology and other capital expenditures do
not yield expected returns, our results of operations could be
reduced.
The manufacture of our tableware products involves the use of
automated processes and technologies. We designed much of our
glass tableware production machinery internally and have
continued to develop and refine this equipment to incorporate
advancements in technology. We will continue to invest in
equipment and make other capital expenditures to further improve
our production efficiency and reduce our cost profile. To the
extent that these investments do not generate targeted levels of
returns in terms of efficiency or improved cost profile, our
financial condition and results of operations could be adversely
affected.
Our
failure to protect our intellectual property or prevail in any
intellectual property litigation could materially and adversely
affect our competitive position, reduce revenue or otherwise
harm our business.
Our success depends in part on our ability to protect our
intellectual property rights. We rely on a combination of
patent, trademark, copyright and trade secret laws, licenses,
confidentiality and other agreements to protect our intellectual
property rights. However, this protection may not be fully
adequate. Our intellectual property rights may be challenged or
invalidated, an infringement suit by us against a third party
may not be successful
and/or third
parties could adopt trademarks similar to our own. In
particular, third parties could design around or copy our
proprietary furnace, manufacturing and mold technologies, which
are important contributors to our competitive position in the
glass tableware industry. We may be particularly susceptible to
these challenges in countries where protection of intellectual
property is not strong. In addition, we may be accused of
infringing or violating the intellectual property rights of
third parties. Any such claims, whether or not meritorious,
could result in costly litigation and divert the efforts of our
personnel. 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.
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.
Major devaluation or depreciation of the Mexican peso could
result in disruption of the international foreign exchange
markets and may limit our ability to transfer or to convert
Crisas Mexican peso earnings into U.S. dollars and
other currencies upon which we will rely in part to satisfy our
debt obligations. While the Mexican government does not
currently restrict, and for many years has not restricted, the
right or ability of Mexican or foreign persons or
22
entities to convert pesos into U.S. dollars or to transfer
other currencies out of Mexico, the government could institute
restrictive exchange rate policies in the future. Restrictive
exchange rate policies could adversely affect our results of
operations and financial condition.
In addition, the government of China imposes controls on the
convertibility of RMB into foreign currencies and, in certain
cases, the remittance of currency out of China. Shortages in the
availability of foreign currency may restrict the ability of our
Chinese subsidiaries to remit sufficient foreign currency to
make payments to us. Under existing Chinese foreign exchange
regulations, payments of current account items, including profit
distributions, interest payments and expenditures from
trade-related transactions, can be made in foreign currencies
without prior approval from the Chinese State Administration of
Foreign Exchange by complying with certain procedural
requirements. However, approval from appropriate government
authorities is required where RMB are to be converted into
foreign currencies and remitted out of China to pay capital
expenses such as the repayment of bank loans denominated in
foreign currencies. In the future, the Chinese government could
institute restrictive exchange rate policies for current account
transactions. These policies could adversely affect our results
of operations and financial condition.
Payment
of severance or retirement benefits earlier than anticipated
could strain our cash flow.
Certain members of our senior management have employment and
change in control agreements that provide for substantial
severance payments and retirement benefits. We are required to
fund a certain portion of these payments according to a
predetermined schedule, but some of our nonqualified obligations
are currently unfunded. Should several of these senior managers
leave our employ under circumstances entitling them to severance
or retirement benefits, or become disabled or die, before we
have funded these payments, the need to pay these severance or
retirement benefits ahead of their anticipated schedule could
put a strain on our cash flow.
We are
involved in litigation from time to time in the ordinary course
of business.
We are involved in various routine legal proceedings arising in
the ordinary course of our business. We do not consider any
pending legal proceeding as material. However, we could be
adversely affected by legal proceedings in the future, including
products liability claims related to the products we manufacture.
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,
or 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. In addition, such new
regulations could reduce sales of our glass tableware products.
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.
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ITEM 1B.
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UNRESOLVED
STAFF COMMENTS
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None.
23
At December 31, 2010 the Company had the following square
footage at plants and warehouse/distribution facilities:
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North American Glass
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North American Other
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International
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Location
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Owned
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Leased
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Owned
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Leased
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Owned
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Leased
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Toledo, Ohio:
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Manufacturing
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733,800
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Warehousing/Distribution
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713,100
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598,200
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Shreveport, Louisiana:
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Manufacturing
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525,000
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Warehousing/Distribution
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166,000
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646,000
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Syracuse, New York(1):
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Manufacturing
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549,000
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Warehousing/Distribution
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104,000
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Dane, Wisconsin:
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Manufacturing
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56,000
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Warehousing/Distribution
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61,000
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Monterrey, Mexico:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
534,000
|
|
|
|
173,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
228,000
|
|
|
|
645,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leerdam, Netherlands:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
141,000
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
127,000
|
|
|
|
442,000
|
|
Laredo, Texas:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
149,000
|
|
|
|
117,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
West Chicago, Illinois:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
249,000
|
|
|
|
|
|
|
|
|
|
Marinha Grande, Portugal:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
217,000
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
193,000
|
|
|
|
13,000
|
|
Langfang, China:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manufacturing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
195,000
|
|
|
|
|
|
Warehousing/Distribution
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
232,000
|
|
|
|
|
|
|
|
|
(1) |
|
We ceased production and distribution at our Syracuse China
ceramic dinnerware manufacturing facility in April 2009. |
These facilities have an aggregate floor space of
7.8 million square feet. We own approximately
63 percent and lease approximately 37 percent of this
floor space. In addition to the facilities listed above, our
headquarters (Toledo, Ohio), some warehouses (various
locations), sales offices (various locations), showrooms (in
Toledo, Ohio and New York) and various outlet stores are located
in leased space. We also utilize various warehouses as needed on
a
month-to-month
basis.
All of our principal facilities are currently being utilized for
their intended purpose. In the opinion of management, all of
these facilities are well maintained and adequate for our
planned operational requirements.
|
|
ITEM 3.
|
LEGAL
PROCEEDINGS
|
We are involved in various routine legal proceedings arising in
the ordinary course of our business. No pending legal proceeding
is deemed to be material.
24
PART II
|
|
ITEM 5.
|
MARKET
FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES
|
Common
Stock and Dividends
Libbey Inc. common stock is listed for trading on the NYSE Amex
exchange under the symbol LBY. The price range for the
Companys common stock as reported by the NYSE Amex
exchange and dividends declared for our common stock were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
Price Range
|
|
|
Dividend
|
|
|
Price Range
|
|
|
Dividend
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
First Quarter
|
|
$
|
14.25
|
|
|
$
|
7.23
|
|
|
$
|
|
|
|
$
|
2.05
|
|
|
$
|
0.73
|
|
|
$
|
|
|
Second Quarter
|
|
$
|
15.00
|
|
|
$
|
12.15
|
|
|
$
|
|
|
|
$
|
2.75
|
|
|
$
|
0.47
|
|
|
$
|
|
|
Third Quarter
|
|
$
|
14.03
|
|
|
$
|
9.88
|
|
|
$
|
|
|
|
$
|
4.27
|
|
|
$
|
1.30
|
|
|
$
|
|
|
Fourth Quarter
|
|
$
|
15.47
|
|
|
$
|
12.36
|
|
|
$
|
|
|
|
$
|
7.99
|
|
|
$
|
3.75
|
|
|
$
|
|
|
The closing market price of our common stock on March 1,
2011 was $16.82 per share.
On March 1, 2011, there were 900 registered common
shareholders of record. We paid a regular quarterly cash
dividend from the time of Initial Public Offering in 1993 until
we suspended the dividend in February 2009. The declaration of
future dividends is within the discretion of the Board of
Directors of Libbey and depends upon, among other things,
business conditions, earnings and the financial condition of
Libbey.
Comparison
of Cumulative Total Returns
The graph below compares the total stockholder return on our
common stock to the cumulative total return for the Russell 2000
Index (Russell 2000), a small-cap index, and the
Standard & Poors Housewares &
Specialties Index, a capitalization-weighted index that measures
the performance of the housewares sector of the
Standard & Poors SmallCap Index
(Housewares-Small). We selected the
Housewares Small index because there are no other
glass tableware manufacturers with stock that is publicly traded
in the U.S. The indices reflect the year-end market value
of an investment in the stock of each company in the index,
including additional shares assumed to have been acquired with
cash dividends, if any.
25
The graph assumes a $100 investment in our common stock on
January 1, 2004, and also assumes investments of $100 in
each of the Russell 2000, and the Housewares-Small index,
respectively, on January 1, 2004. The value of these
investments on December 31 of each year from 2005 through 2010
is shown in the table below the graph.
TOTAL
SHAREHOLDER RETURN
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Annual Return Percentage Years Ending
|
|
Company/Index
|
|
Dec 06
|
|
|
Dec 07
|
|
|
Dec 08
|
|
|
Dec 09
|
|
|
Dec 10
|
|
Libbey Inc.
|
|
|
21.97
|
|
|
|
29.12
|
|
|
|
(92.00
|
)
|
|
|
512.00
|
|
|
|
102.22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell 2000 Index
|
|
|
18.37
|
|
|
|
(1.57
|
)
|
|
|
(33.79
|
)
|
|
|
27.17
|
|
|
|
26.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 600 Housewares & Specialties
|
|
|
10.07
|
|
|
|
8.57
|
|
|
|
(40.75
|
)
|
|
|
52.97
|
|
|
|
(6.53
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Indexed Returns Years Ending
|
|
|
|
Base
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company/Index
|
|
Dec 05
|
|
|
Dec 06
|
|
|
Dec 07
|
|
|
Dec 08
|
|
|
Dec 09
|
|
|
Dec 10
|
|
Libbey Inc.
|
|
|
100
|
|
|
|
121.97
|
|
|
|
157.49
|
|
|
|
12.59
|
|
|
|
77.08
|
|
|
|
155.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell 2000 Index
|
|
|
100
|
|
|
|
118.37
|
|
|
|
116.51
|
|
|
|
77.15
|
|
|
|
98.11
|
|
|
|
124.46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S&P 600 Housewares & Specialties
|
|
|
100
|
|
|
|
110.07
|
|
|
|
119.50
|
|
|
|
70.80
|
|
|
|
108.31
|
|
|
|
101.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
26
Equity
Compensation Plan Information
Following are the number of securities and weighted average
exercise price thereof under our compensation plans approved and
not approved by security holders as of December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
Securities to be
|
|
|
|
|
|
Number of
|
|
|
|
Issued Upon
|
|
|
Weighted Average
|
|
|
Securities
|
|
|
|
Exercise of
|
|
|
Exercise Price of
|
|
|
Remaining Available
|
|
|
|
Outstanding
|
|
|
Outstanding
|
|
|
for Future Issuance
|
|
|
|
Options, Warrants
|
|
|
Options, Warrants
|
|
|
Under Equity
|
|
Plan Category
|
|
and Rights
|
|
|
and Rights
|
|
|
Compensation Plans
|
|
|
Equity compensation plans approved by security holders
|
|
|
1,716,184
|
|
|
$
|
15.57
|
|
|
|
1,398,778
|
|
Equity compensation plans not approved by security holders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
1,716,184
|
|
|
$
|
15.57
|
|
|
|
1,398,778
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer
Purchases of Equity Securities
Following is a summary of the 2010 fourth quarter activity in
our share repurchase program:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of
|
|
|
Maximum Number
|
|
|
|
|
|
|
|
|
|
Shares Purchased
|
|
|
of Shares that May
|
|
|
|
|
|
|
|
|
|
as part of Publicly
|
|
|
Yet Be Purchased
|
|
|
|
Total Number of
|
|
|
Average Price Paid
|
|
|
Announced Plans
|
|
|
Under the Plans or
|
|
Period
|
|
Shares Purchased
|
|
|
per Share
|
|
|
or Programs
|
|
|
Programs(1)
|
|
|
October 1 to October 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
November 1 to November 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
December 1 to December 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We announced on December 10, 2002, that our Board of
Directors authorized the purchase of up to 2,500,000 shares
of our common stock in the open market and negotiated purchases.
There is no expiration date for this plan. In 2003,
1,500,000 shares of our common stock were purchased for
$38.9 million. No additional shares were purchased in 2010,
2009, 2008, 2007, 2006, 2005 or 2004. Our ABL Facility and the
indentures governing the Senior Secured Notes significantly
restrict our ability to repurchase additional shares. |
|
|
ITEM 6.
|
SELECTED
FINANCIAL DATA
|
Information with respect to Selected Financial Data is
incorporated by reference to our 2010 Annual Report to
Shareholders.
|
|
ITEM 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
FORWARD
LOOKING STATEMENTS
This document and supporting schedules contain statements that
are not historical facts and constitute projections, forecasts
or forward-looking statements. For a description of the
forward-looking statements and risk factors that may affect our
performance, see the Risk Factors section above.
Additionally, for an understanding of the significant factors
that influenced our performance during the past three years, the
following should be read in conjunction with the audited
Consolidated Financial Statements and Notes.
27
OVERVIEW
GENERAL
Headquartered in Toledo, Ohio, Libbey has the largest
manufacturing, distribution and service network among glass
tableware manufacturers in the Western Hemisphere and is one of
the largest glass tableware manufacturers in the world. Our
product portfolio consists of an extensive line of high quality,
machine-made glass tableware, including casual glass
beverageware, in addition to ceramic dinnerware, metalware and
plasticware. We sell our products to foodservice, retail, and
business-to-business
customers in over 100 countries, with our sales to customers
within North America accounting for approximately
75 percent of our total sales. We are the largest
manufacturer and marketer of casual glass beverageware in North
America for the foodservice and retail channels. Additionally,
we believe we are a leading manufacturer and marketer of casual
glass beverageware in Europe and have a growing presence in Asia.
We report our results of operations in the following three
segments:
|
|
|
|
|
North American Glass includes sales of glass
tableware from subsidiaries throughout the United States, Canada
and Mexico.
|
|
|
|
North American Other includes sales of ceramic
dinnerware; metal tableware, hollowware and serveware; and
plastic items from subsidiaries in the United States.
|
|
|
|
International includes worldwide sales of glass
tableware from subsidiaries outside the United States, Canada
and Mexico.
|
EXECUTIVE
OVERVIEW
Throughout 2010, economic market conditions continued to be very
fragile, with unemployment in the United Sates remaining at
high levels and sovereign debt issues confronting select
countries. Despite this economy, Libbey net sales grew
6.8 percent to $799.8 million in 2010 compared to net
sales of $748.6 million in 2009. Our income from operations
for 2010 was $68.8 million, as compared to
$36.6 million for 2009. The $32.2 million increase in
income from operations was primarily driven by the following
factors:
|
|
|
|
|
Higher net sales and a more favorable mix of sales.
|
|
|
|
Increased production activity, net of increased costs inherent
in the higher level of activity. All factories ran at
exceptionally high levels throughout the year, with Mexico
running full for the entire year.
|
|
|
|
Libbeys LEAN initiative has been in place for five years.
Our USA factories and our Dutch factory are now organized along
value streams.
|
Our Adjusted EBITDA for 2010 was $115.0 million, compared
to $90.1 million during 2009. This resulted in an Adjusted
EBITDA margin of 14.4 percent, which was the highest
Adjusted EBITDA margin since 2003. We also had record Free Cash
Flow generation of $49.4 million in the fourth quarter of
2010.
In addition, in 2010 we completed a two-step debt restructuring,
which enhanced our capital structure and liquidity position. As
a result we reduced our weighted average cost of capital and
extended loan maturities. See note 6 to our Consolidated
Financial Statements for further details. The two-step
restructuring consisted of the following:
|
|
|
|
|
In October 2009, we restructured a portion of our debt by
exchanging our Old PIK Notes in the face amount of
$160.9 million for New PIK Notes in the face amount of
$80.4 million and additional common stock and warrants of
Libbey Inc. In August 2010, the Company successfully concluded a
secondary offering of these additional shares of common stock
and the shares of common stock underlying these warrants.
|
|
|
|
On February 8, 2010, we used the proceeds of a
$400.0 million debt offering (Senior Secured Notes) and
cash on hand to redeem the New PIK Notes and repurchase the
$306.0 million Floating Rate Senior Secured Notes due 2011.
We also amended our ABL Facility.
|
28
In addition to the completion of the two-step debt
restructuring, in late 2010 we paid down approximately
$10.0 million of debt in China and Portugal. As of
December 31, 2010, we had nothing drawn on our ABL
Facility. Further, in February 2011, we announced plans to
redeem $40.0 million of our $400.0 million Senior
Secured Notes.
In addition to making significant progress in addressing our
debt, we achieved a number of sales highlights in 2010. Among
them are the following:
|
|
|
|
|
We increased our leading U.S. retail market share for the
fifth year in a row. According to NPD Group Retail Tracking
Services, we now have 46.6 percent of the causal
beverageware market in the U.S. retail channel.
|
|
|
|
Our Crisa business in Mexico had a strong year, with net sales
up 21.9 percent compared to 2009.
|
|
|
|
Net sales in our U.S. and Canadian retail business grew
more than 6.0 percent.
|
|
|
|
Libbey China had a net sales increase of 29.4 percent
compared to 2009.
|
RESULTS
OF OPERATIONS
The following table presents key results of our operations for
the years 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance
|
|
|
|
|
|
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
In
|
|
|
In
|
|
|
|
|
|
|
|
|
In
|
|
|
In
|
|
Year End December 31,
|
|
2010
|
|
|
2009
|
|
|
Dollars
|
|
|
Percent
|
|
|
2009
|
|
|
2008
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Dollars in thousands, except percentages and per-share
amounts)
|
|
|
Net sales
|
|
$
|
799,794
|
|
|
$
|
748,635
|
|
|
$
|
51,159
|
|
|
|
6.8
|
%
|
|
$
|
748,635
|
|
|
$
|
810,207
|
|
|
$
|
(61,572
|
)
|
|
|
(7.6
|
)%
|
Gross profit(2)
|
|
$
|
168,013
|
|
|
$
|
133,145
|
|
|
$
|
34,868
|
|
|
|
26.2
|
%
|
|
$
|
133,145
|
|
|
$
|
109,337
|
|
|
$
|
23,808
|
|
|
|
21.8
|
%
|
Gross profit margin
|
|
|
21.0
|
%
|
|
|
17.8
|
%
|
|
|
|
|
|
|
|
|
|
|
17.8
|
%
|
|
|
13.5
|
%
|
|
|
|
|
|
|
|
|
Income (loss) from operations (IFO)(2)(3)
|
|
$
|
68,821
|
|
|
$
|
36,614
|
|
|
$
|
32,207
|
|
|
|
88.0
|
%
|
|
$
|
36,614
|
|
|
$
|
(5,548
|
)
|
|
$
|
42,162
|
|
|
|
759.9
|
%
|
IFO margin
|
|
|
8.6
|
%
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
4.9
|
%
|
|
|
(0.7
|
)%
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
(EBIT)(1)(2)(3)(4)
|
|
$
|
126,839
|
|
|
$
|
40,667
|
|
|
$
|
86,172
|
|
|
|
211.9
|
%
|
|
$
|
40,667
|
|
|
$
|
(4,429
|
)
|
|
$
|
45,096
|
|
|
|
NM
|
|
EBIT margin
|
|
|
15.9
|
%
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
5.4
|
%
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
Earnings before interest, taxes, depreciation and amortization
(EBITDA)(1)(2)(3)(4)
|
|
$
|
167,954
|
|
|
$
|
83,833
|
|
|
$
|
84,121
|
|
|
|
100.3
|
%
|
|
$
|
83,833
|
|
|
$
|
40,001
|
|
|
$
|
43,832
|
|
|
|
109.6
|
%
|
EBITDA margin
|
|
|
21.0
|
%
|
|
|
11.2
|
%
|
|
|
|
|
|
|
|
|
|
|
11.2
|
%
|
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
Adjusted earnings before interest, taxes, depreciation and
amortization (Adjusted EBITDA)(1)
|
|
$
|
114,958
|
|
|
$
|
90,141
|
|
|
$
|
24,817
|
|
|
|
27.5
|
%
|
|
$
|
90,141
|
|
|
$
|
85,238
|
|
|
$
|
4,903
|
|
|
|
5.8
|
%
|
Adjusted EBITDA margin
|
|
|
14.4
|
%
|
|
|
12.0
|
%
|
|
|
|
|
|
|
|
|
|
|
12.0
|
%
|
|
|
10.5
|
%
|
|
|
|
|
|
|
|
|
Net income (loss)(2)(3)(4)(5)
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
98,874
|
|
|
|
343.5
|
%
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
|
$
|
51,675
|
|
|
|
64.2
|
%
|
Net income (loss) margin
|
|
|
8.8
|
%
|
|
|
(3.8
|
)%
|
|
|
|
|
|
|
|
|
|
|
(3.8
|
)%
|
|
|
(9.9
|
)%
|
|
|
|
|
|
|
|
|
Diluted net income (loss) per share
|
|
$
|
3.51
|
|
|
$
|
(1.90
|
)
|
|
$
|
5.41
|
|
|
|
284.7
|
%
|
|
$
|
(1.90
|
)
|
|
$
|
(5.48
|
)
|
|
$
|
3.58
|
|
|
|
65.3
|
%
|
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. For reconciliation from
net income (loss) to EBIT, EBITDA and Adjusted EBITDA, see the
Reconciliation of Non-GAAP Financial Measures
section below. |
|
(2) |
|
2010 includes pre-tax fixed asset write-downs of
$2.7 million related to after-processing equipment in our
North American segment, $0.6 million related to the
write-off of decorating assets at our Shreveport, Louisiana
facility and $0.9 million in an insurance recovery.
Includes pre-tax restructuring charges of $2.0 million in
2009 |
29
|
|
|
|
|
related to the closing of our Syracuse China manufacturing
facility and our Mira Loma distribution center. Also includes
pre-tax charges of $14.2 million related to the closing of
our Syracuse China manufacturing facility and our Mira Loma
distribution center and a pre-tax write-down of
$4.5 million for certain fixed assets in our North American
Glass segment that had become idled and were no longer being
used in 2008. (See note 7 to the Consolidated Financial
Statements). |
|
(3) |
|
In addition to item (2) above, includes a $1.0 million
charge related to fees for the secondary stock offering,
$0.7 million related to the write-off of decorating assets
at our Shreveport, Louisiana facility and $1.1 million
related to the closing of our Syracuse China manufacturing
facility and our Mira Loma distribution center in 2010, pre-tax
restructuring charges $1.6 million related to the closing
of our Syracuse China manufacturing facility and our Mira Loma
distribution center and $3.2 million related to pension
settlement charges in 2009. Also includes pre-tax charges of
$11.9 million for impairment of goodwill related to our
Royal Leerdam and Crisal operations and $14.5 million
related to closing of our Syracuse China manufacturing facility
and our Mira Loma distribution center in 2008 (See notes 4,
5, 6 and 7 to the Condensed Consolidated Financial Statements). |
|
(4) |
|
In addition to item (3) above, includes pre-tax income of
$58.3 million in 2010 related to the gain on redemption of
the New PIK Notes and pre-tax restructuring charges of
$0.1 million in 2010, $0.2 million in 2009 and
$0.4 million in 2008 related to the closing of our Syracuse
China manufacturing facility and our Mira Loma distribution
center. (See notes 6 and 7 to the Condensed Consolidated
Financial Statements). |
|
(5) |
|
In addition to item (4) above, includes a pre-tax charge of
$2.7 million in 2010 related to finance fees incurred in
connection with the exchange of the Old PIK Notes. (See
note 6 to the Condensed Consolidated Financial Statements). |
Discussion
of 2010 vs. 2009 Results of Operations
Net
Sales
In 2010, net sales increased 6.8 percent to
$799.8 million from $748.6 million in 2009. The
increase in net sales was attributable to increased sales in our
North American Glass and International business segments,
partially offset by sales decreasing slightly in our North
American Other business segment. Within North American Glass,
where sales increased 7.7 percent to $562.7 million in
2010 from $522.6 million in 2009, Crisa sales increased
21.9 percent, including a favorable $7.0 million or
3.9 percent impact from movement in the value of the
Mexican peso. Sales to U.S. and Canadian retail glassware
customers increased 6.2 percent, while sales to
U.S. and Canadian foodservice customers were essentially
flat when compared to the previous year. Within North American
Other, sales declined 1.2 percent to $86.0 million in
2010 from $87.0 million in 2009, as sales declined by
14.1 percent at Syracuse China (primarily due to the
closure of the Syracuse China facility in April 2009 and the
decision to reduce the
Syracuse®
China product offering), offset by a 6.4 percent increase
in World Tableware sales. Sales to Traex customers were even
with the prior year. International net sales increased
12.2 percent to $162.7 million in 2010 from
$145.0 million in 2009 in spite of an $8.1 million
unfavorable currency exchange impact in Europe. Excluding the
currency exchange impact, sales increased 17.5 percent at
Royal Leerdam and 18.6 percent at Crisal. In addition,
customer sales increased 29.4 percent from our facility in
China.
Gross
Profit
Gross profit increased in 2010 by $34.9 million, or
26.2 percent, to $168.0 million in 2010, compared to
$133.1 million in 2009. Gross profit as a percentage of net
sales increased to 21.0 percent in 2010, compared to
17.8 percent in 2009. The primary contributor to the
increase in gross profit and gross profit margin was an increase
in sales, excluding the effects of currency of
$51.4 million (see discussion of Net Sales above). In
addition, an increase in production activity, net of volume
related production and sales cost increases of
$10.8 million, excluding the impact of currency,
contributed to the increase in EBIT. Favorable currency impact
contributed $8.8 million to the margin, primarily from the
Mexican peso. These improvements were offset by a
$33.0 million increase in costs, primarily driven by labor
and benefits, packaging costs, freight and repair costs, offset
by natural gas savings. Gross profit was also unfavorably
impacted by a $4.0 million variance related to
last-in
first out (LIFO) and other inventory adjustments which occurred
in 2009 and did not repeat in 2010.
30
Income
(loss) from operations
Income from operations increased 88.0 percent, to
$68.8 million in 2010, compared to $36.6 million in
2009. Income from operations as a percentage of net sales
increased to 8.6 percent in 2010, compared to
4.9 percent in 2009. Contributing to the increase in income
from operations and income from operations margin are the
improved gross profit and gross profit margin (discussed above)
offset by a $2.5 million increase in selling, general and
administrative expenses. The selling, general and administrative
expense increase was caused by a $1.4 million increase in
labor and benefit costs (net of a $5.6 million reduction in
bonus expense), $1.0 million in fees related to the
secondary stock offering in 2010, a $1.5 million increase
in legal and professional fees, a $0.6 million increase in
research and development expenses and a $0.7 million
increase in supplies and selling and marketing expenses
partially offset by a $3.2 million pension settlement
charge in 2009 that did not repeat in 2010.
Earnings
(loss) before interest and income taxes (EBIT)
Earnings before interest and income taxes increased by
$86.2 million, or 211.9 percent, to
$126.8 million in 2010 from $40.7 million in 2009.
EBIT as a percentage of net sales increased to 15.9 percent
in 2010, compared to 5.4 percent in 2009. The improved EBIT
was mostly a result of a $58.3 million gain on redemption
of debt in 2010, along with the improvement in income from
operations discussed above, offset by a decrease of
$4.3 million in other (expense) income primarily related to
a reduction in foreign exchange gains versus the prior year.
Earnings
before interest, taxes, depreciation and amortization
(EBITDA)
EBITDA increased by $84.1 million, or 100.3 percent,
to $168.0 million in 2010 from $83.8 million in 2009. As a
percentage of net sales, EBITDA was 21.0 percent in 2010,
compared to 11.2 percent in 2009. The key contributors to
the increase in EBITDA were those factors discussed above under
Earnings (loss) before interest and income taxes
(EBIT), however, it is not impacted by the benefit of a
$2.1 million decrease in depreciation and amortization
expense.
Adjusted
earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA)
Adjusted EBITDA increased by $24.8 million, or
27.5 percent, to $115.0 million in 2010 from
$90.1 million in 2009. As a percentage of net sales,
Adjusted EBITDA was 14.4 percent in 2010, compared to
12.0 percent in 2009. The key contributors to the increase
in Adjusted EBITDA were those factors discussed above under
Earnings before interest, taxes, depreciation and amortization
(EBITDA). Impacting Adjusted EBITDA for 2010 were the exclusion
of a $58.3 million gain on redemption of debt and a
$0.9 million insurance claim recovery in 2010, a
$1.0 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 North American Glass segment
in 2010, a $1.3 million charge to write off decorating
assets at our Shreveport, Louisiana facility in 2010 and a
$1.2 million facility closure charge in 2010 (see
note 7 to the Consolidated Financial Statements). Impacting
Adjusted EBITDA in 2009 were pension settlement charges of
$3.2 million and facility closure charges of
$3.8 million less $0.7 million of accelerated
depreciation included in those charges in 2009 (see note 7
to the Consolidated Financial Statements).
Net
income (loss) and diluted net income (loss) per
share
We reported net income of $70.1 million, or $3.51 per
diluted share, in 2010, compared to a net loss of
$(28.8) million, or loss of $(1.90) per diluted share, in
2009. Net income (loss) as a percentage of net sales was income
of 8.8 percent of sales in 2010, compared to a net loss of
(3.8) percent of sales in 2009. 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 a
$21.5 million reduction in interest expense offset by an
$8.8 million increase in provision for income taxes.
Interest expense for 2009 included $2.7 million of finance
fees related to the October 2009 debt exchange transaction.
Excluding these finance fees, interest expense decreased
$18.8 million as a result of lower debt levels and the
impact of the debt refinancing completed in February 2010. The
effective tax rate was a 14.2 percent expense for 2010
compared to a negative 10.6 percent for 2009, primarily due
to changes in valuation allowances, changes in the mix of
earnings with differing statutory rates, changes in tax laws and
tax planning structures and changes in accruals related to
uncertain tax positions.
31
Discussion
of 2009 vs. 2008 Results of Operations
Net
Sales
In 2009, net sales decreased 7.6 percent to
$748.6 million from $810.2 million in 2008. The
decrease in net sales was attributable to reduced sales within
all three of our business segments. Within North American Glass,
where sales declined 5.7 percent overall, shipments to
U.S. and Canadian foodservice customers declined over
10.0 percent and net sales of Crisa product declined
14.7 percent. Nearly half of the sales decline at Crisa was
due to an unfavorable currency impact from the Mexican peso.
Partially offsetting these decreases in net sales was an
increase of more than 7.0 percent in shipments to
U.S. and Canadian retail glassware customers. Within North
American Other, sales declined 21.6 percent to
$87.0 million in 2009 from $111.0 million in 2008, as
shipments declined by 37.2 percent at Syracuse China
(primarily due to the closure of the Syracuse China facility in
April 2009 and the decision to reduce the
Syracuse®
China product offering), 11.3 percent at World Tableware
and 24.2 percent at Traex. International net sales
decreased 5.5 percent primarily due to an unfavorable
currency exchange impact in Europe. Excluding currency exchange
impact, a decline in shipments of more than 2.5 percent at
Royal Leerdam was more than offset by an 11.7 percent
increase in shipments from our facility in China.
Gross
Profit
Gross profit increased in 2009 by $23.8 million, or
21.8 percent, compared to 2008. Gross profit as a
percentage of net sales increased to 17.8 percent in 2009,
compared to 13.5 percent in 2008. Contributing to the
increase in gross profit and gross profit margin was a decrease
of $16.7 million in special charges, to $2.0 million
in 2009 from $18.7 million in 2008 (see note 7 to the
Consolidated Financial Statements). The 2009 amounts are
primarily attributable to the closing of our Syracuse China
facility. Included in the 2008 amount were $14.0 million of
special charges related to the announced closing of our Syracuse
China manufacturing facility, $0.2 million related to the
announced closure of our Mira Loma distribution center and
$4.5 million related to fixed asset impairment charges in
our North American Glass segment. Excluding the impact from
special charges and currency, 2009 gross profit benefited
from an improvement of $12.1 million due to lower
manufacturing costs, primarily labor and benefits, natural gas,
electricity and cartons, offset by reduced production activity,
a reduction of $23.6 million in distribution costs and a
reduction of $1.1 million in depreciation expense. The
reduction in distribution costs was the result of lower net
sales and lower inventory levels. These improvements were
partially offset by a $20.4 million decrease due to an
unfavorable mix and lower level of net sales, and a
$10.6 million negative currency impact.
Income
(loss) from operations
Income from operations was $36.6 million in 2009, compared
to a loss from operations of $(5.5) million in 2008. Income
from operations as a percentage of net sales increased to
4.9 percent in 2009, compared to (0.7) percent in 2008.
Contributing to the increase in income from operations and
income from operations margin are the improved gross profit and
gross profit margin (discussed above), a decrease of
$24.8 million in special charges partially offset by a
$6.4 million increase in selling, general and
administrative expenses. The reduction in special charges
related to the closures of our Syracuse China manufacturing
facility ($12.2 million), our Mira Loma distribution center
($0.7 million) and the impairment charge on goodwill and
other intangible assets within our International segment
($11.9 million) which occurred in 2008 and a similar charge
did not occur in 2009 (see note 7 to the Consolidated
Financial Statements). The $6.4 million increase in
selling, general and administrative expenses was caused by a
$12.8 million increase in expense for our annual incentive
compensation plan, a $3.2 million pension settlement charge
arising from lump sum payments to retirees during 2009 and a
one-time 2008 accrual reversal of $1.3 million related to
favorable rulings in connection with an outstanding dispute
regarding a warehouse lease in Mexico. These increases in
selling, general and administrative expenses were offset by a
favorable currency impact of $2.8 million and decreases of
$4.3 million and $4.2 million in labor and benefit
costs and selling and marketing costs, respectively.
32
Earnings
(loss) before interest and income taxes (EBIT)
Earnings before interest and income taxes increased by
$45.1 million, to earnings of $40.7 million in 2009
from a loss of $(4.4) million in 2008. EBIT as a percentage
of net sales increased to 5.4 percent in 2009, compared to
(0.5) percent in 2008. The improved EBIT was mostly a result of
the improvement in income from operations (discussed above), and
an increase of $2.9 million in other (expense) income
primarily related to a favorable swing in foreign currency
translation gains versus the prior year.
Earnings
before interest, taxes, depreciation and amortization
(EBITDA)
EBITDA increased by $43.8 million, or 109.6 percent,
to $83.8 million in 2009 from $40.0 million in 2008.
As a percentage of net sales, EBITDA was 11.2 percent in
2009, compared to 4.9 percent in 2008. The key contributors
to the increase in EBITDA were those factors discussed above
under Earnings (loss) before interest and income taxes
(EBIT), however, it is not impacted by the benefit of a
$1.3 million decrease in depreciation and amortization
expense.
Adjusted
Earnings before interest, taxes, depreciation and amortization
(Adjusted EBITDA)
Adjusted EBITDA increased by $4.9 million, or
5.8 percent, to $90.1 million in 2009 from
$85.2 million in 2008. As a percentage of net sales,
Adjusted EBITDA was 12.0 percent in 2009, compared to
10.5 percent in 2008. Excluding the impact of currency, the
key contributors in the increase in Adjusted EBIDTA were a
$23.6 million reduction in distribution costs, a
$12.1 million benefit from lower manufacturing costs offset
by reduced production activity and an increase of
$2.9 million in other (expense) income primarily related to
a favorable swing in foreign currency translation gains versus
the prior year. These improvements were offset by a
$20.4 million impact from unfavorable mix and lower level
of net sales, a $6.0 million increase in selling, general
and administrative expenses (see Income (loss) from operations
above for details) and $7.8 million of unfavorable impact
from currency movement.
Net
loss and diluted loss per share
We reported a net loss of $(28.8) million, or loss of
$(1.90) per diluted share, in 2009, compared to a net loss of
$(80.5) million, or loss of $(5.48) per diluted share, in
2008. The net loss as a percentage of net sales was (3.8)
percent in 2009, compared to (9.9) percent in 2008. The
reduction in net loss was driven primarily by the items
discussed above under Earnings (loss) before interest and
income taxes (EBIT), in addition to a $3.0 million
decrease in interest expense and a $3.6 million decrease in
income tax provision. Interest expense for 2009 included
$2.7 million of finance fees related to the October 2009
debt exchange transaction. (See note 6 to the Consolidated
Financial Statements for a further discussion of this
transaction). Excluding these finance fees, interest expense
declined by $5.7 million during the year as the result of
lower variable rates and lower levels of debt carried in 2009.
The effective tax rate was a negative 10.6 percent for
2009, compared to a negative 8.5 percent for 2008. The rate
was influenced by valuation allowances, changes in the mix of
earnings with differing statutory rates, changes in tax laws and
tax planning structures and changes in accruals related to
uncertain tax positions.
33
SEGMENT
RESULTS OF OPERATIONS
The following table summarizes the results of operations for our
three segments described as follows:
|
|
|
|
|
North American Glass-includes sales of glass tableware from
subsidiaries throughout the United States, Canada and Mexico.
|
|
|
|
North American Other-includes sales of ceramic dinnerware; metal
tableware, hollowware and serveware; and plastic items from
subsidiaries in the United States.
|
|
|
|
International-includes worldwide sales of glass tableware from
subsidiaries outside the United States, Canada and Mexico.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance
|
|
|
|
|
|
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
In
|
|
|
In
|
|
|
|
|
|
|
|
|
In
|
|
|
In
|
|
Year End December 31,
|
|
2010
|
|
|
2009
|
|
|
Dollars
|
|
|
Percent
|
|
|
2009
|
|
|
2008
|
|
|
Dollars
|
|
|
Percent
|
|
|
|
(Amounts in thousands, except percentages and per-share
amounts)
|
|
|
Net Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
562,653
|
|
|
$
|
522,575
|
|
|
$
|
40,078
|
|
|
|
7.7
|
%
|
|
$
|
522,575
|
|
|
$
|
554,128
|
|
|
$
|
(31,553
|
)
|
|
|
(5.7
|
)%
|
North American Other
|
|
|
85,996
|
|
|
|
87,041
|
|
|
|
(1,045
|
)
|
|
|
(1.2
|
)%
|
|
|
87,041
|
|
|
|
111,029
|
|
|
|
(23,988
|
)
|
|
|
(21.6
|
)%
|
International
|
|
|
162,685
|
|
|
|
145,023
|
|
|
|
17,662
|
|
|
|
12.2
|
%
|
|
|
145,023
|
|
|
|
153,532
|
|
|
|
(8,509
|
)
|
|
|
(5.5
|
)%
|
Eliminations
|
|
|
(11,540
|
)
|
|
|
(6,004
|
)
|
|
|
|
|
|
|
|
|
|
|
(6,004
|
)
|
|
|
(8,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
799,794
|
|
|
$
|
748,635
|
|
|
$
|
51,159
|
|
|
|
6.8
|
%
|
|
$
|
748,635
|
|
|
$
|
810,207
|
|
|
$
|
(61,572
|
)
|
|
|
(7.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and taxes (EBIT):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
109,069
|
|
|
$
|
33,727
|
|
|
$
|
75,342
|
|
|
|
223.4
|
%
|
|
$
|
33,727
|
|
|
$
|
25,495
|
|
|
$
|
8,232
|
|
|
|
32.3
|
%
|
North American Other
|
|
|
13,916
|
|
|
|
9,802
|
|
|
|
4,114
|
|
|
|
42.0
|
%
|
|
|
9,802
|
|
|
|
(17,696
|
)
|
|
|
27,498
|
|
|
|
155.4
|
%
|
International
|
|
|
3,854
|
|
|
|
(2,862
|
)
|
|
|
6,716
|
|
|
|
234.7
|
%
|
|
|
(2,862
|
)
|
|
|
(12,228
|
)
|
|
|
9,366
|
|
|
|
76.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
126,839
|
|
|
$
|
40,667
|
|
|
$
|
86,172
|
|
|
|
211.9
|
%
|
|
$
|
40,667
|
|
|
$
|
(4,429
|
)
|
|
$
|
45,096
|
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT Margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
|
19.4
|
%
|
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
|
6.5
|
%
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
North American Other
|
|
|
16.2
|
%
|
|
|
11.3
|
%
|
|
|
|
|
|
|
|
|
|
|
11.3
|
%
|
|
|
(15.9
|
)%
|
|
|
|
|
|
|
|
|
International
|
|
|
2.4
|
%
|
|
|
(2.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
(2.0
|
)%
|
|
|
(8.0
|
)%
|
|
|
|
|
|
|
|
|
Consolidated
|
|
|
15.9
|
%
|
|
|
5.4
|
%
|
|
|
|
|
|
|
|
|
|
|
5.4
|
%
|
|
|
(0.5
|
)%
|
|
|
|
|
|
|
|
|
Special items (income) expense (excluding write-off of
financing fees in 2009):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
(54,151
|
)
|
|
$
|
3,204
|
|
|
$
|
(57,355
|
)
|
|
|
NM
|
|
|
$
|
3,204
|
|
|
$
|
5,356
|
|
|
$
|
(2,152
|
)
|
|
|
40.2
|
%
|
North American Other
|
|
|
1,155
|
|
|
|
3,809
|
|
|
|
(2,654
|
)
|
|
|
69.7
|
%
|
|
|
3,809
|
|
|
|
28,252
|
|
|
|
(24,443
|
)
|
|
|
86.5
|
%
|
International
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM
|
|
|
|
|
|
|
|
11,890
|
|
|
|
(11,890
|
)
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
(52,996
|
)
|
|
$
|
7,013
|
|
|
$
|
(60,009
|
)
|
|
|
NM
|
|
|
$
|
7,013
|
|
|
$
|
45,498
|
|
|
$
|
(38,485
|
)
|
|
|
84.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM = Not meaningful
Discussion
of 2010 vs. 2009 Segment Results of Operations
North
American Glass
Net sales increased 7.7 percent to $562.7 million in
2010 from $522.6 million in 2009. The increase in net sales
was mainly attributable to a 21.9 percent increase in Crisa
sales (including a favorable currency impact of
34
$7.0 million or 3.9 percent) and a 6.2 percent
increase in sales to U.S. and Canadian retail glassware
customers. Sales to U.S. and Canadian foodservice customers
were essentially flat when compared to the previous year.
EBIT increased by $75.3 million to $109.1 million in
2010, compared to $33.7 million in 2009. EBIT as a
percentage of net sales increased to 19.4 percent in 2010,
compared to 6.5 percent in 2009. The key contributors to
the improvement in EBIT were a $58.3 million gain on
redemption of debt in 2010 and an increase in sales excluding
the effects of currency of $33.1 million (see discussion of
Net Sales above). In addition, an increase in production
activity, net of volume related production and sales cost
increases of $7.8 million, excluding the impact of
currency, contributed to the increase in EBIT. Favorable
currency impact from the Mexican peso contributed
$9.4 million. These improvements were offset by a
$21.9 million increase in costs of goods sold, primarily
driven by labor and benefits, packaging costs, freight and
repair costs, offset by natural gas savings. EBIT was also
unfavorably impacted by a $4.0 million variance related to
accounting gains for LIFO and other inventory adjustments which
occurred in 2009 and did not repeat in 2010. Cost of sales also
included a $2.7 million charge for a write-down of certain
after-processing equipment and an additional $0.6 million
for a write-down of decorating inventory in our Shreveport
manufacturing facility (see Note 7 to the Consolidated
Financial Statements). Selling, general and administrative costs
included a $1.0 million charge for fees related to the
secondary offering in 2010, offset by a $3.2 million
pension settlement charge in 2009 that did not repeat in 2010.
Excluding the impact of these two items, selling, general and
administrative expenses increased $3.1 million in 2010 due
primarily to a $1.4 million increase in legal and
professional fees, a $0.6 million increase in research and
development expenses and a $0.7 million increase in
selling, marketing and other expenses. Within selling, general
and administrative costs, we had a reduction in bonus expense of
$6.0 million which was offset by increases in other salary
and benefit expenses. Other (expense) income decreased
$3.6 million related to an unfavorable swing in foreign
currency translation gains versus the prior-year period.
North
American Other
Net sales decreased 1.2 percent to $86.0 million in
2010 from $87.0 million in 2009. The decrease was caused by
a 14.1 percent decline in sales to Syracuse China customers
related to the closure of the Syracuse China facility in 2009
and the related decision to reduce the Syracuse China product
offering, offset by a 6.4 percent increase in sales of
World Tableware products. Sales to Traex customers were even
with the prior year.
EBIT improved by $4.1 million to $13.9 million in 2010
from $9.8 million in 2009. EBIT as a percentage of net
sales increased to 16.2 percent in 2010, compared to
11.3 percent in 2009. The key contributors to the
improvement in EBIT were an improvement of $5.2 million due
to improved sales mix and the April 2009 closure of our Syracuse
China production facility (see note 7 to the Consolidated
Financial Statements). In addition, we benefited from a decrease
of $2.7 million in special charges. These improvements were
offset by a $2.5 million increase in costs of purchased
finished goods, as products previously manufactured at Syracuse
China are now sourced, and a $1.2 million increase in
selling, general and administrative expenses.
International
In 2010, net sales increased 12.2 percent to
$162.7 million from $145.0 million in 2009 in spite of
an $8.1 million unfavorable currency exchange impact in
Europe. Excluding currency exchange impact, sales increased
17.5 percent at Royal Leerdam and 18.6 percent at
Crisal. In addition, customer sales increased 29.4 percent
from our facility in China.
EBIT increased by $6.7 million to income of
$3.9 million in 2010 from a loss of $(2.9) million in
2009. EBIT as a percentage of net sales improved to income of
2.4 percent in 2010 compared to a loss of (2.0) percent in
2009. The primary contributor to the increase in EBIT was
improved sales of $24.9 million, excluding the impact of
currency. Offsetting the increase in sales was an increase in
production activity, net of volume related production and sales
cost increases of $8.7 million, excluding the impact of
currency, $8.8 million in increases costs, primarily driven
by labor and benefits, packaging costs, freight and repair
costs, and an unfavorable currency impact of $0.6 million.
35
Discussion
of 2009 vs. 2008 Segment Results of Operations
North
American Glass
Net sales declined 5.7 percent to $522.6 million in
2009 from $554.1 million in 2008. Key factors in the
reduction in net sales were a 14.7 percent decline in
shipments to Crisas customers and a 10.7 percent
reduction in shipments to U.S. and Canadian foodservice
glassware customers. The primary offset to these declines was a
7.3 percent increase in sales from the U.S. and
Canadian retail glassware channel. Nearly half of the
14.7 percent reduction attributable to decreased sales of
Crisa product was related to an unfavorable currency impact.
EBIT increased by $8.2 million to $33.7 million in
2009, compared to $25.5 million in 2008. EBIT as a
percentage of net sales increased to 6.5 percent in 2009,
compared to 4.6 percent in 2008. The key contributors to
the improvement in EBIT were an $11.2 million decline in
distribution costs, a $9.3 million reduction due to lower
manufacturing costs, primarily labor and benefits, natural gas,
electricity and cartons, offset by lower production activity, a
$5.3 million reduction in special charges related to a
fixed asset impairment charge and the announced closing of our
Mira Loma distribution center in 2008 which did not recur in
2009 (see note 7 to the Consolidated Financial Statements),
a $2.4 million increase in other (expense) income and a
decrease of $1.2 million in depreciation expense. The
reduction in distribution costs was the result of lower net
sales and lower inventory levels. The increase in other
(expense) income was entirely attributable to favorable foreign
currency translation gains. These improvements were partially
offset by an $11.0 million increase in selling,
general & administrative expenses, a $7.9 million
impact from lower sales volume and unfavorable sales mix and
unfavorable currency impact of $2.3 million. The increase
in selling, general & administrative expenses was
attributable to increased accruals for incentive compensation
payments of $13.2 million, a pension settlement charge of
$3.2 million arising from lump sum payments to retirees
during 2009 and a one-time 2008 accrual reversal of
$1.3 million related to favorable rulings in connection
with an outstanding dispute regarding a warehouse lease in
Mexico. These increases in selling, general and administrative
expenses were offset by decreases of $4.3 million and
$2.7 million in labor and benefit costs and selling and
marketing costs, respectively.
North
American Other
Net sales decreased 21.6 percent to $87.0 million in
2009 from $111.0 million in 2008. The decline in net sales
was felt throughout the segment, with a 37.2 percent
reduction in shipments to Syracuse China customers resulting
from the closure of the Syracuse China facility in 2009 and the
related decision to reduce the Syracuse China product offering,
an 11.3 percent reduction in shipments of World Tableware
products and a 24.2 percent reduction in shipments of Traex
products.
EBIT improved by $27.5 million to income of
$9.8 million in 2009, compared to a loss of
$(17.7) million in 2008. EBIT as a percentage of net sales
increased to 11.3 percent in 2009, compared to (15.9)
percent in 2008. The key contributors to the improvement in EBIT
were a $24.4 million reduction in special charges related
to the closing of our Syracuse China facility (see note 7
to the Consolidated Financial Statements), a $10.6 million
reduction in distribution costs, a $3.1 million reduction
in selling, general and administrative expenses, a
$1.1 million decline in depreciation expense, a
$0.5 million impact from lower manufacturing costs offset
by reduced production activity and a $0.2 million
improvement in other (expense) income. The reduction in
distribution costs was the result of lower net sales, lower
inventory levels and the discontinuation of shipping from the
Syracuse China facility. The reduction in selling, general and
administrative expense is primarily attributable to reduced
selling & marketing expenses. These improvements in
EBIT were partially offset by a $12.9 million impact from
reduced sales volume.
International
In 2009, net sales decreased 5.5 percent to
$145.0 million from $153.5 million in 2008. The
largest factor in the decline in net sales was the unfavorable
currency impact from the euro, which caused a 4.7 percent
decline in euro-denominated sales. On a constant currency basis,
the impact of reduced shipments to Royal Leerdam customers was
2.5 percent, which was offset by an increase of
11.7 percent in shipments to customers of our facility in
China, while shipments to Crisal customers were essentially flat
when compared to the prior year.
36
EBIT increased by $9.4 million to a loss of
$(2.9) million in 2009 from a loss of $(12.2) million
in 2008. EBIT as a percentage of net sales improved to (2.0)
percent in 2009, compared to (8.0) percent in 2008. The key
contributors to the improvement in EBIT were a reduction of
$11.9 million in special charges related to an impairment
charge against goodwill and other intangibles in 2008 which did
not recur in 2009 (see note 7 to the Consolidated Financial
Statements), a $2.3 million favorable impact from lower
manufacturing costs, primarily labor and benefits, natural gas,
electricity and cartons, offset by reduced production activity,
a reduction of $1.8 million in distribution costs, a
$0.4 million benefit from sales as improved product mix
overcame the reduction in overall sales volume, and an increase
of $0.1 million in other (expense) income. Partially
offsetting these improvements were an unfavorable currency
impact of $5.5 million, an increase of $1.0 million in
depreciation expense and a $0.6 million increase in
selling, general and administrative expenses.
CAPITAL
RESOURCES AND LIQUIDITY
Historically, cash flows generated from operations, cash on hand
and our borrowing capacity under our ABL Facility have enabled
us to meet our cash requirements, including capital expenditures
and working capital requirements. At December 31, 2010 we
had no amounts outstanding under our $110 million ABL
Facility, although we had $10.4 million of letters of
credit issued under that facility. As a result, we had
$65.2 million of unused availability remaining under the
ABL Facility at December 31, 2010, as compared to
$79.2 million of unused availability at December 31,
2009 under the prior $150 million ABL Facility. In
addition, we had $76.3 million of cash on hand at
December 31, 2010, compared to $55.1 million of cash
on hand at December 31, 2009.
On February 8, 2010, we used the $379.8 million of net
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 New PIK Notes that were
outstanding at that date and to repurchase the
$306.0 million of floating rate notes due 2011. See
note 6 to the Consolidated Financial Statements for more
information regarding the proceeds of the debt offering. 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, on November 30, 2010, we
fully paid off our RMB 50.0 million working capital loan
due January 2011.
As previously announced on February 9, 2011, we intend to
redeem, on March 25, 2011, an aggregate principal amount of
$40.0 million of our outstanding Senior Secured Notes due
2015.
Based on our operating plans and current forecast expectations,
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.
Balance
Sheet and Cash flows
Cash and
Equivalents
See the cash flow section below for a discussion of our cash
balance.
37
Working
Capital
The following table presents working capital components for 2010
and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
In Dollars
|
|
|
In Percent
|
|
|
|
(Amounts in thousands, except percentages, DSO, DIO, DPO and
DWC)
|
|
|
Accounts receivable net
|
|
$
|
92,101
|
|
|
$
|
82,424
|
|
|
$
|
9,677
|
|
|
|
11.7
|
%
|
DSO(1)
|
|
|
42.0
|
|
|
|
40.2
|
|
|
|
|
|
|
|
|
|
Inventories net
|
|
$
|
148,146
|
|
|
$
|
144,015
|
|
|
$
|
4,131
|
|
|
|
2.9
|
%
|
DIO(2)
|
|
|
67.6
|
|
|
|
70.2
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
59,095
|
|
|
$
|
55,539
|
|
|
$
|
3,556
|
|
|
|
6.4
|
%
|
DPO(3)
|
|
|
27.0
|
|
|
|
27.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital(4)
|
|
$
|
181,152
|
|
|
$
|
170,900
|
|
|
$
|
10,252
|
|
|
|
6.0
|
%
|
DWC(5)
|
|
|
82.6
|
|
|
|
83.3
|
|
|
|
|
|
|
|
|
|
Percentage of net sales
|
|
|
22.6
|
%
|
|
|
22.8
|
%
|
|
|
|
|
|
|
|
|
DSO, DIO, DPO and DWC are all calculated using net sales as the
denominator and 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 Reconciliation of
Non-GAAP Financial Measures below 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, defined as net accounts receivable plus net
inventories less accounts payable, increased by
$10.3 million in 2010, compared to 2009. However, as a
percentage of net sales, working capital decreased to
22.6 percent in 2010, compared to 22.8 percent in
2009. This increase in working capital is primarily the result
of higher accounts receivable related to higher sales in the
final quarter of the year. We also saw an increase in
inventories as our production levels increased to provide for
optimal customer service during a time of steadily increasing
customer demand. The increase in inventories was partially
offset by an increase in accounts payable, which is also related
to higher production levels. Our DSO also increased
4.5 percent compared to year-end 2009, which is
attributable to the 6.8 percent increase in sales over the
course of the year. While our inventory levels increased
2.9 percent compared to year-end 2009, we achieved a
3.7 percent reduction in our DIO compared to the prior year.
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 New PIK Notes.
|
38
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 New PIK Notes and to
pay certain related fees and expenses. Upon completion of the
refinancing, we recorded a gain of $71.7 million related to
the redemption of the New 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 $58.3 million as shown on the
Consolidated Statements of Operations.
The following table presents our total borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Rate
|
|
|
Maturity Date
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
|
|
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
|
%
|
|
January, 2011 to September, 2016
|
|
|
1,307
|
|
|
|
1,492
|
|
Notes payable
|
|
|
floating
|
|
|
January, 2011
|
|
|
|
|
|
|
672
|
|
RMB loan contract
|
|
|
floating
|
|
|
July, 2012 to January, 2014
|
|
|
37,925
|
|
|
|
36,675
|
|
RMB working capital loan
|
|
|
floating
|
|
|
January, 2011
|
|
|
|
|
|
|
7,335
|
|
BES Euro line
|
|
|
floating
|
|
|
December, 2011 to December, 2013
|
|
|
10,934
|
|
|
|
14,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
|
|
|
|
|
|
450,166
|
|
|
|
446,795
|
|
Less unamortized discount
|
|
|
|
|
|
|
|
|
6,307
|
|
|
|
1,749
|
|
Plus Carrying value adjustment on debt related to
the Interest Rate Agreement(1)
|
|
|
|
|
|
|
|
|
3,266
|
|
|
|
|
|
Plus Carrying value in excess of principal on New
PIK Notes(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
70,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings net(3)(4)
|
|
|
|
|
|
|
|
$
|
447,125
|
|
|
$
|
515,239
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Derivatives below and note 13 to the
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 a
$71.1 million gain in gain on redemption of debt on the
Consolidated Statements of Operations. |
|
(3) |
|
Total borrowings net includes notes payable,
long-term debt due within one year and long-term debt as stated
in our Consolidated Balance Sheets. |
|
(4) |
|
See Contractual Obligations below for scheduled
payments by period. |
We had total borrowings of $450.2 million at
December 31, 2010, compared to total borrowings of
$446.8 million at December 31, 2009. The
$3.4 million increase in borrowings was the result of the
debt refinancing completed on February 8, 2010, when we
used the proceeds of a $400.0 million debt offering and
cash on hand to redeem the New 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 6 to the Consolidated Financial Statements for further
details.
39
Of our total borrowings, $138.9 million, or approximately
30.8 percent, was subject to variable interest rates at
December 31, 2010. A change of one percentage point in such
rates would result in a change in interest expense of
approximately $1.4 million on an annual basis.
Interest expense in 2009 included a $2.7 million charge for
finance fees related to the debt exchange. Also included in
interest expense is the amortization of discounts, warrants and
other financing fees. Excluding the $2.7 million previously
mentioned for 2009, these items amounted to $4.3 million,
$4.9 million and $5.0 million for the annual periods
ended December 31, 2010, December 31, 2009 and
December 31, 2008, respectively.
Cash
Flow
The following table presents key drivers to Free Cash Flow for
2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance
|
|
|
|
|
|
|
|
|
Variance
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
In Dollars
|
|
|
In Percent
|
|
|
2009
|
|
|
2008
|
|
|
In Dollars
|
|
|
In Percent
|
|
|
|
(Dollars in thousands, except percentages)
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
47,699
|
|
|
$
|
102,148
|
|
|
$
|
(54,449
|
)
|
|
|
(53.3
|
)%
|
|
$
|
102,148
|
|
|
$
|
(1,040
|
)
|
|
$
|
103,188
|
|
|
|
NM
|
|
Capital expenditures
|
|
|
(28,247
|
)
|
|
|
(17,005
|
)
|
|
|
11,242
|
|
|
|
66.1
|
%
|
|
|
(17,005
|
)
|
|
|
(45,717
|
)
|
|
|
(28,712
|
)
|
|
|
(62.8
|
)%
|
Payment of interest on New PIK Notes
|
|
|
29,400
|
|
|
|
|
|
|
|
(29,400
|
)
|
|
|
NM
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM
|
|
Proceeds from asset sales and other
|
|
|
|
|
|
|
265
|
|
|
|
(265
|
)
|
|
|
(100.0
|
)%
|
|
|
265
|
|
|
|
117
|
|
|
|
148
|
|
|
|
126.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow(1)
|
|
$
|
48,852
|
|
|
$
|
85,408
|
|
|
$
|
(36,556
|
)
|
|
|
(42.8
|
)%
|
|
$
|
85,408
|
|
|
$
|
(46,640
|
)
|
|
$
|
132,048
|
|
|
|
283.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NM Not Meaningful
|
|
|
(1) |
|
We believe that Free Cash Flow (which we define as net cash
provided by (used in) operating activities, less capital
expenditures, plus payment of interest on New PIK Notes and
proceeds from asset sales and other) is a useful metric for
evaluating our financial performance, as it is a measure we use
internally to assess performance. See Reconciliation of
Non-GAAP Financial Measures below for a
reconciliation of net cash provided by (used in) operating
activities to Free Cash Flow and a further discussion as to the
reasons we believe this non-GAAP financial measure is useful. |
Discussion
of 2010 vs. 2009 Cash Flow
Our net cash provided by operating activities was
$47.7 million in 2010, compared to $102.1 million in
2009, or a decrease of $54.4 million. The major factors
impacting cash flow from operating activities were the
$98.9 million improvement in net income (loss) offset by
$87.7 million of items related to our debt transactions,
change in cash flow impact of $51.1 million from working
capital related to increased sales and production in 2010
(discussed above), an $11.6 million impact from a decrease
in accrued liabilities net of prepaid expenses primarily the
result of incentive compensation payments in the first quarter
of 2010 and a $2.1 million decrease in non-cash
depreciation and amortization that is included in the benefit
from improved net income (loss). We also experienced the benefit
of lower cash interest payments as a result of lower debt and
improved interest rates, offset by higher cash payment of taxes
as our income has improved.
Net cash used in investing activities was $36.7 million in
2010, compared to $16.7 million in 2009, or an increase of
$19.9 million. This change was attributable to an
$11.2 million increase in capital spending and payment of
an $8.4 million call premium on floating rate notes as part
of our debt refinancing.
Net cash provided by (used in) financing activities was a source
of $10.7 million in 2010, compared to a use of
$(43.6) million in 2009, or a swing of $54.3 million.
During 2010, our proceeds from the Senior Secured Notes were
only partially offset by the repurchase of our floating rate
notes, the redemption of the New 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 New PIK notes and the call premium on the floating rate
notes.
40
At December 31, 2010, our cash balance was
$76.3 million, an increase of $21.2 million from
$55.1 million at December 31, 2009.
Free Cash Flow was $48.9 million in 2010, compared to
$85.4 million in 2009, or a decrease of $36.6 million.
The primary contributors to this increase were the changes in
net cash provided by operating activities excluding the payment
of interest on the New PIK Notes and the increase in capital
spending as discussed above.
Discussion
of 2009 vs. 2008 Cash Flow
Our net cash provided by operating activities was
$102.1 million in 2009, compared to net cash used in
operating activities of $1.1 million in 2008, or an
increase of $103.2 million. The increase is primarily
related to improvements in our results of operations, lower cash
interest, higher non-cash expenses, a positive cash flow impact
of $42.9 million from inventory and $24.9 million from
accounts payable, and a 2008 payment of $19.6 million to
Vitro related to the 2006 acquisition of Crisa which did not
recur in 2009, offset by a negative cash flow impact of
$22.9 million from accounts receivable when compared to
2008, and lower uses of cash for pension contributions. The cash
generated from these cash flow improvements was utilized to pay
down debt and increase our cash balance.
Net cash used in investing activities was $16.7 million in
2009, compared to $45.6 million in 2008, or a decrease of
$28.9 million. This change was completely attributable to a
reduction in capital spending.
Net cash (used in) provided by financing activities was a use of
$(43.6) million in 2009, compared to a source of
$25.8 million in 2008, or a swing of $69.4 million.
During 2008, we utilized $28.7 million more of our capacity
on the ABL Facility to fund our operations, while we made
$34.2 million of repayments on that facility in 2009.
Free Cash Flow was $85.4 million in 2009, compared to
$(46.6) million in 2008, or an increase of
$132.0 million. The primary contributors to this increase
were the changes in net cash provided by (used in) operating
activities and the decrease in capital spending as discussed
above.
Derivatives
In March 2010, we entered into an Interest Rate Protection
Agreement (Rate Agreement) with respect to $100.0 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. In August 2010, Wells Fargo, the counterparty to the
Rate Agreement, called 10 percent of the balance reducing
the amount to $90.0 million. The interest rate for our
borrowings related to the Rate Agreement at December 31,
2010 was 7.57 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 result. However, we do not anticipate
nonperformance by the counterparty. The counterparty was rated
AA- as of December 31, 2010, by Standard and Poors.
The fair market value for the Rate Agreement at
December 31, 2010 was a $2.5 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 limit the fluctuations in prices
paid from adverse price movements in the underlying commodity.
We consider our forecasted natural gas requirements in
determining the quantity of natural gas to hedge. We combine the
forecasts with historical observations to establish the
percentage of forecast eligible to be hedged, typically ranging
from 40 percent to 70 percent of our anticipated
requirements, up to eighteen months in the future. The fair
values of these instruments are determined from market quotes.
At December 31, 2010, we had commodity futures contracts
for 3,090,000 million British Thermal Units (BTUs) of
natural gas. The fair market value for these contracts at
December 31, 2010 was a $(3.2) million liability. We
have hedged a portion of our forecasted transactions through
June 2012. At December 31, 2009, we had commodity
41
futures contracts for 3,610,000 million BTUs of
natural gas. On that date, the fair market value of these
contracts was a $(5.4) million liability. The
counterparties for these derivatives were rated BBB+ or better
as of December 31, 2010, by Standard &
Poors.
During December 2008, we announced the planned closure of the
Syracuse China facility in early April 2009 (see note 7 to
the Consolidated Financial Statements). At the time of the
announcement we held natural gas contracts for the Syracuse
China facility with a settlement date after March 2009 of
165,000 million British Thermal Units (BTUs). The
closure of this facility rendered the forecasted transactions
related to these contracts not probable of occurring. Under FASB
ASC Topic 815, Derivatives and Hedging, when the
forecasted transactions of a hedging relationship become not
probable of occurring, the gains or losses that have been
classified in Other Accumulated Comprehensive Loss in prior
periods for those contracts affected should be reclassified into
earnings. We recognized expense of $0.1 million and
$0.2 million for the year ended December 31, 2010 and
2009, respectively, in other (expense) income on the
Consolidated Statements of Operations relating to these
contracts.
We use foreign currency contracts to manage our currency
exposure, which arises from transactions denominated in a
currency other than 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.
As of December 31, 2010, we had currency contracts for
$18.7 million Canadian dollars. On that date, the fair
market value of these contracts was a $(0.2) million
liability.
Share
Repurchase Program
Since mid-1998, we have repurchased 5,125,000 shares for
$141.1 million, as authorized by our Board of Directors. As
of December 31, 2010, authorization remains for the
purchase of an additional 1,000,000 shares. During 2010 and
2009, we did not repurchase any common stock. Our debt
agreements significantly restrict our ability to repurchase
additional shares.
We used a portion of the repurchased common stock to issue
shares on the warrants exercised by Merrill Lynch PCG, Inc. in
2010. As of December 31, 2010, all of the repurchased
shares have been issued. See notes 5, 6 and 12 to the
Consolidated Financial Statements for further discussion.
Contractual
Obligations
The following table presents our existing contractual
obligations at December 31, 2010 and related future cash
requirements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
|
Less than
|
|
|
|
|
|
|
|
|
More than
|
|
Contractual Obligations(1)
|
|
Total
|
|
|
1 Year
|
|
|
1 - 3 Years
|
|
|
3 - 5 Years
|
|
|
5 Years
|
|
|
|
(Dollars in thousands)
|
|
|
Borrowings
|
|
$
|
450,166
|
|
|
$
|
3,142
|
|
|
$
|
37,295
|
|
|
$
|
409,556
|
|
|
$
|
173
|
|
Interest payments(2)
|
|
|
186,392
|
|
|
|
42,554
|
|
|
|
83,760
|
|
|
|
60,075
|
|
|
|
3
|
|
Long-term operating leases
|
|
|
108,010
|
|
|
|
16,687
|
|
|
|
26,396
|
|
|
|
19,173
|
|
|
|
45,754
|
|
Pension and nonpension(3)
|
|
|
31,648
|
|
|
|
31,648
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term incentive plans
|
|
|
3,560
|
|
|
|
|
|
|
|
3,560
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total obligations
|
|
$
|
779,776
|
|
|
$
|
94,031
|
|
|
$
|
151,011
|
|
|
$
|
488,804
|
|
|
$
|
45,930
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Amounts reported in local currencies have been translated at
2010 exchange rates. |
|
(2) |
|
The obligations for interest payments are based on
December 31, 2010 debt levels and interest rates. |
|
(3) |
|
It is difficult to estimate future cash contributions as they
are a function of actual investment returns, withdrawals from
the plan, changes in interest rates, and other factors uncertain
at this time. |
In addition to the above, we have commercial commitments secured
by letters of credit and guarantees. Our letters of credit
outstanding at December 31, 2010, totaled
$10.4 million.
42
The Company is unable to make a reasonably reliable estimate as
to when cash settlement with taxing authorities may occur for
our unrecognized tax benefits. Therefore, our liability for
unrecognized tax benefits is not included in the table above.
See note 8 to the Consolidated Financial Statements for
additional information.
Reconciliation
of Non-GAAP Financial Measures
We sometimes refer to data derived from 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.
Reconciliation
of net income (loss) to EBIT, EBITDA and Adjusted
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
Add: Interest expense
|
|
|
45,171
|
|
|
|
66,705
|
|
|
|
69,720
|
|
Add: Provision for income taxes
|
|
|
11,582
|
|
|
|
2,750
|
|
|
|
6,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes (EBIT)
|
|
|
126,839
|
|
|
|
40,667
|
|
|
|
(4,429
|
)
|
Add: Depreciation and amortization
|
|
|
41,115
|
|
|
|
43,166
|
|
|
|
44,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before interest, taxes, deprecation and amortization
(EBITDA)
|
|
|
167,954
|
|
|
|
83,833
|
|
|
|
40,001
|
|
Add: Special items before interest and taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on redemption of debt (see note 6)(6)
|
|
|
(58,292
|
)
|
|
|
|
|
|
|
|
|
Pension settlement charges (see note 9)(4)
|
|
|
|
|
|
|
3,190
|
|
|
|
|
|
Facility closure charges (see note 7)(1)
|
|
|
1,183
|
|
|
|
3,823
|
|
|
|
29,127
|
|
Fixed asset write-down (see note 7)(2)
|
|
|
2,696
|
|
|
|
|
|
|
|
4,481
|
|
Write-off of Shreveport decorating assets (see note 7)
|
|
|
1,315
|
|
|
|
|
|
|
|
|
|
Expenses of secondary stock offering (see note 6)(5)
|
|
|
1,047
|
|
|
|
|
|
|
|
|
|
Insurance claim recovery
|
|
|
(945
|
)
|
|
|
|
|
|
|
|
|
Goodwill and intangible impairment charges (see notes 4
and 7)(3)
|
|
|
|
|
|
|
|
|
|
|
11,890
|
|
Less: Depreciation expense included in special charges and also
in depreciation and amortization above
|
|
|
|
|
|
|
(705
|
)
|
|
|
(261
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings before interest, taxes, deprecation and
amortization (Adjusted EBITDA)
|
|
$
|
114,958
|
|
|
$
|
90,141
|
|
|
$
|
85,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Facility closure charges are related to the closure of our
Syracuse, New York ceramic dinnerware manufacturing facility and
our Mira Loma, California distribution center. |
|
(2) |
|
Fixed asset impairment charges are related to unutilized fixed
assets at our North American Glass segment. |
|
(3) |
|
Goodwill and intangible asset impairment charges are related to
goodwill and intangible assets at our Crisal and Royal Leerdam
locations. |
|
(4) |
|
Pension settlement charges were triggered by excess lump sum
distributions taken by employees. |
|
(5) |
|
Equity offering and finance fees are related to the secondary
stock offering completed in August, 2010, for which the company
received no proceeds. |
43
|
|
|
(6) |
|
Gain on redemption of debt relates to the net gain recorded upon
redeeming $80.4 million of New PIK notes, repurchasing
$306.0 million of floating rate notes and writing off bank
fees, discounts and a call premium on the floating rate notes. |
We define EBIT as net income 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 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.
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.
|
44
Because of these limitations, Adjusted EBITDA should not be
considered in isolation or as a substitute for performance
measures calculated in accordance with GAAP.
Reconciliation
of net cash provided by (used in) operating activities to Free
Cash Flow
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Net cash provided by (used in) operating activities
|
|
$
|
47,699
|
|
|
$
|
102,148
|
|
|
$
|
(1,040
|
)
|
Less: Capital expenditures
|
|
|
(28,247
|
)
|
|
|
(17,005
|
)
|
|
|
(45,717
|
)
|
Plus: Payment of interest on New PIK Notes
|
|
|
29,400
|
|
|
|
|
|
|
|
|
|
Plus: Proceeds from asset sales and other
|
|
|
|
|
|
|
265
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Free Cash Flow
|
|
$
|
48,852
|
|
|
$
|
85,408
|
|
|
$
|
(46,640
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We define Free Cash Flow as net cash provided by (used in)
operating activities, less capital expenditures, adjusted for
the payment of interest on the New PIK Notes and for proceeds
from asset sales and other. The most directly comparable
U.S. GAAP financial measure is net cash provided by (used
in) operating activities.
We believe that Free Cash Flow is important supplemental
information for investors in evaluating cash flow performance in
that it provides insight into the cash flow available to fund
such things as discretionary debt service, acquisitions and
other strategic investment opportunities. It is a measure of
performance we use to internally evaluate the overall
performance of the business.
Free Cash Flow is used in conjunction with and in addition to
results presented in accordance with U.S. GAAP. Free Cash
Flow is neither intended to represent nor be an alternative to
the measure of net cash provided by (used in) operating
activities recorded under U.S. GAAP. Free Cash Flow may not
be comparable to similarly titled measures reported by other
companies.
Reconciliation
of Working Capital
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Accounts receivable -net
|
|
$
|
92,101
|
|
|
$
|
82,424
|
|
Plus: Inventories -net
|
|
|
148,146
|
|
|
|
144,015
|
|
Less: Accounts payable
|
|
|
59,095
|
|
|
|
55,539
|
|
|
|
|
|
|
|
|
|
|
Working Capital
|
|
$
|
181,152
|
|
|
$
|
170,900
|
|
|
|
|
|
|
|
|
|
|
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.
CRITICAL
ACCOUNTING ESTIMATES
The preparation of financial statements and related disclosures
in conformity with U.S. generally accepted accounting
principles requires us to make judgments, estimates and
assumptions that affect the reported amounts in the Consolidated
Financial Statements and accompanying notes. Note 2 to the
Consolidated Financial Statements describes the significant
accounting policies and methods used in their preparation. The
areas described below are affected by critical accounting
estimates and are impacted significantly by judgments and
assumptions in the
45
preparation of the Consolidated Financial Statements. Actual
results could differ materially from the amounts reported based
on these critical accounting estimates.
Revenue
Recognition
Revenue is recognized when products are shipped and title and
risk of loss have passed to the customer. Revenue is recorded
net of returns, discounts and sales incentive programs offered
to customers. We offer various incentive programs to a broad
base of customers, and we record accruals for these as sales
occur. These programs typically offer incentives for purchase
activities by customers that include growth objectives. Criteria
for payment include the achievement by customers of certain
purchase targets and the purchase by customers of particular
product types. Management regularly reviews the adequacy of the
accruals based on current customer purchases, targeted purchases
and payout levels.
Allowance
for Doubtful Accounts
Our accounts receivable balance, net of reserves, was
$92.1 million in 2010, compared to $82.4 million in
2009. The reserve balance was $5.5 million in 2010,
compared to $7.5 million in 2009. Approximately half of the
reduction in the reserve is related to the write-off of fully
reserved accounts receivable. The allowance for doubtful
accounts is established through charges to the provision for bad
debts. We regularly evaluate the adequacy of the allowance for
doubtful accounts based on historical trends in collections and
write-offs, our judgment as to the probability of collecting
accounts and our evaluation of business risk. This evaluation is
inherently subjective, as it requires estimates that are
susceptible to revision as more information becomes available.
Accounts are determined to be uncollectible when the debt is
deemed to be worthless or only recoverable in part and are
written off at that time through a charge against the allowance.
Allowance
for Slow-Moving and Obsolete Inventory
We identify slow-moving or obsolete inventories and estimate
appropriate allowance provisions accordingly. We provide
inventory allowances based upon excess and obsolete inventories
driven primarily by future demand forecasts. At
December 31, 2010, our inventories were
$148.1 million, with loss provisions of $4.7 million,
compared to inventories of $144.0 million and loss
provisions of $4.5 million at December 31, 2009.
Asset
Impairment
Fixed
Assets
We assess our property, plant and equipment for possible
impairment in accordance with FASB ASC Topic 360, Property
Plant and Equipment, (FASB ASC 360),
whenever events or changes in circumstances indicate that the
carrying value of the assets may not be recoverable or a
revision of remaining useful lives is necessary. Such indicators
may include economic and competitive conditions, changes in our
business plans or managements intentions regarding future
utilization of the assets or changes in our commodity prices. An
asset impairment would be indicated if the sum of the expected
future net pretax cash flows from the use of an asset
(undiscounted and without interest charges) is less than the
carrying amount of the asset. An impairment loss would be
measured based on the difference between the fair value of the
asset and its carrying value. The determination of fair value is
based on an expected present value technique in which multiple
cash flow scenarios that reflect a range of possible outcomes
and a risk-free rate of interest are used to estimate fair value
or on a market appraisal. Projections used in the fair value
determination are based on internal estimates for sales and
production levels, capital expenditures necessary to maintain
the projected production levels, and remaining useful life of
the assets. These projections are prepared at the lowest level
at which we have access to cash flow information and complete
financial data for our operations, which is generally at the
plant level.
Determination as to whether and how much an asset is impaired
involves significant management judgment involving highly
uncertain matters, including estimating the future success of
product lines, future sales volumes, future selling prices and
costs, alternative uses for the assets, and estimated proceeds
from disposal of the assets. However, the impairment reviews and
calculations are based on estimates and assumptions that take
into account our business plans and long-term investment
decisions. During 2010, we decided to outsource our
U.S. decorating
46
business, which represented an indicator of impairment for that
asset group. Accordingly, our impairment analysis resulted in a
write-down of our carrying value for those assets to the
estimated fair value less cost to sell. There were no indicators
of impairment noted in 2009 that required an impairment analysis
to be performed for the Companys property, plant and
equipment. As announced during 2008, our plans to cease
production at our Syracuse China facility represented an
indicator for impairment for that facility. Accordingly, our
impairment analysis resulted in the write-down of our carrying
value for that facility to the estimated fair value less cost to
sell. During 2010, we reviewed the carrying value remaining for
the Syracuse China land, which resulted in a further write-down
of our carrying value for the land. We also reviewed other asset
groups within our operations for indicators of impairment, and
as a result recorded an impairment charge for certain fixed
assets during 2010 and 2008 as disclosed in notes 5 and 7
to the Consolidated Financial Statements.
In accordance with FASB ASC 360, we also perform an
impairment analysis for its definite useful lived intangible
assets when factors indicating impairment are present. There
were no indicators of impairment noted in 2010 or 2009 that
would require an impairment analysis to be performed for our
definite useful lived intangible assets.
Goodwill
and Indefinite Life Intangible Assets
Goodwill at December 31, 2010 was $169.3 million,
representing approximately 21 percent of total assets.
Goodwill represents the excess of cost over fair value of assets
acquired for each reporting unit. Our reporting units are one
level below the operating segment level, which represents the
lowest level of the business for which financial statements are
prepared internally, and may represent a single facility
(operating component) or a group of plants under a common
management team. Goodwill impairment tests are completed for
each reporting unit as of October 1 of each year, or more
frequently in certain circumstances where impairment indicators
arise. When performing our test for impairment, we use an
approach which includes a discounted cash flow analysis,
incorporating the weighted average cost of capital of a
hypothetical third party buyer to compute the fair value of each
reporting unit. These cash flow projections are based in part on
sales projections for the next several years, capital spending
trends and investment in working capital to support anticipated
sales growth, which are updated at least annually and reviewed
by management. The fair value is then compared to the carrying
value. To the extent that fair value exceeds the carrying value,
no impairment exists. However, to the extent the carrying value
exceeds fair value, we compare the implied fair value of
goodwill to its book value to determine if an impairment charge
should be recorded.
The discount rates used in present value calculations are
updated annually. We also use available market value information
to evaluate fair value. The total of the fair values of the
segments less debt was reconciled to end of year total market
capitalization. The discount rates used in the 2010 goodwill
impairment analysis ranged from 11.9 percent to
13.3 percent, as compared to a range of 13.7 percent
to 16.0 percent used in the 2009 test. The decrease in the
discount rate resulted from continued improvements in the
markets when compared to the credit crisis of 2008 and 2009,
which had significantly affected the financial markets and
economies in the countries in which we have operations. The cash
flow terminal growth rates used in the 2010 and 2009 goodwill
impairment analysis ranged from 1.0 percent to
4.0 percent. Management believes these rates are reasonably
conservative based upon historical growth rates and its
expectations of future economic conditions in the markets in
which we operate. Any changes in the discount rate or cash flow
terminal growth rate would move in tandem. For example, the
discount rate is lower in part due to decreased uncertainty as
to our ability to meet short term and long term forecasts. As
such, if we were to increase the cash flow terminal growth rate,
we would also increase the discount rate.
The discounted cash flow model used to determine fair value for
the goodwill analysis is most sensitive to the discount rate and
terminal cash flow growth rate assumptions. A sensitivity
analysis was performed on these factors for all reporting units
and it was determined, assuming all other assumptions remain
constant, that the discount rate used could be increased by a
factor of 20 percent of the discount rate or the terminal
cash flow growth rate could decrease to zero and the fair value
of all reporting units with goodwill would still exceed their
carrying values. Significant changes in the estimates and
assumptions used in calculating the fair value of the segments
and the recoverability of goodwill or differences between
estimates and actual results could result in impairment charges
in the future.
47
As of October 1, 2010 and October 1, 2009, our review
did not indicate an impairment of goodwill. During the fourth
quarter of 2008, the global economic environment weakened,
causing an adverse effect on our business environment and our
related future cash flow projections. This was considered an
impairment indicator, which caused us to test for goodwill
impairment as of December 31, 2008. As a result of the
December 31, 2008 testing, we recorded a goodwill
impairment charge of $9.4 million in 2008 at our
International segment. This impairment is further disclosed in
notes 4 and 7 to the Consolidated Financial Statements.
Individual indefinite life intangible assets are also evaluated
for impairment on an annual basis, or more frequently in certain
circumstances where impairment indicators arise. Total
indefinite life intangible assets at December 31, 2010 were
$12.9 million, representing 1.6 percent of total
assets. When performing our test for impairment, we use a
discounted cash flow method (based on a relief from royalty
calculation) to compute the fair value, which is then compared
to the carrying value of the indefinite life intangible asset.
To the extent that fair value exceeds the carrying value, no
impairment exists. This was done as of October 1st for
each year presented. As of October 1, 2010 and
October 1, 2009, our review did not indicate an impairment
of indefinite life intangible assets. During the fourth quarter
of 2008, the global economic environment weakened, causing an
adverse effect on our business environment. This was an
impairment trigger event, which caused us to test for impairment
on our indefinite life intangible assets as of December 31,
2008. As a result of the December 31, 2008 testing, we
recorded an indefinite life intangible asset impairment charge
of $2.5 million in 2008 at our International segment. The
announcement in December 2008 that we would be closing our
Syracuse China manufacturing facility in April 2009 was an
impairment trigger event for the Syracuse China reporting unit.
An impairment loss for intangible assets of $0.3 million
was recorded in 2008 for our Syracuse China facility. These
impairments are further disclosed in notes 4 and 7 to the
Consolidated Financial Statements.
Self-Insurance
Reserves
We use self-insurance mechanisms to provide for potential
liabilities related to workers compensation and employee
health care benefits that are not covered by third-party
insurance. Workers compensation accruals are recorded at
the estimated ultimate payout amounts based on individual case
estimates. In addition, we record estimates of
incurred-but-not-reported losses based on actuarial models.
Although we believe that the estimated liabilities for
self-insurance are adequate, the estimates described above may
not be indicative of current and future losses. In addition, the
actuarial calculations used to estimate self-insurance
liabilities are based on numerous assumptions, some of which are
subjective. We will continue to adjust our estimated liabilities
for self-insurance, as deemed necessary, in the event that
future loss experience differs from historical loss patterns.
Pension
Assumptions
The assumptions used to determine the benefit obligations were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
5.50% to 5.76%
|
|
|
|
5.62% to 5.96%
|
|
|
|
5.40% to 8.25%
|
|
|
|
5.50% to 8.50%
|
|
Rate of compensation increase
|
|
|
2.25% to 4.50%
|
|
|
|
2.25% to 4.50%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
The assumptions used to determine net periodic pension costs
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.62% to 5.96%
|
|
|
|
6.41% to 6.48%
|
|
|
|
6.16% to 6.32%
|
|
|
|
5.50% to 8.50%
|
|
|
|
5.70% to 8.50%
|
|
|
|
5.50% to 8.50%
|
|
Expected long-term rate of return on plan assets
|
|
|
8.00%
|
|
|
|
8.25%
|
|
|
|
8.50%
|
|
|
|
5.75%
|
|
|
|
6.00%
|
|
|
|
6.50%
|
|
Rate of compensation increase
|
|
|
2.25% to 4.50%
|
|
|
|
2.63% to 5.25%
|
|
|
|
3.00% to 6.00%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
48
Two critical assumptions, discount rate and expected long-term
rate of return on plan assets, are important elements of plan
expense and asset/liability measurement. We evaluate these
critical assumptions on our annual measurement date of
December 31. Other assumptions involving demographic
factors such as retirement age, mortality and turnover are
evaluated periodically and are updated to reflect our
experience. Actual results in any given year often will differ
from actuarial assumptions because of demographic, economic and
other factors.
The discount rate enables us to estimate the present value of
expected future cash flows on the measurement date. The rate
used reflects a rate of return on high-quality fixed income
investments that match the duration of expected benefit payments
at our December 31 measurement date. The discount rate at
December 31 is used to measure the year-end benefit obligations
and the earnings effects for the subsequent year. A lower
discount rate increases the present value of benefit obligations
and increases pension expense.
To determine the expected long-term rate of return on plan
assets, we consider the current and expected asset allocations,
as well as historical and expected returns on various categories
of plan assets. The expected long-term rate of return on plan
assets at December 31 is used to measure the earnings effects
for the subsequent year.
Sensitivity to changes in key assumptions based on year-end data
is as follows:
|
|
|
|
|
A change of 1.0 percent in the discount rate would change
our total pension expense by approximately $4.0 million.
|
|
|
|
A change of 1.0 percent in the expected long-term rate of
return on plan assets would change total pension expense by
approximately $2.4 million.
|
Nonpension
Postretirement Assumptions
We use various actuarial assumptions, including the discount
rate and the expected trend in health care costs, to estimate
the costs and benefit obligations for our retiree welfare plan.
The discount rate is determined based on high-quality fixed
income investments that match the duration of expected retiree
medical benefits at our December 31 measurement date. The
discount rate at December 31 is used to measure the year-end
benefit obligations and the earnings effects for the subsequent
year. The discount rate used to determine the accumulated
postretirement benefit obligation was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
5.34%
|
|
|
|
5.54%
|
|
|
|
4.86%
|
|
|
|
5.42%
|
|
The discount rate used to determine net postretirement benefit
cost was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Discount rate
|
|
|
5.54
|
%
|
|
|
6.36
|
%
|
|
|
6.16
|
%
|
|
|
5.42
|
%
|
|
|
5.89
|
%
|
|
|
5.14
|
%
|
The weighted average assumed health care cost trend rates at
December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Initial health care trend
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
Ultimate health care trend
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Years to reach ultimate trend rate
|
|
|
10
|
|
|
|
6
|
|
|
|
10
|
|
|
|
6
|
|
Sensitivity to changes in key assumptions is as follows:
|
|
|
|
|
A change of 1.0 percent in the discount rate would change
the nonpension postretirement expense by $0.5 million.
|
|
|
|
A change of 1.0 percent in the health care trend rate would
not have a material impact upon the nonpension postretirement
expense.
|
49
Income
Taxes
The company is subject to income taxes in the U.S. and
various foreign jurisdictions. Management judgment is required
in evaluating our tax positions and determining our provision
for income taxes. Throughout the course of business, there are
numerous transactions and calculations for which the ultimate
tax determination is uncertain. When management believes certain
tax positions may be challenged despite our belief that the tax
return positions are supportable, the company establishes
reserves for tax uncertainties based on estimates of whether
additional taxes will be due. We adjust these reserves taking
into consideration changing facts and circumstances, such as an
outcome of a tax audit. The income tax provision includes the
impact of reserve provisions and changes to reserves that are
considered appropriate. Accruals for tax contingencies are
provided for in accordance with the requirements of FASB ASC
Topic 740 Income Taxes.
Income taxes are accounted for under the asset and liability
method. Deferred income tax assets and liabilities are
recognized for estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and tax attribute carry-forwards. Deferred income tax assets and
liabilities are measured using enacted tax rates in effect for
the year in which those temporary differences are expected to be
recovered or settled. FASB ASC 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, China, the
Netherlands and Portugal, we have recorded a valuation allowance
against our deferred income tax assets.
Derivatives
and Hedging
We use derivatives to manage a variety of risks, including risks
related to interest rates and commodity prices. Accounting for
derivatives as hedges requires that, at inception and over the
term of the arrangement, the hedged item and related derivative
meet the requirements for hedge accounting. The rules and
interpretations related to derivatives accounting are complex.
Failure to apply this complex guidance will result in all
changes in the fair value of the derivative being reported in
earnings, without regard to the offsetting in the fair value of
the hedged item. The accompanying financial statements reflect
consequences of loss of hedge accounting for certain positions.
In evaluating whether a particular relationship qualifies for
hedge accounting, we first determine whether the relationship
meets the strict criteria to qualify for exemption from ongoing
effectiveness testing. For a relationship that does not meet
these criteria, we test effectiveness at inception and quarterly
thereafter by determining whether changes in the fair value of
the derivative offset, within a specified range, change the fair
value of the hedged item. If the fair value changes fail this
test, we discontinue applying hedge accounting to that
relationship prospectively. See note 13 to the Consolidated
Financial Statements.
Stock-Based
Compensation Expense
We account for stock-based compensation in accordance with FASB
ASC 718, Compensation Stock
Compensation and FASB
ASC 505-50,
Equity Equity Based Payments to
Non-Employees, which requires the measurement and
recognition of compensation expense for all share-based payment
awards made to our employees and directors. Stock-based
compensation expense recognized under FASB ASC 718 and FASB
ASC 050-50
for fiscal 2010, 2009 and 2008 was $3.5 million,
$2.4 million and $3.5 million, respectively.
We estimate the value of employee share-based compensation on
the date of grant using the Black-Scholes model. The
determination of fair value of share-based payment awards on the
date of grant using an option-pricing model is affected by our
stock price as well as assumptions regarding a number of highly
complex and subjective variables. These variables include, but
are not limited to, the expected stock price volatility over the
term of the award, and actual and projected employee stock
option exercise behaviors. The use of the Black-Scholes model
requires extensive actual employee exercise behavior data and a
number of complex assumptions including expected volatility,
risk-free interest rate, and expected dividends. See
note 12 of the Consolidated Financial Statements for
additional information.
50
Restructuring
Accruals have been recorded in conjunction with our
restructuring actions. These accruals include estimates
primarily related to facility consolidations and closures,
employment reductions and contract termination costs. Actual
costs may vary from these estimates. Restructuring-related
accruals are reviewed on a quarterly basis, and changes to
restructuring actions are appropriately recognized when
identified.
Legal and
other contingencies
We are involved from time to time in various legal proceedings
and claims, including commercial or contractual disputes,
product liability claims and environmental and other matters,
that arise in the normal course of business. We routinely assess
the likelihood of any adverse judgments or outcomes related to
these matters, as well as ranges of probable losses, by
consulting with internal personnel principally involved with
such matters and with our outside legal counsel handling such
matters. We have accrued for estimated losses in accordance with
GAAP for those matters where we believe that the likelihood that
a loss has occurred is probable and the amount of the loss is
reasonably estimable. The determination of the amount of such
reserves is based on knowledge and experience with regard to
past and current matters and consultation with internal
personnel principally involved with such matters and with our
outside legal counsel handling such matters. The amount of such
reserves may change in the future due to new developments or
changes in circumstances. The inherent uncertainty related to
the outcome of these matters can results in amounts materially
different from any provisions made with respect to their
resolution.
New
Accounting Standards
On July 1, 2009 the FASB Accounting Standards
Codificationtm
(FASB ASC) became the single source of authoritative
U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial
statements in conformity with GAAP. The Codification is not
intended to change U.S. GAAP; instead, it reorganized the
various U.S. GAAP pronouncements into approximately 90
accounting Topics, and displays all Topics using a consistent
structure. The Codification was effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. Accordingly, in our discussion of New
Accounting Standards below, we have incorporated references to
the Codification Topics.
In September 2006, the FASB issued guidance contained in FASB
ASC 820, Fair Value Measurements and
Disclosures. This guidance defines fair value, establishes
a framework for measuring fair value, and expands disclosure
about fair value measurements. This guidance clarifies how to
measure fair value as permitted under other accounting
pronouncements but does not require any new fair value
measurements. In February 2008, the FASB issued additional
guidance contained in FASB ASC 820, which delays until
January 1, 2009 the effective date of this guidance for
nonfinancial assets and liabilities, except for those that are
recognized or disclosed at fair value in the financial
statements on a recurring basis. In October 2008, the FASB
issued additional guidance which clarifies the application of
FASB ASC 820 as it relates to the valuation of financial
assets in a market that is not active for those financial
assets. This guidance was effective upon issuance. We adopted
FASB ASC 820 as of January 1, 2008, but had not
applied it to non-recurring, nonfinancial assets and
liabilities. The adoption of FASB ASC 820 had no impact on
our consolidated results of operations and financial condition.
We adopted FASB ASC 820 for nonfinancial assets and
liabilities as of January 1, 2009. The adoption of FASB
ASC 820 for nonfinancial assets and liabilities did not
have a material impact on our Consolidated Financial Statements.
See notes 6, 13, and 15 of the Consolidated Financial
Statements for additional information.
In March 2008, the FASB issued guidance contained in FASB
ASC 815, Derivatives and Hedging, which
requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of
accounting for such instruments, and a tabular disclosure of the
effects of such instruments and related hedged items on our
financial position, financial performance, and cash flows. FASB
ASC 815 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. This
guidance was effective for Libbey on January 1, 2009.
Adoption of this guidance did not have a material impact on our
Consolidated Financial Statements. See note 13 of the
Consolidated Financial Statements for additional information.
51
In April 2008, the FASB issued guidance contained in FASB
ASC 350-30,
Intangibles Goodwill and Other
General Intangibles Other than Goodwill, which amends the
factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a
recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible Assets. This guidance
was effective for Libbey on January 1, 2009. The adoption
of this guidance did not have a material impact on our
Consolidated Financial Statements.
In June 2008, the FASB issued guidance contained in FASB
ASC 815-40,
Derivatives and Hedging Contracts in
Entitys Own Equity. This guidance provides that an
entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the
instruments contingent exercise and settlement provisions.
It also clarifies the impact of foreign currency denominated
strike prices and market-based employee stock option valuation
instruments on the evaluation. This guidance was effective for
Libbey on January 1, 2009. The adoption of this guidance
did not have any impact on our Consolidated Financial Statements.
In June 2008, the FASB issued guidance contained in FASB
ASC 260, Earnings Per Share. This guidance
addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in
computing earnings per share (EPS) under the two-class method.
This guidance was effective for Libbey on January 1, 2009,
and requires that all prior period EPS data is adjusted
retrospectively. The adoption of this guidance did not have a
material impact on our Consolidated Financial Statements.
In December 2008, the FASB issued guidance contained in FASB
ASC 715-20,
Compensation Retirement Benefits, to
provide guidance on an employers disclosures about plan
assets of a defined benefit pension or other postretirement
plan. This guidance is effective for Libbey for the year ended
December 31, 2009. This guidance required increased
disclosures in the financial statements related to the assets of
our pension and other postretirement benefit plans. See
notes 9 and 10 of the Consolidated Financial Statements for
additional information.
In May 2009, the FASB issued guidance contained in FASB
ASC 855, Subsequent Events, to establish
general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued. This
guidance was effective for interim or annual financial periods
ending after June 15, 2009. We have evaluated and, as
necessary, made changes to these Consolidated Financial
Statements for the events. In February, 2010, the FASB issued
Accounting Standards Update
2010-09
Subsequent Events which removed the requirement to
disclose the date through which subsequent events had been
considered for disclosure. This update was effective upon
issuance.
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 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 Consolidated Financial
Statements.
52
In April 2010, the FASB issued Accounting Standards Update
2010-13
Compensation Stock Compensation (Topic 718):
Effect of Denominating the Exercise Price of a Share-Based
Payment Award in the Currency of the Market in Which the
Underlying Equity Security Trades A consensus of the
FASB Emerging Issues Task Force (ASU
2010-13).
The provisions of ASU
2010-13
affect entities with equity awards which, because of their
characteristics, have been classified as liabilities. This
guidance applies to interim and annual periods beginning after
December 15, 2010, and will not impact our Consolidated
Financial Statements as our stock awards are classified as
equity.
In July 2010, the FASB issued Accounting Standards Update
2010-20
Receivables (Topic 310): Disclosure about the Credit
Quality of Financing Receivables and the Allowance for Credit
Losses (ASU
2010-20).
The amendments in this update affect all entities with financing
receivables, generally excluding short-term trade accounts
receivable or receivables measured at fair value or lower of
cost or fair value. This update also requires additional
disclosure of certain types of receivables, and disclosures of
policies related to measurement and valuation of the receivables
and related reserves. The effectiveness of this update was
delayed until periods ending after June 15, 2011 by Update
No. 2011-01.
We do not expect the provisions of this update to have any
impact on our Consolidated Financial Statements.
In December 2010, the FASB issued Accounting Standards Update
2010-28
Intangibles Goodwill and Other (Topic 350):
When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts (a
consensus of the FASB Emerging Issues Task Force)
(ASU
2010-28).
ASU 2010-28
addresses the decision process involved in testing for
impairment of goodwill when the carrying value of a reporting
unit is zero or less. The provisions of this update are
effective for periods beginning after December 15, 2010. We
do not expect the provisions of this update to have any impact
on our Consolidated Financial Statements or on our process of
testing for potential impairment of goodwill.
In December 2010, the FASB issued Accounting Standards Update
2010-29
Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations (a
consensus of the FASB Emerging Issues Task Force)
(ASU
2010-29).
ASU 2010-29
clarifies the extent to which pro-forma historical information
must be prepared and presented in comparative financial
statements for periods following a merger or acquisition. The
amendments in this Update specify that if a public entity
presents comparative financial statements, the entity should
disclose revenue and earnings of the combined entity as though
the business combination(s) that occurred during the current
year had occurred as of the beginning of the comparable prior
annual reporting period only. ASU
2010-29 also
expands the supplemental pro forma disclosures under Topic 805
to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue
and earnings. For Libbey, the required disclosures are effective
for combinations with acquisition dates during or after 2011.
The impact on our Consolidated Financial Statements will depend
on the nature and timing of any potential future business
combinations.
|
|
ITEM 7A.
|
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 December 31,
2010 is 7.57 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
53
desired results. However, we do not anticipate nonperformance by
the counterparty. The counterparty was rated AA- as of
December 31, 2010, by Standard and Poors. Of our
total borrowings, $138.9 million, or approximately
31 percent, was subject to variable interest rates at
December 31, 2010. A change of one percentage point in such
rates would result in a change in interest expense of
approximately $1.4 million on an annual basis.
Natural
Gas
We are also exposed to market risks associated with changes in
the price of natural gas due to either general market forces, or
in the case of our operations in China, by government mandate.
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 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 and cash flows. If the
counterparties to these futures contracts were to fail to
perform, we would no longer be protected from natural gas
fluctuations by the futures contracts. However, we do not
anticipate nonperformance by these counterparties. All
counterparties were rated BBB+ or better as of December 2010 by
Standard and Poors.
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 and related pension expense and cash funding
requirements. Sensitivity to these key market risk factors is as
follows:
|
|
|
|
|
A change of 1.0 percent in the discount rate would change
our total pension and nonpension postretirement expense by
approximately $4.5 million.
|
|
|
|
A change of 1.0 percent in the expected long-term rate of
return on plan assets would change total pension expense by
approximately $2.4 million.
|
54
|
|
ITEM 8.
|
FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA
|
|
|
|
|
|
|
|
Page
|
|
|
|
|
56
|
|
|
|
|
58
|
|
For the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
59
|
|
|
|
|
60
|
|
|
|
|
61
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
62
|
|
|
|
|
68
|
|
|
|
|
69
|
|
|
|
|
71
|
|
|
|
|
72
|
|
|
|
|
79
|
|
|
|
|
83
|
|
|
|
|
87
|
|
|
|
|
93
|
|
|
|
|
96
|
|
|
|
|
96
|
|
|
|
|
103
|
|
|
|
|
107
|
|
|
|
|
107
|
|
|
|
|
108
|
|
|
|
|
108
|
|
|
|
|
111
|
|
|
|
|
120
|
|
55
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Libbey Inc.
We have audited the accompanying consolidated balance sheets of
Libbey Inc. as of December 31, 2010 and 2009, and the
related consolidated statements of operations,
shareholders equity (deficit), and cash flows for each of
the three years in the period ended December 31, 2010. Our
audits also included the financial statement schedule listed in
the Index at Item 15. These financial statements and
schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated
financial position of Libbey Inc. at December 31, 2010 and
2009, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 2010, in conformity with U.S. generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set
forth therein.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States),
Libbey Inc.s internal control over financial reporting as
of December 31, 2010, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission and our
report dated March 14, 2011 expressed an unqualified
opinion thereon.
Toledo, Ohio
March 14, 2011
56
Report of
Independent Registered Public Accounting Firm
The Board of Directors and Shareholders of Libbey Inc.
We have audited Libbey Inc.s internal control over
financial reporting as of December 31, 2010 based on
criteria established in Internal Control Integrated
Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (the COSO criteria). Libbey Inc.s
management is responsible for maintaining effective internal
control over financial reporting, and for its assessment of the
effectiveness of internal control over financial reporting
included in the accompanying Report of Management. Our
responsibility is to express an opinion on the companys
internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
over financial reporting was maintained in all material
respects. Our audit included obtaining an understanding of
internal control over financial reporting, assessing the risk
that a material weakness exists, testing and evaluating the
design and operating effectiveness of internal control based on
the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinion.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of
management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
In our opinion, Libbey Inc. maintained, in all material
respects, effective internal control over financial reporting as
of December 31, 2010, based on the COSO criteria.
We also have audited, in accordance with the standards of the
Public Company Accounting Oversight Board (United States), the
consolidated balance sheets of Libbey Inc. as of
December 31, 2010 and 2009, and the related consolidated
statements of operations, shareholders equity (deficit),
and cash flows for each of the three years in the period ended
December 31, 2010 and our report dated March 14, 2011
expressed an unqualified opinion thereon.
Toledo, Ohio
March 14, 2011
57
Libbey
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
Footnote Reference
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands, except per-share amounts)
|
|
|
ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & cash equivalents
|
|
|
|
|
|
$
|
76,258
|
|
|
$
|
55,089
|
|
Accounts receivable net
|
|
|
(note 3
|
)
|
|
|
92,101
|
|
|
|
82,424
|
|
Inventories net
|
|
|
(note 3
|
)
|
|
|
148,146
|
|
|
|
144,015
|
|
Prepaid and other current assets
|
|
|
(notes 3 & 8
|
)
|
|
|
6,437
|
|
|
|
8,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
322,942
|
|
|
|
290,012
|
|
Other assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension asset
|
|
|
(note 9
|
)
|
|
|
12,767
|
|
|
|
9,454
|
|
Purchased intangible assets net
|
|
|
(notes 4 & 7
|
)
|
|
|
23,134
|
|
|
|
24,861
|
|
Goodwill
|
|
|
(notes 4 & 7
|
)
|
|
|
169,340
|
|
|
|
168,320
|
|
Derivative asset
|
|
|
(notes 13 & 15
|
)
|
|
|
2,589
|
|
|
|
|
|
Other assets
|
|
|
(notes 3, 13 & 15
|
)
|
|
|
17,802
|
|
|
|
8,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
|
|
|
|
225,632
|
|
|
|
211,489
|
|
Property, plant, and equipment net
|
|
|
(notes 5 & 7
|
)
|
|
|
270,397
|
|
|
|
290,013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
$
|
818,971
|
|
|
$
|
791,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT)
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes payable
|
|
|
(note 6
|
)
|
|
$
|
|
|
|
$
|
672
|
|
Accounts payable
|
|
|
|
|
|
|
59,095
|
|
|
|
55,539
|
|
Salaries and wages
|
|
|
|
|
|
|
32,087
|
|
|
|
34,064
|
|
Accrued liabilities
|
|
|
(note 3
|
)
|
|
|
51,211
|
|
|
|
35,699
|
|
Accrued special charges
|
|
|
(note 7
|
)
|
|
|
768
|
|
|
|
1,016
|
|
Accrued income taxes
|
|
|
(note 8
|
)
|
|
|
3,121
|
|
|
|
|
|
Pension liability (current portion)
|
|
|
(note 9
|
)
|
|
|
2,330
|
|
|
|
1,984
|
|
Nonpension postretirement benefits (current portion)
|
|
|
(note 10
|
)
|
|
|
5,017
|
|
|
|
4,363
|
|
Derivative liability
|
|
|
(notes 13 & 15
|
)
|
|
|
3,392
|
|
|
|
3,346
|
|
Deferred income taxes
|
|
|
(note 8
|
)
|
|
|
|
|
|
|
3,559
|
|
Long-term debt due within one year
|
|
|
(note 6
|
)
|
|
|
3,142
|
|
|
|
9,843
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
160,163
|
|
|
|
150,085
|
|
Long-term debt
|
|
|
(note 6
|
)
|
|
|
443,983
|
|
|
|
504,724
|
|
Pension liability
|
|
|
(note 9
|
)
|
|
|
115,521
|
|
|
|
119,727
|
|
Nonpension postretirement benefits
|
|
|
(note 10
|
)
|
|
|
67,737
|
|
|
|
64,780
|
|
Deferred income taxes
|
|
|
(note 8
|
)
|
|
|
8,376
|
|
|
|
6,226
|
|
Derivative liability
|
|
|
(notes 13 & 15
|
)
|
|
|
|
|
|
|
2,061
|
|
Other long-term liabilities
|
|
|
(notes 3, 13 & 15
|
)
|
|
|
11,925
|
|
|
|
10,818
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
807,705
|
|
|
|
858,421
|
|
Shareholders equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, par value $.01 per share, 50,000,000 shares
authorized, 19,682,506 shares issued in
2010(18,697,630 shares issued in 2009)
|
|
|
|
|
|
|
197
|
|
|
|
187
|
|
Capital in excess of par value (includes warrants of $1,034 and
$15,560 in 2010 and 2009, respectively, and 485,309 shares
and 3,952,165 shares in 2010 and 2009, respectively)
|
|
|
|
|
|
|
300,692
|
|
|
|
324,272
|
|
Treasury stock, at cost, 0 shares in 2010
(2,599,769 shares in 2009)
|
|
|
|
|
|
|
|
|
|
|
(70,298
|
)
|
Retained deficit
|
|
|
|
|
|
|
(178,677
|
)
|
|
|
(205,344
|
)
|
Accumulated other comprehensive loss
|
|
|
(note 14
|
)
|
|
|
(110,946
|
)
|
|
|
(115,724
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity (deficit)
|
|
|
|
|
|
|
11,266
|
|
|
|
(66,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity (deficit)
|
|
|
|
|
|
$
|
818,971
|
|
|
$
|
791,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
58
Libbey
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Footnote Reference
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands, except per-share amounts)
|
|
|
Net sales
|
|
|
(note 2
|
)
|
|
$
|
799,794
|
|
|
$
|
748,635
|
|
|
$
|
810,207
|
|
Freight billed to customers
|
|
|
|
|
|
|
1,790
|
|
|
|
1,605
|
|
|
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
801,584
|
|
|
|
750,240
|
|
|
|
812,629
|
|
Cost of sales
|
|
|
(notes 2 & 7
|
)
|
|
|
633,571
|
|
|
|
617,095
|
|
|
|
703,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
168,013
|
|
|
|
133,145
|
|
|
|
109,337
|
|
Selling, general and administrative expenses
|
|
|
(note 7
|
)
|
|
|
97,390
|
|
|
|
94,900
|
|
|
|
88,451
|
|
Impairment of goodwill
|
|
|
(note 7
|
)
|
|
|
|
|
|
|
|
|
|
|
9,434
|
|
Special charges
|
|
|
(note 7
|
)
|
|
|
1,802
|
|
|
|
1,631
|
|
|
|
17,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
68,821
|
|
|
|
36,614
|
|
|
|
(5,548
|
)
|
Gain on redemption of debt
|
|
|
(note 6
|
)
|
|
|
58,292
|
|
|
|
|
|
|
|
|
|
Other (expense) income
|
|
|
(note 7
|
)
|
|
|
(274
|
)
|
|
|
4,053
|
|
|
|
1,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
|
|
|
|
|
126,839
|
|
|
|
40,667
|
|
|
|
(4,429
|
)
|
Interest expense
|
|
|
(note 6
|
)
|
|
|
45,171
|
|
|
|
66,705
|
|
|
|
69,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
|
|
|
|
81,668
|
|
|
|
(26,038
|
)
|
|
|
(74,149
|
)
|
Provision for income taxes
|
|
|
(note 8
|
)
|
|
|
11,582
|
|
|
|
2,750
|
|
|
|
6,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
(note 11
|
)
|
|
$
|
3.97
|
|
|
$
|
(1.90
|
)
|
|
$
|
(5.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
(note 11
|
)
|
|
$
|
3.51
|
|
|
$
|
(1.90
|
)
|
|
$
|
(5.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
|
|
|
(note 11
|
)
|
|
|
17,668
|
|
|
|
15,149
|
|
|
|
14,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
(note 11
|
)
|
|
|
19,957
|
|
|
|
15,149
|
|
|
|
14,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes
59
Libbey
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
Common
|
|
|
Capital in
|
|
|
Treasury
|
|
|
|
|
|
Comprehensive
|
|
|
|
|
|
|
Stock
|
|
|
Excess of
|
|
|
Stock
|
|
|
Retained
|
|
|
Loss
|
|
|
|
|
|
|
Amount(1)
|
|
|
Par Value
|
|
|
Amount(1)
|
|
|
Deficit
|
|
|
(note 14)
|
|
|
Total
|
|
|
|
(Dollars in thousands, except per-share amounts)
|
|
|
Balance December 31, 2007
|
|
$
|
187
|
|
|
$
|
306,874
|
|
|
$
|
(110,780
|
)
|
|
$
|
(60,689
|
)
|
|
$
|
(42,477
|
)
|
|
$
|
93,115
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80,463
|
)
|
|
|
|
|
|
|
(80,463
|
)
|
Effect of derivatives net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,300
|
)
|
|
|
(10,300
|
)
|
Pension and other postretirement benefit adjustments
net of tax (notes 9 and 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58,607
|
)
|
|
|
(58,607
|
)
|
Effect of exchange rate fluctuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,402
|
)
|
|
|
(4,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(153,772
|
)
|
Stock compensation expense (note 12)
|
|
|
|
|
|
|
3,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,466
|
|
Stock issued from treasury
|
|
|
|
|
|
|
(1,065
|
)
|
|
|
4,369
|
|
|
|
(2,536
|
)
|
|
|
|
|
|
|
768
|
|
Dividends $0.10 per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
187
|
|
|
|
309,275
|
|
|
|
(106,411
|
)
|
|
|
(145,154
|
)
|
|
|
(115,786
|
)
|
|
|
(57,889
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,788
|
)
|
|
|
|
|
|
|
(28,788
|
)
|
Effect of derivatives net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,440
|
|
|
|
12,440
|
|
Pension and other postretirement benefit adjustments
net of tax (notes 9 and 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,479
|
)
|
|
|
(13,479
|
)
|
Effect of exchange rate fluctuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,101
|
|
|
|
1,101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(28,726
|
)
|
Stock compensation expense (note 12)
|
|
|
|
|
|
|
2,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,419
|
|
Equity issuance costs (note 6)
|
|
|
|
|
|
|
(1,800
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,800
|
)
|
Stock issued from treasury
|
|
|
|
|
|
|
(148
|
)
|
|
|
36,113
|
|
|
|
(31,402
|
)
|
|
|
|
|
|
|
4,563
|
|
Issuance of warrants (note 6)
|
|
|
|
|
|
|
14,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14,526
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
$
|
187
|
|
|
|
324,272
|
|
|
|
(70,298
|
)
|
|
|
(205,344
|
)
|
|
|
(115,724
|
)
|
|
|
(66,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
70,086
|
|
|
|
|
|
|
|
70,086
|
|
Effect of derivative- net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,049
|
|
|
|
3,049
|
|
Pension and other postretirement benefit
adjustments net of tax (notes 9 and 10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,722
|
|
|
|
9,722
|
|
Effect of exchange rate fluctuation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7,993
|
)
|
|
|
(7,993
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (note 14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
74,864
|
|
Stock compensation expense (note 12)
|
|
|
|
|
|
|
3,496
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,496
|
|
Equity issuance costs (note 6)
|
|
|
|
|
|
|
145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
145
|
|
Stock issued from treasury
|
|
|
|
|
|
|
(1,495
|
)
|
|
|
2,302
|
|
|
|
(1,262
|
)
|
|
|
|
|
|
|
(455
|
)
|
Exercise of stock options (note 12)
|
|
|
|
|
|
|
88
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
88
|
|
Exercise of warrants (note 6)
|
|
|
10
|
|
|
|
(25,814
|
)
|
|
|
67,996
|
|
|
|
(42,157
|
)
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2010
|
|
$
|
197
|
|
|
$
|
300,692
|
|
|
$
|
|
|
|
$
|
(178,677
|
)
|
|
$
|
(110,946
|
)
|
|
$
|
11,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Share amounts are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock
|
|
|
Treasury
|
|
|
|
|
|
|
Shares
|
|
|
Stock Shares
|
|
|
Total
|
|
|
Balance December 31, 2007
|
|
|
18,697,630
|
|
|
|
4,133,074
|
|
|
|
14,564,556
|
|
Stock issued from treasury
|
|
|
|
|
|
|
(165,588
|
)
|
|
|
165,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
18,697,630
|
|
|
|
3,967,486
|
|
|
|
14,730,144
|
|
Stock issued from treasury
|
|
|
|
|
|
|
(1,367,717
|
)(1)
|
|
|
1,367,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2009
|
|
|
18,697,630
|
|
|
|
2,599,769
|
|
|
|
16,097,861
|
|
Stock issued from treasury
|
|
|
|
|
|
|
(2,599,769
|
)(1)
|
|
|
2,599,769
|
|
Stock options and warrants exercised
|
|
|
984,876
|
|
|
|
|
(1)
|
|
|
984,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2010
|
|
|
19,682,506
|
|
|
|
|
|
|
|
19,682,506
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
0.9 million shares and 3.5 million shares were issued
to the holder of PIK Notes in 2009 and 2010, respectively. See
note 6 for details. |
See accompanying notes
60
Libbey
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Footnote Reference
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
(notes 4 & 5
|
)
|
|
|
41,115
|
|
|
|
43,166
|
|
|
|
44,430
|
|
Loss on sale of assets
|
|
|
|
|
|
|
343
|
|
|
|
323
|
|
|
|
101
|
|
Change in accounts receivable
|
|
|
|
|
|
|
(11,210
|
)
|
|
|
(6,430
|
)
|
|
|
16,518
|
|
Change in inventories
|
|
|
|
|
|
|
(6,654
|
)
|
|
|
40,834
|
|
|
|
(2,027
|
)
|
Change in accounts payable
|
|
|
|
|
|
|
4,955
|
|
|
|
3,828
|
|
|
|
(21,106
|
)
|
Accrual of interest on Old PIK notes
|
|
|
(note 6
|
)
|
|
|
|
|
|
|
11,916
|
|
|
|
21,249
|
|
Income taxes
|
|
|
(note 8
|
)
|
|
|
1,801
|
|
|
|
(93
|
)
|
|
|
9,275
|
|
Special charges
|
|
|
(note 7
|
)
|
|
|
3,507
|
|
|
|
(1,728
|
)
|
|
|
46,326
|
|
Change in Vitro payable
|
|
|
(note 4
|
)
|
|
|
|
|
|
|
|
|
|
|
(19,575
|
)
|
Gain on redemption of New PIK notes
|
|
|
(note 6
|
)
|
|
|
(71,693
|
)
|
|
|
|
|
|
|
|
|
Payment of interest on New PIK notes
|
|
|
(note 6
|
)
|
|
|
(29,400
|
)
|
|
|
|
|
|
|
|
|
Call premium payment on floating rate notes
|
|
|
(note 6
|
)
|
|
|
8,415
|
|
|
|
|
|
|
|
|
|
Write-off of bank fees & discounts on old ABL and
floating rate notes
|
|
|
(note 6
|
)
|
|
|
4,986
|
|
|
|
|
|
|
|
|
|
Pension and postretirement
|
|
|
(notes 9 & 10
|
)
|
|
|
5,200
|
|
|
|
5,331
|
|
|
|
(18,604
|
)
|
Accrued interest and amortization of discounts, warrants and
financing fees
|
|
|
|
|
|
|
17,391
|
|
|
|
12,945
|
|
|
|
4,165
|
|
Accrued liabilities and prepaid expenses
|
|
|
|
|
|
|
3,344
|
|
|
|
14,920
|
|
|
|
(4,988
|
)
|
Stock option expense
|
|
|
|
|
|
|
3,496
|
|
|
|
2,438
|
|
|
|
3,558
|
|
Other operating activities
|
|
|
|
|
|
|
2,017
|
|
|
|
3,486
|
|
|
|
101
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
47,699
|
|
|
|
102,148
|
|
|
|
(1,040
|
)
|
Investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to property, plant and equipment
|
|
|
|
|
|
|
(28,247
|
)
|
|
|
(17,005
|
)
|
|
|
(45,717
|
)
|
Call premium on floating rate notes
|
|
|
(note 6
|
)
|
|
|
(8,415
|
)
|
|
|
|
|
|
|
|
|
Proceeds from asset sales and other
|
|
|
|
|
|
|
|
|
|
|
265
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
|
|
(36,662
|
)
|
|
|
(16,740
|
)
|
|
|
(45,600
|
)
|
Financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net borrowings/(repayments) on ABL credit facility
|
|
|
(note 6
|
)
|
|
|
|
|
|
|
(34,169
|
)
|
|
|
28,693
|
|
Other repayments
|
|
|
(note 6
|
)
|
|
|
(10,610
|
)
|
|
|
(5,225
|
)
|
|
|
(1,399
|
)
|
Other borrowings
|
|
|
(note 6
|
)
|
|
|
215
|
|
|
|
|
|
|
|
|
|
Floating rate notes payments
|
|
|
(note 6
|
)
|
|
|
(306,000
|
)
|
|
|
|
|
|
|
|
|
New PIK note payment
|
|
|
(note 6
|
)
|
|
|
(51,031
|
)
|
|
|
|
|
|
|
|
|
Proceeds from senior notes
|
|
|
(note 6
|
)
|
|
|
392,328
|
|
|
|
|
|
|
|
|
|
Debt issuance costs and other
|
|
|
(note 6
|
)
|
|
|
(14,199
|
)
|
|
|
(4,171
|
)
|
|
|
|
|
Dividends paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
10,703
|
|
|
|
(43,565
|
)
|
|
|
25,828
|
|
Effect of exchange rate fluctuations on cash
|
|
|
|
|
|
|
(571
|
)
|
|
|
(58
|
)
|
|
|
(2,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
|
|
|
|
21,169
|
|
|
|
41,785
|
|
|
|
(23,235
|
)
|
Cash & equivalents at beginning of year
|
|
|
|
|
|
|
55,089
|
|
|
|
13,304
|
|
|
|
36,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & equivalents at end of year
|
|
|
|
|
|
$
|
76,258
|
|
|
$
|
55,089
|
|
|
$
|
13,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flows information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the year for interest
|
|
|
|
|
|
$
|
27,822
|
|
|
$
|
39,221
|
|
|
$
|
42,888
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid (refunded) during the year for income taxes
|
|
|
|
|
|
$
|
8,830
|
|
|
$
|
3,133
|
|
|
$
|
(2,276
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
On October 28, 2009, we issued notes to an investor for
approximately $80.4 million, along with 933,145 shares
of company stock and warrants to purchase an additional
3,466,856 shares of company stock at $0.01 per share, in
exchange for existing notes with a balance of approximately
$160.9 million. During 2010, the New PIK notes were
redeemed, resulting in the recognition of a gain of
$71.7 million. The gain was offset by $13.4 million of
expense related to the refinancing of the floating rate notes,
resulting in a net gain of $58.3 million on the
Consolidated Statements of Operations. See note 6 for
additional information regarding this transaction.
See accompanying notes
61
LIBBEY
INC.
|
|
1.
|
Description
of the Business
|
Libbey is the leading producer of glass tableware products in
the Western Hemisphere, in addition to supplying to key markets
throughout the world. We produce glass tableware in five
countries and sell to customers in over 100 countries. We 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 7 on closure effective April,
2009). 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.
|
|
2.
|
Significant
Accounting Policies
|
Basis of Presentation The Consolidated
Financial Statements include Libbey Inc. and its majority-owned
subsidiaries (collectively, Libbey or the Company). Our fiscal
year end is December 31st. All material intercompany
accounts and transactions have been eliminated. The preparation
of financial statements and related disclosures in conformity
with United States generally accepted accounting principles
(U.S. GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the Consolidated
Financial Statements and accompanying notes. Actual results
could differ materially from managements estimates.
Consolidated Statements of
Operations Net sales in our 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 costs to
manufacture
and/or
purchase products, warehouse, shipping and delivery costs,
royalty expense and other costs.
Revenue Recognition Revenue is
recognized when products are shipped and title and risk of loss
have passed to the customer. Revenue is recorded net of returns,
discounts and incentives offered to customers. We estimate
returns, discounts and incentives at the time of sale based on
the terms of the agreements, historical experience and
forecasted sales. We continually evaluate the adequacy of these
methods used to estimate returns, discounts and incentives.
Cash and cash equivalents The Company
considers all highly liquid investments purchased with an
original or remaining maturity of less than three months at the
date of purchase to be cash equivalents. Cash and cash
equivalents are maintained with various financial institutions.
Accounts Receivable and Allowance for Doubtful
Accounts We record trade receivables when
revenue is recorded in accordance with our revenue recognition
policy and relieve accounts receivable when payments are
received from customers. The allowance for doubtful accounts is
established through charges to the provision for bad debts. We
regularly evaluate the adequacy of the allowance for doubtful
accounts based on historical trends in collections and
write-offs, our judgment as to the probability of collecting
accounts and our evaluation of business risk. This evaluation is
inherently subjective, as it requires estimates that are
susceptible to revision as more information becomes available.
Accounts are determined to be uncollectible when the debt is
deemed to be worthless or only recoverable in part and are
written off at that time through a charge against the allowance.
Inventory Valuation Inventories are
valued at the lower of cost or market. The
last-in,
first-out (LIFO) method was used for our U.S. glass
inventories, which represented 31.8 percent and
31.9 percent of our total inventories in 2010 and 2009,
respectively. The remaining inventories are valued using either
the
first-in,
first-out (FIFO) or average cost method. For those inventories
valued on the LIFO method, the excess of FIFO cost over LIFO,
was $16.5 million for both 2010 and 2009.
62
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Purchased Intangible Assets and
Goodwill FASB ASC Topic 350
Intangibles-Goodwill and other (FASB
ASC 350) requires goodwill and purchased indefinite
life intangible assets to be reviewed for impairment annually,
or more frequently if impairment indicators arise. Intangible
assets with lives restricted by contractual, legal or other
means will continue to be amortized over their useful lives. As
of October 1st of each year, we update our separate
impairment evaluations for both goodwill and indefinite life
intangible assets. In 2010 and 2009, our
October 1st assessment did not indicate any impairment
of goodwill or indefinite life intangibles. There were also no
indicators of impairment at December 31, 2010. However, in
the fourth quarter of 2008, we identified certain indicators of
impairment of goodwill and purchased intangible assets of
$11.9 million in our International segment and
$0.3 million related to our Syracuse China subsidiary. For
further disclosure on goodwill and intangibles, see note 4.
Software We account for software in
accordance with FASB ASC 350. Software represents the costs
of internally developed and purchased software packages for
internal use. Capitalized costs include software packages,
installation
and/or
internal labor costs. These costs generally are amortized over a
five-year period.
Property, Plant and Equipment Property,
plant and equipment are stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, generally
3 to 14 years for equipment and furnishings and 10 to
40 years for buildings and improvements. Maintenance and
repairs are expensed as incurred.
Long-lived assets to be held and used are reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of such assets may not be recoverable.
Measurement of an impairment loss for long-lived assets that we
expect to hold and use is based on the fair value of the asset.
Long-lived assets to be disposed of are reported at the lower of
carrying amount or fair value less costs to sell. In 2010, we
wrote down decorating assets in our Shreveport, Louisiana
facility as a result of our decision to outsource our
U.S. decorating business and certain after-processing
equipment within our North American Glass segment. Due to the
announcement of our closure of our Syracuse China manufacturing
facility and our Mira Loma distribution center, we wrote down
the values of certain assets to fair value in 2008 and recorded
adjustments to these write-downs in 2009 and 2010. See
note 7 for further disclosure.
Self-Insurance Reserves Self-Insurance
reserves reflect the estimated liability for group health and
workers compensation claims not covered by third-party
insurance. We accrue estimated losses based on actuarial models
and assumptions as well as our historical loss experience.
Workers compensation accruals are recorded at the
estimated ultimate payout amounts based on individual case
estimates. In addition, we record estimates of
incurred-but-not-reported losses based on actuarial models.
Pension and Nonpension Postretirement
Benefits We account for pension and
nonpension postretirement benefits in accordance with FASB ASC
Topic 758 Compensation-Retirement Plans
(FASB ASC 758). FASB ASC 758 requires
recognition of the over-funded or under-funded status of pension
and other postretirement benefit plans on the balance sheet.
Under FASB ASC 758, gains and losses, prior service costs
and credits and any remaining prior transaction amounts that
have not yet been recognized through net periodic benefit cost
are recognized in accumulated other comprehensive income, net of
tax effect where appropriate.
The U.S. pension plans cover most hourly
U.S.-based
employees (excluding new hires at Shreveport after 2008 and
employees hired at Toledo after September 30,
2010) and those salaried
U.S.-based
employees hired before January 1, 2006. The
non-U.S. pension
plans cover the employees of our wholly-owned subsidiaries Royal
Leerdam, located in the Netherlands, and Crisa, located in
Mexico, and our Canadian employees. For further discussion see
note 9.
We also provide certain postretirement health care and life
insurance benefits covering substantially all U.S. and
Canadian salaried 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 reaching a
certain age and completion of a
63
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
specified number of years of creditable service. Benefits for
most hourly retirees are determined by collective bargaining.
Under a cross-indemnity agreement, Owens-Illinois, Inc. assumed
liability for the nonpension postretirement benefit of our
retirees who had retired as of June 24, 1993. Therefore,
the benefits related to these retirees are not included in our
liability. For further discussion see note 10.
Income Taxes Income taxes are accounted
for under the asset and liability method. Deferred income tax
assets and liabilities are recognized for estimated future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities
and their respective tax bases and tax attribute carry-forwards.
Deferred income tax assets and liabilities are measured using
enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
FASB ASC Topic 740, Income Taxes (FASB
ASC 740) 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, China, the Netherlands and Portugal, we have
recorded a valuation allowance against our deferred income tax
assets.
Derivatives We account for derivatives
in accordance with FASB ASC Topic 815 Derivatives and
Hedging (FASB ASC 815). We hold
derivative financial instruments to hedge certain of our
interest rate risks associated with long-term debt, commodity
price risks associated with forecasted future natural gas
requirements and foreign exchange rate risks associated with
occasional transactions denominated in a currency other than the
U.S. dollar. These derivatives (except for the foreign
currency contracts and some natural gas contracts at Syracuse
China) qualify for hedge accounting since the hedges are highly
effective, and we have designated and documented
contemporaneously the hedging relationships involving these
derivative instruments. While we intend to continue to meet the
conditions for hedge accounting, if hedges do not qualify as
highly effective or if we do not believe that forecasted
transactions would occur, the changes in the fair value of the
derivatives used as hedges would be reflected in earnings. Cash
flows from fair value hedges of debt and short-term forward
exchange contracts are classified as an operating activity. Cash
flows of currency swaps, interest rate swaps, and commodity
futures contracts are classified as operating activities. See
additional discussion at note 13.
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 income. Income and expense accounts are translated
at average exchange rates during the year. The effect of
exchange rate changes on transactions denominated in currencies
other than the functional currency is recorded in other
(expense) income. Gain on currency translation was
$0.1 million, $2.8 million and $0.7 million for
the year ended December 31, 2010, 2009 and 2008,
respectively.
Stock-Based Compensation Expense We
account for stock-based compensation expense in accordance with
FASB ASC Topic 718 Compensation-Stock Compensation
(FASB ASC 718) and FASB ASC Topic
505-50
Equity based payment to non-employees (FASB
ASC 505-50),
which require share-based compensation transactions to be
accounted for using a fair-value-based method and the resulting
cost recognized in our financial statements. Share-based
compensation cost is measured based on the fair value of the
equity instruments issued. FASB ASC 718 and FASB
ASC 505-50
apply to all of our outstanding unvested share-based payment
awards. The impact of applying the provisions of FASBASC 718 and
FASB
ASC 505-50
was a pre-tax charge of $3.5 million, $2.4 million and
$3.5 million for 2010, 2009 and 2008, respectively. See
note 12 for additional information.
Research and Development Research and
development costs are charged to selling, general and
administrative expense in the Consolidated Statements of
Operations when incurred. Expenses for 2010, 2009 and 2008,
respectively, were $2.6 million, $2.0 million and
$1.7 million.
Advertising Costs We expense all
advertising costs as incurred, and the amounts were immaterial
for all periods presented.
64
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Computation of Income Per Share of Common
Stock Basic net income per share of common
stock is computed using the weighted average number of shares of
common stock outstanding during the period. Diluted net income
per share of common stock is computed using the weighted average
number of shares of common stock outstanding and dilutive
potential common share equivalents during the period.
Treasury Stock Treasury stock purchases
are recorded at cost. During 2010, 2009 and 2008, we did not
purchase any treasury stock. During 2010, 2009, and 2008, we
issued 2,599,769, 1,367,717 and 165,588 shares from
treasury stock at an average cost of $27.04, $26.40, and $26.39
respectively. The increase in issued shares from treasury stock
in 2009 was for common stock given to the PIK Notes holder in
the October 2009 debt exchange. The increase in issued shares
from treasury stock in 2010 and 2009 was mainly attributable to
the exercise of warrants related to our refinancing activities
in 2010 and for common stock given to the PIK Notes holder in
the October 2009 debt exchange. See note 6 for further
information.
Reclassifications Certain amounts in
prior years financial statements have been reclassified to
conform to the presentation used in the year ended
December 31, 2010.
New
Accounting Standards
On July 1, 2009 the FASB Accounting Standards
Codificationtm
(FASB ASC) became the single source of authoritative
U.S. GAAP recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial
statements in conformity with GAAP. The Codification is not
intended to change U.S. GAAP; instead, it reorganized the
various U.S. GAAP pronouncements into approximately 90
accounting Topics, and displays all Topics using a consistent
structure. The Codification was effective for financial
statements issued for interim and annual periods ending after
September 15, 2009. Accordingly, in our discussion of New
Accounting Standards below, we have incorporated references to
the Codification Topics.
In September 2006, the FASB issued guidance contained in FASB
ASC 820, Fair Value Measurements and
Disclosures. This guidance defines fair value, establishes
a framework for measuring fair value, and expands disclosure
about fair value measurements. This guidance clarifies how to
measure fair value as permitted under other accounting
pronouncements but does not require any new fair value
measurements. In February 2008, the FASB issued additional
guidance contained in FASB ASC 820, which delays until
January 1, 2009 the effective date of this guidance for
nonfinancial assets and liabilities, except for those that are
recognized or disclosed at fair value in the financial
statements on a recurring basis. In October 2008, the FASB
issued additional guidance which clarifies the application of
FASB ASC 820 as it relates to the valuation of financial
assets in a market that is not active for those financial
assets. This guidance was effective upon issuance. We adopted
FASB ASC 820 as of January 1, 2008, but had not
applied it to non-recurring, nonfinancial assets and
liabilities. The adoption of FASB ASC 820 had no impact on
our consolidated results of operations and financial condition.
We adopted FASB ASC 820 for nonfinancial assets and
liabilities as of January 1, 2009. The adoption of FASB
ASC 820 for nonfinancial assets and liabilities did not
have a material impact on our Consolidated Financial Statements.
See notes 6, 13, and 15 of the Consolidated Financial
Statements for additional information.
In March 2008, the FASB issued guidance contained in FASB
ASC 815, Derivatives and Hedging, which
requires additional disclosures about the objectives of the
derivative instruments and hedging activities, the method of
accounting for such instruments, and a tabular disclosure of the
effects of such instruments and related hedged items on our
financial position, financial performance, and cash flows. FASB
ASC 815 encourages, but does not require, comparative
disclosures for earlier periods at initial adoption. This
guidance was effective for Libbey on January 1, 2009.
Adoption of this guidance did not have a material impact on our
Consolidated Financial Statements. See note 13 of the
Consolidated Financial Statements for additional information.
In April 2008, the FASB issued guidance contained in FASB
ASC 350-30,
Intangibles Goodwill and Other
General Intangibles Other than Goodwill, which amends the
factors that should be considered in developing renewal or
extension assumptions used to determine the useful life of a
recognized intangible asset
65
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
under FASB Statement No. 142, Goodwill and Other
Intangible Assets. This guidance was effective for Libbey
on January 1, 2009. The adoption of this guidance did not
have a material impact on our Consolidated Financial Statements.
In June 2008, the FASB issued guidance contained in FASB
ASC 815-40,
Derivatives and Hedging Contracts in
Entitys Own Equity. This guidance provides that an
entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is
indexed to its own stock, including evaluating the
instruments contingent exercise and settlement provisions.
It also clarifies the impact of foreign currency denominated
strike prices and market-based employee stock option valuation
instruments on the evaluation. This guidance was effective for
Libbey on January 1, 2009. The adoption of this guidance
did not have any impact on our Consolidated Financial Statements.
In June 2008, the FASB issued guidance contained in FASB
ASC 260, Earnings Per Share. This guidance
addresses whether instruments granted in share-based payment
transactions are participating securities prior to vesting and,
therefore, need to be included in the earnings allocation in
computing earnings per share (EPS) under the two-class method.
This guidance was effective for Libbey on January 1, 2009,
and requires that all prior period EPS data is adjusted
retrospectively. The adoption of this guidance did not have a
material impact on our Consolidated Financial Statements.
In December 2008, the FASB issued guidance contained in FASB
ASC 715-20,
Compensation Retirement Benefits, to
provide guidance on an employers disclosures about plan
assets of a defined benefit pension or other postretirement
plan. This guidance is effective for Libbey for the year ended
December 31, 2009. This guidance required increased
disclosures in the financial statements related to the assets of
our pension and other postretirement benefit plans. See
notes 9 and 10 of the Consolidated Financial Statements for
additional information.
In May 2009, the FASB issued guidance contained in FASB
ASC 855, Subsequent Events, to establish
general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial
statements are issued or are available to be issued. This
guidance was effective for interim or annual financial periods
ending after June 15, 2009. We have evaluated and, as
necessary, made changes to these Consolidated Financial
Statements for the events. In February, 2010, the FASB issued
Accounting Standards Update
2010-09
Subsequent Events which removed the requirement to
disclose the date through which subsequent events had been
considered for disclosure. This update was effective upon
issuance.
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 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 Consolidated Financial
Statements.
66
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
In April 2010, the FASB issued Accounting Standards Update
2010-13
Compensation Stock Compensation (Topic 718):
Effect of Denominating the Exercise Price of a Share-Based
Payment Award in the Currency of the Market in Which the
Underlying Equity Security Trades A consensus of the
FASB Emerging Issues Task Force (ASU
2010-13).
The provisions of ASU
2010-13
affect entities with equity awards which, because of their
characteristics, have been classified as liabilities. This
guidance applies to interim and annual periods beginning after
December 15, 2010, and will not impact our Consolidated
Financial Statements as our stock awards are classified as
equity.
In July 2010, the FASB issued Accounting Standards Update
2010-20
Receivables (Topic 310): Disclosure about the Credit
Quality of Financing Receivables and the Allowance for Credit
Losses (ASU
2010-20).
The amendments in this update affect all entities with financing
receivables, generally excluding short-term trade accounts
receivable or receivables measured at fair value or lower of
cost or fair value. This update also requires additional
disclosure of certain types of receivables, and disclosures of
policies related to measurement and valuation of the receivables
and related reserves. The effectiveness of this update was
delayed until periods ending after June 15, 2011 by Update
No. 2011-01.
We do not expect the provisions of this update to have any
impact on our Consolidated Financial Statements.
In December 2010, the FASB issued Accounting Standards Update
2010-28
Intangibles Goodwill and Other (Topic 350):
When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts (a
consensus of the FASB Emerging Issues Task Force)
(ASU
2010-28).
ASU 2010-28
addresses the decision process involved in testing for
impairment of goodwill when the carrying value of a reporting
unit is zero or less. The provisions of this update are
effective for periods beginning after December 15, 2010. We
do not expect the provisions of this update to have any impact
on our Consolidated Financial Statements or on our process of
testing for potential impairment of goodwill.
In December 2010, the FASB issued Accounting Standards Update
2010-29
Business Combinations (Topic 805): Disclosure of
Supplementary Pro Forma Information for Business Combinations (a
consensus of the FASB Emerging Issues Task Force)
(ASU
2010-29).
ASU 2010-29
clarifies the extent to which pro-forma historical information
must be prepared and presented in comparative financial
statements for periods following a merger or acquisition. The
amendments in this Update specify that if a public entity
presents comparative financial statements, the entity should
disclose revenue and earnings of the combined entity as though
the business combination(s) that occurred during the current
year had occurred as of the beginning of the comparable prior
annual reporting period only. ASU
2010-29 also
expands the supplemental pro forma disclosures under Topic 805
to include a description of the nature and amount of material,
nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue
and earnings. For Libbey, the required disclosures are effective
for combinations with acquisition dates during or after 2011.
The impact on our Consolidated Financial Statements will depend
on the nature and timing of any potential future business
combinations.
67
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following tables provide detail of selected balance sheet
items:
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Accounts receivable:
|
|
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
90,899
|
|
|
$
|
81,032
|
|
Other receivables
|
|
|
1,202
|
|
|
|
1,392
|
|
|
|
|
|
|
|
|
|
|
Total accounts receivable, less allowances of $5,518 and $7,457
|
|
$
|
92,101
|
|
|
$
|
82,424
|
|
|
|
|
|
|
|
|
|
|
Inventories:
|
|
|
|
|
|
|
|
|
Finished goods
|
|
$
|
132,169
|
|
|
$
|
126,651
|
|
Work in process
|
|
|
653
|
|
|
|
1,255
|
|
Raw materials
|
|
|
4,444
|
|
|
|
4,408
|
|
Repair parts
|
|
|
9,496
|
|
|
|
9,933
|
|
Operating supplies
|
|
|
1,384
|
|
|
|
1,768
|
|
|
|
|
|
|
|
|
|
|
Total inventories, less allowances of $4,658 and $4,528
|
|
$
|
148,146
|
|
|
$
|
144,015
|
|
|
|
|
|
|
|
|
|
|
Prepaid and other current assets:
|
|
|
|
|
|
|
|
|
Value added tax
|
|
$
|
1,332
|
|
|
$
|
1,647
|
|
Other prepaid expenses
|
|
|
4,822
|
|
|
|
6,362
|
|
Refundable, deferred and prepaid income taxes
|
|
|
283
|
|
|
|
475
|
|
|
|
|
|
|
|
|
|
|
Total prepaid and other current assets
|
|
$
|
6,437
|
|
|
$
|
8,484
|
|
|
|
|
|
|
|
|
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Deposits
|
|
$
|
904
|
|
|
$
|
583
|
|
Finance fees net of amortization
|
|
|
13,012
|
|
|
|
4,056
|
|
Other
|
|
|
3,886
|
|
|
|
4,215
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
17,802
|
|
|
$
|
8,854
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Accrued incentives
|
|
$
|
15,060
|
|
|
$
|
13,790
|
|
Workers compensation
|
|
|
9,608
|
|
|
|
8,834
|
|
Medical liabilities
|
|
|
3,785
|
|
|
|
2,948
|
|
Interest
|
|
|
14,416
|
|
|
|
1,998
|
|
Commissions payable
|
|
|
904
|
|
|
|
1,134
|
|
Other accrued liabilities
|
|
|
7,438
|
|
|
|
6,995
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
51,211
|
|
|
$
|
35,699
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
|
|
|
|
Deferred liability
|
|
$
|
4,622
|
|
|
$
|
3,350
|
|
Other
|
|
|
7,303
|
|
|
|
7,468
|
|
|
|
|
|
|
|
|
|
|
Total other long-term liabilities
|
|
$
|
11,925
|
|
|
$
|
10,818
|
|
|
|
|
|
|
|
|
|
|
68
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
4.
|
Purchased
Intangible Assets and Goodwill
|
Purchased
Intangibles
Changes in purchased intangibles balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance
|
|
$
|
24,861
|
|
|
$
|
26,121
|
|
Amortization
|
|
|
(1,333
|
)
|
|
|
(1,367
|
)
|
Foreign currency impact
|
|
|
(394
|
)
|
|
|
107
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
23,134
|
|
|
$
|
24,861
|
|
|
|
|
|
|
|
|
|
|
Purchased intangible assets are composed of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Indefinite life intangible assets
|
|
$
|
12,923
|
|
|
$
|
13,094
|
|
Definite life intangible assets, net of accumulated amortization
of $12,123 and $10,988
|
|
|
10,211
|
|
|
|
11,767
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
23,134
|
|
|
$
|
24,861
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for definite life intangible assets was
$1.3 million, $1.4 million and $1.3 million for
years 2010, 2009 and 2008, respectively.
Indefinite life intangible assets are composed of trade names
and trademarks that have an indefinite life and are therefore
individually tested for impairment on an annual basis, or more
frequently in certain circumstances where impairment indicators
arise, in accordance with FASB ASC 350. Our measurement
date for impairment testing is October 1st of each
year. When performing our test for impairment of individual
indefinite life intangible assets, we use a relief from royalty
method to determine the fair market value that is compared to
the carrying value of the indefinite life intangible asset. The
inputs used for this analysis are considered as Level 3
inputs in the fair value hierarchy. See note 15 for further
discussion of the fair value hierarchy. Our
October 1st review for 2010 and 2009 did not indicate
impairment of our indefinite life intangible assets. There were
also no indicators of impairment at December 31, 2010. As
of December 31, 2008, we performed an additional impairment
test as the severe global economic downturn during the final
quarter of 2008 represented a significant adverse condition in
our business environment, which was an indicator of impairment.
As a result of this analysis, we concluded that intangibles of
$2.5 million associated with our International segment were
impaired. We also announced in December, 2008 that our Syracuse
China manufacturing facility would be shut down by early April,
2009. This was an indicator of impairment for the Syracuse China
reporting unit (part of our North American Other segment), and,
based on our analysis, we concluded that intangibles of
$0.3 million were impaired. These impairment charges for
2008 were included in Special charges on the Consolidated
Statements of Operations.
The definite life intangible assets primarily consist of
technical assistance agreements, noncompete agreements, customer
relationships and patents. The definite life assets are
generally amortized over a period ranging from 5 to
20 years. The weighted average remaining life on the
definite life intangible assets is 7.8 years at
December 31, 2010.
Future estimated amortization expense of definite life
intangible assets is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
$
|
1,197
|
|
|
$
|
1,080
|
|
|
$
|
1,080
|
|
|
$
|
1,080
|
|
|
$
|
1,079
|
|
69
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Goodwill
Changes in goodwill balances are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
North
|
|
|
North
|
|
|
|
|
|
|
|
|
North
|
|
|
North
|
|
|
|
|
|
|
|
|
|
American
|
|
|
American
|
|
|
|
|
|
|
|
|
American
|
|
|
American
|
|
|
|
|
|
|
|
|
|
Glass
|
|
|
Other
|
|
|
International
|
|
|
Total
|
|
|
Glass
|
|
|
Other
|
|
|
International
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
$
|
154,003
|
|
|
$
|
19,758
|
|
|
$
|
9,434
|
|
|
$
|
183,195
|
|
|
$
|
152,419
|
|
|
$
|
19,758
|
|
|
$
|
9,434
|
|
|
$
|
181,611
|
|
Accumulated impairment losses
|
|
|
|
|
|
|
(5,441
|
)
|
|
|
(9,434
|
)
|
|
|
(14,875
|
)
|
|
|
|
|
|
|
(5,441
|
)
|
|
|
(9,434
|
)
|
|
|
(14,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
154,003
|
|
|
|
14,317
|
|
|
|
|
|
|
|
168,320
|
|
|
|
152,419
|
|
|
|
14,317
|
|
|
|
|
|
|
|
166,736
|
|
Other
|
|
|
1,020
|
|
|
|
|
|
|
|
|
|
|
|
1,020
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
1,584
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
155,023
|
|
|
|
19,758
|
|
|
|
9,434
|
|
|
|
184,215
|
|
|
|
154,003
|
|
|
|
19,758
|
|
|
|
9,434
|
|
|
|
183,195
|
|
Accumulated impairment losses
|
|
|
|
|
|
|
(5,441
|
)
|
|
|
(9,434
|
)
|
|
|
(14,875
|
)
|
|
|
|
|
|
|
(5,441
|
)
|
|
|
(9,434
|
)
|
|
|
(14,875
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
155,023
|
|
|
$
|
14,317
|
|
|
$
|
|
|
|
$
|
169,340
|
|
|
$
|
154,003
|
|
|
$
|
14,317
|
|
|
$
|
|
|
|
$
|
168,320
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, in the table above, relates to income tax adjustments
affecting the fair value of assets acquired and liabilities
assumed related to the Crisa acquisition.
Goodwill impairment tests are completed for each reporting unit
on an annual basis, or more frequently in certain circumstances
where impairment indicators arise. The inputs used for this
analysis are considered as Level 3 inputs in the fair value
hierarchy. See note 15 for further discussion of the fair
value hierarchy. When performing our test for impairment, we use
an approach which includes a discounted cash flow analysis,
incorporating the weighted average cost of capital of a
hypothetical third party buyer to compute the fair value of each
reporting unit. The fair value is then compared to the carrying
value. To the extent that fair value exceeds the carrying value,
no impairment exists. However, to the extent the carrying value
exceeds the fair value, we compare the implied fair value of
goodwill to its book value to determine if an impairment should
be recorded. Our annual review was performed as of
October 1st for each year presented, and our review
for 2010 and 2009 did not indicate an impairment of goodwill.
There were also no indicators of impairment at December 31,
2010. However, the severe global economic downturn during the
later part of the fourth quarter of 2008 represented a
significant adverse change in our business environment, which
was considered an indicator of impairment. An updated goodwill
impairment analysis was performed as of December 31, 2008.
As a result of this analysis, goodwill impairment of
$9.4 million was recorded in 2008 in our International
operations, and was included in Impairment of goodwill on the
Consolidated Statements of Operations. This has been our only
goodwill impairment in the International segment. We have
recorded no accumulated goodwill impairment in our North
American Glass segment since this companys inception in
1993.
70
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
5.
|
Property,
Plant and Equipment
|
Property, plant and equipment consists of the following:
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Land
|
|
$
|
21,534
|
|
|
$
|
22,632
|
|
Buildings
|
|
|
90,666
|
|
|
|
89,863
|
|
Machinery and equipment
|
|
|
438,965
|
|
|
|
438,541
|
|
Furniture and fixtures
|
|
|
13,774
|
|
|
|
13,696
|
|
Software
|
|
|
21,499
|
|
|
|
20,240
|
|
Construction in progress
|
|
|
11,609
|
|
|
|
8,587
|
|
|
|
|
|
|
|
|
|
|
Gross property, plant and equipment
|
|
|
598,047
|
|
|
|
593,559
|
|
Less accumulated depreciation
|
|
|
327,650
|
|
|
|
303,546
|
|
|
|
|
|
|
|
|
|
|
Net property, plant and equipment
|
|
$
|
270,397
|
|
|
$
|
290,013
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment are stated at cost less
accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the
assets, generally 3 to 14 years for equipment and 10 to
40 years for buildings and improvements. Software consists
of internally developed and purchased software packages for
internal use. Capitalized costs include software packages,
installation,
and/or
certain internal labor costs. These costs are generally
amortized over a five-year period. Depreciation expense was
$39.8 million, $41.7 million and $42.9 million
for the years 2010, 2009, and 2008, respectively.
In 2010, we wrote down decorating assets in our Shreveport,
Louisiana facility as a result of our decision to outsource our
U.S. decorating business. A non-cash charge of
$0.4 million was recorded in Special charges on the
Consolidated Statements of Operations. In addition, in 2010, we
wrote down certain after-processing equipment within our North
American Glass segment that was no longer being used in our
production process. A non-cash charge of $2.7 million was
recorded in Cost of sales on the Consolidated Statements of
Operations. See note 7 for further information.
During 2008, we recorded $9.7 million of reductions in the
carrying value of our long-lived assets in accordance with FASB
ASC 360. In 2010, we recorded an additional
$0.6 million reduction in the carrying value of the land.
These charges were included in Special charges on the
Consolidated Statements of Operations. Under FASB ASC 360,
long-lived assets are tested for recoverability if certain
events or changes in circumstances indicate that the carrying
value of the long-lived assets may not be recoverable. The
announcement of the closure of the Syracuse China reporting unit
indicated that the carrying value of our long-lived assets may
not be recoverable and we performed an impairment review. We
then recorded impairment charges for property, plant and
equipment to the extent the amounts by which the carrying
amounts of these assets exceeded their fair values. Fair value
was determined by appraisals. See note 7 for further
discussion of these and other special charges.
The inputs used for this analysis are considered as Level 3
inputs in the fair value hierarchy. See note 15 for further
discussion of the fair value hierarchy. The determination of
fair value is based on an expected present value technique in
which multiple cash flow scenarios that reflect a range of
possible outcomes and a risk-free rate of interest are used to
estimate fair value or on a market appraisal. Projections used
in the fair value determination are based on internal estimates
for sales and production levels, capital expenditures necessary
to maintain the projected production levels, and remaining
useful life of the assets. These projections are prepared at the
lowest level at which we have access to cash flow information
and complete financial data for our operations, which is
generally at the plant level. An asset impairment would be
indicated if the sum of the expected future net pretax cash
flows from the use of an asset (undiscounted and without
interest charges) is less than the carrying amount of the asset.
An
71
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
impairment loss would be measured based on the difference
between the fair value of the asset and its carrying value.
In addition, in 2008 we wrote off certain fixed assets within
our North American Glass reporting segment that had become idled
and were no longer being used in our production process. A
non-cash charge of $4.5 million was recorded in Cost of
sales on the Consolidated Statements of Operations in 2008. See
note 7 for further discussion of these special charges.
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 of
16.0 percent New 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 New PIK Notes and to
pay certain related fees and expenses. Upon completion of the
refinancing, we recorded a gain of $71.7 million related to
the redemption of the New 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 $58.3 million as shown on the
Consolidated Statements of Operations.
Concurrently with the issuance of the original PIK Notes (Old
PIK Notes) in 2006, we issued, to the holder of the Old PIK
Notes, detachable warrants to purchase 485,309 shares of
Libbey Inc. common stock (Warrants) at an exercise price of
$11.25 per share. These warrants, which do not have voting
rights, remain outstanding at December 31, 2010, and expire
on December 1, 2011.
On October 28, 2009, we entered into a transaction with
Merrill Lynch PCG, Inc. (the Investor) to exchange
the existing 16.0 percent Old PIK Notes due in December
2011, for a combination of debt and equity securities (Exchange
Transaction). Pursuant to the Exchange Transaction, Old PIK
Notes having an outstanding principal balance of approximately
$160.9 million were exchanged for new Senior Subordinated
Secured Notes due in June 2021 (New PIK Notes) having a
principal amount of approximately $80.4 million, together
with common stock and warrants in Libbey Inc. Interest due under
the New PIK Notes was to accrue at zero percent until the date
(FRN Redemption Date) that is the first to occur of
(a) December 10, 2010 or (b) the date on which
the Senior Notes due 2011 were redeemed or paid in full. If the
New PIK Notes remained outstanding at the FRN
Redemption Date, interest under the New PIK Notes would
accrue at the rate of 16.0 percent per annum and be payable
semi-annually in cash or in additional New PIK Notes, at the
option of Libbey Glass.
Management evaluated the application of FASB
ASC 470-50,
Modifications and Extinguishments and FASB
ASC 470-60,
Troubled Debt Restructuring by Debtors and concluded
that the Exchange Transaction constituted a troubled debt
restructuring, rather than a debt modification or
extinguishment. Under FASB
ASC 470-60,
the carrying value of the New PIK Notes was $150.6 million
which was comprised of the $80.4 million principal amount
and an excess carrying amount of $70.2 million.
$2.7 million of costs associated with the Exchange
Transaction were expensed in interest expense in 2009 on the
Consolidated Statements of Operations. The remainder of the
costs associated with the Exchange Transaction of
$1.8 million were related to the equity
72
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
issued and were recorded in capital in excess of par value on
the Consolidated Balance Sheets, and also as shown in the
Consolidated Statement of Shareholders Equity (Deficit).
As part of the Exchange Transaction, we also issued to the
Investor 933,145 shares of Libbey Inc. common stock and
warrants (Series I Warrants) conveying the right to
purchase, for $0.01 per share, an additional
3,466,856 shares of the Companys common stock. The
amount allocated to the Series I Warrants was recorded in
capital in excess of par value, with the offset recorded against
the carrying value of the New PIK Notes. Collectively this
represented approximately 22.5 percent of the
Companys common stock outstanding following the Exchange
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 $1.0 million related to this transaction were
recorded as Selling, General and Administrative expense in the
Consolidated Statements of Operations in 2010 and were reflected
in our North American Glass segment.
73
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
Rate
|
|
|
Maturity Date
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Borrowings under ABL facility
|
|
|
Floating
|
|
|
April 8, 2014
|
|
$
|
|
|
|
$
|
|
|
Senior Secured Notes
|
|
|
10.00
|
%(1)
|
|
February 15, 2015
|
|
|
400,000
|
|
|
|
|
|
Floating rate notes
|
|
|
|
|
|
|
|
|
|
|
|
|
306,000
|
|
New PIK notes(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
80,431
|
|
Promissory note
|
|
|
6.00
|
%
|
|
January, 2011 to September, 2016
|
|
|
1,307
|
|
|
|
1,492
|
|
Notes payable
|
|
|
Floating
|
|
|
January, 2011
|
|
|
|
|
|
|
672
|
|
RMB loan contract
|
|
|
Floating
|
|
|
July, 2012 to January, 2014
|
|
|
37,925
|
|
|
|
36,675
|
|
RMB working capital loan
|
|
|
Floating
|
|
|
January, 2011
|
|
|
|
|
|
|
7,335
|
|
BES Euro line
|
|
|
Floating
|
|
|
December, 2011 to December, 2013
|
|
|
10,934
|
|
|
|
14,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings
|
|
|
|
|
|
|
|
|
450,166
|
|
|
|
446,795
|
|
Less unamortized discount
|
|
|
|
|
|
|
|
|
6,307
|
|
|
|
1,749
|
|
Plus carrying value adjustment on debt related to
the Interest Rate Agreement(1)
|
|
|
|
|
|
|
|
|
3,266
|
|
|
|
|
|
Plus carrying value in excess of principal on New
PIK Notes(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
70,193
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total borrowings net
|
|
|
|
|
|
|
|
|
447,125
|
|
|
|
515,239
|
|
Less long-term debt due within one year and notes
payable
|
|
|
|
|
|
|
|
|
3,142
|
|
|
|
10,515
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-term portion of borrowings net
|
|
|
|
|
|
|
|
$
|
443,983
|
|
|
$
|
504,724
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
See Interest Rate Protection Agreements below and in
note 13. |
|
(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 2010, we redeemed
the New PIK Notes in conjunction with the refinancing discussed
above and recognized a $71.7 million gain in gain on
redemption of debt on the Consolidated Statements of Operations. |
Annual maturities for all of our total borrowings for the next
five years and beyond are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2011
|
|
|
2012
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Thereafter
|
|
|
$
|
3,142
|
|
|
$
|
14,491
|
|
|
$
|
22,804
|
|
|
$
|
9,329
|
|
|
$
|
400,227
|
|
|
$
|
173
|
|
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
74
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
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
Glass present and future direct and indirect domestic
subsidiaries;
|
|
|
|
100 percent of the non-voting stock of substantially all of
Libbey Glass first-tier present and future foreign
subsidiaries; and
|
|
|
|
65 percent of the voting stock of substantially all of
Libbey Glass 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 December 31, 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 December 31, 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 December 31, 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.
75
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The available total borrowing base is offset by ERISA, rent and
tax reserves totaling $3.5 million and
mark-to-market
reserves for natural gas contracts of $2.8 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 December 31, 2010, we had
$10.4 million in letters of credit outstanding under the
ABL Facility. Remaining unused availability on the new ABL
Facility was $65.2 million at December 31, 2010
compared to $79.2 million under the old ABL Facility at
December 31, 2009.
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 could 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. On
January 25, 2011, we exchanged $400.0 million
aggregate principal amount of 10.0 percent Senior Secured
Notes due 2015 for an equal principal amount of a new issue of
10.0 percent Senior Secured Notes due 2015, which have been
registered under the Securities Act of 1933, as amended.
76
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
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 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. 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 December 31, 2010, excluding applicable fees, is
7.57 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 December 31, 2010, by Standard and Poors.
The fair market value for the Rate Agreement at
December 31, 2010 was a $2.5 million asset. An
adjustment of $3.3 million was recorded to increase the
carrying value of the related long-term debt. The net impact of
$0.4 million expense is recorded in other (expense) income
on the Consolidated Statements of Operations for 2010. 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
December 31, 2010 and December 31, 2009, we had
$1.3 million and $1.5 million, respectively,
outstanding on the promissory note. Interest with respect to the
promissory note is paid monthly.
Notes
Payable
We have an overdraft line of credit for a maximum of
1.1 million. There were no borrowings under the
facility at December 31, 2010. The $0.7 million
outstanding at December 31, 2009, was the U.S. dollar
equivalent under the euro-based overdraft line and the interest
rate was 5.80 percent. Interest with respect to the note
payable was paid monthly.
RMB
Loan Contract
On January 23, 2006, Libbey Glassware (China) Co., Ltd.
(Libbey China), an indirect wholly owned subsidiary of Libbey
Inc., entered into an RMB Loan Contract (RMB Loan Contract) with
China Construction Bank Corporation Langfang Economic
Development Area
Sub-Branch
(CCB). Pursuant to the RMB Loan Contract, CCB agreed to lend to
Libbey China RMB 250.0 million, or the equivalent of
approximately $37.9 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 December 31, 2010, the annual
interest rate was 5.37 percent. As of December 31,
2010, the outstanding balance was RMB 250.0 million
(approximately $37.9 million). Interest is payable
quarterly. Payments of principal in the amount of RMB
30.0 million
77
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
(approximately $4.5 million) and RMB 40.0 million
(approximately $6.1 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 $9.1 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
3-year term
loan was 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 amended extending the maturity date to January, 2011 and
requiring a standby letter of credit. On November 30, 2010,
the working capital loan was fully repaid and the standby letter
of credit was canceled.
BES
Euro Line
In January 2007, Crisal entered into a seven year,
11.0 million line of credit (approximately
$14.6 million) with Banco Espírito Santo, S.A. (BES).
The $10.9 million outstanding at December 31, 2010 was
the U.S. dollar equivalent of the 8.3 million
outstanding under the line at an interest rate of
5.79 percent. Payment of principal in the amount of
2.2 million (approximately $2.9 million) is due
in December 2011, payment of 2.8 million
(approximately $3.7 million) is due in December 2012 and
payment of 3.3 million (approximately
$4.3 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 $428.5 million at
December 31, 2010. Our floating rate notes of
$306.0 million had an estimated fair value of
$301.4 million at December 31, 2009. The
$80.4 million New PIK Notes were held by a single holder
since inception, and there was no active market from which a
fair value could be derived at December 31, 2009. The fair
value of the remainder of our debt approximates carrying value
due to variable interest rates.
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 December 31, 2010 we
had no amounts outstanding under our ABL Facility, although we
had $10.4 million of letters of credit issued under that
facility. As a result, we had $65.2 million of unused
availability remaining under the ABL Facility at
December 31, 2010, as compared to $79.2 million of
unused availability at December 31, 2009. In addition, we
had $76.3 million of cash on hand at December 31,
2010, compared to $55.1 million of cash on hand at
December 31, 2009.
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 New 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, our RMB 50.0 million
working capital loan due in January, 2011, was fully repaid on
November 30, 2010.
Based on our operating plans and current forecast expectations,
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.
78
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Facility
Closures
In December 2008, we announced that the 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, and we accordingly recorded a pretax
charge of $29.1 million in 2008. The principal components
of the charge included fixed asset write-downs, inventory
write-downs, and employee severance related costs for the
approximately 305 employees impacted by the closures and
pension and postretirement charges.
In 2008 we performed an analysis to determine the appropriate
carrying value of inventory located at Syracuse China and Mira
Loma. A lower of cost or market adjustment was recorded in the
fourth quarter of 2008 in the amount of $9.8 million to
properly state our ending inventory values. This charge was
included in cost of sales on the 2008 Consolidated Statements of
Operations.
In the fourth quarter of 2008, we recorded a $9.7 million
reduction in the carrying value of our long-lived assets in
accordance with FASB ASC 360. Under FASB ASC 360,
long-lived assets are tested for recoverability if certain
events or changes in circumstances indicate that the carrying
value of the long-lived assets may not be recoverable. The
announcement of the closure of the Syracuse China reporting unit
indicated that the carrying value of our long-lived assets may
not be recoverable and we performed an impairment review. We
then recorded impairment charges, for property, plant and
equipment, based upon the amounts by which the carrying amounts
of these assets exceeded their fair values. Fair value was
determined by appraisals. This charge was included in special
charges on the 2008 Consolidated Statements of Operations.
In 2008 we recorded a charge of $9.0 million related to the
announced closures for employee-related costs and other. Of this
amount, $4.2 million was included in cost of sales in the
2008 Consolidated Statements of Operations for pension and
non-pension postretirement welfare costs. An additional
$4.8 million included primarily severance, medical benefits
and outplacement services for the employees. This amount was
included in special charges in the 2008 Consolidated Statements
of Operations.
Further, depreciation expense was increased by $0.3 million
at Syracuse in 2008 to reflect the shorter remaining life of the
assets. This was recorded in cost of sales on the 2008
Consolidated Statements of Operations, in the North American
Other reporting segment.
In addition, natural gas hedges in place for the Syracuse China
facility were no longer deemed effective, as the forecasted
transactions related to those contracts were not probable of
occurring. This resulted in a charge of $0.4 million to
other (expense) income on the 2008 Consolidated Statements of
Operations, in the North American Other reporting segment. See
note 13 for further discussion of derivatives.
In 2009 we recorded a pre-tax charge of $3.8 million
related to the closures of the Syracuse China manufacturing
facility and the Mira Loma, California distribution center that
were announced in 2008. The principal components of the charge
included building site clean up, inventory write-downs related
to
work-in-process
and raw materials of $1.0 million net of fixed asset
recoveries (net of write-downs), employee severance related
costs and other of $1.7 million and pension and
postretirement charges of $0.3 million. Further,
depreciation expense was increased by $0.7 million at
Syracuse in the first quarter of 2009 to reflect the shorter
life of the remaining assets. In addition, natural gas hedges of
$0.2 million for the Syracuse China facility were charged
to other (expense) income on the 2009 Consolidated Statements of
Operations, in the North American Other reporting segment. See
note 13 for further discussion of derivatives.
In 2010, we recorded a pre-tax charge of $1.2 million
related to the closures of the Syracuse China manufacturing
facility and the Mira Loma, California distribution center, that
were originally announced in 2008. The principal components of
the charge included a $0.6 million charge to write-down the
value of land at Syracuse, and site cleanup of
$0.4 million. In addition, natural gas hedge
ineffectiveness of $0.1 million was
79
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
charged to other (expense) income on the 2010 Consolidated
Statements of Operations, in the North American Other reporting
segment.
The following table summarizes the facility closure charge in
2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
|
December 31, 2008
|
|
|
|
North
|
|
|
North
|
|
|
|
|
|
North
|
|
|
North
|
|
|
|
|
|
North
|
|
|
North
|
|
|
|
|
|
|
American
|
|
|
American
|
|
|
|
|
|
American
|
|
|
American
|
|
|
|
|
|
American
|
|
|
American
|
|
|
|
|
|
|
Glass
|
|
|
Other
|
|
|
Total
|
|
|
Glass
|
|
|
Other
|
|
|
Total
|
|
|
Glass
|
|
|
Other
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Inventory write-down
|
|
$
|
|
|
|
$
|
(12
|
)
|
|
$
|
(12
|
)
|
|
$
|
|
|
|
$
|
977
|
|
|
$
|
977
|
|
|
$
|
192
|
|
|
$
|
9,576
|
|
|
$
|
9,768
|
|
Pension & postretirement welfare
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
278
|
|
|
|
278
|
|
|
|
|
|
|
|
4,170
|
|
|
|
4,170
|
|
Fixed asset depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
705
|
|
|
|
705
|
|
|
|
|
|
|
|
261
|
|
|
|
261
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales
|
|
|
|
|
|
|
(12
|
)
|
|
|
(12
|
)
|
|
|
|
|
|
|
1,960
|
|
|
|
1,960
|
|
|
|
192
|
|
|
|
14,007
|
|
|
|
14,199
|
|
Fixed asset write-down and site
clean-up
|
|
|
|
|
|
|
1,012
|
|
|
|
1,012
|
|
|
|
112
|
|
|
|
(138
|
)
|
|
|
(26
|
)
|
|
|
65
|
|
|
|
9,660
|
|
|
|
9,725
|
|
Employee termination cost & other
|
|
|
28
|
|
|
|
25
|
|
|
|
53
|
|
|
|
(98
|
)
|
|
|
1,755
|
|
|
|
1,657
|
|
|
|
618
|
|
|
|
4,202
|
|
|
|
4,820
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in special charges
|
|
|
28
|
|
|
|
1,037
|
|
|
|
1,065
|
|
|
|
14
|
|
|
|
1,617
|
|
|
|
1,631
|
|
|
|
683
|
|
|
|
13,862
|
|
|
|
14,545
|
|
Ineffectiveness of natural gas hedge
|
|
|
|
|
|
|
130
|
|
|
|
130
|
|
|
|
|
|
|
|
232
|
|
|
|
232
|
|
|
|
|
|
|
|
383
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other expense (income)
|
|
|
|
|
|
|
130
|
|
|
|
130
|
|
|
|
|
|
|
|
232
|
|
|
|
232
|
|
|
|
|
|
|
|
383
|
|
|
|
383
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax charge
|
|
$
|
28
|
|
|
$
|
1,155
|
|
|
$
|
1,183
|
|
|
$
|
14
|
|
|
$
|
3,809
|
|
|
$
|
3,823
|
|
|
$
|
875
|
|
|
$
|
28,252
|
|
|
$
|
29,127
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following reflects the balance sheet activity related to the
facility closure charge for the year ended December 31,
2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
Balances
|
|
|
Total
|
|
|
Cash
|
|
|
Inventory &
|
|
|
|
|
|
Balances at
|
|
|
|
at January 1,
|
|
|
Charge to
|
|
|
(Payments)
|
|
|
Fixed Asset
|
|
|
Non-Cash
|
|
|
December 31,
|
|
|
|
2010
|
|
|
Earnings
|
|
|
Receipts
|
|
|
Write Downs
|
|
|
Utilization
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Inventory write-down
|
|
$
|
|
|
|
$
|
(12
|
)
|
|
$
|
12
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
Building site
clean-up and
fixed asset write-down
|
|
|
306
|
|
|
|
1,012
|
|
|
|
(538
|
)
|
|
|
(629
|
)
|
|
|
|
|
|
|
151
|
|
Employee termination cost & other
|
|
|
710
|
|
|
|
53
|
|
|
|
(462
|
)
|
|
|
|
|
|
|
|
|
|
|
301
|
|
Ineffectiveness of natural gas hedges
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
(130
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,016
|
|
|
$
|
1,183
|
|
|
$
|
(988
|
)
|
|
$
|
(629
|
)
|
|
$
|
(130
|
)
|
|
$
|
452
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following reflects the balance sheet activity related to the
facility closure charge for the year ended December 31,
2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
Balances
|
|
|
Total
|
|
|
Cash
|
|
|
Inventory &
|
|
|
|
|
|
Balances at
|
|
|
|
at January 1,
|
|
|
Charge to
|
|
|
(Payments)
|
|
|
Fixed Asset
|
|
|
Non-Cash
|
|
|
December 31,
|
|
|
|
2009
|
|
|
Earnings
|
|
|
Receipts
|
|
|
Write Downs
|
|
|
Utilization
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Inventory write-down
|
|
$
|
|
|
|
$
|
977
|
|
|
$
|
137
|
|
|
$
|
(1,114
|
)
|
|
$
|
|
|
|
$
|
|
|
Pension & postretirement welfare
|
|
|
|
|
|
|
278
|
|
|
|
|
|
|
|
|
|
|
|
(278
|
)
|
|
|
|
|
Fixed asset depreciation
|
|
|
|
|
|
|
705
|
|
|
|
|
|
|
|
|
|
|
|
(705
|
)
|
|
|
|
|
Building site
clean-up and
fixed asset write-down
|
|
|
|
|
|
|
(26
|
)
|
|
|
444
|
|
|
|
(112
|
)
|
|
|
|
|
|
|
306
|
|
Employee termination cost & other
|
|
|
4,248
|
|
|
|
1,657
|
|
|
|
(5,683
|
)
|
|
|
|
|
|
|
488
|
|
|
|
710
|
|
Ineffectiveness of natural gas hedges
|
|
|
|
|
|
|
232
|
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
4,248
|
|
|
$
|
3,823
|
|
|
$
|
(5,102
|
)
|
|
$
|
(1,226
|
)
|
|
$
|
(727
|
)
|
|
$
|
1,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The ending balances of $0.5 million and $1.0 million
for 2010 and 2009, respectively, were included in accrued
special charges on the Consolidated Balance Sheets. We expect
the 2010 balance to result in cash payments in 2011. The
carrying value of this balance approximates its fair value.
These charges were recorded in the North American Other and
North American Glass reporting segments in 2010 and 2009.
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
|
|
|
|
Glass
|
|
|
Other
|
|
|
To Date
|
|
|
|
(Dollars in thousands)
|
|
|
Inventory write-down
|
|
$
|
192
|
|
|
$
|
10,541
|
|
|
$
|
10,733
|
|
Pension & postretirement welfare
|
|
|
|
|
|
|
4,448
|
|
|
|
4,448
|
|
Fixed asset depreciation
|
|
|
|
|
|
|
966
|
|
|
|
966
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in cost of sales
|
|
|
192
|
|
|
|
15,955
|
|
|
|
16,147
|
|
Employee termination cost & other
|
|
|
548
|
|
|
|
5,982
|
|
|
|
6,530
|
|
Building site
clean-up &
fixed asset write-down
|
|
|
177
|
|
|
|
10,534
|
|
|
|
10,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in special charges
|
|
|
725
|
|
|
|
16,516
|
|
|
|
17,241
|
|
Ineffectiveness of natural gas hedge
|
|
|
|
|
|
|
745
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in other (expense) income
|
|
|
|
|
|
|
745
|
|
|
|
745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax charge to date
|
|
$
|
917
|
|
|
$
|
33,216
|
|
|
$
|
34,133
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 2010, a charge
of $0.6 million was recorded to write down inventory and
spare machine parts related to our decorating business. This
amount was included in cost of sales on the Consolidated
Statements of Operations in the North American Glass segment.
Charges of $0.7 million were recorded in 2010 for site
cleanup and fixed assets write-down. This amount was included in
special charges on the
81
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Consolidated Statements of Operations in the North American
Glass segment. No employee related costs were incurred, as all
employees were reassigned into the facility.
The following reflects the balance sheet activity related to the
fixed asset and inventory write-down charge for the year ended
December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
|
|
|
|
|
|
|
|
Reserve
|
|
|
|
Balances
|
|
|
Total
|
|
|
Cash
|
|
|
Inventory &
|
|
|
Balances at
|
|
|
|
at January 1,
|
|
|
Charge to
|
|
|
(Payments)
|
|
|
Fixed Asset
|
|
|
December 31,
|
|
|
|
2010
|
|
|
Earnings
|
|
|
Receipts
|
|
|
Write Downs
|
|
|
2010
|
|
|
|
(Dollars in thousands)
|
|
|
Inventory write-down
|
|
$
|
|
|
|
$
|
578
|
|
|
$
|
|
|
|
$
|
(578
|
)
|
|
$
|
|
|
Building site
clean-up and
fixed asset write-down
|
|
|
|
|
|
|
737
|
|
|
|
9
|
|
|
|
(430
|
)
|
|
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
1,315
|
|
|
$
|
9
|
|
|
$
|
(1,008
|
)
|
|
$
|
316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The ending balance of $0.3 million for 2010 was included in
accrued special charges on the Consolidated Balance Sheets and
we expect this to result in cash payments in 2011.
During 2010, we wrote down certain after-processing equipment
within our North American Glass segment. The non-cash charge of
$2.7 million was included in Cost of Sales on the
Consolidated Statements of Operations.
During 2008, we wrote down certain fixed assets within our North
American Glass segment that had become idled and no longer were
being used in our production process. The non-cash charge of
$4.5 million was included in cost of sales on the
Consolidated Statements of Operations.
Write-off
of Finance Fees
In October 2009, we wrote off $2.7 million of finance fees
incurred in connection with the exchange of the Old PIK Notes.
These charges were recorded as interest expense on the
Consolidated Statements of Operations and are reflected in the
North American Glass reporting segment. See note 6 for
further discussion.
Intangible
Asset Impairment
Goodwill and intangible assets were tested for impairment in
accordance with FASB ASC Topic 350 and an impairment charge was
incurred in 2008 in the amount of $11.9 million for both
goodwill and intangibles associated with Royal Leerdam and
Crisal, which are in our International reporting segment.
$9.4 million of this charge was included in impairment of
goodwill and $2.5 million was recorded in special charges
on the Consolidated Statements of Operations. For further
discussion of goodwill and intangibles impairment, see
note 4.
82
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Summary
of Total Special Charges
The following table summarizes the special charges mentioned
above and their classifications in the Consolidated Statements
of Operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Cost of sales
|
|
$
|
3,262
|
|
|
$
|
1,960
|
|
|
$
|
18,681
|
|
Impairment of goodwill
|
|
|
|
|
|
|
|
|
|
|
9,434
|
|
Special charges
|
|
|
1,802
|
|
|
|
1,631
|
|
|
|
17,000
|
|
Other expense (income)
|
|
|
130
|
|
|
|
232
|
|
|
|
383
|
|
Interest expense
|
|
|
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total special charges
|
|
$
|
5,194
|
|
|
$
|
6,523
|
|
|
$
|
45,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The provisions for income taxes were calculated based on the
following components of earnings (loss) before income taxes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
United States
|
|
$
|
46,720
|
|
|
$
|
(25,385
|
)
|
|
$
|
(79,496
|
)
|
Non-U.S.
|
|
|
34,948
|
|
|
|
(653
|
)
|
|
|
5,347
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings (loss) before tax
|
|
$
|
81,668
|
|
|
$
|
(26,038
|
)
|
|
$
|
(74,149
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The current and deferred provisions (benefit) for income taxes
were:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
$
|
(423
|
)
|
|
$
|
11,436
|
|
|
$
|
(724
|
)
|
Non-U.S.
|
|
|
13,459
|
|
|
|
10,782
|
|
|
|
2,798
|
|
U.S. state and local
|
|
|
212
|
|
|
|
170
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax provision
|
|
|
13,248
|
|
|
|
22,388
|
|
|
|
2,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
94
|
|
|
|
(16,053
|
)
|
|
|
1,855
|
|
Non-U.S.
|
|
|
(1,854
|
)
|
|
|
(3,570
|
)
|
|
|
2,204
|
|
U.S. state and local
|
|
|
94
|
|
|
|
(15
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax (benefit) provision
|
|
|
(1,666
|
)
|
|
|
(19,638
|
)
|
|
|
4,059
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. federal
|
|
|
(329
|
)
|
|
|
(4,617
|
)
|
|
|
1,131
|
|
Non-U.S.
|
|
|
11,605
|
|
|
|
7,212
|
|
|
|
5,002
|
|
U.S. state and local
|
|
|
306
|
|
|
|
155
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision
|
|
$
|
11,582
|
|
|
$
|
2,750
|
|
|
$
|
6,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
83
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The significant components of our deferred income tax assets and
liabilities are as follows:
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Deferred income tax assets:
|
|
|
|
|
|
|
|
|
Pension
|
|
$
|
33,007
|
|
|
$
|
38,558
|
|
Nonpension postretirement benefits
|
|
|
25,853
|
|
|
|
24,820
|
|
Other accrued liabilities
|
|
|
20,426
|
|
|
|
16,843
|
|
Receivables
|
|
|
1,496
|
|
|
|
2,201
|
|
Cancellation of indebtedness income
|
|
|
|
|
|
|
27,300
|
|
Net operating loss carry forwards
|
|
|
15,212
|
|
|
|
15,969
|
|
Tax credits
|
|
|
10,056
|
|
|
|
10,143
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax assets
|
|
|
106,050
|
|
|
|
135,834
|
|
|
|
|
|
|
|
|
|
|
Deferred income tax liabilities:
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
22,432
|
|
|
|
26,248
|
|
Inventories
|
|
|
7,138
|
|
|
|
8,210
|
|
Intangibles and other assets
|
|
|
12,246
|
|
|
|
12,172
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax liabilities
|
|
|
41,816
|
|
|
|
46,630
|
|
|
|
|
|
|
|
|
|
|
Net deferred income tax asset before valuation allowance
|
|
|
64,234
|
|
|
|
89,204
|
|
Valuation allowance
|
|
|
(72,327
|
)
|
|
|
(98,989
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liability
|
|
$
|
(8,093
|
)
|
|
$
|
(9,785
|
)
|
|
|
|
|
|
|
|
|
|
The net deferred income tax assets and liabilities at December
31 of the respective year-ends were included in the Consolidated
Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Current deferred income tax asset (liability)
|
|
$
|
283
|
|
|
$
|
(3,559
|
)
|
Noncurrent deferred income tax liability
|
|
|
(8,376
|
)
|
|
|
(6,226
|
)
|
|
|
|
|
|
|
|
|
|
Net deferred income tax liability
|
|
$
|
(8,093
|
)
|
|
$
|
(9,785
|
)
|
|
|
|
|
|
|
|
|
|
The 2010 deferred income tax asset for net operating loss carry
forwards of $15.2 million relates to pre-tax losses
incurred in the Netherlands of $12.9 million, in Portugal
of $12.5 million, in China of $14.4 million, in
U.S. federal of $11.6 million and in U.S. state
and local jurisdictions of $77.9 million. Our foreign net
operating loss carry forwards of $39.8 million will expire
between 2011 and 2019. Our U.S. federal net operating loss
carry forward of $11.6 million will expire between 2028 and
2029. The U.S. state and local net operating loss carry
forward of $77.9 million will expire between 2017 and 2030.
The 2009 deferred income tax asset for net operating loss carry
forwards of $16.0 million relates to pre-tax losses
incurred in the Netherlands of $21.6 million, in Mexico of
$4.3 million, in Portugal of $11.3 million, in China
of $14.9 million, in U.S. federal of $5.9 million
and in U.S. state and local jurisdictions of
$36.2 million.
The Company has a tax holiday in China, which will expire in
2013. The Company recognized no benefit from the tax holiday in
2010, 2009 or 2008.
The 2010 deferred tax credits of $10.1 million consist of
$3.1 million U.S. federal tax credits and
$7.0 million
non-U.S. credits.
The U.S. federal tax credits are foreign tax credits
associated with undistributed earnings of our Canadian
operations, which are not permanently reinvested, general
business research and development credits, and alternative
minimum tax credits. The
non-U.S. credit
of $7.0 million, which is related to withholding tax on
inter-
84
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
company debt in the Netherlands, can be carried forward
indefinitely. The 2009 deferred tax credits of
$10.1 million consist of $3.0 million
U.S. federal tax credits and $7.1 million
non-U.S. credits.
In assessing the need for a valuation allowance, management
considers whether it is more likely than not that some portion
or all of the deferred income tax assets will be realized on a
quarterly basis or whenever events indicate that a review is
required. The ultimate realization of deferred income tax assets
is dependent upon the generation of future taxable income
(including reversals of deferred income tax liabilities) during
the periods in which those temporary differences reverse. As a
result, we consider the historical and projected financial
results of the legal entity or consolidated group recording the
net deferred income tax asset as well as all other positive and
negative evidence. Examples of the evidence we consider are
cumulative losses in recent years, losses expected in early
future years, a history of potential tax benefits expiring
unused, 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. As part of the review in
determining the need for a valuation allowance, we assess
potential releases of existing valuation allowances. If we
continue to generate positive pre-tax income in the U.S., it is
possible that the existing valuation allowance, or portions
thereof, could be released.
The valuation allowance activity for the years ended December 31
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance
|
|
$
|
98,989
|
|
|
$
|
87,442
|
|
|
$
|
28,855
|
|
(Benefit) charge to provision for income taxes
|
|
|
(22,830
|
)
|
|
|
8,140
|
|
|
|
37,247
|
|
(Benefit) charge to other comprehensive income
|
|
|
(3,832
|
)
|
|
|
3,407
|
|
|
|
21,340
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
72,327
|
|
|
$
|
98,989
|
|
|
$
|
87,442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The valuation allowance decreased $26.7 million in 2010
from $99.0 million at December 31, 2009 to
$72.3 million at December 31, 2010. The 2010 valuation
allowance of $72.3 million consists of $56.9 million
related to U.S. entities and $15.4 million related to
non-U.S. entities.
The 2010 decrease in valuation allowance was largely driven by a
decrease in our U.S. deferred tax asset related to
cancellation of indebtedness income attributed to debt
restructuring activities in 2009 and the release of a partial
valuation allowance for one of our Mexican entities. The
valuation allowance increased $11.6 million in 2009 from
$87.4 million at December 31, 2008 to
$99.0 million at December 31, 2009. The 2009 increase
of $11.6 million was attributable to the 2009 change in
deferred tax assets.
Reconciliation from the statutory U.S. federal income tax
rate of 35.0 percent to the consolidated effective income
tax rate was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Statutory U.S. federal income tax rate
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
Increase (decrease) in rate due to:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-U.S.
income tax differential
|
|
|
(2.8
|
)
|
|
|
9.9
|
|
|
|
4.7
|
|
U.S. state and local income taxes, net of related U.S. federal
income taxes
|
|
|
0.3
|
|
|
|
(0.6
|
)
|
|
|
(0.2
|
)
|
U.S. federal credits and net operating loss caryforward
|
|
|
0.8
|
|
|
|
|
|
|
|
1.0
|
|
Permanent adjustments
|
|
|
6.9
|
|
|
|
(14.8
|
)
|
|
|
(2.6
|
)
|
Non-U.S.
federal credits
|
|
|
|
|
|
|
|
|
|
|
4.8
|
|
Valuation allowance
|
|
|
(25.4
|
)
|
|
|
(31.3
|
)
|
|
|
(50.3
|
)
|
Income tax impact pursuant to Crisa acquisition
|
|
|
|
|
|
|
(12.1
|
)
|
|
|
|
|
Other
|
|
|
(0.6
|
)
|
|
|
3.3
|
|
|
|
(0.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated effective income tax rate
|
|
|
14.2
|
%
|
|
|
(10.6
|
)%
|
|
|
(8.5
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
85
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
During 2009, the Company identified an income tax adjustment
related to the 2006 Crisa acquisition as reflected in the table
above. After review, management believes these items did not
have a material impact on the financial statements.
Significant components of our current income tax (liability)
asset are as follows:
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
U.S. federal
|
|
$
|
564
|
|
|
$
|
3,077
|
|
Non-U.S.
|
|
|
(3,519
|
)
|
|
|
(2,486
|
)
|
U.S. state and local
|
|
|
(166
|
)
|
|
|
(116
|
)
|
|
|
|
|
|
|
|
|
|
Total current income tax (liability) asset
|
|
$
|
(3,121
|
)
|
|
$
|
475
|
|
|
|
|
|
|
|
|
|
|
There were no incremental undistributed earnings from
non-U.S.
subsidiaries in 2010 and due in part to a one-time distribution
to the United States, there were no accumulated undistributed
earnings from
non-U.S.
subsidiaries as of December 31, 2010. U.S. income taxes and
non-U.S.
withholding taxes were not provided on a cumulative total of
$37.5 million at December 31, 2009 of undistributed
earnings for certain
non-U.S.
subsidiaries. We intend to reinvest any future undistributed
earnings indefinitely into
non-U.S. operations.
Determination of the net amount of unrecognized U.S. income
tax and potential foreign withholdings with respect to these
earnings is not practicable.
We are subject to income taxes in the U.S. and various
foreign jurisdictions. Management judgment is required in
evaluating our tax positions and determining our provision for
income taxes. Throughout the course of business, there are
numerous transactions and calculations for which the ultimate
tax determination is uncertain. When management believes certain
tax positions may be challenged despite our belief that the tax
return positions are supportable, we establish reserves for tax
uncertainties based on estimates of whether additional taxes
will be due. We adjust these reserves taking into consideration
changing facts and circumstances, such as an outcome of a tax
audit. The income tax provision includes the impact of reserve
provisions and changes to reserves that are considered
appropriate. Accruals for tax contingencies are provided for in
accordance with the requirements of FASB ASC 740.
At December 31, 2010, we had $1.1 million of total
gross unrecognized tax benefits, of which approximately
$1.0 million would impact the effective tax rate, if
recognized. At December 31, 2009, we had $1.0 million
of total gross unrecognized tax benefits, of which approximately
$1.0 million would impact the effective tax rate, if
recognized. At December 31, 2008, we had $2.3 million
of total gross unrecognized tax benefits, of which approximately
$0.9 million would impact the effective tax rate, if
recognized. During 2010, we accrued a net $0.1 million of
total unrecognized tax benefits due to tax positions related to
current and prior years and lapses in statutes of limitations.
A reconciliation of the beginning and ending amount of gross
unrecognized tax benefits, excluding interest and penalties, is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance
|
|
$
|
1,029
|
|
|
$
|
2,301
|
|
|
$
|
2,729
|
|
Additions based on tax positions related to the current year
|
|
|
48
|
|
|
|
1,180
|
|
|
|
29
|
|
Additions for tax positions of prior years
|
|
|
|
|
|
|
|
|
|
|
1,567
|
|
Reductions for tax positions of prior years
|
|
|
(34
|
)
|
|
|
(229
|
)
|
|
|
(1,020
|
)
|
Reductions due to lapse of statute of limitations
|
|
|
86
|
|
|
|
137
|
|
|
|
(1,004
|
)
|
Reductions due to settlements with tax authorities
|
|
|
|
|
|
|
(2,360
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance
|
|
$
|
1,129
|
|
|
$
|
1,029
|
|
|
$
|
2,301
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
86
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
We recognize interest and penalties related to unrecognized tax
benefits in the provision for income taxes. We recognized a
$0.3 million benefit in 2010, a $0.5 million benefit
in 2009 and a $0.5 million benefit in 2008 in our
Consolidated Statements of Operations from a reduction in
interest and penalties for uncertain tax positions. In addition,
we had $1.7 million, $2.0 million and
$2.5 million accrued for interest and penalties, net of tax
benefit, at December 31, 2010, 2009 and 2008, respectively.
Based upon the outcome of tax examinations, judicial
proceedings, or expiration of statutes of limitations, it is
reasonably possible that the ultimate resolution of these
unrecognized tax benefits may result in a payment that is
materially different from the current estimate of the tax
liabilities. It is not possible at this point in time, however,
to estimate whether there will be a significant change in the
Companys gross unrecognized tax benefits.
We file income tax returns in the U.S. federal
jurisdiction, and various state and foreign jurisdictions. As of
December 31, 2010, the tax years that remained subject to
examination by major tax jurisdictions were as follows:
|
|
|
|
|
Jurisdiction
|
|
Open Years
|
|
|
Canada
|
|
|
2007-2010
|
|
China
|
|
|
2007-2010
|
|
Mexico
|
|
|
2005-2010
|
|
Netherlands
|
|
|
2009-2010
|
|
Portugal
|
|
|
2006-2010
|
|
United States
|
|
|
2008-2010
|
|
We have pension plans covering certain employees. Benefits
generally are based on compensation for salaried employees and
job grade and length of service for hourly employees. Our policy
is to fund pension plans such that sufficient assets will be
available to meet future benefit requirements. In addition, we
have an unfunded supplemental employee retirement plan (SERP)
that covers salaried
U.S.-based
employees of Libbey hired before January 1, 2006. The
U.S. pension plans cover the salaried
U.S.-based
employees of Libbey hired before January 1, 2006 and most
hourly
U.S.-based
employees (excluding new hires 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.
Effect
on Operations
The components of our net pension expense, including the SERP,
are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Service cost (benefits earned during the period)
|
|
$
|
5,341
|
|
|
$
|
5,050
|
|
|
$
|
5,388
|
|
|
$
|
1,603
|
|
|
$
|
1,354
|
|
|
$
|
1,669
|
|
|
$
|
6,944
|
|
|
$
|
6,404
|
|
|
$
|
7,057
|
|
Interest cost on projected benefit obligation
|
|
|
15,896
|
|
|
|
15,623
|
|
|
|
15,634
|
|
|
|
4,557
|
|
|
|
4,147
|
|
|
|
4,729
|
|
|
|
20,453
|
|
|
|
19,770
|
|
|
|
20,363
|
|
Expected return on plan assets
|
|
|
(16,683
|
)
|
|
|
(17,573
|
)
|
|
|
(17,567
|
)
|
|
|
(2,463
|
)
|
|
|
(2,530
|
)
|
|
|
(3,265
|
)
|
|
|
(19,146
|
)
|
|
|
(20,103
|
)
|
|
|
(20,832
|
)
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
|
2,328
|
|
|
|
2,242
|
|
|
|
2,381
|
|
|
|
2
|
|
|
|
(207
|
)
|
|
|
(212
|
)
|
|
|
2,330
|
|
|
|
2,035
|
|
|
|
2,169
|
|
Actuarial loss
|
|
|
3,621
|
|
|
|
960
|
|
|
|
1,308
|
|
|
|
417
|
|
|
|
375
|
|
|
|
293
|
|
|
|
4,038
|
|
|
|
1,335
|
|
|
|
1,601
|
|
Transition obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
122
|
|
|
|
113
|
|
|
|
142
|
|
|
|
122
|
|
|
|
113
|
|
|
|
142
|
|
Curtailment charge
|
|
|
|
|
|
|
|
|
|
|
1,070
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,070
|
|
Settlement charge
|
|
|
|
|
|
|
3,661
|
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
47
|
|
|
|
3,661
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension expense
|
|
$
|
10,503
|
|
|
$
|
9,963
|
|
|
$
|
8,214
|
|
|
$
|
4,285
|
|
|
$
|
3,252
|
|
|
$
|
3,356
|
|
|
$
|
14,788
|
|
|
$
|
13,215
|
|
|
$
|
11,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
87
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
In 2009, we incurred pension settlement charges of
$3.7 million. The pension settlement charges were triggered
by excess lump sum distributions taken by employees, which
required us to record unrecognized gains and losses in our
pension plan accounts.
In the fourth quarter of 2008 we incurred a pension curtailment
charge of $1.1 million related to the announced closing of
our Syracuse China plant. See note 7 for further discussion.
Actuarial
Assumptions
The assumptions used to determine the benefit obligations were
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
5.50% to 5.76%
|
|
|
|
5.62% to 5.96%
|
|
|
|
5.40% to 8.25%
|
|
|
|
5.50% to 8.50%
|
|
Rate of compensation increase
|
|
|
2.25% to 4.50%
|
|
|
|
2.25% to 4.50%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
The assumptions used to determine net periodic pension costs
were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Discount rate
|
|
|
5.62% to 5.96%
|
|
|
|
6.41% to 6.48%
|
|
|
|
6.16% to 6.32%
|
|
|
|
5.50% to 8.50%
|
|
|
|
5.70% to 8.50%
|
|
|
|
5.50% to 8.50%
|
|
Expected long-term rate of return on plan assets
|
|
|
8.00%
|
|
|
|
8.25%
|
|
|
|
8.50%
|
|
|
|
5.75%
|
|
|
|
6.00%
|
|
|
|
6.50%
|
|
Rate of compensation increase
|
|
|
2.25% to 4.50%
|
|
|
|
2.63% to 5.25%
|
|
|
|
3.00% to 6.00%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
|
|
2.00% to 4.30%
|
|
The discount rate enables us to estimate the present value of
expected future cash flows on the measurement date. The rate
used reflects a rate of return on high-quality fixed income
investments that match the duration of expected benefit payments
at our December 31 measurement date. The discount rate at
December 31 is used to measure the year-end benefit obligations
and the earnings effects for the subsequent year. A higher
discount rate decreases the present value of benefit obligations
and decreases pension expense.
To determine the expected long-term rate of return on plan
assets for our funded plans, we consider the current and
expected asset allocations, as well as historical and expected
returns on various categories of plan assets. The expected
long-term rate of return on plan assets at
December 31st is used to measure the earnings effects
for the subsequent year. The assumed long-term rate of return on
assets is applied to a calculated value of plan assets that
recognizes gains and losses in the fair value of plan assets
compared to expected returns over the next five years. This
produces the expected return on plan assets that is included in
pension expense. The difference between the expected return and
the actual return on plan assets is deferred and amortized over
five years. The net deferral of past asset gains (losses)
affects the calculated value of plan assets and, ultimately,
future pension expense (income).
Future benefits are assumed to increase in a manner consistent
with past experience of the plans, which, to the extent benefits
are based on compensation, includes assumed compensation
increases as presented above. Amortization included in net
pension expense is based on the average remaining service of
employees.
We account for our defined benefit pension plans on an expense
basis that reflects actuarial funding methods. The actuarial
valuations require significant estimates and assumptions to be
made by management, primarily with respect to the discount rate
and expected long-term return on plan assets. These assumptions
are all susceptible to changes in market conditions. The
discount rate is based on a selected settlement portfolio from a
universe of high quality bonds. In determining the expected
long-term rate of return on plan assets, we consider historical
market and portfolio rates of return, asset allocations and
expectations of future rates of return. We evaluate these
critical assumptions on our annual measurement date of
December 31st. Other assumptions involving demographic
factors such as retirement age, mortality and turnover are
evaluated periodically and are updated to reflect our
experience. Actual results in any given year often will differ
from actuarial assumptions because of demographic, economic and
other factors.
88
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Considering 2010 results, the disclosure below provides a
sensitivity analysis of the impact that changes in the
significant assumptions would have on 2010 and 2011 pension
expense:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated
|
|
|
Percentage
|
|
Effect on Annual Expense:
|
Assumption
|
|
Point Change
|
|
2010
|
|
2011
|
|
|
(Dollars in thousands)
|
|
Discount rate
|
|
|
1.0 percent change
|
|
|
$
|
3,200
|
|
|
$
|
4,000
|
|
Long-term rate of return on assets
|
|
|
1.0 percent change
|
|
|
$
|
2,400
|
|
|
$
|
2,400
|
|
Projected
Benefit Obligation (PBO) and Fair Value of Assets
The changes in the projected benefit obligations and fair value
of plan assets are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Change in projected benefit obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation, beginning of year
|
|
$
|
278,801
|
|
|
$
|
256,871
|
|
|
$
|
69,201
|
|
|
$
|
60,897
|
|
|
$
|
348,002
|
|
|
$
|
317,768
|
|
Service cost
|
|
|
5,341
|
|
|
|
5,050
|
|
|
|
1,603
|
|
|
|
1,354
|
|
|
|
6,944
|
|
|
|
6,404
|
|
Interest cost
|
|
|
15,896
|
|
|
|
15,623
|
|
|
|
4,557
|
|
|
|
4,147
|
|
|
|
20,453
|
|
|
|
19,770
|
|
Exchange rate fluctuations
|
|
|
|
|
|
|
|
|
|
|
(1,334
|
)
|
|
|
2,833
|
|
|
|
(1,334
|
)
|
|
|
2,833
|
|
Actuarial loss
|
|
|
4,238
|
|
|
|
27,910
|
|
|
|
816
|
|
|
|
1,239
|
|
|
|
5,054
|
|
|
|
29,149
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
1,281
|
|
|
|
1,079
|
|
|
|
1,281
|
|
|
|
1,079
|
|
Settlements
|
|
|
|
|
|
|
(6,445
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,445
|
)
|
Benefits paid
|
|
|
(14,551
|
)
|
|
|
(20,208
|
)
|
|
|
(2,796
|
)
|
|
|
(2,348
|
)
|
|
|
(17,347
|
)
|
|
|
(22,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected benefit obligation, end of year
|
|
$
|
289,725
|
|
|
$
|
278,801
|
|
|
$
|
73,328
|
|
|
$
|
69,201
|
|
|
$
|
363,053
|
|
|
$
|
348,002
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, beginning of year
|
|
$
|
185,930
|
|
|
$
|
170,354
|
|
|
$
|
49,815
|
|
|
$
|
45,482
|
|
|
$
|
235,745
|
|
|
$
|
215,836
|
|
Actual return on plan assets
|
|
|
25,590
|
|
|
|
26,540
|
|
|
|
3,667
|
|
|
|
1,944
|
|
|
|
29,257
|
|
|
|
28,484
|
|
Exchange rate fluctuations
|
|
|
|
|
|
|
|
|
|
|
(3,764
|
)
|
|
|
820
|
|
|
|
(3,764
|
)
|
|
|
820
|
|
Employer contributions
|
|
|
9,118
|
|
|
|
9,244
|
|
|
|
3,679
|
|
|
|
2,838
|
|
|
|
12,797
|
|
|
|
12,082
|
|
Plan participants contributions
|
|
|
|
|
|
|
|
|
|
|
1,281
|
|
|
|
1,079
|
|
|
|
1,281
|
|
|
|
1,079
|
|
Benefits paid
|
|
|
(14,551
|
)
|
|
|
(20,208
|
)
|
|
|
(2,796
|
)
|
|
|
(2,348
|
)
|
|
|
(17,347
|
)
|
|
|
(22,556
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets, end of year
|
|
$
|
206,087
|
|
|
$
|
185,930
|
|
|
$
|
51,882
|
|
|
$
|
49,815
|
|
|
$
|
257,969
|
|
|
$
|
235,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded ratio
|
|
|
71.1
|
%
|
|
|
66.7
|
%
|
|
|
70.8
|
%
|
|
|
72.0
|
%
|
|
|
71.1
|
%
|
|
|
67.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and net accrued pension benefit cost
|
|
$
|
(83,638
|
)
|
|
$
|
(92,871
|
)
|
|
$
|
(21,446
|
)
|
|
$
|
(19,386
|
)
|
|
$
|
(105,084
|
)
|
|
$
|
(112,257
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2010 net accrued pension benefit cost of
$105.1 million is represented by a non-current asset in the
amount of $12.7 million, a current liability in the amount
of $2.3 million and a long-term liability in the amount of
$115.5 million on the Consolidated Balance Sheets. The
2009 net accrued pension benefit cost of
$112.3 million is represented by a non-current asset in the
amount of $9.4 million, a current liability in the amount
of $2.0 million and a long-term liability in the amount of
$119.7 million on the Consolidated Balance Sheets. The
current portion reflects the amount of expected benefit payments
that are greater than the plan assets on a
plan-by-plan
basis.
89
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The pre-tax amounts recognized in accumulated other
comprehensive loss as of December 31, 2010 and 2009, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss
|
|
$
|
87,357
|
|
|
$
|
95,648
|
|
|
$
|
9,097
|
|
|
$
|
9,215
|
|
|
$
|
96,454
|
|
|
$
|
104,863
|
|
Prior service cost
|
|
|
7,736
|
|
|
|
10,064
|
|
|
|
2,005
|
|
|
|
2,151
|
|
|
|
9,741
|
|
|
|
12,215
|
|
Transition obligation
|
|
|
|
|
|
|
|
|
|
|
384
|
|
|
|
483
|
|
|
|
384
|
|
|
|
483
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
$
|
95,093
|
|
|
$
|
105,712
|
|
|
$
|
11,486
|
|
|
$
|
11,849
|
|
|
$
|
106,579
|
|
|
$
|
117,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-tax amounts in accumulated other comprehensive loss as
of December 31, 2010, that are expected to be recognized as
components of net periodic benefit cost during 2011 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss
|
|
$
|
4,871
|
|
|
$
|
493
|
|
|
$
|
5,364
|
|
Prior service cost
|
|
|
2,163
|
|
|
|
194
|
|
|
|
2,357
|
|
Transition obligation
|
|
|
|
|
|
|
125
|
|
|
|
125
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost
|
|
$
|
7,034
|
|
|
$
|
812
|
|
|
$
|
7,846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We contributed $9.1 million to the U.S. pension plans
in 2010, compared to $9.2 million in 2009. We contributed
$3.7 million in 2010 to the
non-U.S. pension
plans compared to $2.8 million in 2009. It is difficult to
estimate future cash contributions, as such amounts are a
function of actual investment returns, withdrawals from the
plans, changes in interest rates and other factors uncertain at
this time. We currently anticipate making cash contributions of
approximately $22.9 million into the U.S. pension
plans and approximately $3.8 million into the
non-U.S. pension
plans in 2011. However, it is possible that greater cash
contributions may be required in 2011. Although a decline in
market conditions, changes in current pension law and
uncertainties regarding significant assumptions used in the
actuarial valuations may have a material impact in future
required contributions to our pension plans, we currently do not
expect funding requirements to have a material adverse impact on
current or future liquidity.
Pension benefit payment amounts are anticipated to be paid from
the plans (including the SERP) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
2011
|
|
$
|
17,190
|
|
|
$
|
2,932
|
|
|
$
|
20,122
|
|
2012
|
|
$
|
17,790
|
|
|
$
|
3,000
|
|
|
$
|
20,790
|
|
2013
|
|
$
|
18,610
|
|
|
$
|
3,241
|
|
|
$
|
21,851
|
|
2014
|
|
$
|
19,256
|
|
|
$
|
3,699
|
|
|
$
|
22,955
|
|
2015
|
|
$
|
19,949
|
|
|
$
|
4,479
|
|
|
$
|
24,428
|
|
2016-2020
|
|
$
|
106,548
|
|
|
$
|
27,775
|
|
|
$
|
134,323
|
|
90
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Accumulated
Benefit Obligation in Excess of Plan Assets
The projected benefit obligation, accumulated benefit obligation
and fair value of plan assets for pension plans with an
accumulated benefit obligation in excess of plan asset at
December 31, 2010 and 2009 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Projected benefit obligation
|
|
$
|
289,725
|
|
|
$
|
34,213
|
|
|
$
|
323,938
|
|
Accumulated benefit obligation
|
|
$
|
285,551
|
|
|
$
|
29,632
|
|
|
$
|
315,183
|
|
Fair value of plan assets
|
|
$
|
206,087
|
|
|
$
|
|
|
|
$
|
206,087
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Projected benefit obligation
|
|
$
|
278,801
|
|
|
$
|
28,839
|
|
|
$
|
307,640
|
|
Accumulated benefit obligation
|
|
$
|
274,266
|
|
|
$
|
22,531
|
|
|
$
|
296,797
|
|
Fair value of plan assets
|
|
$
|
185,930
|
|
|
$
|
|
|
|
$
|
185,930
|
|
Plan
Asset Allocation
The asset allocation for our U.S. pension plans at the end
of 2010 and 2009 and the target allocation for 2011, by asset
category, are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
Percentage of Plan Assets at Year End
|
|
U.S. Plans Asset Category
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Equity securities
|
|
|
45
|
%
|
|
|
49
|
%
|
|
|
48
|
%
|
Debt securities
|
|
|
35
|
%
|
|
|
31
|
%
|
|
|
34
|
%
|
Real estate
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
Other
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
13
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The asset allocation for our Royal Leerdam pension plans at the
end of 2010 and 2009 and the target allocation for 2011, by
asset category, are as follows.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target
|
|
|
|
|
|
|
|
|
|
Allocation
|
|
|
Percentage of Plan Assets at Year End
|
|
Non-U.S. Plan Asset Category
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
|
Equity securities
|
|
|
22
|
%
|
|
|
23
|
%
|
|
|
19
|
%
|
Debt securities
|
|
|
62
|
%
|
|
|
61
|
%
|
|
|
64
|
%
|
Real estate
|
|
|
11
|
%
|
|
|
10
|
%
|
|
|
11
|
%
|
Other
|
|
|
5
|
%
|
|
|
6
|
%
|
|
|
6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment strategy is to control and manage investment risk
through diversification across asset classes and investment
styles, within established target asset allocation ranges. The
investment risk of the assets is limited by appropriate
diversification both within and between asset classes. Assets
will be diversified among a mix of traditional investments in
equity and fixed income instruments, as well as alternative
investments including real estate and hedge funds. It would be
anticipated that a modest allocation to cash would exist within
the plans, since
91
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
each investment manager is likely to hold some cash in the
portfolio with the goal of ensuring that sufficient liquidity
will be available to meet expected cash flow requirements.
Our investment valuation policy is to value the investments at
fair value. All investments are valued at their respective net
asset values as calculated by the Trustee. Underlying equity
securities for which market quotations are readily available are
valued at the last reported readily available sales price on
their principal exchange on the valuation date or official close
for certain markets. Fixed income investments are valued on a
basis of valuations furnished by a trustee-approved pricing
service, which determines valuations for normal
institutional-size trading units of such securities which are
generally recognized at fair value as determined in good faith
by the Trustee. Short-term investments, if any, are stated at
amortized cost, which approximates fair value. The fair value of
investments in real estate funds is based on valuation of the
fund as determined by periodic appraisals of the underlying
investments owned by the respective fund. The fair value of
hedge funds is based on the net asset values provided by the
fund manager. Investments in registered investments companies or
collective pooled funds, if any, are valued at their respective
net asset value.
The following table sets forth by level, within the fair value
hierarchy established by FASB ASC Topic 820, our pension plan
assets at fair value (see note 15 for further discussion of
the fair value hierarchy) as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2010
|
|
Level One
|
|
|
Level Two
|
|
|
Level Three
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Cash & cash equivalents
|
|
$
|
|
|
|
$
|
3,442
|
|
|
$
|
|
|
|
$
|
3,442
|
|
Real estate
|
|
|
|
|
|
|
11,088
|
|
|
|
5,385
|
|
|
|
16,473
|
|
Equity securities
|
|
|
|
|
|
|
111,369
|
|
|
|
|
|
|
|
111,369
|
|
Debt securities
|
|
|
|
|
|
|
96,081
|
|
|
|
|
|
|
|
96,081
|
|
Hedge funds
|
|
|
|
|
|
|
|
|
|
|
30,604
|
|
|
|
30,604
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
221,980
|
|
|
$
|
35,989
|
|
|
$
|
257,969
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009
|
|
Level One
|
|
|
Level Two
|
|
|
Level Three
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Cash & cash equivalents
|
|
$
|
|
|
|
$
|
957
|
|
|
$
|
|
|
|
$
|
957
|
|
Real estate
|
|
|
|
|
|
|
232
|
|
|
|
5,401
|
|
|
|
5,633
|
|
Equity securities
|
|
|
|
|
|
|
109,290
|
|
|
|
|
|
|
|
109,290
|
|
Debt securities
|
|
|
|
|
|
|
94,179
|
|
|
|
|
|
|
|
94,179
|
|
Hedge funds
|
|
|
|
|
|
|
|
|
|
|
25,686
|
|
|
|
25,686
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
|
|
|
$
|
204,658
|
|
|
$
|
31,087
|
|
|
$
|
235,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following is a reconciliation for which Level three inputs
were used in determining fair value:
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance of assets classified as Level 3 as of
December 31, 2009
|
|
$
|
31,087
|
|
Change in unrealized appreciation (depreciation)
|
|
|
2,912
|
|
Net purchases (sales)
|
|
|
1,990
|
|
|
|
|
|
|
Ending balance of assets classified as Level 3 as of
December 31, 2010
|
|
$
|
35,989
|
|
|
|
|
|
|
92
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Beginning balance of assets classified as Level 3 as of
December 31, 2008
|
|
$
|
34,056
|
|
Change in unrealized appreciation (depreciation)
|
|
|
3,721
|
|
Net purchases (sales)
|
|
|
(6,690
|
)
|
|
|
|
|
|
Ending balance of assets classified as Level 3 as of
December 31, 2009
|
|
$
|
31,087
|
|
|
|
|
|
|
|
|
10.
|
Nonpension
Postretirement Benefits
|
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. nonpension postretirement plans cover the hourly and
salaried
U.S.-based
employees of Libbey. The
non-U.S. nonpension
postretirement plans cover the retirees and active employees of
Libbey who are located in Canada. The postretirement benefit
plans are not funded.
Effect
on Operations
The provision for our nonpension postretirement benefit expense
consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Service cost (benefits earned during the period)
|
|
$
|
1,360
|
|
|
$
|
1,333
|
|
|
$
|
1,099
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1,361
|
|
|
$
|
1,334
|
|
|
$
|
1,100
|
|
Interest cost on projected benefit obligation
|
|
|
3,617
|
|
|
|
3,783
|
|
|
|
2,979
|
|
|
|
124
|
|
|
|
112
|
|
|
|
129
|
|
|
|
3,741
|
|
|
|
3,895
|
|
|
|
3,108
|
|
Amortization of unrecognized:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost (credit)
|
|
|
290
|
|
|
|
(418
|
)
|
|
|
2,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
290
|
|
|
|
(418
|
)
|
|
|
2,967
|
|
Loss (gain)
|
|
|
1,028
|
|
|
|
764
|
|
|
|
239
|
|
|
|
(29
|
)
|
|
|
(34
|
)
|
|
|
(33
|
)
|
|
|
999
|
|
|
|
730
|
|
|
|
206
|
|
Curtailment credit
|
|
|
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(94
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonpension postretirement benefit expense
|
|
$
|
6,295
|
|
|
$
|
5,368
|
|
|
$
|
7,284
|
|
|
$
|
96
|
|
|
$
|
79
|
|
|
$
|
97
|
|
|
$
|
6,391
|
|
|
$
|
5,447
|
|
|
$
|
7,381
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost for 2008 includes a charge of
$3.1 million to write off unrecognized prior service cost
related to the announced closure of our Syracuse China
manufacturing operation. See note 7 for further discussion.
Actuarial
Assumptions
The discount rate used to determine the accumulated
postretirement benefit obligation was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Discount rate
|
|
|
5.34
|
%
|
|
|
5.54
|
%
|
|
|
4.86
|
%
|
|
|
5.42
|
%
|
93
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The discount rate used to determine net postretirement benefit
cost was:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
Non-U.S. Plans
|
|
|
2010
|
|
2009
|
|
2008
|
|
2010
|
|
2009
|
|
2008
|
|
Discount rate
|
|
|
5.54
|
%
|
|
|
6.36
|
%
|
|
|
6.16
|
%
|
|
|
5.42
|
%
|
|
|
5.89
|
%
|
|
|
5.14
|
%
|
The weighted average assumed health care cost trend rates at
December 31 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Initial health care trend
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
|
|
7.50
|
%
|
|
|
8.00
|
%
|
Ultimate health care trend
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
|
|
5.00
|
%
|
Years to reach ultimate trend rate
|
|
|
10
|
|
|
|
6
|
|
|
|
10
|
|
|
|
6
|
|
We use various actuarial assumptions, including the discount
rate and the expected trend in health care costs, to estimate
the costs and benefit obligations for our retiree health plan.
The discount rate is determined based on high-quality fixed
income investments that match the duration of expected retiree
medical benefits at our December 31 measurement date to
establish the discount rate. The discount rate at December 31 is
used to measure the year-end benefit obligations and the
earnings effects for the subsequent year.
The health care cost trend rate represents our expected annual
rates of change in the cost of health care benefits. The trend
rate noted above represents a forward projection of health care
costs as of the measurement date.
Sensitivity to changes in key assumptions is as follows:
|
|
|
|
|
A 1.0 percent change in the health care trend rate would
not have a material impact upon the nonpension postretirement
expense.
|
|
|
|
A 1.0 percent change in the discount rate would change the
nonpension postretirement expense by $0.5 million.
|
Accumulated
Postretirement Benefit Obligation
The components of our nonpension postretirement benefit
obligation are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Change in accumulated nonpension postretirement benefit
obligation:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, beginning of year
|
|
$
|
66,792
|
|
|
$
|
59,854
|
|
|
$
|
2,351
|
|
|
$
|
2,027
|
|
|
$
|
69,143
|
|
|
$
|
61,881
|
|
Service cost
|
|
|
1,360
|
|
|
|
1,333
|
|
|
|
1
|
|
|
|
1
|
|
|
|
1,361
|
|
|
|
1,334
|
|
Interest cost
|
|
|
3,617
|
|
|
|
3,783
|
|
|
|
124
|
|
|
|
112
|
|
|
|
3,741
|
|
|
|
3,895
|
|
Plan participants contributions
|
|
|
1,365
|
|
|
|
1,416
|
|
|
|
|
|
|
|
|
|
|
|
1,365
|
|
|
|
1,416
|
|
Plan amendments
|
|
|
300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
300
|
|
|
|
|
|
Actuarial loss
|
|
|
2,068
|
|
|
|
4,958
|
|
|
|
101
|
|
|
|
76
|
|
|
|
2,169
|
|
|
|
5,034
|
|
Exchange rate fluctuations
|
|
|
|
|
|
|
|
|
|
|
120
|
|
|
|
333
|
|
|
|
120
|
|
|
|
333
|
|
Curtailments
|
|
|
|
|
|
|
(7
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7
|
)
|
Benefits paid
|
|
|
(5,321
|
)
|
|
|
(4,545
|
)
|
|
|
(124
|
)
|
|
|
(198
|
)
|
|
|
(5,445
|
)
|
|
|
(4,743
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation, end of year
|
|
$
|
70,181
|
|
|
$
|
66,792
|
|
|
$
|
2,573
|
|
|
$
|
2,351
|
|
|
$
|
72,754
|
|
|
$
|
69,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funded status and accrued benefit cost
|
|
$
|
(70,181
|
)
|
|
$
|
(66,792
|
)
|
|
$
|
(2,573
|
)
|
|
$
|
(2,351
|
)
|
|
$
|
(72,754
|
)
|
|
$
|
(69,143
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
94
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The 2010 net accrued postretirement benefit cost of
$72.8 million is represented by a current liability in the
amount of $5.0 million and a long-term liability in the
amount of $67.7 million on the Consolidated Balance Sheets.
The 2009 net accrued postretirement benefit cost of
$69.1 million is represented by a current liability in the
amount of $4.3 million and a long-term liability in the
amount of $64.8 million on the Consolidated Balance Sheets.
The pre-tax amounts recognized in accumulated other
comprehensive loss as of December 31, 2010 and 2009, are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non-U.S. Plans
|
|
|
Total
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss (gain)
|
|
$
|
20,574
|
|
|
$
|
19,534
|
|
|
$
|
(456
|
)
|
|
$
|
(566
|
)
|
|
$
|
20,118
|
|
|
$
|
18,968
|
|
Prior service cost
|
|
|
2,612
|
|
|
|
2,602
|
|
|
|
|
|
|
|
|
|
|
|
2,612
|
|
|
|
2,602
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost (credit)
|
|
$
|
23,186
|
|
|
$
|
22,136
|
|
|
$
|
(456
|
)
|
|
$
|
(566
|
)
|
|
$
|
22,730
|
|
|
$
|
21,570
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The pre-tax amounts in accumulated other comprehensive loss of
December 31, 2010, that are expected to be recognized as a
credit to net periodic benefit cost during 2011 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans
|
|
|
Non U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Net actuarial loss (gain)
|
|
$
|
1,160
|
|
|
$
|
(16
|
)
|
|
$
|
1,144
|
|
Prior service cost
|
|
|
422
|
|
|
|
|
|
|
|
422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost (credit )
|
|
$
|
1,582
|
|
|
$
|
(16
|
)
|
|
$
|
1,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonpension postretirement benefit payments net of estimated
future Medicare Part D subsidy payments and future retiree
contributions, are anticipated to be paid as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
U.S. Plans
|
|
|
Non U.S. Plans
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
2011
|
|
$
|
4,829
|
|
|
$
|
188
|
|
|
$
|
5,017
|
|
2012
|
|
$
|
5,252
|
|
|
$
|
190
|
|
|
$
|
5,442
|
|
2013
|
|
$
|
5,719
|
|
|
$
|
192
|
|
|
$
|
5,911
|
|
2014
|
|
$
|
6,123
|
|
|
$
|
195
|
|
|
$
|
6,318
|
|
2015
|
|
$
|
6,201
|
|
|
$
|
195
|
|
|
$
|
6,396
|
|
2016-2020
|
|
$
|
29,630
|
|
|
$
|
927
|
|
|
$
|
30,557
|
|
Prior to September 1, 2008, we also provided retiree health
care benefits to certain union hourly employees through
participation in a multi-employer retiree health care benefit
plan. This was an insured, premium-based arrangement. Related to
this plan, approximately $0.5 million was charged to
expense for the year ended December 31, 2008. During the
second quarter of 2008, we amended our U.S. non-pension
postretirement plans to cover employees and retirees previously
covered under the multi-employer plan. This plan amendment was
effective September 1, 2008 and resulted in a charge of
$3.4 million to other comprehensive loss during the second
quarter of 2008.
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. 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.
95
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
11.
|
Net
Income per Share of Common Stock
|
The following table sets forth the computation of basic and
diluted earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands, except per-share amounts)
|
|
|
Numerator for earnings per share net income (loss)
that is available to common shareholders
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per share
Weighted-average shares outstanding
|
|
|
17,668,214
|
|
|
|
15,149,013
|
|
|
|
14,671,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of stock options, restricted stock units and performance
shares
|
|
|
501,395
|
|
|
|
|
|
|
|
|
|
Effect of warrants
|
|
|
1,787,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities(1)
|
|
|
2,288,867
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator for diluted earnings per share Adjusted
weighted-average shares and assumed conversions
|
|
|
19,957,081
|
|
|
|
15,149,013
|
|
|
|
14,671,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
$
|
3.97
|
|
|
$
|
(1.90
|
)
|
|
$
|
(5.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
$
|
3.51
|
|
|
$
|
(1.90
|
)
|
|
$
|
(5.48
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
The effect of employee stock options, warrants, restricted stock
units and performance shares, 733,908 shares for the year
ended December 31, 2009, were anti-dilutive and thus not
included in the earnings per share calculation. The effect of
employee stock options, warrants, restricted stock units,
performance shares and the employee stock purchase plan, (ESPP),
237,802 shares for the years ended December 31, 2008
were anti-dilutive and thus not included in the earnings per
share calculation. These amounts would have been dilutive if not
for the net loss. |
When applicable, diluted shares outstanding include the dilutive
impact of
in-the-money
options, which are calculated based on the average share price
for each fiscal period using the treasury stock method. Under
the treasury stock method, the tax-effected proceeds that
hypothetically would be received from the exercise of all
in-the-money
options are assumed to be used to repurchase shares.
|
|
12.
|
Employee
Stock Benefit Plans
|
We have one stock-based employee compensation plan. We also had
an Employee Stock Purchase Plan (ESPP) under which eligible
employees could purchase a limited number of shares of Libbey
Inc. common stock at a discount. The ESPP was terminated
effective May 31, 2009.
We account for stock-based compensation in accordance with FASB
ASC Topic 718, Compensation Stock
Compensation and FASB ASC Topic
505-50,
Equity Equity Based Payment to
Non-Employees, which requires the measurement and
recognition of compensation expense for all share-based awards
to our employees and directors. Share-based compensation cost is
measured based on the fair value of the equity or liability
instruments issued. FASB ASC 718 and FASB
ASC 505-50
apply to all of our outstanding unvested share-based payment
awards.
Equity
Participation Plan Program Description
We have one equity participation plan: the Amended and Restated
Libbey Inc. 2006 Omnibus Incentive Plan which we refer to as the
Omnibus Plan. Up to a total of 2,960,000 shares of Libbey
Inc. common stock are authorized for issuance as equity-based
compensation under the Omnibus Plan. Under the Omnibus Plan,
grants of
96
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
equity-based compensation may take the form of stock options,
stock appreciation rights, performance shares or units,
restricted stock or restricted stock units or other stock-based
awards. Employees and directors are eligible for awards under
this plan. During 2010, there were grants of 220,007 stock
options, 226,667 restricted stock units and 2,800 stock
appreciation rights. During 2009, there were grants of 346,021
stock options, 8,717 performance shares, 260,271 restricted
stock units and 2,700 stock appreciation rights. All option
grants have an exercise price equal to the fair market value of
the underlying stock on the grant date. The vesting period of
options, stock appreciation rights and restricted stock units
outstanding as of December 31, 2010, is four years. These
instruments do not participate in dividends. All grants of
equity-based compensation are amortized over the vesting period
in accordance FASB ASC 718 expense attribution methodology.
The impact of applying the provisions of FASB ASC 718 is a
pre-tax compensation expense of $3.5 million,
$2.4 million and $3.5 million in selling, general and
administrative expenses in the Consolidated Statements of
Operations for 2010, 2009 and 2008, respectively.
Non-Qualified
Stock Option and Employee Stock Purchase Plan (ESPP)
Information
We had an ESPP under which 950,000 shares of common stock
had been reserved for issuance. Eligible employees could
purchase a limited number of shares of common stock at a
discount of up to 15 percent of the market value at certain
plan-defined dates. The ESPP terminated on May 31, 2009. In
2009 and 2008, shares issued under the ESPP totaled 362,011 and
113,247, respectively. Due to termination of the Plan, at
December 31, 2010 and December 31, 2009 there were no
shares available for issuance under the ESPP. Repurchased common
stock was used to fund the ESPP.
A participant could elect to have payroll deductions made during
the offering period in an amount not less than 2 percent
and not more than 20 percent of the participants
compensation during the option period. The option period started
on the offering date (June 1st) and ended on the exercise
date (May 31st). In no event could the option price per
share be less than the par value per share ($.01) of common
stock. All options and rights to participate in the ESPP were
nontransferable and subject to forfeiture in accordance with the
ESPP guidelines. In the event of certain corporate transactions,
each option outstanding under the ESPP would be assumed or the
successor corporation or a parent or subsidiary of such
successor corporation would substitute an equivalent option.
Compensation expense for 2010, 2009 and 2008 related to the ESPP
was $0.0 million, $(0.1) million, and
$0.6 million, respectively. The credit in expense for 2009
was attributable to the reversal of expense related to the
employees who elected to cancel their participation in the plan
prior to the plans May 31, 2009 termination.
Stock option compensation expense of $1.0 million,
$1.0 million, and $1.1 million is included in the
Consolidated Statements of Operations for 2010, 2009 and 2008,
respectively.
The Black-Scholes option-pricing model was developed for use in
estimating the value of traded options that have no vesting
restrictions and are fully transferable. There were 220,007
stock option grants made during 2010. Under the Black-Scholes
option-pricing model, the weighted-average grant-date fair value
of options granted during 2010 is $8.33. There were 346,021 and
147,976 stock option grants made during 2009 and 2008,
respectively. Under the Black-Scholes option-pricing model, the
weighted-average grant-date fair value of options
97
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
granted during 2009 and 2008 was $0.74 and $7.34, respectively.
The fair value of each option is estimated on the date of grant
with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
Stock option grants:
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest
|
|
|
2.86
|
%
|
|
|
2.78
|
%
|
|
|
3.30
|
%
|
Expected term
|
|
|
6.3 years
|
|
|
|
6.3 years
|
|
|
|
6.3 years
|
|
Expected volatility
|
|
|
87.21
|
%
|
|
|
74.00
|
%
|
|
|
48.20
|
%
|
Dividend yield
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
|
|
0.65
|
%
|
Employee Stock Purchase Plan:
|
|
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
|
|
2.18
|
%
|
Expected term
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
|
|
12 months
|
|
Expected volatility
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
|
|
57.30
|
%
|
Dividend yield
|
|
|
Not Applicable
|
|
|
|
Not Applicable
|
|
|
|
0.89
|
%
|
|
|
|
|
|
The risk-free interest rate is based on the U.S. Treasury
yield curve at the time of grant and has a term equal to the
expected life.
|
|
|
|
The expected term represents the period of time the options are
expected to be outstanding. Additionally, we use historical data
to estimate option exercises and employee forfeitures. The
Company uses the Simplified Method defined by the SEC Staff
Accounting Bulletin No. 107, Share-Based
Payment (SAB 107), to estimate the expected term of
the option, representing the period of time that options granted
are expected to be outstanding.
|
|
|
|
The expected volatility was developed based on historic stock
prices commensurate with the expected term of the option. We use
projected data for expected volatility of our stock options
based on the average of daily, weekly and monthly historical
volatilities of our stock price over the expected term of the
option and other economic data trended into future years.
|
|
|
|
The dividend yield is calculated as the ratio based on our most
recent historical dividend payments per share of common stock at
the grant date to the stock price on the date of grant.
|
98
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Information with respect to our stock option activity for 2010,
2009, and 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
|
|
|
Exercise Price per
|
|
|
Contractual Life
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Share
|
|
|
(In Years)
|
|
|
Value
|
|
|
|
(Dollars in thousands, except shares and per-share
amounts)
|
|
|
Outstanding balance at January 1, 2008
|
|
|
1,520,296
|
|
|
$
|
24.67
|
|
|
|
5
|
|
|
$
|
1,181
|
|
Granted
|
|
|
147,976
|
|
|
|
15.08
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(194,295
|
)
|
|
|
34.98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2008
|
|
|
1,473,977
|
|
|
|
22.37
|
|
|
|
5
|
|
|
$
|
|
|
Granted
|
|
|
346,021
|
|
|
|
1.09
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled
|
|
|
(175,831
|
)
|
|
|
29.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2009
|
|
|
1,644,167
|
|
|
|
17.18
|
|
|
|
6
|
|
|
$
|
2,258
|
|
Granted
|
|
|
220,007
|
|
|
|
11.10
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(9,279
|
)
|
|
|
14.50
|
|
|
|
|
|
|
$
|
84
|
|
Canceled
|
|
|
(139,961
|
)
|
|
|
28.05
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2010
|
|
|
1,714,934
|
|
|
$
|
15.58
|
|
|
|
6
|
|
|
$
|
6,710
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at December 31, 2010
|
|
|
1,164,814
|
|
|
$
|
19.48
|
|
|
|
|
|
|
$
|
2,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intrinsic value for share-based instruments is defined as the
difference between the current market value and the exercise
price. FASB ASC Topic 718 requires the benefits of tax
deductions in excess of the compensation cost recognized for
those stock options (excess tax benefit) to be classified as
financing cash flows. There were 9,279 stock options exercised
in 2010 and there were no stock options exercised during 2009 or
2008.
The aggregate intrinsic value in the preceding table represents
the total pretax intrinsic value, based on the Libbey Inc.
closing stock price of $15.47 as of December 31, 2010,
which would have been received by the option holders had all
option holders exercised their options as of that date. As of
December 31, 2010, 1,164,814 outstanding options were
exercisable, and the weighted average exercise price was $19.48.
As of December 31, 2009, 1,070,798 outstanding options were
exercisable, and the weighted average exercise price was $22.48.
As of December 31, 2008, 1,076,152 outstanding options were
exercisable, and the weighted average exercise price was $25.16.
As of December 31, 2010, $1.3 million of total
unrecognized compensation expense related to nonvested stock
options is expected to be recognized within the next four years
on a weighted-average basis. The total fair value of shares
vested during 2010 is $1.2 million. Shares issued for
exercised options are issued from treasury stock and newly
issued stock.
99
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
The following table summarizes our nonvested stock option
activity for 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average
|
|
|
|
Shares
|
|
|
Value (per Share)
|
|
|
Nonvested at January 1, 2008
|
|
|
337,010
|
|
|
$
|
6.67
|
|
Granted
|
|
|
147,976
|
|
|
$
|
7.34
|
|
Vested
|
|
|
(87,536
|
)
|
|
$
|
5.54
|
|
Canceled
|
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2008
|
|
|
397,450
|
|
|
$
|
7.17
|
|
Granted
|
|
|
346,021
|
|
|
$
|
0.74
|
|
Vested
|
|
|
(159,221
|
)
|
|
$
|
5.70
|
|
Canceled
|
|
|
(10,881
|
)
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2009
|
|
|
573,369
|
|
|
$
|
3.74
|
|
Granted
|
|
|
220,007
|
|
|
$
|
8.33
|
|
Vested
|
|
|
(221,065
|
)
|
|
$
|
5.57
|
|
Canceled
|
|
|
(22,191
|
)
|
|
$
|
4.26
|
|
|
|
|
|
|
|
|
|
|
Nonvested at December 31, 2010
|
|
|
550,120
|
|
|
$
|
4.81
|
|
|
|
|
|
|
|
|
|
|
Performance
Share Information
Performance share compensation expense of $0.5 million,
$0.5 million and $0.2 million for 2010, 2009 and 2008,
respectively, is included in our Consolidated Statements of
Operations.
Under the Omnibus Plan, we grant select executives and key
employees performance shares. The number of performance shares
granted to an executive is determined by dividing the value to
be transferred to the executive, expressed in U.S. dollars
and determined as a percentage of the executives long-term
incentive target (which in turn is a percentage of the
executives base salary on January 1 of the year in which
the performance shares are granted), by the average closing
price of Libbey Inc. common stock over a period of 60
consecutive trading days ending on the date of the grant. There
were no performance shares granted in 2010, but participants
earned performance shares that were granted in 2008 with respect
to a 3-year
performance cycle that began on January 1, 2008. Beginning
in 2009, awards under this portion of the Incentive Plan were
changed to cash awards.
The performance shares that are earned are settled by issuance
to the executive of one share of Libbey Inc. common stock for
each performance share earned. Performance shares are earned
only if and to the extent we achieve certain company-wide
performance goals over performance cycles of between 1 and
3 years.
100
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
A summary of the activity for performance shares under the
Amended and Restated Libbey Inc. 2006 Omnibus Incentive Plan for
2010, 2009 and 2008 is presented below:
|
|
|
|
|
Performance Shares
|
|
Shares
|
|
|
Outstanding balance at January 1, 2008
|
|
|
113,598
|
|
Granted
|
|
|
80,368
|
|
Issued
|
|
|
(14,626
|
)
|
Canceled
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2008
|
|
|
179,340
|
|
Granted
|
|
|
8,717
|
|
Issued
|
|
|
(13,896
|
)
|
Canceled
|
|
|
(2,300
|
)
|
|
|
|
|
|
Outstanding balance at December 31, 2009
|
|
|
171,861
|
|
Granted
|
|
|
|
|
Issued
|
|
|
(48,035
|
)
|
Canceled
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2010
|
|
|
123,826
|
|
|
|
|
|
|
Of this amount, 58,365 performance shares were earned as of
December 31, 2010, and as a result, 58,365 shares of
Libbey Inc. common stock were issued in February 2011 to the
executives in settlement of these performance shares.
The weighted-average grant-date fair value of the performance
shares granted during 2009 and 2008 was $1.41 and $15.35 per
share, respectively. As of December 31, 2010, there was no
unrecognized compensation cost related to nonvested performance
shares granted. Shares issued for performance share awards are
issued from treasury stock and newly issued stock.
Stock
and Restricted Stock Unit Information
Compensation expense of $2.0 million, $1.0 million,
and $1.6 million for 2010, 2009 and 2008, respectively, is
included in our Consolidated Statements of Operations to reflect
grants of restricted stock units and of stock.
Under the Omnibus Plan, we grant non-employee members of our
Board of Directors restricted stock units or shares of
unrestricted stock. The restricted stock units or shares granted
to Directors are immediately vested and all compensation expense
is recognized in our Consolidated Statements of Operations in
the year the grants are made. In addition, we grant restricted
stock units to select executives, and we grant shares of
restricted stock to key employees. The restricted stock units
granted to select executives vest over four years. The
restricted stock units granted to key employees generally vest
on the first anniversary of the grant date.
101
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
A summary of the activity for restricted stock units under the
Omnibus Plan for 2010 and 2009 is presented below:
|
|
|
|
|
Restricted Stock Units
|
|
Shares
|
|
|
Outstanding balance at January 1, 2008
|
|
|
170,158
|
|
Granted
|
|
|
100,725
|
|
Awarded
|
|
|
(67,972
|
)
|
Canceled
|
|
|
(300
|
)
|
|
|
|
|
|
Outstanding balance at December 31, 2008
|
|
|
202,611
|
|
Granted
|
|
|
260,271
|
|
Awarded
|
|
|
(170,154
|
)
|
Canceled
|
|
|
|
|
|
|
|
|
|
Outstanding balance at December 31, 2009
|
|
|
292,728
|
|
Granted
|
|
|
226,667
|
|
Awarded
|
|
|
(111,480
|
)
|
Canceled
|
|
|
(3,500
|
)
|
|
|
|
|
|
Outstanding balance at December 31, 2010
|
|
|
404,415
|
|
|
|
|
|
|
The weighted-average grant-date fair value of the restricted
stock units granted during 2010, 2009 and 2008 was $13.85, $1.26
and $14.63 respectively. As of December 31, 2010, there was
$1.6 million of total unrecognized compensation cost
related to nonvested restricted stock units granted. That cost
is expected to be recognized over a period of 4 years.
Shares issued for restricted stock unit awards are issued from
treasury stock or newly issued shares.
Employee
401(k) Plan Retirement Fund and Non-Qualified Deferred Executive
Compensation Plans
We sponsor the Libbey Inc. salary and hourly 401(k) plans (the
Plan) to provide retirement benefits for our
U.S. employees. As allowed under Section 401(k) of the
Internal Revenue Code, the Plan provides tax-deferred salary
contributions for eligible employees.
For the Salary Plan, employees can contribute from
1 percent to 50 percent of their annual salary on a
pre-tax basis, up to the annual IRS limits. We match
100 percent on the first 1 percent and match
50 percent on the next five percent of pretax contributions
to a maximum of 3.5 percent of compensation. For the Hourly
Plan, employees can contribute from 1 percent to
25 percent of their annual pay up to the annual IRS limits.
We match 50 percent of the first 6 percent of eligible
earnings that are contributed by employees on a pretax basis.
Therefore, the maximum matching contribution that we may
allocate to each participants account did not exceed
$8,575 for the Salary Plan or $7,350 for the Hourly Plan for the
2010 calendar year due to the $245,000 annual limit on eligible
earnings imposed by the Internal Revenue Code. The company
suspended matching contributions under the Plans for salaried
and non-union employees effective March 16, 2009, and they
were reinstated December 1, 2009. Starting in 2003, we used
treasury stock for the company match contributions to the Plans;
however, we discontinued that practice beginning January 1,
2007 with respect to salaried positions and beginning
January 1, 2008 with respect to hourly positions. All
matching contributions are now made in cash and vest immediately.
Effective January 1, 2005, employees who meet the age
requirements and reach the Plan contribution limits can make a
catch-up
contribution not to exceed the lesser of 50 percent of
their eligible compensation or the limit of $5,000 set forth in
the Internal Revenue Code for the 2010 calendar year. The
catch-up
contributions are not eligible for matching contributions.
102
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Effective January 1, 2009, we have a non-qualified
Executive Deferred Compensation Plan (EDCP). Under the EDCP,
executives and other members of senior management may elect to
defer base salary (including vacation pay and holiday pay), cash
incentive and bonus compensation and equity-based compensation.
We provide matching contributions on excess contributions in the
same manner as we provide matching contributions under our
401(k) plan.
At the end of 2008, the non-qualified Executive Savings Plan
(ESP) was frozen. The ESP was for those employees whose salary
exceeded the IRS limit. Libbey matched employee contributions
under the ESP in the same manner as we provided matching
contributions under our 401(k) Salary Plan.
Our matching contributions to all Plans totaled
$2.4 million, $1.3 million and $2.6 million in
2010, 2009, and 2008, respectively.
We utilize derivative financial instruments to manage our
interest rate exposure associated with our long-term debt, to
hedge 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 our derivative
financial instruments for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Derivatives:
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
Derivatives Designated as
|
|
Balance
|
|
|
|
|
Balance
|
|
|
|
Hedging Instruments
|
|
Sheet
|
|
Fair
|
|
|
Sheet
|
|
Fair
|
|
Under FASB ASC 815:
|
|
Location:
|
|
Value
|
|
|
Location:
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
Interest rate contracts
|
|
Other assets
|
|
$
|
2,536
|
|
|
|
|
$
|
|
|
Natural gas contracts
|
|
Other assets
|
|
|
53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total designated
|
|
|
|
$
|
2,589
|
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
103
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liability Derivatives:
|
|
|
|
December 31, 2010
|
|
|
December 31, 2009
|
|
Derivatives Designated as
|
|
Balance
|
|
|
|
|
Balance
|
|
|
|
Hedging Instruments
|
|
Sheet
|
|
Fair
|
|
|
Sheet
|
|
Fair
|
|
Under FASB ASC 815:
|
|
Location
|
|
Value
|
|
|
Location
|
|
Value
|
|
|
|
(Dollars in thousands)
|
|
|
Natural gas contracts
|
|
Derivative liability
|
|
$
|
3,117
|
|
|
Derivative liability
|
|
|
3,129
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
|
|
|
|
Other long-term liabilities
|
|
|
1,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total designated
|
|
|
|
|
3,117
|
|
|
|
|
|
5,111
|
|
Derivatives undesignated as hedging instruments under FASB
ASC 815:
|
|
|
|
|
|
|
|
|
|
|
|
|
Natural gas contracts
|
|
Derivative liability
|
|
|
124
|
|
|
Derivative liability
|
|
|
217
|
|
Currency contracts
|
|
Derivative liability
|
|
|
151
|
|
|
Derivative liability
|
|
|
|
|
Natural gas contracts
|
|
Other long-term liabilities
|
|
|
|
|
|
Other long-term liabilities
|
|
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total undesignated
|
|
|
|
|
275
|
|
|
|
|
|
296
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
3,392
|
|
|
|
|
$
|
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 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 (expense) income on the
Consolidated Statements of Operations along with the offsetting
loss or gain on the related interest rate swap.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Gain (Loss)
|
|
Year Ended December 31,
|
|
Recognized in Other (Expense) Income
|
|
Derivative:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Interest rate swap
|
|
$
|
2,536
|
|
|
$
|
|
|
|
$
|
|
|
Related long-term debt
|
|
|
(3,266
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net impact on other (expense) income
|
|
$
|
(730
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
104
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
occurring due to the closure of our Syracuse China facility in
April 2009. Under FASB ASC 815 Derivatives and
Hedging, when the forecasted transactions of a hedging
relationship becomes not probable of occurring, the gains or
losses that have been classified in OCI in prior periods for
those contracts effected should be reclassified into earnings.
We recognized $0.1 million, $0.2 million and
$0.4 million for the years ended December 31, 2010,
2009 and 2008, respectively, in other (expense) income on the
Consolidated Statements of Operations relating to these
contracts. As of December 31, 2010, we had commodity
contracts for 3,090,000 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
December 31, 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. Changes in
effective portion of the fair value of these hedges are recorded
in other comprehensive income (loss) (OCI). The ineffective
portion of the change in the fair value of a derivative
designated as a cash flow hedge is recognized in current
earnings. As the natural gas contracts mature, the accumulated
gains (losses) for the respective contracts are reclassified
from accumulated other comprehensive loss to current expense in
cost of sales in our Consolidated Statements of Operations. We
paid additional cash of $11.8 million, $18.3 million
and $2.4 million in the years ended December 31, 2010,
2009 and 2008, 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 $3.2 million of expense in our Consolidated
Statements 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 (loss) related to the interest rate
agreements. We paid additional cash interest of
$6.8 million and $2.7 million in the years ended
December 31, 2009 and 2008, respectively, due to the
difference between the contractual fixed interest rates in our
Interest Rate Protection Agreements and the variable interest
rates associated with our long-term debt.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of Derivative Gain/(Loss)
|
|
|
|
Recognized in OCI (Effective Portion)
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Derivatives in Cash Flow Hedging relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate contracts
|
|
$
|
|
|
|
$
|
6,322
|
|
|
$
|
(790
|
)
|
Natural gas contracts
|
|
|
(8,539
|
)
|
|
|
(8,976
|
)
|
|
|
(15,447
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(8,539
|
)
|
|
$
|
(2,654
|
)
|
|
$
|
(16,237
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain/(Loss) Reclassified from
|
|
|
|
|
|
|
Accumulated Other
|
|
|
|
|
|
|
Comprehensive Loss to
|
|
|
|
|
|
|
Consolidated Statements of
|
|
Year Ended December 31,
|
|
|
|
|
Operations (Effective Portion)
|
|
Derivative:
|
|
Location:
|
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Natural gas contracts
|
|
|
Cost of sales
|
|
|
$
|
(11,139
|
)
|
|
$
|
(18,269
|
)
|
|
$
|
(2,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total impact on net income (loss)
|
|
|
|
|
|
$
|
(11,139
|
)
|
|
$
|
(18,269
|
)
|
|
$
|
(2,431
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table provides the impact on the Consolidated
Statements 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
|
|
Year Ended December 31,
|
|
|
|
and Amount Excluded from Effectiveness Testing)
|
|
Derivative:
|
|
Location:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Natural gas contracts
|
|
Other (expense) income
|
|
$
|
(126
|
)
|
|
$
|
(155
|
)
|
|
$
|
(461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(126
|
)
|
|
$
|
(155
|
)
|
|
$
|
(461
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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. During 2010, we entered into a
series of foreign currency contracts to sell Canadian dollars.
As of December 31, 2010, we had contracts for
$18.7 million Canadian dollars.
Gains and losses for derivatives which were not designated as
hedging instruments are recorded in current earnings as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
Derivative:
|
|
Location:
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
Currency contracts
|
|
Other (expense) income
|
|
$
|
(150
|
)
|
|
$
|
|
|
|
$
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
$
|
(150
|
)
|
|
$
|
|
|
|
$
|
(359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 counterparties to the other derivative
agreements as of December 31, 2010, by Standard and
Poors.
106
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
14.
|
Comprehensive
Income (Loss)
|
Total comprehensive income (loss) (net of tax) includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
Effect of derivatives, net of tax (below)
|
|
|
3,049
|
|
|
|
12,440
|
|
|
|
(10,300
|
)
|
Minimum pension and non-pension retirement liability and
intangible pension asset, net of tax (shown below)
|
|
|
9,722
|
|
|
|
(13,479
|
)
|
|
|
(58,607
|
)
|
Effect of exchange rate fluctuation
|
|
|
(7,993
|
)
|
|
|
1,101
|
|
|
|
(4,402
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive income (loss)
|
|
$
|
74,864
|
|
|
$
|
(28,726
|
)
|
|
$
|
(153,772
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss (net of tax) includes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum Pension
|
|
|
|
|
|
|
Effect of
|
|
|
|
|
|
and Non-Pension
|
|
|
Total
|
|
|
|
Exchange
|
|
|
|
|
|
Retirement Liability
|
|
|
Accumulated
|
|
|
|
Rate
|
|
|
Cash Flow
|
|
|
and Intangible
|
|
|
Comprehensive
|
|
|
|
Fluctuation
|
|
|
Derivatives
|
|
|
Pension Asset
|
|
|
Loss
|
|
|
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
Balance on December 31, 2007
|
|
$
|
8,633
|
|
|
$
|
(6,310
|
)
|
|
$
|
(44,800
|
)
|
|
$
|
(42,477
|
)
|
2008 change
|
|
|
(4,402
|
)
|
|
|
(13,690
|
)
|
|
|
(55,938
|
)
|
|
|
(74,030
|
)
|
Translation effect
|
|
|
|
|
|
|
|
|
|
|
(2,387
|
)
|
|
|
(2,387
|
)
|
Tax effect
|
|
|
|
|
|
|
3,390
|
|
|
|
(282
|
)
|
|
|
3,108
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2008
|
|
|
4,231
|
|
|
|
(16,610
|
)
|
|
|
(103,407
|
)
|
|
|
(115,786
|
)
|
2009 change
|
|
|
1,101
|
|
|
|
15,613
|
|
|
|
(12,904
|
)
|
|
|
3,810
|
|
Translation effect
|
|
|
|
|
|
|
|
|
|
|
(348
|
)
|
|
|
(348
|
)
|
Tax effect
|
|
|
|
|
|
|
(3,173
|
)
|
|
|
(227
|
)
|
|
|
(3,400
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2009
|
|
|
5,332
|
|
|
|
(4,170
|
)
|
|
|
(116,886
|
)
|
|
|
(115,724
|
)
|
2010 change
|
|
|
(7,993
|
)
|
|
|
2,600
|
|
|
|
11,453
|
|
|
|
6,060
|
|
Translation effect
|
|
|
|
|
|
|
|
|
|
|
(1,630
|
)
|
|
|
(1,630
|
)
|
Tax effect
|
|
|
|
|
|
|
449
|
|
|
|
(101
|
)
|
|
|
348
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance on December 31, 2010
|
|
$
|
(2,661
|
)
|
|
$
|
(1,121
|
)
|
|
$
|
(107,164
|
)
|
|
$
|
(110,946
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
We adopted the rules for Fair Value Accounting as of
January 1, 2008, but we had not applied them to
non-recurring, nonfinancial assets and liabilities. We adopted
Fair Value Accounting rules for nonrecurring, nonfinancial
assets and liabilities as of January 1, 2009. The adoption
of these rules had no impact on our fair value measurements.
FASB ASC Topic 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 Topic 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.
|
107
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
Level 3 Unobservable inputs based on our own
assumptions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Asset (Liability) at December 31, 2010
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Commodity futures natural gas contracts
|
|
$
|
|
|
|
$
|
(3,188
|
)
|
|
$
|
|
|
|
$
|
(3,188
|
)
|
Currency contracts
|
|
|
|
|
|
|
(151
|
)
|
|
|
|
|
|
|
(151
|
)
|
Interest rate agreement
|
|
|
|
|
|
|
2,536
|
|
|
|
|
|
|
|
2,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net derivative liability
|
|
$
|
|
|
|
$
|
(803
|
)
|
|
$
|
|
|
|
$
|
(803
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Asset (Liability) at December 31, 2009
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
|
(Dollars in thousands)
|
|
|
Commodity futures natural gas contracts
|
|
$
|
|
|
|
$
|
(5,407
|
)
|
|
$
|
|
|
|
$
|
(5,407
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative liability
|
|
$
|
|
|
|
$
|
(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 Consolidated Balance Sheets with
$2.6 million in other assets and $3.4 million in
derivative liability as of December 31, 2010. As of
December 31, 2009, $3.3 million was recorded in
derivative liability and $2.1 million in other long-term
liabilities on the Consolidated Balance Sheets.
The commodity futures natural gas contracts, interest rate
protection 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.
Rental expense for all non-cancelable operating leases,
primarily for warehouses, was $18.4 million,
$17.9 million and $18.5 million for the years ended
December 31, 2010, 2009 and 2008, respectively.
Future minimum rentals under operating leases are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 and
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
Thereafter
|
|
$16,687
|
|
$13,971
|
|
$12,425
|
|
$10,828
|
|
$8,345
|
|
$45,754
|
We have three reportable segments from which we derive revenue
from external customers. Some operating segments were aggregated
to arrive at the disclosed reportable segments. The segments are
distinguished as follows:
|
|
|
|
|
North American Glass includes sales of glass
tableware from subsidiaries throughout the United States, Canada
and Mexico.
|
|
|
|
North American Other includes sales of ceramic
dinnerware; metal tableware, hollowware and serveware; and
plastic items from subsidiaries in the United States.
|
108
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
International includes worldwide sales of glass
tableware from subsidiaries outside the United States, Canada
and Mexico.
|
The accounting policies of the segments are the same as those
described in note 2. We do not have any customers who
represent 10 percent or more of total sales. We evaluate
the performance of our segments based upon sales and Earnings
Before Interest and Taxes (EBIT). Intersegment sales are
consummated at arms length and are reflected in
eliminations in the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
562,653
|
|
|
$
|
522,575
|
|
|
$
|
554,128
|
|
North American Other
|
|
|
85,996
|
|
|
|
87,041
|
|
|
|
111,029
|
|
International
|
|
|
162,685
|
|
|
|
145,023
|
|
|
|
153,532
|
|
Eliminations
|
|
|
(11,540
|
)
|
|
|
(6,004
|
)
|
|
|
(8,482
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
799,794
|
|
|
$
|
748,635
|
|
|
$
|
810,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
109,069
|
|
|
$
|
33,727
|
|
|
$
|
25,495
|
|
North American Other
|
|
|
13,916
|
|
|
|
9,802
|
|
|
|
(17,696
|
)
|
International
|
|
|
3,854
|
|
|
|
(2,862
|
)
|
|
|
(12,228
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
126,839
|
|
|
$
|
40,667
|
|
|
$
|
(4,429
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items (income) expense (excluding
write-off of financing fees in 2009) (see notes 6 and
7):
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
(54,151
|
)(1)
|
|
$
|
3,204
|
|
|
$
|
5,356
|
|
North American Other
|
|
|
1,155
|
|
|
|
3,809
|
|
|
|
28,252
|
|
International
|
|
|
|
|
|
|
|
|
|
|
11,890
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
(52,996
|
)
|
|
$
|
7,013
|
|
|
$
|
45,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
24,277
|
|
|
$
|
24,806
|
|
|
$
|
26,004
|
|
North American Other
|
|
|
743
|
|
|
|
2,052
|
|
|
|
3,123
|
|
International
|
|
|
16,095
|
|
|
|
16,308
|
|
|
|
15,303
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
41,115
|
|
|
$
|
43,166
|
|
|
$
|
44,430
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures:
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
18,075
|
|
|
$
|
10,317
|
|
|
$
|
21,170
|
|
North American Other
|
|
|
238
|
|
|
|
339
|
|
|
|
611
|
|
International
|
|
|
9,934
|
|
|
|
6,349
|
|
|
|
23,936
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
28,247
|
|
|
$
|
17,005
|
|
|
$
|
45,717
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
109
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
2010
|
|
|
2009
|
|
|
2008
|
|
|
|
(Dollars in thousands)
|
|
|
Total assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass
|
|
$
|
792,231
|
|
|
$
|
853,412
|
|
|
$
|
837,256
|
|
North American Other
|
|
|
62,145
|
|
|
|
53,029
|
|
|
|
54,089
|
|
International
|
|
|
342,573
|
|
|
|
436,594
|
|
|
|
429,749
|
|
Eliminations
|
|
|
(377,978
|
)
|
|
|
(551,521
|
)
|
|
|
(502,687
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
|
|
$
|
818,971
|
|
|
$
|
791,514
|
|
|
$
|
818,407
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of EBIT to net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment EBIT
|
|
$
|
126,839
|
|
|
$
|
40,667
|
|
|
$
|
(4,429
|
)
|
Interest expense
|
|
|
(45,171
|
)
|
|
|
(66,705
|
)
|
|
|
(69,720
|
)
|
Income taxes
|
|
|
(11,582
|
)
|
|
|
(2,750
|
)
|
|
|
(6,314
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
70,086
|
|
|
$
|
(28,788
|
)
|
|
$
|
(80,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Includes a $58.3 million gain on redemption of debt and
$1.0 million of expenses from the secondary stock offering
as discussed in note 6, $1.3 million of restructuring
charges primarily related to the write-down of decorating assets
at our Shreveport Louisiana facility, $2.7 million related
to the write-down of certain after-processing equipment and
$0.9 million from an insurance recovery. |
110
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Net sales to customers and long-lived assets located in the
U.S., Mexico, and Other regions for 2010, 2009 and 2008 are
presented below. Intercompany sales to affiliates represent
products that are transferred between geographic areas on a
basis intended to reflect as nearly as possible the market value
of the products. The long-lived assets include net fixed assets,
goodwill and equity investments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
|
Mexico
|
|
|
All Other
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
444,534
|
|
|
$
|
121,282
|
|
|
$
|
233,978
|
|
|
|
|
|
|
$
|
799,794
|
|
Intercompany
|
|
|
55,432
|
|
|
|
10,846
|
|
|
|
16,085
|
|
|
$
|
(82,363
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
499,966
|
|
|
$
|
132,128
|
|
|
$
|
250,063
|
|
|
$
|
(82,363
|
)
|
|
$
|
799,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
$
|
118,363
|
|
|
$
|
197,604
|
|
|
$
|
123,770
|
|
|
$
|
|
|
|
$
|
439,737
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
435,500
|
|
|
$
|
104,254
|
|
|
$
|
208,881
|
|
|
|
|
|
|
$
|
748,635
|
|
Intercompany
|
|
|
42,832
|
|
|
|
6,958
|
|
|
|
7,927
|
|
|
$
|
(57,717
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
478,332
|
|
|
$
|
111,212
|
|
|
$
|
216,808
|
|
|
$
|
(57,717
|
)
|
|
$
|
748,635
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
$
|
126,371
|
|
|
$
|
195,648
|
|
|
$
|
136,314
|
|
|
$
|
|
|
|
$
|
458,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
|
|
$
|
451,794
|
|
|
$
|
131,383
|
|
|
$
|
227,030
|
|
|
|
|
|
|
$
|
810,207
|
|
Intercompany
|
|
|
50,825
|
|
|
|
9,402
|
|
|
|
3,555
|
|
|
$
|
(63,782
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total net sales
|
|
$
|
502,619
|
|
|
$
|
140,785
|
|
|
$
|
230,585
|
|
|
$
|
(63,782
|
)
|
|
$
|
810,207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets
|
|
$
|
136,934
|
|
|
$
|
199,583
|
|
|
$
|
145,066
|
|
|
$
|
|
|
|
$
|
481,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18.
|
Condensed
Consolidated Guarantor Financial Statements
|
Libbey Glass is a direct, 100 percent owned subsidiary of
Libbey Inc. and the issuer of the Senior Notes and the PIK
Notes. The obligations of Libbey Glass under the Senior Notes
and the PIK Notes are fully and unconditionally and jointly and
severally guaranteed by Libbey Inc. and by certain indirect,
100 percent owned domestic subsidiaries of Libbey Inc. as
described below. All are related parties that are included in
the Consolidated Financial Statements for the year ended
December 31, 2010, 2009 and 2008.
At December 31, 2010, December 31, 2009 and
December 31, 2008, Libbey Inc.s indirect,
100 percent owned domestic subsidiaries were Syracuse China
Company, World Tableware Inc., LGA4 Corp., LGA3 Corp., The
Drummond Glass Company, LGC Corp., Traex Company, Libbey.com
LLC, LGFS Inc. and LGAC 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.
111
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
400,565
|
|
|
$
|
85,996
|
|
|
$
|
380,912
|
|
|
$
|
(67,679
|
)
|
|
$
|
799,794
|
|
Freight billed to customers
|
|
|
|
|
|
|
622
|
|
|
|
883
|
|
|
|
285
|
|
|
|
|
|
|
|
1,790
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
401,187
|
|
|
|
86,879
|
|
|
|
381,197
|
|
|
|
(67,679
|
)
|
|
|
801,584
|
|
Cost of sales
|
|
|
|
|
|
|
329,865
|
|
|
|
62,827
|
|
|
|
308,558
|
|
|
|
(67,679
|
)
|
|
|
633,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
71,322
|
|
|
|
24,052
|
|
|
|
72,639
|
|
|
|
|
|
|
|
168,013
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
55,245
|
|
|
|
9,077
|
|
|
|
33,068
|
|
|
|
|
|
|
|
97,390
|
|
Special charges
|
|
|
|
|
|
|
765
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
1,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
15,312
|
|
|
|
13,938
|
|
|
|
39,571
|
|
|
|
|
|
|
|
68,821
|
|
Other income (expense)
|
|
|
|
|
|
|
57,315
|
|
|
|
(133
|
)
|
|
|
836
|
|
|
|
|
|
|
|
58,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
|
|
|
|
|
72,627
|
|
|
|
13,805
|
|
|
|
40,407
|
|
|
|
|
|
|
|
126,839
|
|
Interest expense
|
|
|
|
|
|
|
39,717
|
|
|
|
(5
|
)
|
|
|
5,459
|
|
|
|
|
|
|
|
45,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
|
|
|
|
|
32,910
|
|
|
|
13,810
|
|
|
|
34,948
|
|
|
|
|
|
|
|
81,668
|
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
(4,057
|
)
|
|
|
4,034
|
|
|
|
11,605
|
|
|
|
|
|
|
|
11,582
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
36,967
|
|
|
|
9,776
|
|
|
|
23,343
|
|
|
|
|
|
|
|
70,086
|
|
Equity in net income (loss) of subsidiaries
|
|
|
70,086
|
|
|
|
33,119
|
|
|
|
|
|
|
|
|
|
|
|
(103,205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
70,086
|
|
|
$
|
70,086
|
|
|
$
|
9,776
|
|
|
$
|
23,343
|
|
|
$
|
(103,205
|
)
|
|
$
|
70,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following represents the total
special items (income) expense included in the above Statement
of Operations (see notes 6 and 7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
|
|
|
$
|
2,329
|
|
|
$
|
(12
|
)
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2,317
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
1,047
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,047
|
|
Special charges
|
|
|
|
|
|
|
765
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
|
|
1,802
|
|
Other (income) expense
|
|
|
|
|
|
|
(58,292
|
)
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
(58,162
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax special items
|
|
$
|
|
|
|
$
|
(54,151
|
)
|
|
$
|
1,155
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(52,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items net of tax
|
|
$
|
|
|
|
$
|
(54,151
|
)
|
|
$
|
1,155
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
(52,996
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
112
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
385,467
|
|
|
$
|
87,041
|
|
|
$
|
325,175
|
|
|
$
|
(49,048
|
)
|
|
$
|
748,635
|
|
Freight billed to customers
|
|
|
|
|
|
|
601
|
|
|
|
839
|
|
|
|
165
|
|
|
|
|
|
|
|
1,605
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
386,068
|
|
|
|
87,880
|
|
|
|
325,340
|
|
|
|
(49,048
|
)
|
|
|
750,240
|
|
Cost of sales
|
|
|
|
|
|
|
310,031
|
|
|
|
68,505
|
|
|
|
287,607
|
|
|
|
(49,048
|
)
|
|
|
617,095
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
76,037
|
|
|
|
19,375
|
|
|
|
37,733
|
|
|
|
|
|
|
|
133,145
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
53,906
|
|
|
|
7,954
|
|
|
|
33,040
|
|
|
|
|
|
|
|
94,900
|
|
Special charges
|
|
|
|
|
|
|
14
|
|
|
|
1,617
|
|
|
|
|
|
|
|
|
|
|
|
1,631
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
22,117
|
|
|
|
9,804
|
|
|
|
4,693
|
|
|
|
|
|
|
|
36,614
|
|
Other income (expense)
|
|
|
|
|
|
|
3,533
|
|
|
|
(138
|
)
|
|
|
658
|
|
|
|
|
|
|
|
4,053
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
|
|
|
|
|
25,650
|
|
|
|
9,666
|
|
|
|
5,351
|
|
|
|
|
|
|
|
40,667
|
|
Interest expense
|
|
|
|
|
|
|
60,798
|
|
|
|
1
|
|
|
|
5,906
|
|
|
|
|
|
|
|
66,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
|
|
|
|
|
(35,148
|
)
|
|
|
9,665
|
|
|
|
(555
|
)
|
|
|
|
|
|
|
(26,038
|
)
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
(7,275
|
)
|
|
|
1,666
|
|
|
|
8,359
|
|
|
|
|
|
|
|
2,750
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
(27,873
|
)
|
|
|
7,999
|
|
|
|
(8,914
|
)
|
|
|
|
|
|
|
(28,788
|
)
|
Equity in net income (loss) of subsidiaries
|
|
|
(28,788
|
)
|
|
|
(915
|
)
|
|
|
|
|
|
|
|
|
|
|
29,703
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(28,788
|
)
|
|
$
|
(28,788
|
)
|
|
$
|
7,999
|
|
|
$
|
(8,914
|
)
|
|
$
|
29,703
|
|
|
$
|
(28,788
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following represents the total
special items included in the above Statement of Operations (see
notes 6, 7 and 9):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,960
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,960
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
3,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,190
|
|
Special charges
|
|
|
|
|
|
|
14
|
|
|
|
1,617
|
|
|
|
|
|
|
|
|
|
|
|
1,631
|
|
Other income (expense)
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
|
|
|
|
|
|
|
|
|
|
(232
|
)
|
Interest expense
|
|
|
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax special charges
|
|
$
|
|
|
|
$
|
5,904
|
|
|
$
|
3,809
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special charges net of tax
|
|
$
|
|
|
|
$
|
5,904
|
|
|
$
|
3,809
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
9,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
113
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales
|
|
$
|
|
|
|
$
|
392,738
|
|
|
$
|
111,029
|
|
|
$
|
363,625
|
|
|
$
|
(57,185
|
)
|
|
$
|
810,207
|
|
Freight billed to customers
|
|
|
|
|
|
|
743
|
|
|
|
1,220
|
|
|
|
459
|
|
|
|
|
|
|
|
2,422
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
|
|
|
|
393,481
|
|
|
|
112,249
|
|
|
|
364,084
|
|
|
|
(57,185
|
)
|
|
|
812,629
|
|
Cost of sales
|
|
|
|
|
|
|
345,669
|
|
|
|
104,683
|
|
|
|
310,125
|
|
|
|
(57,185
|
)
|
|
|
703,292
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
|
|
|
|
47,812
|
|
|
|
7,566
|
|
|
|
53,959
|
|
|
|
|
|
|
|
109,337
|
|
Selling, general and administrative expenses
|
|
|
|
|
|
|
44,269
|
|
|
|
11,265
|
|
|
|
32,917
|
|
|
|
|
|
|
|
88,451
|
|
Special charges
|
|
|
|
|
|
|
683
|
|
|
|
13,861
|
|
|
|
11,890
|
|
|
|
|
|
|
|
26,434
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from operations
|
|
|
|
|
|
|
2,860
|
|
|
|
(17,560
|
)
|
|
|
9,152
|
|
|
|
|
|
|
|
(5,548
|
)
|
Other income (expense)
|
|
|
|
|
|
|
(2,332
|
)
|
|
|
(504
|
)
|
|
|
3,955
|
|
|
|
|
|
|
|
1,119
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before interest and income taxes
|
|
|
|
|
|
|
528
|
|
|
|
(18,064
|
)
|
|
|
13,107
|
|
|
|
|
|
|
|
(4,429
|
)
|
Interest expense
|
|
|
|
|
|
|
62,730
|
|
|
|
1
|
|
|
|
6,989
|
|
|
|
|
|
|
|
69,720
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) before income taxes
|
|
|
|
|
|
|
(62,202
|
)
|
|
|
(18,065
|
)
|
|
|
6,118
|
|
|
|
|
|
|
|
(74,149
|
)
|
Provision (benefit) for income taxes
|
|
|
|
|
|
|
(7,380
|
)
|
|
|
9,284
|
|
|
|
4,410
|
|
|
|
|
|
|
|
6,314
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
|
|
|
|
(54,822
|
)
|
|
|
(27,349
|
)
|
|
|
1,708
|
|
|
|
|
|
|
|
(80,463
|
)
|
Equity in net income (loss) of subsidiaries
|
|
|
(80,463
|
)
|
|
|
(25,641
|
)
|
|
|
|
|
|
|
|
|
|
|
106,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(80,463
|
)
|
|
$
|
(80,463
|
)
|
|
$
|
(27,349
|
)
|
|
$
|
1,708
|
|
|
$
|
106,104
|
|
|
$
|
(80,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following represents the total
special items included in the above Statement of Operations (see
note 7):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
|
|
|
$
|
3,795
|
|
|
$
|
14,007
|
|
|
$
|
879
|
|
|
$
|
|
|
|
$
|
18,681
|
|
Special charges
|
|
|
|
|
|
|
683
|
|
|
|
13,861
|
|
|
|
11,890
|
|
|
|
|
|
|
|
26,434
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
|
(383
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pretax special charges
|
|
$
|
|
|
|
$
|
4,478
|
|
|
$
|
28,251
|
|
|
$
|
12,769
|
|
|
$
|
|
|
|
$
|
45,498
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special charges net of tax
|
|
$
|
|
|
|
$
|
4,478
|
|
|
$
|
28,251
|
|
|
$
|
12,523
|
|
|
$
|
|
|
|
$
|
45,252
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
114
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
December 31, 2010
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Cash and equivalents
|
|
$
|
|
|
|
$
|
58,277
|
|
|
$
|
293
|
|
|
$
|
17,688
|
|
|
$
|
|
|
|
$
|
76,258
|
|
Accounts receivable net
|
|
|
|
|
|
|
37,099
|
|
|
|
5,360
|
|
|
|
49,642
|
|
|
|
|
|
|
|
92,101
|
|
Inventories net
|
|
|
|
|
|
|
52,398
|
|
|
|
19,902
|
|
|
|
75,846
|
|
|
|
|
|
|
|
148,146
|
|
Other current assets
|
|
|
|
|
|
|
(2,634
|
)
|
|
|
10,960
|
|
|
|
10,518
|
|
|
|
(12,407
|
)
|
|
|
6,437
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
145,140
|
|
|
|
36,515
|
|
|
|
153,694
|
|
|
|
(12,407
|
)
|
|
|
322,942
|
|
Other non-current assets
|
|
|
|
|
|
|
8,344
|
|
|
|
2,779
|
|
|
|
41,169
|
|
|
|
(19,134
|
)
|
|
|
33,158
|
|
Investments in and advances to subsidiaries
|
|
|
11,266
|
|
|
|
360,784
|
|
|
|
189,171
|
|
|
|
(32,151
|
)
|
|
|
(529,070
|
)
|
|
|
|
|
Goodwill and purchased intangible assets net
|
|
|
|
|
|
|
26,833
|
|
|
|
15,761
|
|
|
|
149,880
|
|
|
|
|
|
|
|
192,474
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
11,266
|
|
|
|
395,961
|
|
|
|
207,711
|
|
|
|
158,898
|
|
|
|
(548,204
|
)
|
|
|
225,632
|
|
Property, plant and equipment net
|
|
|
|
|
|
|
72,892
|
|
|
|
4,862
|
|
|
|
192,643
|
|
|
|
|
|
|
|
270,397
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
11,266
|
|
|
$
|
613,993
|
|
|
$
|
249,088
|
|
|
$
|
505,235
|
|
|
$
|
(560,611
|
)
|
|
$
|
818,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
13,514
|
|
|
$
|
2,926
|
|
|
$
|
42,655
|
|
|
$
|
|
|
|
$
|
59,095
|
|
Accrued and other current liabilities
|
|
|
|
|
|
|
48,092
|
|
|
|
27,811
|
|
|
|
34,430
|
|
|
|
(12,407
|
)
|
|
|
97,926
|
|
Notes payable and long-term debt due within one year
|
|
|
|
|
|
|
227
|
|
|
|
|
|
|
|
2,915
|
|
|
|
|
|
|
|
3,142
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
|
|
|
|
61,833
|
|
|
|
30,737
|
|
|
|
80,000
|
|
|
|
(12,407
|
)
|
|
|
160,163
|
|
Long-term debt
|
|
|
|
|
|
|
398,039
|
|
|
|
|
|
|
|
45,944
|
|
|
|
|
|
|
|
443,983
|
|
Other long-term liabilities
|
|
|
|
|
|
|
131,100
|
|
|
|
21,964
|
|
|
|
69,629
|
|
|
|
(19,134
|
)
|
|
|
203,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
|
|
|
|
590,972
|
|
|
|
52,701
|
|
|
|
195,573
|
|
|
|
(31,541
|
)
|
|
|
807,705
|
|
Total shareholders equity
|
|
|
11,266
|
|
|
|
23,021
|
|
|
|
196,387
|
|
|
|
309,662
|
|
|
|
(529,070
|
)
|
|
|
11,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
11,266
|
|
|
$
|
613,993
|
|
|
$
|
249,088
|
|
|
$
|
505,235
|
|
|
$
|
(560,611
|
)
|
|
$
|
818,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
115
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
December 31, 2009
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
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
|
|
|
|
9,083
|
|
|
|
(15,385
|
)
|
|
|
8,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
|
|
|
|
135,892
|
|
|
|
24,514
|
|
|
|
144,991
|
|
|
|
(15,385
|
)
|
|
|
290,012
|
|
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
|
|
|
$
|
678,926
|
|
|
$
|
(788,059
|
)
|
|
$
|
791,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
|
|
|
$
|
13,503
|
|
|
$
|
3,289
|
|
|
$
|
38,747
|
|
|
$
|
|
|
|
$
|
55,539
|
|
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
|
|
|
|
84,111
|
|
|
|
(8,848
|
)
|
|
|
150,085
|
|
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
|
|
|
|
194,594
|
|
|
|
(34,519
|
)
|
|
|
858,421
|
|
Total shareholders equity
|
|
|
(66,907
|
)
|
|
|
(29,075
|
)
|
|
|
298,283
|
|
|
|
484,332
|
|
|
|
(753,540
|
)
|
|
|
(66,907
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders equity
|
|
$
|
(66,907
|
)
|
|
$
|
640,989
|
|
|
$
|
326,565
|
|
|
$
|
678,926
|
|
|
$
|
(788,059
|
)
|
|
$
|
791,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
116
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2010
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
70,086
|
|
|
$
|
70,086
|
|
|
$
|
9,776
|
|
|
$
|
23,343
|
|
|
$
|
(103,205
|
)
|
|
$
|
70,086
|
|
Depreciation and amortization
|
|
|
|
|
|
|
14,512
|
|
|
|
743
|
|
|
|
25,860
|
|
|
|
|
|
|
|
41,115
|
|
Other operating activities
|
|
|
(70,086
|
)
|
|
|
(67,690
|
)
|
|
|
(10,407
|
)
|
|
|
(18,524
|
)
|
|
|
103,205
|
|
|
|
(63,502
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
16,908
|
|
|
|
112
|
|
|
|
30,679
|
|
|
|
|
|
|
|
47,699
|
|
Additions to property, plant & equipment
|
|
|
|
|
|
|
(8,515
|
)
|
|
|
(238
|
)
|
|
|
(19,494
|
)
|
|
|
|
|
|
|
(28,247
|
)
|
Other investing activities
|
|
|
|
|
|
|
(8,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,415
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
(16,930
|
)
|
|
|
(238
|
)
|
|
|
(19,494
|
)
|
|
|
|
|
|
|
(36,662
|
)
|
Net borrowings
|
|
|
|
|
|
|
35,112
|
|
|
|
|
|
|
|
(10,210
|
)
|
|
|
|
|
|
|
24,902
|
|
Other financing activities
|
|
|
|
|
|
|
(14,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
20,913
|
|
|
|
|
|
|
|
(10,210
|
)
|
|
|
|
|
|
|
10,703
|
|
Exchange effect on cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(571
|
)
|
|
|
|
|
|
|
(571
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
|
|
|
|
20,891
|
|
|
|
(126
|
)
|
|
|
404
|
|
|
|
|
|
|
|
21,169
|
|
Cash at beginning of period
|
|
|
|
|
|
|
37,386
|
|
|
|
419
|
|
|
|
17,284
|
|
|
|
|
|
|
|
55,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
|
$
|
58,277
|
|
|
$
|
293
|
|
|
$
|
17,688
|
|
|
$
|
|
|
|
$
|
76,258
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2009
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
(28,788
|
)
|
|
$
|
(28,788
|
)
|
|
$
|
7,999
|
|
|
$
|
(8,914
|
)
|
|
$
|
29,703
|
|
|
$
|
(28,788
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
14,678
|
|
|
|
2,052
|
|
|
|
26,436
|
|
|
|
|
|
|
|
43,166
|
|
Other operating activities
|
|
|
28,788
|
|
|
|
55,517
|
|
|
|
(9,711
|
)
|
|
|
42,879
|
|
|
|
(29,703
|
)
|
|
|
87,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
41,407
|
|
|
|
340
|
|
|
|
60,401
|
|
|
|
|
|
|
|
102,148
|
|
Additions to property, plant & equipment
|
|
|
|
|
|
|
(6,189
|
)
|
|
|
(339
|
)
|
|
|
(10,477
|
)
|
|
|
|
|
|
|
(17,005
|
)
|
Other investing activities
|
|
|
|
|
|
|
60
|
|
|
|
5
|
|
|
|
200
|
|
|
|
|
|
|
|
265
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
|
|
|
|
(6,129
|
)
|
|
|
(334
|
)
|
|
|
(10,277
|
)
|
|
|
|
|
|
|
(16,740
|
)
|
Net borrowings (repayments)
|
|
|
|
|
|
|
(174
|
)
|
|
|
|
|
|
|
(39,220
|
)
|
|
|
|
|
|
|
(39,394
|
)
|
Other financing activities
|
|
|
|
|
|
|
(4,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,171
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
(4,345
|
)
|
|
|
|
|
|
|
(39,220
|
)
|
|
|
|
|
|
|
(43,565
|
)
|
Exchange effect on cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
(58
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
|
|
|
|
30,933
|
|
|
|
6
|
|
|
|
10,846
|
|
|
|
|
|
|
|
41,785
|
|
Cash at beginning of period
|
|
|
|
|
|
|
6,453
|
|
|
|
413
|
|
|
|
6,438
|
|
|
|
|
|
|
|
13,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
|
$
|
37,386
|
|
|
$
|
419
|
|
|
$
|
17,284
|
|
|
$
|
|
|
|
$
|
55,089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
118
LIBBEY
INC.
Notes to
Consolidated Financial
Statements (Continued)
Libbey
Inc.
Condensed
Consolidating Statement of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Libbey
|
|
|
Libbey
|
|
|
|
|
|
Non-
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
Glass
|
|
|
Subsidiary
|
|
|
Guarantor
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
(Parent)
|
|
|
(Issuer)
|
|
|
Guarantors
|
|
|
Subsidiaries
|
|
|
Eliminations
|
|
|
Consolidated
|
|
|
|
(Dollars in thousands)
|
|
|
Net income (loss)
|
|
$
|
(80,463
|
)
|
|
$
|
(80,463
|
)
|
|
$
|
(27,349
|
)
|
|
$
|
1,708
|
|
|
$
|
106,104
|
|
|
$
|
(80,463
|
)
|
Depreciation and amortization
|
|
|
|
|
|
|
14,904
|
|
|
|
3,123
|
|
|
|
26,403
|
|
|
|
|
|
|
|
44,430
|
|
Other operating activities
|
|
|
80,463
|
|
|
|
65,694
|
|
|
|
24,718
|
|
|
|
(29,778
|
)
|
|
|
(106,104
|
)
|
|
|
34,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
|
|
135
|
|
|
|
492
|
|
|
|
(1,667
|
)
|
|
|
|
|
|
|
(1,040
|
)
|
Additions to property, plant & equipment
|
|
|
|
|
|
|
(13,003
|
)
|
|
|
(611
|
)
|
|
|
(32,103
|
)
|
|
|
|
|
|
|
(45,717
|
)
|
Other investing activities
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) investing activities
|
|
|
|
|
|
|
(12,886
|
)
|
|
|
(611
|
)
|
|
|
(32,103
|
)
|
|
|
|
|
|
|
(45,600
|
)
|
Net borrowings
|
|
|
|
|
|
|
(164
|
)
|
|
|
|
|
|
|
27,458
|
|
|
|
|
|
|
|
27,294
|
|
Other financing activities
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
|
|
|
|
(1,630
|
)
|
|
|
|
|
|
|
27,458
|
|
|
|
|
|
|
|
25,828
|
|
Exchange effect on cash
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,423
|
)
|
|
|
|
|
|
|
(2,423
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash
|
|
|
|
|
|
|
(14,381
|
)
|
|
|
(119
|
)
|
|
|
(8,735
|
)
|
|
|
|
|
|
|
(23,235
|
)
|
Cash at beginning of period
|
|
|
|
|
|
|
20,834
|
|
|
|
532
|
|
|
|
15,173
|
|
|
|
|
|
|
|
36,539
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of period
|
|
$
|
|
|
|
$
|
6,453
|
|
|
$
|
413
|
|
|
$
|
6,438
|
|
|
$
|
|
|
|
$
|
13,304
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
119
Selected
Quarterly Financial Data (unaudited)
The following tables present selected quarterly financial data
for the years ended December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Net sales
|
|
$
|
173,904
|
|
|
$
|
157,853
|
|
|
$
|
203,036
|
|
|
$
|
195,826
|
|
|
$
|
200,007
|
|
|
$
|
186,878
|
|
|
$
|
222,847
|
|
|
$
|
208,078
|
|
Gross profit
|
|
$
|
33,877
|
|
|
$
|
10,716
|
|
|
$
|
48,031
|
|
|
$
|
34,283
|
|
|
$
|
41,685
|
|
|
$
|
42,960
|
|
|
$
|
44,420
|
|
|
$
|
45,186
|
|
Gross profit margin
|
|
|
19.5
|
%
|
|
|
6.8
|
%
|
|
|
23.7
|
%
|
|
|
17.5
|
%
|
|
|
20.8
|
%
|
|
|
23.0
|
%
|
|
|
19.9
|
%
|
|
|
21.7
|
%
|
Selling, general & administrative expenses
|
|
$
|
22,824
|
|
|
$
|
22,374
|
|
|
$
|
24,719
|
|
|
$
|
22,514
|
|
|
$
|
25,335
|
|
|
$
|
24,811
|
|
|
$
|
24,512
|
|
|
$
|
25,201
|
|
Special charges
|
|
$
|
232
|
|
|
$
|
396
|
|
|
$
|
156
|
|
|
$
|
278
|
|
|
$
|
700
|
|
|
$
|
300
|
|
|
$
|
714
|
|
|
$
|
657
|
|
Income (loss) from operations (IFO)
|
|
$
|
10,821
|
|
|
$
|
(12,054
|
)
|
|
$
|
23,156
|
|
|
$
|
11,491
|
|
|
$
|
15,650
|
|
|
$
|
17,849
|
|
|
$
|
19,194
|
|
|
$
|
19,328
|
|
IFO margin
|
|
|
6.2
|
%
|
|
|
(7.6
|
)%
|
|
|
11.4
|
%
|
|
|
5.9
|
%
|
|
|
7.8
|
%
|
|
|
9.6
|
%
|
|
|
8.6
|
%
|
|
|
9.3
|
%
|
Earnings (loss) before interest and income taxes (EBIT)
|
|
$
|
66,850
|
|
|
$
|
(12,091
|
)
|
|
$
|
24,812
|
|
|
$
|
14,249
|
|
|
$
|
15,673
|
|
|
$
|
20,552
|
|
|
$
|
19,504
|
|
|
$
|
17,957
|
|
EBIT margin
|
|
|
38.4
|
%
|
|
|
(7.7
|
)%
|
|
|
12.2
|
%
|
|
|
7.3
|
%
|
|
|
7.8
|
%
|
|
|
11.0
|
%
|
|
|
8.8
|
%
|
|
|
8.6
|
%
|
Earnings before interest, taxes, depreciation and amortization
(EBITDA)
|
|
$
|
77,236
|
|
|
$
|
(363
|
)
|
|
$
|
35,380
|
|
|
$
|
24,767
|
|
|
$
|
25,713
|
|
|
$
|
31,181
|
|
|
$
|
29,625
|
|
|
$
|
28,248
|
|
EBITDA margin
|
|
|
44.4
|
%
|
|
|
(0.2
|
)%
|
|
|
17.4
|
%
|
|
|
12.6
|
%
|
|
|
12.9
|
%
|
|
|
16.7
|
%
|
|
|
13.3
|
%
|
|
|
13.6
|
%
|
Net income (loss)
|
|
$
|
55,410
|
|
|
$
|
(27,893
|
)
|
|
$
|
9,567
|
|
|
$
|
2,664
|
|
|
$
|
2,346
|
|
|
$
|
3,533
|
|
|
$
|
2,763
|
|
|
$
|
(7,092
|
)
|
Net income margin
|
|
|
31.9
|
%
|
|
|
(17.7
|
)%
|
|
|
4.7
|
%
|
|
|
1.4
|
%
|
|
|
1.2
|
%
|
|
|
1.9
|
%
|
|
|
1.2
|
%
|
|
|
(3.4
|
)%
|
Diluted earnings (loss) per share
|
|
$
|
2.76
|
|
|
$
|
(1.89
|
)
|
|
$
|
0.47
|
|
|
$
|
0.18
|
|
|
$
|
0.12
|
|
|
$
|
0.23
|
|
|
$
|
0.13
|
|
|
$
|
(0.45
|
)
|
Accounts receivable net
|
|
$
|
87,506
|
|
|
$
|
74,555
|
|
|
$
|
92,782
|
|
|
$
|
91,252
|
|
|
$
|
110,574
|
|
|
$
|
91,119
|
|
|
$
|
92,101
|
|
|
$
|
82,424
|
|
DSO
|
|
|
41.8
|
|
|
|
34.9
|
|
|
|
43.9
|
|
|
|
44.3
|
|
|
|
51.4
|
|
|
|
45.7
|
|
|
|
42.0
|
|
|
|
40.2
|
|
Inventories net
|
|
$
|
152,503
|
|
|
$
|
169,426
|
|
|
$
|
153,187
|
|
|
$
|
145,798
|
|
|
$
|
159,374
|
|
|
$
|
153,523
|
|
|
$
|
148,146
|
|
|
$
|
144,015
|
|
DIO
|
|
|
72.8
|
|
|
|
79.2
|
|
|
|
72.4
|
|
|
|
70.8
|
|
|
|
74.1
|
|
|
|
77.1
|
|
|
|
67.6
|
|
|
|
70.2
|
|
Accounts payable
|
|
$
|
49,550
|
|
|
$
|
46,906
|
|
|
$
|
52,427
|
|
|
$
|
49,307
|
|
|
$
|
55,496
|
|
|
$
|
46,020
|
|
|
$
|
59,095
|
|
|
$
|
55,539
|
|
DPO
|
|
|
23.7
|
|
|
|
21.9
|
|
|
|
24.8
|
|
|
|
23.9
|
|
|
|
25.8
|
|
|
|
23.1
|
|
|
|
27.0
|
|
|
|
27.1
|
|
Working capital
|
|
$
|
190,459
|
|
|
$
|
197,075
|
|
|
$
|
193,542
|
|
|
$
|
187,743
|
|
|
$
|
214,452
|
|
|
$
|
198,622
|
|
|
$
|
181,152
|
|
|
$
|
170,900
|
|
DWC
|
|
|
90.9
|
|
|
|
92.2
|
|
|
|
91.5
|
|
|
|
91.2
|
|
|
|
99.7
|
|
|
|
99.7
|
|
|
|
82.6
|
|
|
|
83.3
|
|
Percent of net sales
|
|
|
24.9
|
%
|
|
|
25.2
|
%
|
|
|
25.1
|
%
|
|
|
25.0
|
%
|
|
|
27.3
|
%
|
|
|
27.3
|
%
|
|
|
22.6
|
%
|
|
|
22.8
|
%
|
Net cash provided by (used in) operating activities
|
|
$
|
(46,165
|
)
|
|
$
|
14,384
|
|
|
$
|
38,112
|
|
|
$
|
24,706
|
|
|
$
|
(2,780
|
)
|
|
$
|
26,639
|
|
|
$
|
58,532
|
|
|
$
|
36,419
|
|
Free Cash Flow
|
|
$
|
(50,313
|
)
|
|
$
|
9,511
|
|
|
$
|
30,881
|
|
|
$
|
20,117
|
|
|
$
|
(10,523
|
)
|
|
$
|
24,074
|
|
|
$
|
49,407
|
|
|
$
|
31,706
|
|
Total borrowings net
|
|
$
|
452,011
|
|
|
$
|
540,856
|
|
|
$
|
452,448
|
|
|
$
|
543,032
|
|
|
$
|
456,102
|
|
|
$
|
526,669
|
|
|
$
|
447,125
|
|
|
$
|
515,239
|
|
120
The following table represents special items (see notes 6,
7 and 9) included in the above quarterly data for the years
ended December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
|
Second Quarter
|
|
|
Third Quarter
|
|
|
Fourth Quarter
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
(Dollars in thousands)
|
|
|
Special items included in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
$
|
|
|
|
$
|
1,823
|
|
|
$
|
1,742
|
|
|
$
|
(2
|
)
|
|
$
|
578
|
|
|
$
|
162
|
|
|
$
|
(3
|
)
|
|
$
|
(23
|
)
|
Selling, general & administrative expense
|
|
|
|
|
|
|
2,500
|
|
|
|
|
|
|
|
200
|
|
|
|
1,096
|
|
|
|
255
|
|
|
|
(49
|
)
|
|
|
235
|
|
Special charges
|
|
|
232
|
|
|
|
396
|
|
|
|
156
|
|
|
|
278
|
|
|
|
700
|
|
|
|
300
|
|
|
|
714
|
|
|
|
657
|
|
Gain on redemption of debt
|
|
|
(56,792
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,500
|
)
|
|
|
|
|
Other expense (income)
|
|
|
130
|
|
|
|
229
|
|
|
|
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
|
19
|
|
Interest expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total pre-tax special items (income) expense
|
|
$
|
(56,430
|
)
|
|
$
|
4,948
|
|
|
$
|
1,898
|
|
|
$
|
433
|
|
|
$
|
2,374
|
|
|
$
|
744
|
|
|
$
|
(838
|
)
|
|
$
|
3,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Special items net of tax
|
|
$
|
(56,430
|
)
|
|
$
|
4,948
|
|
|
$
|
1,898
|
|
|
$
|
433
|
|
|
$
|
2,374
|
|
|
$
|
744
|
|
|
$
|
(838
|
)
|
|
$
|
3,588
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
Market Information
Libbey Inc. common stock is listed for trading on the NYSE Amex
exchange under the symbol LBY. The price range for the
Companys common stock as reported by the NYSE Amex
exchange and dividends declared for our common stock were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
Price Range
|
|
|
Dividend
|
|
|
Price Range
|
|
|
Dividend
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
First Quarter
|
|
$
|
14.25
|
|
|
$
|
7.23
|
|
|
$
|
|
|
|
$
|
2.05
|
|
|
$
|
0.73
|
|
|
$
|
|
|
Second Quarter
|
|
$
|
15.00
|
|
|
$
|
12.15
|
|
|
$
|
|
|
|
$
|
2.75
|
|
|
$
|
0.47
|
|
|
$
|
|
|
Third Quarter
|
|
$
|
14.03
|
|
|
$
|
9.88
|
|
|
$
|
|
|
|
$
|
4.27
|
|
|
$
|
1.30
|
|
|
$
|
|
|
Fourth Quarter
|
|
$
|
15.47
|
|
|
$
|
12.36
|
|
|
$
|
|
|
|
$
|
7.99
|
|
|
$
|
3.75
|
|
|
$
|
|
|
121
|
|
ITEM 9.
|
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
|
None.
|
|
ITEM 9A.
|
CONTROLS
AND PROCEDURES
|
The Company maintains disclosure controls and procedures that
are designed to ensure that information required to be disclosed
in the Companys 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 the
Companys management, including its 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.
Also, we have investments in certain unconsolidated entities. As
we do not control or manage these entities, our disclosure
controls and procedures with respect to such entities are
necessarily substantially more limited than those we maintain
with respect to our consolidated subsidiaries.
As required by SEC
Rule 13a-15(b),
the Company carried out an evaluation, under the supervision and
with the participation of the Companys management,
including the Companys Chief Executive Officer and the
Companys Chief Financial Officer, of the effectiveness of
the design and operation of the Companys disclosure
controls and procedures as of the end of the period covered by
this report. Based on the foregoing, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures were effective
at the reasonable assurance level.
Report of
Management
The management of the Company is responsible for establishing
and maintaining adequate internal control over financial
reporting. Internal control over financial reporting refers to
the process designed by, or under the supervision of, our Chief
Executive Officer and Chief Financial Officer, and effected by
our board of directors, management and other personnel, to
provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements
for external purposes in accordance with generally accepted
accounting principles, and includes those policies and
procedures that:
(1) Pertain to the maintenance of records that in
reasonable detail accurately and fairly reflect the transactions
and dispositions of the assets of the Company;
(2) Provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial
statements in accordance with U.S. generally accepted
accounting principles, and that receipts and expenditures of the
Company are being made only in accordance with authorizations of
management and directors of the Company; and
(3) Provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition
of the Companys assets that could have a material effect
on the financial statements.
Internal control over financial reporting cannot provide
absolute assurance of achieving financial reporting objectives
because of its inherent limitations. Internal control over
financial reporting is a process that involves human diligence
and compliance and is subject to lapses in judgment and
breakdowns resulting from human failures. Internal control over
financial reporting also can be circumvented by collusion or
improper management override. Because of such limitations, there
is a risk that material misstatements may not be prevented or
detected on a timely basis by internal control over financial
reporting. However, these inherent limitations are known
features of the financial reporting process. Therefore, it is
possible to design into the process safeguards to reduce, though
not eliminate, this risk. Management is responsible for
establishing and maintaining adequate internal control over
financial reporting for the Company.
122
Management has used the framework set forth in the report
entitled Internal Control Integrated
Framework published by the Committee of Sponsoring
Organizations (COSO) of the Treadway Commission to evaluate the
effectiveness of the Companys internal control over
financial reporting. Management has concluded that the
Companys internal control over financial reporting was
effective as of the end of the most recent fiscal year. The
Companys independent registered public accounting firm,
Ernst & Young LLP, that audited the Companys
Consolidated Financial Statements, has issued an attestation
report on the Companys internal control over financial
reporting.
Changes
in Internal Control
There has been no change in the Companys internal controls
over financial reporting during the Companys most recent
fiscal year that has materially affected, or is reasonably
likely to materially affect, the Companys internal
controls over financial reporting.
|
|
ITEM 9B.
|
OTHER
INFORMATION
|
None.
PART III
|
|
ITEM 10.
|
DIRECTORS,
EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|
Information with respect to executive officers of Libbey is
incorporated herein by reference to Item 1 of this report
under the caption Executive Officers of the
Registrant. Information with respect to directors of
Libbey is incorporated herein by reference to the information
set forth under the caption Libbey Corporate
Governance-Who are the current members of Libbeys Board of
Directors? in the Proxy Statement. Certain information
regarding compliance with Section 16(a) of the Exchange Act
is incorporated herein by reference to the information set forth
under the caption Stock Ownership
Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement. Information with
respect to the Audit Committee members, the Audit Committee
financial experts, and material changes in the procedures by
which shareholders can recommend nominees to the Board of
Directors is incorporated herein by reference to the information
set forth under the captions Libbey Corporate
Governance-Who are the current members of Libbeys Board of
Directors?, What is the role of
the Boards Committees? and How
does the Board select nominees for the Board? in the Proxy
Statement.
Libbeys Code of Business Ethics and Conduct applicable to
its Directors, Officers (including Libbeys principal
executive officer and principal financial and accounting
officers) and employees, as well as the Audit Committee Charter,
Nominating and Governance Committee Charter, Compensation
Committee Charter and Corporate Governance Guidelines are posted
on Libbeys website at www.libbey.com. Libbeys
Code of Business Ethics and Conduct is also available to any
shareholder who submits a request in writing addressed to Susan
A. Kovach, Vice President, General Counsel and Secretary, Libbey
Inc., 300 Madison Avenue, P.O. Box 10060, Toledo, Ohio
43699-0060.
If Libbey amends or waives any of the provisions of the Code of
Business Ethics and Conduct applicable to the principal
executive officer or principal financial and accounting
officers, Libbey intends to disclose the subsequent information
on Libbeys website.
|
|
ITEM 11.
|
EXECUTIVE
COMPENSATION
|
Information regarding executive compensation is incorporated
herein by reference to the information set forth under the
caption Compensation Discussion and Analysis in the
Proxy Statement.
|
|
ITEM 12.
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
|
Information regarding security ownership of certain beneficial
owners and management is incorporated herein by reference to the
information set forth under the captions Stock Ownership
Who are the largest owners of Libbey stock?
and How much stock do Libbeys directors
and officers own? in the Proxy Statement.
123
Information regarding equity compensation plans is incorporated
herein by reference to Item 5 of this report under the
caption Equity Compensation Plan Information.
|
|
ITEM 13.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
|
Information regarding certain relationships and related
transactions is incorporated herein by reference to the
information set forth under the caption Libbey Corporate
Governance Certain Relationships and Related
Transactions What related party transactions
involved directors or related parties? and
How does the Board determine which directors
are considered independent? in the Proxy Statement.
|
|
ITEM 14.
|
PRINCIPAL
ACCOUNTING FEES AND SERVICES
|
Information regarding principal accounting fees and services is
incorporated herein by reference to the information set forth
under the caption Audit-Related Matters Who
are Libbeys auditors? and What
fees has Libbey paid to its auditors for fiscal year 2010 and
2009? in the Proxy Statement.
PART IV
|
|
ITEM 15.
|
EXHIBITS,
FINANCIAL STATEMENT SCHEDULES
|
a) Index of Financial Statements and Financial Statement
Schedule Covered by Report of Independent Auditors.
|
|
|
|
|
|
|
Page
|
|
Reports of Independent Registered Public Accounting Firm
|
|
|
56
|
|
|
|
|
|
|
Consolidated Balance Sheets at December 31, 2010 and 2009
|
|
|
58
|
|
|
|
|
|
|
For the years ended December 31, 2010, 2009 and 2008:
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations
|
|
|
59
|
|
Consolidated Statements of Shareholders Equity (Deficit)
|
|
|
60
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows
|
|
|
61
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
62
|
|
|
|
|
|
|
Selected Quarterly Financial Data (Unaudited)
|
|
|
120
|
|
|
|
|
|
|
Financial Statement Schedule of Libbey Inc. for the years ended
December 31, 2010, 2009 and 2008 for Schedule II
Valuation and Qualifying Accounts (Consolidated)
|
|
|
S-1
|
|
All other schedules have been omitted since the required
information is not present or not present in amounts sufficient
to require submission of the schedule or because the information
required is included in the Consolidated Financial Statements or
the accompanying notes.
b) The accompanying Exhibit Index is hereby
incorporated by reference. The exhibits listed in the
accompanying Exhibit Index are filed or incorporated by
reference as part of this report.
124
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
LIBBEY INC.
|
|
|
|
by:
|
/s/ Richard
I. Reynolds
|
Richard I. Reynolds
Executive Vice President, Chief Financial Officer
Date: March 14, 2011
125
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
|
|
|
Signature
|
|
Title
|
|
|
|
|
William A. Foley
|
|
Director
|
|
|
|
Peter C. McC. Howell
|
|
Director
|
|
|
|
Carol B. Moerdyk
|
|
Director
|
|
|
|
Jean-René Gougelet
|
|
Director
|
|
|
|
Terence P. Stewart
|
|
Director
|
|
|
|
Carlos V. Duno
|
|
Director
|
|
|
|
Deborah G. Miller
|
|
Director
|
|
|
|
John C. Orr
|
|
Director
|
|
|
|
Richard I. Reynolds
|
|
Director, Executive Vice President, Chief Financial Officer
|
|
|
|
John F. Meier
|
|
Chairman of the Board of Directors, Chief Executive Officer
|
|
|
|
|
By:
|
/s/ Richard
I. Reynolds
|
Richard I. Reynolds
Attorney-In-Fact
Date: March 14, 2011
Richard I. Reynolds
Executive Vice President, Chief Financial Officer
(Principal Accounting Officer)
Date: March 14, 2011
126
INDEX TO
FINANCIAL STATEMENT SCHEDULE
|
|
|
|
|
|
|
Page
|
|
Financial Statement Schedule of Libbey Inc. for the years ended
December 31, 2010, 2009, and 2008 for Schedule II
Valuation and Qualifying Accounts (Consolidated)
|
|
|
S-1
|
|
127
LIBBEY
INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS (Consolidated)
Years ended December 31, 2010, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
|
|
|
Valuation
|
|
|
|
|
|
|
Slow Moving
|
|
|
Allowance
|
|
|
|
Allowance for
|
|
|
and Obsolete
|
|
|
for Deferred
|
|
|
|
Doubtful Accounts
|
|
|
Inventory
|
|
|
Tax Asset
|
|
|
|
(Dollars in thousands)
|
|
|
Balance at December 31, 2007
|
|
$
|
11,711
|
|
|
$
|
6,435
|
|
|
$
|
28,855
|
|
Charged to expense or other accounts
|
|
|
181
|
|
|
|
2,391
|
|
|
|
58,587
|
|
Deductions
|
|
|
(1,413
|
)
|
|
|
(2,244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2008
|
|
|
10,479
|
|
|
|
6,582
|
|
|
|
87,442
|
|
Charged to expense or other accounts
|
|
|
2,049
|
|
|
|
1,431
|
|
|
|
11,547
|
|
Deductions
|
|
|
(5,071
|
)
|
|
|
(3,485
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2009
|
|
|
7,457
|
|
|
|
4,528
|
|
|
|
98,989
|
|
Charged to expense or other accounts
|
|
|
457
|
|
|
|
1,774
|
|
|
|
(26,662
|
)
|
Deductions
|
|
|
(2,396
|
)
|
|
|
(1,644
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2010
|
|
$
|
5,518
|
|
|
$
|
4,658
|
|
|
$
|
72,327
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S-1
EXHIBIT INDEX
|
|
|
|
|
|
|
S-K Item
|
|
|
|
|
601 No.
|
|
|
|
Document
|
|
|
2
|
.0
|
|
|
|
Asset Purchase Agreement dated as of September 22, 1995 by
and among The Pfaltzgraff Co., The Pfaltzgraff Outlet Co.,
Syracuse China Company of Canada Ltd., LG Acquisition Corp. and
Libbey Canada Inc., Acquisition of Syracuse China Company (filed
as Exhibit 2.0 to Libbey Inc.s Current Report on
Form 8-K
dated September 22, 1995 and incorporated herein by
reference).
|
|
2
|
.1
|
|
|
|
Asset Purchase Agreement dated as of December 2, 2002 by
and between Menasha Corporation and Libbey Inc. (filed as
Exhibit 2.2 to Libbey Inc.s Annual Report on
Form 10-K
for the year-ended December 31, 2002, and incorporated
herein by reference).
|
|
2
|
.2
|
|
|
|
Stock Purchase Agreement dated as of December 31, 2002
between BSN Glasspack N.V. and Saxophone B.V. (filed as
Exhibit 2.3 to Libbey Inc.s Annual Report on
Form 10-K
for the year-ended December 31, 2002, and incorporated
herein by reference).
|
|
3
|
.1
|
|
|
|
Restated Certificate of Incorporation of Libbey Inc. (filed as
Exhibit 3.1 to Libbey Inc.s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1993 and incorporated herein
by reference)
|
|
3
|
.2
|
|
|
|
Amended and Restated By-Laws of Libbey Inc. (filed as
Exhibit 3.2 to Libbey Inc.s
Form 8-K
filed on February 22, 2011, which is incorporated herein by
reference).
|
|
3
|
.3
|
|
|
|
Certificate of Incorporation of Libbey Glass Inc. (incorporated
by reference to Exhibit 3.3 to Libbey Glass Inc.s
Registration Statement on
Form S-4;
File
No. 333-139358).
|
|
3
|
.4
|
|
|
|
Amended and Restated By-Laws of Libbey Glass Inc. (incorporated
by reference to Exhibit 3.4 to Libbey Glass Inc.s
Registration Statement on
Form S-4;
File
No. 333-139358).
|
|
4
|
.1
|
|
|
|
Certificate of Incorporation of Libbey Glass Inc. (incorporated
by reference to Exhibit 3.3).
|
|
4
|
.2
|
|
|
|
Amended and Restated By-Laws of Libbey Glass Inc. (incorporated
by reference to Exhibit 3.4).
|
|
4
|
.3
|
|
|
|
Warrant, issued June 16, 2006 (filed as Exhibit 4.7 to
Libbey Inc.s Current Report on
Form 8-K
filed June 21, 2006 and incorporated herein by reference).
|
|
4
|
.4
|
|
|
|
Amended and Restated Registration Rights Agreement, dated
October 29, 2009, among Libbey Inc. and Merrill Lynch PCG,
Inc. (filed as Exhibit 4.4 to Libbey Inc.s Current
Report on
Form 8-K
filed October 29, 2009 and incorporated herein by
reference).
|
|
4
|
.5
|
|
|
|
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
|
.6
|
|
|
|
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
|
.7
|
|
|
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Form of New Notes (included as Exhibits A and B to New
Notes Indenture referred to in Exhibit 4.6 above).
|
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4
|
.8
|
|
|
|
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).
|
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10
|
.1
|
|
|
|
Management Services Agreement dated as of June 24, 1993
between Owens-Illinois General Inc. and Libbey Glass Inc. (filed
as Exhibit 10.2 to Libbey Inc.s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1993 and incorporated herein
by reference).
|
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10
|
.2
|
|
|
|
Tax Allocation and Indemnification Agreement dated as of
May 18, 1993 by and among Owens-Illinois, Inc.,
Owens-Illinois Group, Inc. and Libbey Inc. (filed as
Exhibit 10.3 to Libbey Inc.s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 1993 and incorporated herein
by reference).
|
128
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|
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S-K Item
|
|
|
|
|
601 No.
|
|
|
|
Document
|
|
|
10
|
.3
|
|
|
|
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
|
.4
|
|
|
|
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
|
.5
|
|
|
|
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
|
.6
|
|
|
|
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
|
.7
|
|
|
|
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
|
.8
|
|
|
|
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
|
.9
|
|
|
|
The 1999 Equity Participation Plan of Libbey Inc. (filed as
Exhibit 10.67 to Libbey Inc.s Annual Report on
Form 10-K
for the year ended December 31, 1999 and incorporated
herein by reference).
|
|
10
|
.10
|
|
|
|
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
|
.11
|
|
|
|
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
|
.12
|
|
|
|
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
|
.13
|
|
|
|
Limited Waiver and Second Amendment to Purchase Agreement, dated
June 16, 2006, among Vitro, S.A. de C.V., Crisa
Corporation, Crisa Libbey S.A. de C.V., Vitrocrisa Holdings, S.
de R.L. de C.V., Vitrocrisa S. de R.L. de C.V., Vitrocrisa
Commercial S. de R.L. de C.V., Crisa Industrial, L.L.C., Libbey
Mexico, S. de R.L. de C.V., Libbey Europe B.V., and LGA3 Corp.
(filed as exhibit 10.1 to Libbey Inc.s Quarterly
Report on
Form 10-Q
for the quarter ended June 30, 2006 and incorporated herein
by reference).
|
|
10
|
.14
|
|
|
|
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
|
.15
|
|
|
|
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
|
.16
|
|
|
|
Libbey Inc. Amended and Restated Deferred Compensation Plan for
Outside Directors (incorporated by reference to
Exhibit 10.61 to Libbey Glass Inc.s Registration
Statement on
Form S-4;
File No. 333-139358).
|
129
|
|
|
|
|
|
|
S-K Item
|
|
|
|
|
601 No.
|
|
|
|
Document
|
|
|
10
|
.17
|
|
|
|
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 this reference)
|
|
10
|
.18
|
|
|
|
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 this reference).
|
|
10
|
.19
|
|
|
|
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
|
.20
|
|
|
|
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
|
.21
|
|
|
|
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
|
.22
|
|
|
|
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
|
.23
|
|
|
|
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
|
.24
|
|
|
|
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
|
.25
|
|
|
|
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
|
.26
|
|
|
|
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
|
.27
|
|
|
|
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
|
.28
|
|
|
|
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
|
.29
|
|
|
|
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
|
.30
|
|
|
|
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
|
.31
|
|
|
|
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 reference.)
|
|
10
|
.32
|
|
|
|
Amended and Restated 2006 Omnibus Incentive Plan of Libbey Inc
(filed as Exhibit 10.29 to Libbey Inc.s Quarterly
Report on
Form 10-Q
for the quarter ended September 30, 2010 and incorporated
herein by reference.)
|
130
|
|
|
|
|
|
|
S-K Item
|
|
|
|
|
601 No.
|
|
|
|
Document
|
|
|
12
|
.1
|
|
|
|
Statement Regarding Computation of Ratios (incorporated by
reference to Exhibit 12.1 to Libbey Glass Inc.s
Registration Statement on
Form S-4;
File
No. 333-170763).
|
|
13
|
.1
|
|
|
|
Selected Financial Information included in Registrants
2010 Annual Report to Shareholders (filed herein).
|
|
21
|
|
|
|
|
Subsidiaries of the Registrant (filed herein).
|
|
23
|
|
|
|
|
Consent of Ernst & Young LLP (filed herein).
|
|
24
|
|
|
|
|
Power of Attorney (filed herein).
|
|
31
|
.1
|
|
|
|
Certification of Chief Executive Officer Pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
(filed herein).
|
|
31
|
.2
|
|
|
|
Certification of Chief Financial Officer Pursuant to
Rule 13a-14(a)
or
Rule 15d-14(a)
(filed herein).
|
|
32
|
.1
|
|
|
|
Chief Executive Officer Certification Pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (filed herein).
|
|
32
|
.2
|
|
|
|
Chief Financial Officer Certification Pursuant to 18 U.S.C
Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 (filed herein).
|
131