UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2008

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Libbey Inc.

Delaware		34-1559357
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

300 Madison Avenue, Toledo, Ohio 43604

419-325-2100

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 is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one)

Large Accelerated Filer o		Accelerated Filer þ		Non-Accelerated Filer o		Smaller reporting company o
				(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value 14,730,144 shares at October 31, 2008.

 

 

TABLE OF CONTENTS

Item 1. Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of the Business

2. Significant Accounting Policies

3. Balance Sheet Details

4. Borrowings

5. Income Taxes

6. Pension and Non-pension Postretirement Benefits

7. Net Income per Share of Common Stock

8. Derivatives

9. Comprehensive Income (Loss)

10. Condensed Consolidated Guarantor Financial Statements

11. Segments

12. Fair Value

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3. Qualitative and Quantitative Disclosures about Market Risk

Item 4. Controls and Procedures

PART II — OTHER INFORMATION

Item 1A. Risk Factors

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Item 5. Other Information

Item 6. Exhibits

EXHIBIT INDEX

SIGNATURES

Certification

EX-4.10

EX-10.51

EX-10.52

EX-31.1

EX-31.2

EX-32.1

EX-32.2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and all majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three-month and nine-month periods ended September 30, 2008 are not necessarily indicative of the results that may be expected for the year ending December 31, 2008.

The balance sheet at December 31, 2007 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2007.

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except per-share amounts)

(unaudited)

		Three months ended September 30,
		2008				2007
Net sales		$	211,536			$	202,431
Freight billed to customers			664				507
Total revenues			212,200				202,938
Cost of sales			174,266				164,688
Gross profit			37,934				38,250
Selling, general and administrative expenses			23,377				23,571
Income from operations			14,557				14,679
Other (expense) income			(1,000	)			1,561
Earnings before interest and income taxes			13,557				16,240
Interest expense			17,509				16,956
Loss before income taxes			(3,952	)			(716	)
Provision for (benefit from) income taxes			2,006				(1,161	)
Net (loss) income		$	(5,958	)		$	445
Net (loss) income per share:
Basic		$	(0.40	)		$	0.03
Diluted		$	(0.40	)		$	0.03
Dividends per share		$	0.025			$	0.025

See accompanying notes

LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)

		Nine months ended September 30,
		2008				2007
Net sales		$	623,640			$	589,050
Freight billed to customers			1,947				1,531
Total revenues			625,587				590,581
Cost of sales			515,148				475,727
Gross profit			110,439				114,854
Selling, general and administrative expenses			67,687				69,272
Income from operations			42,752				45,582
Other income			339				4,045
Earnings before interest and income taxes			43,091				49,627
Interest expense			52,280				48,949
(Loss) income before income taxes			(9,189	)			678
Provision for (benefit from) income taxes			2,365				(1,969	)
Net (loss) income		$	(11,554	)		$	2,647
Net (loss) income per share:
Basic		$	(0.79	)		$	0.18
Diluted		$	(0.79	)		$	0.18
Dividends per share		$	0.075			$	0.075

See accompanying notes

LIBBEY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except share amounts)

		September 30, 2008				December 31, 2007
		(unaudited)
Assets
Current assets:
Cash and equivalents		$	8,719			$	36,539
Accounts receivable — net			102,781				93,333
Inventories — net			204,485				194,079
Prepaid and other current assets			21,018				20,431
Total current assets			337,003				344,382
Other assets:
Deferred income taxes			907				855
Purchased intangible assets — net			30,692				30,731
Goodwill — net			177,173				177,360
Other assets			14,017				16,366
Total other assets			222,789				225,312
Property, plant and equipment — net			328,369				329,777
Total assets		$	888,161			$	899,471
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable		$	3,289			$	622
Accounts payable			58,468				73,593
Salaries and wages			24,135				28,659
Accrued liabilities			62,966				41,453
Pension liability (current portion)			1,882				1,883
Non-pension postretirement benefits (current portion)			3,528				3,528
Derivative liability			16,158				7,096
Payable to Vitro			—				19,575
Deferred income taxes			4,462				4,462
Long-term debt due within one year			913				913
Total current liabilities			175,801				181,784
Long-term debt			521,500				495,099
Pension liability			54,591				71,709
Non-pension postretirement benefits			50,335				45,667
Other long-term liabilities			9,989				12,097
Total liabilities			812,216				806,356
Shareholders’ equity:
Common stock, par value $.01 per share, 50,000,000 shares authorized, 18,697,630 shares issued at September 30, 2008 and at December 31, 2007.			187				187
Capital in excess of par value (includes warrants of $1,034, based on 485,309 shares at September 30, 2008 and at December 31, 2007)			308,663				306,874
Treasury stock, at cost, 3,967,486 shares (4,133,074 shares in 2007)			(106,410	)			(110,780	)
Retained deficit			(75,855	)			(60,689	)
Accumulated other comprehensive loss			(50,640	)			(42,477	)
Total shareholders’ equity			75,945				93,115
Total liabilities and shareholders’ equity		$	888,161			$	899,471

See accompanying notes

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)

		Three months ended September 30,
		2008				2007
Operating activities:
Net (loss) income		$	(5,958	)		$	445
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			10,899				11,785
Loss on asset sales			159				307
Change in accounts receivable			7,109				(3,698	)
Change in inventories			(5,712	)			(8,801	)
Change in accounts payable			(9,695	)			(11,400	)
Change in accrued interest			17,128				14,307
Pension & non-pension postretirement benefits			(12,544	)			(5,042	)
Accrued liabilities & prepaid expenses			6,553				8,294
Income taxes			1,790				2,446
Other operating activities			3,580				2,709
Net cash provided by operating activities			13,309				11,352
Investing activities:
Additions to property, plant and equipment			(12,390	)			(9,366	)
Proceeds from asset sales and other			71				678
Net cash used in investing activities			(12,319	)			(8,688	)
Financing activities:
Net ABL credit facility activity			(8,669	)			(4,380	)
Other net payments			(587	)			(199	)
Dividends			(369	)			(364	)
Other			—				(138	)
Net cash used in financing activities			(9,625	)			(5,081	)
Effect of exchange rate fluctuations on cash			(529	)			247
Decrease in cash			(9,164	)			(2,170	)
Cash at beginning of period			17,883				15,576
Cash at end of period		$	8,719			$	13,406
Supplemental disclosure of cash flows information:
Cash paid during the period for interest		$	1,721			$	2,289
Cash paid (net of refunds received) during the period for income taxes		$	(167	)		$	(9,934	)

See accompanying notes

LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

		Nine months ended September 30,
		2008				2007
Operating activities:
Net (loss) income		$	(11,554	)		$	2,647
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization			33,433				31,711
Loss (gain) on asset sales			35				(1,268	)
Change in accounts receivable			(10,351	)			(6,476	)
Change in inventories			(10,756	)			(28,367	)
Change in accounts payable			(15,607	)			(13,442	)
Change in accrued interest			15,055				12,477
Pay-in-kind interest			10,216				8,758
Pension & non-pension postretirement benefits			(13,982	)			(2,805	)
Payable to Vitro			(19,575	)			—
Accrued liabilities & prepaid expenses			5,113				11,936
Income taxes			3,661				(1,067	)
Other operating activities			4,562				1,573
Net cash (used in) provided by operating activities			(9,750	)			15,677
Investing activities:
Additions to property, plant and equipment			(30,002	)			(31,992	)
Proceeds from asset sales and other			117				2,631
Net cash used in investing activities			(29,885	)			(29,361	)
Financing activities:
Net ABL credit facility activity			14,713				(34,958	)
Other net (payments) borrowings			(1,460	)			21,081
Dividends			(1,098	)			(1,083	)
Other			—				(138	)
Net cash provided by (used in) financing activities			12,155				(15,098	)
Effect of exchange rate fluctuations on cash			(340	)			422
Decrease in cash			(27,820	)			(28,360	)
Cash at beginning of period			36,539				41,766
Cash at end of period		$	8,719			$	13,406
Supplemental disclosure of cash flows information:
Cash paid during the period for interest		$	23,011			$	23,320
Cash paid (net of refunds received) during the period for income taxes		$	(562	)		$	(8,160	)

See accompanying notes

LIBBEY INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Dollars in thousands, except per share data

(unaudited)

1. Description of the Business

Libbey is the leading producer of glass tableware products in the Western Hemisphere, in addition to supplying 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 North American glass tableware manufacturers. 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, business-to-business and industrial 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 ceramic dinnerware plant in New York and a plastics plant in Wisconsin. In addition, we import products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tableware market by offering an extensive product line at competitive prices.

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

2. Significant Accounting Policies

See our Form 10-K for the year ended December 31, 2007 for a description of significant accounting policies not listed below.

Basis of Presentation

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

Condensed Consolidated Statements of Operations

Net sales in our Condensed Consolidated Statements of Operations include revenue earned when products are shipped and title and risk of loss have passed to the customer. Revenue is recorded net of returns, discounts and incentives offered to customers. Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs, royalty expense and other costs.

Foreign Currency Translation

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

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. FAS No. 109, “Accounting for Income Taxes,” requires that a valuation allowance be recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

Deferred income tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. In the United States, we have recorded a full valuation allowance against our deferred income tax assets. In addition, valuation allowances have been recorded in the Netherlands and for a holding company in Mexico.

Stock-Based Compensation Expense

We account for stock-based compensation in accordance with SFAS No. 123-R, “Accounting for Stock-Based Compensation” (“SFAS No. 123-R”). Stock-based compensation cost is measured based on the fair value of the equity instruments issued. SFAS No. 123-R applies to all of our outstanding unvested stock-based payment awards as of January 1, 2006, and all prospective awards using the modified prospective transition method without restatement of prior periods. Stock-based compensation expense charged to the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2008 was $0.7 million and $2.8 million, respectively. The stock-based compensation expense charged to the Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2007 was $0.9 million and $2.5 million, respectively.

New Accounting Standards

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value, and expands disclosure about fair value measurements. This statement clarifies how to measure fair value as permitted under other accounting pronouncements but does not require any new fair value measurements. However, for some companies, the application of this statement will change current practice. In February 2008, the FASB issued Staff Position 157-2, “Effective Date of FASB Statement No. 157,” which delays until January 1, 2009 the effective date of SFAS 157 for nonfinancial assets and liabilities, except for those that are recognized or disclosed at fair value in the financial statements on a recurring basis. We adopted SFAS 157 as of January 1, 2008, but have not applied it to non-recurring, nonfinancial assets and liabilities. The adoption of SFAS 157 had no impact on our consolidated results of operations and financial condition. See Note 12, Fair Value, for additional information.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of SFAS No. 115” (“SFAS 159”), which is effective for fiscal years beginning after November 15, 2007. This statement permits an entity to choose to measure many financial instruments and certain other items at fair value at specified election dates. Subsequent unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings. We adopted SFAS 159 as of January 1, 2008. The adoption of SFAS 159 had no impact on our consolidated results of operations and financial condition, as we did not elect to apply the provisions of SFAS 159 to any financial instruments as of January 1, 2008.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”), which changes how business combinations are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. SFAS 141R is effective January 1, 2009 for Libbey and will be applied prospectively. The impact of adopting SFAS 141R will depend on the nature and terms of future acquisitions.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”), which changes the accounting and reporting standards for the noncontrolling interests in a subsidiary in consolidated financial statements. SFAS 160 re-characterizes minority interests as noncontrolling interests and requires noncontrolling interests to be classified as a component of shareholders equity. SFAS 160 is effective January 1, 2009 for Libbey, and requires retroactive adoption of the presentation and disclosure requirements for existing minority interests. We do not believe adoption of SFAS 160 will have a material impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“ SFAS 161”), which requires additional disclosures about the objectives of the derivative instruments and

hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS 161 is effective for Libbey beginning January 1, 2009. We are currently evaluating the potential impact, if any, of adoption of SFAS 161 on our consolidated financial statements.

In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” FSP 142-3 is effective on January 1, 2009. We are currently evaluating the potential impact, if any, of the adoption of FSP 142-3 on our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”), which identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” The implementation of this standard will not have a material impact on our consolidated financial statements.

In June 2008, the FASB ratified EITF Issue No. 07-5, “Determining Whether an Instrument (or an Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF 07-5”). EITF 07-5 provides that an entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. It also clarifies the impact of foreign currency denominated strike prices and market-based employee stock option valuation instruments on the evaluation. EITF 07-5 is effective for fiscal years beginning after December 15, 2008. We are currently evaluating the impact of EITF 07-5, if any, on our consolidated financial statements.

          In June 2008, the FASB issued FASB Staff Position No. EITF 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (“FSP 03-6-1”). FSP 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation in computing earnings per share (EPS) under the two-class method described in paragraphs 60 and 61 of SFAS No. 128, “Earnings per Share.” FSP 03-6-1 is effective for financial statements issued for fiscal years beginning after December 15, 2008, with all prior period EPS data being adjusted retrospectively. Early adoption is not permitted. We are currently evaluating the potential impact, if any, of the adoption of FSP 03-6-1 on our consolidated financial statements.

Reclassifications

Certain amounts in the prior year’s financial statements have been reclassified to conform to the presentation used in the current year financial statements.

3. Balance Sheet Details

The following table provides detail of selected balance sheet items:

		September 30, 2008				December 31, 2007
Accounts receivable:
Trade receivables		$	101,110			$	91,435
Other receivables			1,671				1,898
Total accounts receivable, less allowances of $10,903 and $11,711		$	102,781			$	93,333
Inventories:
Finished goods		$	180,169			$	170,386
Work in process			4,904				4,052
Raw materials			5,990				5,668
Repair parts			10,660				11,137
Operating supplies			2,762				2,836
Total inventories, less allowances of $6,775 and $6,435		$	204,485			$	194,079
Prepaid and other current assets:
Prepaid expenses		$	16,042			$	13,551
Derivative asset			—				359
Prepaid income taxes			4,976				6,521
Total prepaid and other current assets		$	21,018			$	20,431
Other assets:
Deposits		$	171			$	596
Finance fees — net of amortization			8,872				11,194
Pension asset			4,761				3,253
Other			213				1,323
Total other assets		$	14,017			$	16,366
Accrued liabilities:
Accrued incentives		$	22,819			$	14,236
Workers compensation			9,226				9,485
Medical liabilities			2,759				2,450
Non-income taxes			1,485				1,129
Interest			17,968				5,218
Commissions payable			1,369				1,381
Accrued special charges			—				38
Accrued liabilities			7,340				7,516
Total accrued liabilities		$	62,966			$	41,453
Other long-term liabilities:
Deferred liability		$	3,046			$	1,254
Other			6,943				10,843
Total other long-term liabilities		$	9,989			$	12,097

4. Borrowings

On June 16, 2006, Libbey Glass Inc. issued $306.0 million aggregate principal amount of floating rate senior secured notes (Senior Notes) due June 1, 2011, and $102.0 million aggregate principal amount of senior subordinated secured pay-in-kind notes (PIK Notes), due December 1, 2011. Concurrently, Libbey Glass Inc. entered into a new $150.0 million Asset Based Loan facility (ABL Facility) expiring December 16, 2010.

Borrowings consist of the following:

										September 30,				December 31,
(Dollars in thousands)		Interest Rate				Maturity Date				2008				2007
Borrowings under ABL facility		floating				December 16, 2010				$	20,951			$	7,366
Senior notes		floating (1)				June 1, 2011					306,000				306,000
PIK notes (2)			16.00	%		December 1, 2011					137,913				127,697
Promissory note			6.00	%		October, 2008 to September, 2016					1,708				1,830
Notes payable		floating				October, 2008					3,289				622
RMB loan contract		floating				July, 2012 to January, 2014					36,575				34,275
RMB working capital loan		floating				March, 2010					7,315				6,855
Obligations under capital leases		floating				October, 2008 to May, 2009					486				1,018
BES Euro line		floating				January, 2010 to January, 2014					15,894				15,962
Other debt		floating				September, 2009					646				1,432
Total borrowings											530,777				503,057
Less — unamortized discounts and warrants											5,075				6,423
Total borrowings — net											525,702				496,634
Less — current portion of borrowings											4,202				1,535
Total long-term portion of borrowings — net										$	521,500			$	495,099

(1)		See Interest Rate Protection Agreements below.
(2)		Additional PIK notes were issued on June 1, 2008 as payment for semi-annual interest accruing on the PIK notes. During the first three years of the term of the PIK notes, interest is payable by the issuance of additional PIK notes.

ABL Facility

The ABL Facility is with a group of six banks and provides for a revolving credit and swing line facility permitting borrowings for Libbey Glass and Libbey Europe up to an aggregate of $150.0 million, with Libbey Europe’s borrowings being limited to $75.0 million. Borrowings under the ABL Facility mature December 16, 2010. Swing line borrowings are limited to $15.0 million, with swing line borrowings for Libbey Europe being limited to €7.5 million. Swing line U.S. dollar borrowings bear interest calculated at the prime rate plus the Applicable Rate for ABR (Alternate Base Rate) Loans, 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 ABR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for ABR Loans and Eurocurrency Loans were 0.0 percent and 1.75 percent, respectively, at September 30, 2008. There were no Libbey Glass borrowings under the facility at September 30, 2008 while Libbey Europe had outstanding borrowings of $21.0 million at September 30, 2008, at an interest rate of 6.71 percent. Interest is payable the last day of the interest period, which can range from one month to six months. Subsequent to the end of the third quarter of 2008, the parties to the ABL Facility amended certain of its terms. For further information regarding the amendment, see “Item 5. Other Information” below.

All borrowings under the ABL Facility are secured by a first priority security interest in (i) substantially all assets of (a) Libbey Glass and (b) substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries, (ii) (a) 100 percent of the stock of Libbey Glass, (b) 100 percent of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries, (c) 100 percent of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries and (d) 65 percent of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries, and (iii) substantially all proceeds and products of the property and assets described in clauses (i) and (ii) of this sentence.

Additionally, borrowings by Libbey Europe under the ABL Facility are secured by a first priority security interest in (i) substantially all of the assets of Libbey Europe, the parent of Libbey Europe and certain of its subsidiaries, (ii) 100 percent of the stock of Libbey Europe and certain subsidiaries of Libbey Europe, and (iii) substantially all proceeds and products of the property and assets described in clauses (i) and (ii) of this sentence.

Libbey pays a Commitment Fee, as defined by the ABL Facility, on the total credit provided under the Facility. The Commitment Fee varies depending on our aggregate availability. The Commitment Fee was 0.25 percent at September 30, 2008. No compensating balances are required by the Agreement. The Agreement does not require compliance with restrictive financial covenants, unless aggregate unused availability falls below $25.0 million.

The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable, inventory and fixed assets. The borrowing base is the sum of (a) 85 percent of eligible accounts receivable, (b) the lesser of (i) 85 percent of the net orderly liquidation value (NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million, and (c) the lesser of $25.0 million and the aggregate of (i) 75 percent of the NOLV of eligible equipment and (ii) 50 percent of the fair market value of eligible real property.

The available total borrowing base is offset by real estate and ERISA reserves totaling $8.0 million and mark-to-market reserves for natural gas and interest rate swaps of $10.8 million and a rent reserve of $1.2 million. The ABL Facility also provides for the issuance of $30.0 million of letters of credit, which are applied against the $150.0 million limit. At September 30, 2008, we had $8.4 million in letters of credit outstanding under the ABL Facility. Remaining unused availability on the ABL Facility was $79.7 million at September 30, 2008.

Senior Notes

Libbey Glass and Libbey Inc. entered into a purchase agreement pursuant to which Libbey Glass agreed to sell $306.0 million aggregate principal amount of floating rate senior secured notes due June 1, 2011 to the initial purchasers named in a private placement. The net proceeds of these notes, after deducting a discount and the estimated expenses and fees, were approximately $289.8 million. On February 15, 2007, we exchanged $306.0 million aggregate principal amount of our floating rate senior secured notes due June 1, 2011, which have been registered under the Securities Act of 1933, as amended (Senior Notes), for the notes sold in the private placement. The Senior Notes bear interest at a rate equal to six-month LIBOR plus 7.0 percent and were offered at a discount of 2 percent of face value. Interest with respect to the Senior Notes is payable semiannually on June 1 and December 1. The interest rate was 9.93 percent at September 30, 2008.

We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate for our borrowings related to the Rate Agreements at September 30, 2008, excluding applicable fees, is 5.24 percent per year and the total interest rate, including applicable fees, is 12.24 percent per year. The average maturity of these Rate Agreements is 1.2 years at September 30, 2008. Total remaining Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 9.93 percent per year at September 30, 2008. If the counterparties to these Rate Agreements were to fail to perform, these Rate Agreements would no longer protect us from interest rate fluctuations. However, we do not anticipate nonperformance by the counterparties. All interest rate swap counterparties’ credit ratings are rated AA or better, as of September 30, 2008, by Standard and Poor’s.

The fair market value for the Rate Agreements at September 30, 2008 was a $7.2 million liability. The fair value of the Rate Agreements is based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. We do not expect to cancel these agreements and expect them to expire as originally contracted.

The Senior Notes are guaranteed by Libbey Inc. and all of Libbey Glass’s existing and future domestic subsidiaries that guarantee any of Libbey Glass’s debt or debt of any subsidiary guarantor (see Note 10). The Senior Notes and related guarantees have the benefit of a second-priority lien, subject to permitted liens, on collateral consisting of substantially all the tangible and intangible assets of Libbey Glass and its domestic subsidiary guarantors that secure all of the indebtedness under Libbey Glass’s ABL Facility. The Collateral does not include the assets of non-guarantor subsidiaries that secure the ABL Facility.

PIK Notes

Concurrently with the execution of the purchase agreement with respect to the Senior Notes, Libbey Glass and Libbey Inc. entered into a purchase agreement (Unit Purchase Agreement) pursuant to which Libbey Glass agreed to sell, to a purchaser named in the private placement, units consisting of $102.0 million aggregate principal amount 16 percent senior subordinated secured pay-in-kind notes due December 1, 2011 (PIK Notes) and detachable warrants to purchase 485,309 shares of Libbey Inc. common stock (Warrants) exercisable on or after June 16, 2006 and expiring on December 1, 2011. The warrant holders do not have voting rights. The net proceeds, after deducting a discount and estimated expenses and fees, were approximately $97.0 million. The proceeds were allocated between the Warrants and the underlying debt based on their respective fair values at the time of issuance. The amount allocated to the Warrants has been recorded in equity, with the offset recorded as a discount on the underlying debt. Each Warrant is exercisable at $11.25. The PIK Notes were offered at a discount of 2 percent of face value. Interest is payable semiannually on June 1 and December 1, but during the first three years interest is payable by issuance of additional PIK Notes. At September 30, 2008, the total principal amount of PIK notes was $137.9 million.

The obligations of Libbey Glass under the PIK Notes are guaranteed by Libbey Inc. and all of Libbey Glass’s existing and future domestic subsidiaries that guarantee any of Libbey Glass’s debt or debt of any subsidiary guarantor (see Note 10). The PIK Notes and related guarantees are senior subordinated obligations of Libbey Glass and the guarantors of the PIK Notes and are entitled to the benefit of a third-priority lien, subject to permitted liens, on the collateral that secures the Senior Notes.

Promissory Note

In September 2001, we issued a $2.7 million promissory note in connection with the purchase of our Laredo, Texas warehouse facility. At September 30, 2008, we had $1.7 million outstanding on the promissory note. Interest with respect to the promissory note is paid monthly.

Notes Payable

We have overdraft lines of credit for a maximum of €2.3 million. The $3.3 million outstanding at September 30, 2008, was the U.S. dollar equivalent under the euro-based overdraft line, and the interest rate was 6.02 percent. Interest with respect to the note payable is paid monthly.

RMB Loan Contract

On January 23, 2006, Libbey Glassware (China) Co., Ltd. (Libbey China), an indirect wholly owned subsidiary of Libbey Inc., entered into an RMB Loan Contract (RMB Loan Contract) with China Construction Bank Corporation Langfang Economic Development Area Sub-Branch (CCB). Pursuant to the RMB Loan Contract, CCB agreed to lend to Libbey China RMB 250.0 million, or the equivalent of approximately $36.6 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 People’s Bank of China. As of the date of the initial advance under the Loan Contract, the annual interest rate was 5.51 percent, and as of September 30, 2008, the annual interest rate was 7.01 percent. As of September 30, 2008, the outstanding balance was RMB 250.0 million (approximately $36.6 million). Interest is payable quarterly. Payments of principal in the amount of RMB 30.0 million (approximately $4.4 million) and RMB 40.0 million (approximately $5.8 million) must be made on July 20, 2012, and December 20, 2012, respectively, and three payments of principal in the amount of RMB 60.0 million (approximately $8.8 million) each must be made on July 20, 2013, December 20, 2013, and January 20, 2014, respectively. The obligations of Libbey China are secured by a guarantee executed by Libbey Inc. for the benefit of CCB.

RMB Working Capital Loan

In March 2007, Libbey China entered into a RMB 50.0 million working capital loan with China Construction Bank. The 3-year term loan has a principal payment at maturity on March 14, 2010, has a current interest rate of 7.56 percent, and is secured by a Libbey Inc. guarantee. At September 30, 2008, the U.S. dollar equivalent on the line was $7.3 million. Interest is payable quarterly.

Obligations Under Capital Leases

We lease certain machinery and equipment under agreements that are classified as capital leases. These leases were assumed in the Crisal acquisition. The cost of the equipment under capital leases is included in the Condensed Consolidated Balance Sheet as property, plant and equipment, and the related depreciation expense is included in the Condensed Consolidated Statements of Operations.

The future minimum lease payments required under the capital leases as of September 30, 2008, are $0.5 million, all due within one year.

BES Euro Line

In January 2007, Crisal entered into a seven year, €11.0 million line of credit (approximately $15.9 million) with BANCO ESPÍRITO SANTO, S.A. (BES). The $15.9 million outstanding at September 30, 2008, was the U.S. dollar equivalent under the line at an interest rate of 6.75 percent. Payment of principal in the amount of €1.1 million (approximately $1.6 million) is due in January 2010, payment of €1.6 million (approximately $2.3 million) is due in January 2011, payment of €2.2 million (approximately $3.2 million) is due in January 2012, payment of €2.8 million (approximately $4.0 million) is due in January 2013 and payment of €3.3 million (approximately $4.8 million) is due in January 2014. Interest with respect to the line is paid every six months.

Other Debt

The other debt of $0.6 million primarily consists of government-subsidized loans for equipment purchases at Crisal.

5. Income Taxes

The Company’s effective tax rate differs from the United States statutory tax rate primarily due to changes in the mix of earnings in countries with differing statutory tax rates, changes in accruals related to uncertain tax positions, tax planning structures and changes in tax laws. Further, the Company’s current and future provision for income taxes for 2008 is significantly impacted by the recognition of valuation allowances in certain countries, particularly the United States. The Company intends to maintain these allowances until it is more likely than not that the deferred income tax assets will be realized.

6. Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation and length of service for salaried employees and job grade and length of service for hourly employees. In addition, we have a supplemental employee retirement plan (SERP) covering certain U.S.-based employees. The U.S. pension plans, including the SERP, which is an unfunded liability, cover the hourly and salaried U.S.-based employees of Libbey hired before January 1, 2006. The non-U.S. pension plans cover the employees of our wholly owned subsidiaries, Royal Leerdam and Crisa. The Crisa plan is not funded.

The components of our net pension expense, including the SERP, are as follows:

		U.S. Plans								Non-U.S. Plans								Total
Three months ended September 30,		2008				2007				2008				2007				2008				2007
Service cost		$	1,348			$	1,481			$	438			$	479			$	1,786			$	1,960
Interest cost			3,908				3,651				1,182				956				5,090				4,607
Expected return on plan assets			(4,393	)			(4,010	)			(813	)			(687	)			(5,206	)			(4,697	)
Amortization of unrecognized:
Prior service cost (gain)			597				522				(18	)			(13	)			579				509
(Gain)/loss			330				535				73				73				403				608
Settlement			—				500				—				—				—				500
Pension expense		$	1,790			$	2,679			$	862			$	808			$	2,652			$	3,487

		U.S. Plans								Non-U.S. Plans								Total
Nine months ended September 30,		2008				2007				2008				2007				2008				2007
Service cost		$	4,044			$	4,442			$	1,314			$	1,440			$	5,358			$	5,882
Interest cost			11,723				10,955				3,547				2,869				15,270				13,824
Expected return on plan assets			(13,180	)			(12,030	)			(2,441	)			(2,062	)			(15,621	)			(14,092	)
Amortization of unrecognized:
Prior service cost (gain)			1,792				1,565				(53	)			(36	)			1,739				1,529
(Gain)/loss			989				1,605				220				222				1,209				1,827
Settlement			—				1,500				—				—				—				1,500
Pension expense		$	5,368			$	8,037			$	2,587			$	2,433			$	7,955			$	10,470

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 U.S. union hourly employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey. During the second quarter of 2008, we amended our U.S. non-pension postretirement plans to cover employees and retirees of Syracuse China previously covered under a multi-employer plan. This plan amendment is effective September 1, 2008 and resulted in a charge of $3.4 million to other comprehensive loss during the second quarter of 2008. The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.

The provision for our non-pension postretirement benefit expense consists of the following:

		U.S. Plans								Non-U.S. Plans								Total
Three months ended September 30,		2008				2007				2008				2007				2008				2007
Service cost		$	274			$	199			$	—			$	1			$	274			$	200
Interest cost			788				561				32				23				820				584
Amortization of unrecognized:
Prior service gain			115				(221	)			—				—				115				(221	)
Loss / (Gain)			60				20				(8	)			(13	)			52				7
Non-pension postretirement benefit expense		$	1,237			$	559			$	24			$	11			$	1,261			$	570

		U.S. Plans								Non-U.S. Plans								Total
Nine months ended September 30,		2008				2007				2008				2007				2008				2007
Service cost		$	824			$	597			$	1			$	1			$	825			$	598
Interest cost			2,215				1,683				96				70				2,311				1,753
Amortization of unrecognized:
Prior service cost (gain)			(116	)			(663	)			—				—				(116	)			(663	)
Loss / (Gain)			179				59				(24	)			(38	)			155				21
Non-pension postretirement benefit expense		$	3,102			$	1,676			$	73			$	33			$	3,175			$	1,709

In 2008, we expect to utilize $29.7 million to fund our pension plans and pay for non-pension postretirement benefits. Of that amount, $15.3 million and $25.0 million was utilized in the three months and nine months ended September 30, 2008, respectively.

7. Net Income per Share of Common Stock

The following table sets forth the computation of basic and diluted earnings per share:

		Three Months Ended September 30,								Nine months Ended September 30,
		2008				2007				2008				2007
Numerator for earnings per share — net (loss) income that is available to common shareholders		$	(5,958	)		$	445			$	(11,554	)		$	2,647
Denominator for basic earnings per share — weighted average shares outstanding			14,729,958				14,534,921				14,651,810				14,444,777
Effect of dilutive securities (1)			—				388,794				—				314,519
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversions			14,729,958				14,923,715				14,651,810				14,759,296
Basic (loss) earnings per share		$	(0.40	)		$	0.03			$	(0.79	)		$	0.18
Diluted (loss) earnings per share		$	(0.40	)		$	0.03			$	(0.79	)		$	0.18

(1)		The effect of employee stock options, warrants, restricted stock units and the employee stock purchase plan (ESPP) (107,984 and 331,671 shares for the three months and nine months ended September 30, 2008, respectively), was anti-dilutive and thus not included in the earnings per share calculation. These amounts are anti-dilutive due to the net loss.

When applicable, diluted shares outstanding include the dilutive impact of in-the-money employee stock options, which are calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the tax-effected proceeds that hypothetically would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.

8. Derivatives

As of September 30, 2008, we had commodity contracts for 5,550,000 million British Thermal Units (BTUs) of natural gas with a fair market value of a $9.1 million liability. We also had Interest Rate Protection Agreements for $200.0 million of our variable rate debt, as discussed in Note 4. The fair market value for the Rate Agreements at September 30, 2008 was a $7.2 million liability. In January 2008, we entered into a series of foreign currency contracts to sell Canadian dollars. As of September 30, 2008, we had contracts for 2.5 million Canadian dollars. The fair value of the Canadian currency agreements was $0.1 million asset as of September 30, 2008. That amount is included in derivative liability in the Condensed Consolidated Balance Sheet. All of the contracts were accounted for under Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (Statement 133).

At December 31, 2007, we had a foreign currency contract for 212.0 million pesos for a contractual payment due to Vitro in January 2008 related to the Crisa acquisition. As of December 31, 2007, the fair value of this contract was $0.4 million, which is included in other current assets in the Condensed Consolidated Balance Sheet. We also had Interest Rate Protection Agreements for $200.0 million of variable rate debt, and commodity contracts for 2,820,000 million BTUs of natural gas at December 31, 2007. The fair values for these agreements at December 31, 2007 were liabilities of $5.3 million and $1.8 million for the Interest Rate Agreement and natural gas contracts, respectively. The fair value of these derivatives is included in derivative liability on the Condensed Consolidated Balance Sheet.

We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate, natural gas and foreign currency hedges, as the counterparties are established financial institutions. The counterparties’ credit ratings are rated AA or better for the Interest Rate Protection Agreements and A or better for the other derivative agreements as of September 30, 2008, by Standard and Poor’s.

Most of our derivatives qualify and are designated as cash flow hedges at September 30, 2008. Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses would be recorded to earnings immediately. The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in current earnings. For the three months and nine months ended September 30, 2008, the ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge was zero. We recognized a loss of $0.2 million in the three months and a gain of $0.5 million in the nine months ended September 30, 2007, in other income on the Condensed Consolidated Statement of Operations.

9. Comprehensive Income (Loss)

Components of comprehensive income (loss), net of tax, are as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Net (loss) income		$	(5,958	)		$	445			$	(11,554	)		$	2,647
Change in pension and nonpension postretirement liability			2,403				70				(728	)			94
Change in fair value of derivative instruments (see detail below)			(11,311	)			(2,060	)			(6,368	)			(1,244	)
Effect of exchange rate fluctuation			(7,999	)			3,988				(1,067	)			5,770
Comprehensive (loss) income		$	(22,865	)		$	2,443			$	(19,717	)		$	7,267

Accumulated other comprehensive loss (net of tax) includes:

		September 30,				December 31,
		2008				2007
Change in pension and nonpension postretirement liability		$	(45,528	)		$	(44,800	)
Derivatives			(12,678	)			(6,310	)
Exchange rate fluctuation			7,566				8,633
Total		$	(50,640	)		$	(42,477	)

The change in other comprehensive loss for derivative instruments for the Company is as follows:

		Three months ended								Nine months ended
		September 30,								September 30,
		2008				2007				2008				2007
Change in fair value of derivative instruments		$	(14,764	)		$	(2,929	)		$	(7,405	)		$	(1,770	)
Less:
Income tax effect			(3,453	)			(869	)			(1,037	)			(526	)
Other comprehensive loss related to derivatives		$	(11,311	)		$	(2,060	)		$	(6,368	)		$	(1,244	)

10. Condensed Consolidated Guarantor Financial Statements

Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and the issuer of the Senior Notes and the PIK Notes. The obligations of Libbey Glass under the Senior Notes and the PIK Notes are fully and unconditionally and jointly and severally guaranteed by Libbey Inc. and by certain indirect, 100 percent owned domestic subsidiaries of Libbey Inc., as described below. All are related parties that are included in the Condensed Consolidated Financial Statements for the three month and nine month periods ended September 30, 2008 and September 30, 2007.

At September 30, 2008, December 31, 2007 and September 30, 2007, Libbey Inc.’s indirect, 100 percent owned domestic subsidiaries were Syracuse China Company, World Tableware Inc., LGA4 Corp., LGA3 Corp., The Drummond Glass Company, LGC Corp., Traex Company, Libbey.com LLC, LGFS Inc., LGAC LLC and Crisa Industrial LLC (collectively, the “Subsidiary Guarantors”). The following tables contain Condensed Consolidating Financial Statements of (a) the parent, Libbey Inc., (b) the issuer, Libbey Glass, (c) the Subsidiary Guarantors, (d) the indirect subsidiaries of Libbey Inc. that are not Subsidiary Guarantors (collectively, “Non-Guarantor Subsidiaries”), (e) the consolidating elimination entries, and (f) the consolidated totals.

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)

Three months ended September 30, 2008
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	100,499			$	28,339			$	97,354			$	(14,656	)		$	211,536
Freight billed to customers			—				230				336				98				—				664
Total revenues			—				100,729				28,675				97,452				(14,656	)			212,200
Cost of sales			—				83,241				23,569				82,112				(14,656	)			174,266
Gross profit			—				17,488				5,106				15,340				—				37,934
Selling, general and administrative expenses			—				10,670				2,998				9,709				—				23,377
Income (loss) from operations			—				6,818				2,108				5,631				—				14,557
Other income (expense)			—				(862	)			(52	)			(86	)			—				(1,000	)
Earnings (loss) before interest and income taxes			—				5,956				2,056				5,545				—				13,557
Interest expense			—				15,560				—				1,949				—				17,509
Earnings (loss) before income taxes			—				(9,604	)			2,056				3,596				—				(3,952	)
Provision (benefit) for income taxes			—				1,231				—				775				—				2,006
Net income (loss)			—				(10,835	)			2,056				2,821				—				(5,958	)
Equity in net income (loss) of subsidiaries			(5,958	)			4,877				—				—				1,081				—
Net income (loss)		$	(5,958	)		$	(5,958	)		$	2,056			$	2,821			$	1,081			$	(5,958	)

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)

Three months ended September 30, 2007
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	99,938			$	29,409			$	87,429			$	(14,345	)		$	202,431
Freight billed to customers			—				137				321				49				—				507
Total revenues			—				100,075				29,730				87,478				(14,345	)			202,938
Cost of sales			—				79,167				23,616				76,250				(14,345	)			164,688
Gross profit			—				20,908				6,114				11,228				—				38,250
Selling, general and administrative expenses			—				13,353				2,400				7,818				—				23,571
Income (loss) from operations			—				7,555				3,714				3,410				—				14,679
Other income (expense)			—				1,375				49				137				—				1,561
Earnings (loss) before interest and income taxes			—				8,930				3,763				3,547				—				16,240
Interest expense			—				15,265				—				1,691				—				16,956
Earnings (loss) before income taxes			—				(6,335	)			3,763				1,856				—				(716	)
Provision (benefit) for income taxes			—				(10,116	)			6,047				2,908				—				(1,161	)
Net income (loss)			—				3,781				(2,284	)			(1,052	)			—				445
Equity in net income (loss) of subsidiaries			445				(3,336	)			—				—				2,891				—
Net income (loss)		$	445			$	445			$	(2,284	)		$	(1,052	)		$	2,891			$	445

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)

Nine months ended September 30, 2008
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	297,814			$	85,042			$	282,137			$	(41,353	)		$	623,640
Freight billed to customers			—				597				947				403				—				1,947
Total revenues			—				298,411				85,989				282,540				(41,353	)			625,587
Cost of sales			—				248,329				67,988				240,184				(41,353	)			515,148
Gross profit			—				50,082				18,001				42,356				—				110,439
Selling, general and administrative expenses			—				33,979				8,706				25,002				—				67,687
Income (loss) from operations			—				16,103				9,295				17,354				—				42,752
Other income (expense)			—				(620	)			(11	)			970				—				339
Earnings (loss) before interest and income taxes			—				15,483				9,284				18,324				—				43,091
Interest expense			—				47,087				1				5,192				—				52,280
Earnings (loss) before income taxes			—				(31,604	)			9,283				13,132				—				(9,189	)
Provision (benefit) for income taxes			—				885				563				917				—				2,365
Net income (loss)			—				(32,489	)			8,720				12,215				—				(11,554	)
Equity in net income (loss) of subsidiaries			(11,554	)			20,935				—				—				(9,381	)			—
Net income (loss)		$	(11,554	)		$	(11,554	)		$	8,720			$	12,215			$	(9,381	)		$	(11,554	)

Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands)
(unaudited)

Nine months ended September 30, 2007
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	297,017			$	87,335			$	241,521			$	(36,823	)		$	589,050
Freight billed to customers			—				403				989				139				—				1,531
Total revenues			—				297,420				88,324				241,660				(36,823	)			590,581
Cost of sales			—				235,362				70,026				207,162				(36,823	)			475,727
Gross profit			—				62,058				18,298				34,498				—				114,854
Selling, general and administrative expenses			—				37,506				6,598				25,168				—				69,272
Income (loss) from operations			—				24,552				11,700				9,330				—				45,582
Other income (expense)			—				2,646				1,243				156				—				4,045
Earnings (loss) before interest and income taxes			—				27,198				12,943				9,486				—				49,627
Interest expense			—				44,733				1				4,215				—				48,949
Earnings (loss) before income taxes			—				(17,535	)			12,942				5,271				—				678
Provision (benefit) for income taxes			—				(3,625	)			727				929				—				(1,969	)
Net income (loss)			—				(13,910	)			12,215				4,342				—				2,647
Equity in net income (loss) of subsidiaries			2,647				16,557				—				—				(19,204	)			—
Net income (loss)		$	2,647			$	2,647			$	12,215			$	4,342			$	(19,204	)		$	2,647

Libbey Inc.
Condensed Consolidating Balance Sheet
(dollars in thousands)

September 30, 2008 (unaudited)
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Cash and equivalents		$	—			$	417			$	1,232			$	7,070			$	—			$	8,719
Accounts receivable — net			—				40,315				7,661				54,805				—				102,781
Inventories — net			—				69,152				37,926				97,407				—				204,485
Other current assets			—				7,881				523				12,614				—				21,018
Total current assets			—				117,765				47,342				171,896				—				337,003
Other non-current assets			—				7,196				211				7,517				—				14,924
Investments in and advances to subsidiaries			75,945				431,903				268,176				125,036				(901,060	)			—
Goodwill and purchased intangible assets — net			—				30,416				16,082				161,367				—				207,865
Total other assets			75,945				469,515				284,469				293,920				(901,060	)			222,789
Property, plant and equipment — net			—				95,665				17,518				215,186				—				328,369
Total assets		$	75,945			$	682,945			$	349,329			$	681,002			$	(901,060	)		$	888,161
Accounts payable		$	—			$	9,920			$	2,891			$	45,657			$	—			$	58,468
Accrued and other current liabilities			—				72,292				6,518				34,321				—				113,131
Notes payable and long-term debt due within one year			—				209				—				3,993				—				4,202
Total current liabilities			—				82,421				9,409				83,971				—				175,801
Long-term debt			—				440,337				—				81,163				—				521,500
Other long-term liabilities			—				79,074				8,550				27,291				—				114,915
Total liabilities			—				601,832				17,959				192,425				—				812,216
Total shareholders’ equity			75,945				81,113				331,370				488,577				(901,060	)			75,945
Total liabilities and shareholders’ equity		$	75,945			$	682,945			$	349,329			$	681,002			$	(901,060	)		$	888,161

December 31, 2007
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Cash and equivalents		$	—			$	20,834			$	532			$	15,173			$	—			$	36,539
Accounts receivable — net			—				39,249				9,588				44,496				—				93,333
Inventories — net			—				71,856				37,890				84,333				—				194,079
Other current assets			—				9,243				467				10,721				—				20,431
Total current assets			—				141,182				48,477				154,723				—				344,382
Other non-current assets			—				12,955				596				3,670				—				17,221
Investments in and advances to subsidiaries			93,115				346,905				277,576				130,751				(848,347	)			—
Goodwill and purchased intangible assets — net			—				26,833				16,089				165,169				—				208,091
Total other assets			93,115				386,693				294,261				299,590				(848,347	)			225,312
Property, plant and equipment — net			—				100,742				19,389				209,646				—				329,777
Total assets		$	93,115			$	628,617			$	362,127			$	663,959			$	(848,347	)		$	899,471
Accounts payable		$	—			$	20,126			$	7,246			$	46,221			$	—			$	73,593
Accrued and other current liabilities			—				51,437				7,614				47,605				—				106,656
Notes payable and long-term debt due within one year			—				209				—				1,326				—				1,535
Total current liabilities			—				71,772				14,860				95,152				—				181,784
Long-term debt			—				428,896				—				66,203				—				495,099
Other long-term liabilities			—				91,369				5,496				32,608				—				129,473
Total liabilities			—				592,037				20,356				193,963				—				806,356
Total shareholders’ equity			93,115				36,580				341,771				469,996				(848,347	)			93,115
Total liabilities and shareholders’ equity		$	93,115			$	628,617			$	362,127			$	663,959			$	(848,347	)		$	899,471