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 March 31, 2009

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

Libbey Inc.

(Exact name of registrant as specified in its charter)

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

300 Madison Avenue, Toledo, Ohio 43604 (Address of principal executive offices) (Zip Code)

419-325-2100 (Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o  No o 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 14,755,997 shares at April 30, 2009.

 

 

TABLE OF CONTENTS

Item 1. Financial Statements			3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS			4
CONDENSED CONSOLIDATED BALANCE SHEETS			5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS			6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS			7
1. Description of the Business			7
2. Significant Accounting Policies			7
3. Balance Sheet Details			10
4. Borrowings			11
5. Special Charges			14
6. Income Taxes			15
7. Pension and Non-pension Postretirement Benefits			15
8. Net Income per Share of Common Stock			17
9. Derivatives			17
10. Comprehensive Income (Loss)			19
11. Condensed Consolidated Guarantor Financial Statements			20
12. Segments			25
13. Fair Value			26
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			27
Item 3. Qualitative and Quantitative Disclosures about Market Risk			36
Item 4. Controls and Procedures			37
PART II — OTHER INFORMATION			38
Item 1A. Risk Factors			38
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			40
Item 5. Other Information			40
Item 6. Exhibits			41
EXHIBIT INDEX			41
SIGNATURES			44
Certification
Certification
Certification
Certification
EX-31.1
EX-31.2
EX-32.1
EX-32.2
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 period ended March 31, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009.

The balance sheet at December 31, 2008 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

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

		Three months ended March 31,
		2009				2008
Net sales		$	157,853			$	187,276
Freight billed to customers			345				668
Total revenues			158,198				187,944
Cost of sales			147,482				157,607
Gross profit			10,716				30,337
Selling, general and administrative expenses			22,374				20,859
Special charges			396				—
(Loss) income from operations			(12,054	)			9,478
Other (expense) income			(37	)			753
(Loss) earnings before interest and income taxes			(12,091	)			10,231
Interest expense			17,179				17,151
Loss before income taxes			(29,270	)			(6,920	)
Benefit from income taxes			(1,377	)			(3,443	)
Net loss		$	(27,893	)		$	(3,477	)
Net loss per share:
Basic		$	(1.89	)		$	(0.24	)
Diluted		$	(1.89	)		$	(0.24	)
Dividends per share		$	—			$	0.025

See accompanying notes

LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)

		March 31, 2009				December 31, 2008
		(unaudited)
Assets
Current assets:
Cash and equivalents		$	16,463			$	13,304
Accounts receivable — net			74,555				76,072
Inventories — net			169,426				185,242
Prepaid and other current assets			16,314				17,167
Total current assets			276,758				291,785
Other assets:
Pension asset			8,640				9,351
Purchased intangible assets — net			25,450				26,121
Goodwill			164,796				166,736
Other assets			12,132				12,714
Total other assets			211,018				214,922
Property, plant and equipment — net			304,135				314,847
Total assets		$	791,911			$	821,554
Liabilities and Shareholders’ Equity
Current liabilities:
Notes payable		$	2,810			$	3,284
Accounts payable			50,896				54,428
Salaries and wages			21,616				22,597
Accrued liabilities			54,919				39,675
Accrued special charges			4,396				4,248
Pension liability (current portion)			1,778				1,778
Non-pension postretirement benefits (current portion)			4,684				4,684
Derivative liability			20,068				17,936
Deferred income taxes			1,320				1,279
Long-term debt due within one year			9,895				1,117
Total current liabilities			172,382				151,026
Long-term debt			528,151				545,856
Pension liability			110,002				109,505
Non-pension postretirement benefits			57,889				57,197
Deferred income taxes			3,231				3,648
Other long-term liabilities			12,271				12,211
Total liabilities			883,926				879,443
Shareholders’ equity:
Common stock, par value $.01 per share, 50,000,000 shares authorized, 18,697,630 shares issued at March 31, 2009 and at December 31, 2008			187				187
Capital in excess of par value (includes warrants of $1,034, based on 485,309 shares at March 31, 2009 and at December 31, 2008)			309,836				309,275
Treasury stock, at cost, 3,941,633 shares (3,967,486 shares in 2008)			(105,728	)			(106,411	)
Retained deficit			(173,710	)			(145,154	)
Accumulated other comprehensive loss			(122,600	)			(115,786	)
Total shareholders’ equity			(92,015	)			(57,889	)
Total liabilities and shareholders’ equity		$	791,911			$	821,554

See accompanying notes

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

		Three months ended March 31,
		2009				2008
Operating activities:
Net loss		$	(27,893	)		$	(3,477	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization			11,728				11,296
Loss (gain) on asset sales			9				(7	)
Change in accounts receivable			410				(230	)
Change in inventories			11,284				(11,020	)
Change in accounts payable			(2,043	)			(9,898	)
Accrued interest and amortization of discounts, warrants and finance fees			14,680				15,745
Pension & non-pension postretirement benefits			2,971				278
Non-cash restructuring charges			1,550				—
Payable to Vitro			—				(19,575	)
Accrued salaries & wages			(680	)			(6,760	)
Accrued income taxes			(1,963	)			(5,586	)
Other operating activities			4,331				1,095
Net cash provided by (used in) operating activities			14,384				(28,139	)
Investing activities:
Additions to property, plant and equipment			(4,940	)			(9,352	)
Proceeds from asset sales and other			67				41
Net cash used in investing activities			(4,873	)			(9,311	)
Financing activities:
Net (repayments) borrowings on ABL credit facility activity			(5,886	)			9,068
Other net payments			(117	)			(473	)
Dividends			—				(364	)
Net cash (used in) provided by financing activities			(6,003	)			8,231
Effect of exchange rate fluctuations on cash			(349	)			282
Increase (decrease) in cash			3,159				(28,937	)
Cash at beginning of period			13,304				36,539
Cash at end of period		$	16,463			$	7,602
Supplemental disclosure of cash flows information:
Cash paid during the period for interest		$	1,136			$	1,041
Cash paid (received) net of refunds during the period for income taxes		$	1,201			$	(19	)

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 glass tableware manufacturers in the Western Hemisphere and are one of the largest glass tableware manufacturers in the world. We design and market an extensive line of high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware, and plastic items to a broad group of customers in the foodservice, retail and business-to-business markets. We own and operate two glass tableware manufacturing plants in the United States as well as glass tableware manufacturing plants in the Netherlands, Portugal, China and Mexico. We also own and operate a plastics plant in Wisconsin. Until April 9, 2009, we operated a ceramic dinnerware manufacturing facility in Syracuse, New York. In addition, we import products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tableware market by offering an extensive product line at competitive prices.

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

Our shares are traded on the Over the Counter Bulletin Board (OTC BB) under the ticker symbol LYBI.OB.

2. Significant Accounting Policies

See our Form 10-K for the year ended December 31, 2008 for a description of significant accounting policies not listed below.

Basis of Presentation

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

Condensed Consolidated Statements of Operations

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

Foreign Currency Translation

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

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 and China, we have recorded a full valuation allowance against our deferred income tax assets. In addition, partial valuation allowances have been recorded in the Netherlands, Portugal and Mexico.

Stock-Based Compensation Expense

We account for stock-based compensation in accordance with 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 months ended March 31, 2009, and the three months ended March 31, 2008, was $0.8 million and $1.0 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. In February 2008, the FASB issued FASB Staff Position 157-2, “Effective Date of FASB Statement No. 157” (“FSP157-2”), which delayed until January 1, 2009 the effective date of SFAS 157 for nonfinancial assets and liabilities, except for those that are recognized or disclosed at fair value in the financial statements on a recurring basis. In October 2008, the FASB issued FASB Staff Position 157-3, “Determining the Fair Value of a Financial Asset when the Market for That Asset is Not Active” (“FSP 157-3”), which clarifies the application of SFAS 157 as it relates to the valuation of financial assets in a market that is not active for those financial assets. FSP 157-3 was effective upon issuance. We adopted SFAS 157 as of January 1, 2008, but had not applied it to non-recurring, nonfinancial assets and liabilities. The adoption of SFAS 157 and its related FSP’s (FSP 157-2 and FSP 157-3) had no impact on our consolidated results of operations and financial condition. We adopted SFAS 157 for nonfinancial assets and liabilities as of January 1, 2009. The adoption of SFAS 157 for nonfinancial assets and liabilities did not have a material impact on our consolidated financial statements. See note 13 of the Condensed Consolidated Financial Statements for additional information.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements” (“SFAS 160”), which changes the accounting and reporting standards for the noncontrolling interests in a subsidiary in consolidated financial statements. SFAS 160 re-characterizes minority interests as noncontrolling interests and requires noncontrolling interests to be classified as a component of shareholders equity. We adopted SFAS 160 as of January 1, 2009. The adoption of SFAS 160 did not have any impact on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (“SFAS 161”), which requires additional disclosures about the objectives of the derivative instruments and hedging activities, the method of accounting for such instruments under SFAS No. 133 and its related interpretations, and a tabular disclosure of the effects of such instruments and related hedged items on our financial position, financial performance, and cash flows. SFAS 161 encourages, but does not require, comparative disclosures for earlier periods at initial adoption. SFAS 161 was effective for Libbey on January 1, 2009. Since SFAS 161 only requires additional disclosures, adoption of this statement did not have a material impact on our consolidated financial statements. See note 9 of the Condensed Consolidated Financial Statements for additional information.

In April 2008, the FASB issued Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP 142-3”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” FSP 142-3 was effective for Libbey on January 1, 2009. The adoption of FSP 142-3 did not have a material impact on our consolidated financial statements.

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. The hierarchical guidance provided by SFAS 162 did not have a significant 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 was effective for Libbey on January 1, 2009. The adoption of EITF 07-5 did not have any impact 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 was effective for Libbey on January 1, 2009, and requires that all prior period EPS data is adjusted retrospectively. The adoption of FSP 03-6-1 did not have a material impact on our consolidated financial statements.

     In December 2008, the FASB issued FASB Staff Position 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets” (“FSP 132(R)-1”). FSP 132(R)-1 amends FASB Statement No. 132 (revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” to provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or other postretirement plan. FSP 132(R)-1 is effective for financial statements issued for fiscal years ending after December 15, 2009. We are currently evaluating the potential impact of the adoption of FSP 132(R)-1, and it is likely that the adoption of this guidance will increase the disclosures in the financial statements related to the assets of our pension and other postretirement benefit plans.

Reclassifications

Certain amounts in the prior year’s financial statements may 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:

(Dollars in thousands)		March 31, 2009				December 31, 2008
Accounts receivable:
Trade receivables		$	73,690			$	74,393
Other receivables			865				1,679
Total accounts receivable, less allowances of $9,449 and $10,479		$	74,555			$	76,072
Inventories:
Finished goods		$	152,384			$	163,817
Work in process			1,656				2,805
Raw materials			4,319				5,748
Repair parts			9,326				10,271
Operating supplies			1,741				2,601
Total inventories, less allowances of $5,160 and $6,582		$	169,426			$	185,242
Prepaid and other current assets:
Prepaid expenses		$	13,364			$	14,865
Refundable and prepaid income taxes			2,950				2,302
Total prepaid and other current assets		$	16,314			$	17,167
Other assets:
Deposits		$	394			$	43
Finance fees — net of amortization			7,373				8,183
Other			4,365				4,488
Total other assets		$	12,132			$	12,714
Accrued liabilities:
Accrued incentives		$	16,755			$	12,760
Workers compensation			10,127				9,384
Medical liabilities			2,715				2,736
Interest			18,019				4,575
Commissions payable			844				1,135
Accrued liabilities			6,459				9,085
Total accrued liabilities		$	54,919			$	39,675
Other long-term liabilities:
Derivative liability		$	4,431			$	3,693
Deferred liability			958				1,566
Other			6,882				6,952
Total other long-term liabilities		$	12,271			$	12,211

4. Borrowings

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

Borrowings consist of the following:

										March 31,				December 31,
(Dollars in thousands)		Interest Rate				Maturity Date				2009				2008
Borrowings under ABL facility		floating				December 16, 2010				$	26,416			$	34,538
Senior notes		floating		(1)		June 1, 2011					306,000				306,000
PIK notes (2)			16.00	%		December 1, 2011					148,946				148,946
Promissory note			6.00	%		April, 2009 to September, 2016					1,624				1,666
Notes payable		floating				April, 2009					2,810				3,284
RMB loan contract		floating				July, 2012 to January, 2014					36,625				36,675
RMB working capital loan		floating				March, 2010					7,325				7,335
Obligations under capital leases		floating				April, 2009 to May, 2009					118				302
BES Euro line		floating				January, 2010 to January, 2014					14,529				15,507
Other debt		floating				September, 2009					639				630
Total borrowings											545,032				554,883
Less — unamortized discounts and warrants											4,176				4,626
Total borrowings — net											540,856				550,257
Less — long term debt due within one year and notes payable											12,705				4,401
Total long-term portion of borrowings — net										$	528,151			$	545,856

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. Loans comprising each CBFR (CB Floating Rate) Borrowing, including each Swingline Loan, shall bear interest at the CB Floating Rate plus the Applicable Rate, and euro-denominated swing line borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swing line rate, as defined in the ABL Facility. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and Eurocurrency Loans were 0.25 percent and 2.00 percent, respectively, at March 31, 2009. There were no Libbey Glass borrowings under the facility at March 31, 2009, while Libbey Europe had outstanding borrowings of $26.4 million at March 31, 2009, at an interest rate of 4.09 percent. Interest is payable on the last day of the interest period, which can range from one month to six months.

All borrowings under the ABL Facility are secured by a first priority security interest in (i) substantially all assets of (a) Libbey Glass and (b) substantially all of Libbey 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 quarterly Commitment Fee, as defined by the ABL Facility, on the total credit provided under the Facility. The Commitment Fee varies depending on our aggregate availability. The Commitment Fee was 0.25 percent at March 31, 2009. No compensating balances are required by the Agreement. The Agreement does not require compliance with a fixed charge coverage ratio covenant, unless aggregate unused availability falls below $15.0 million. If our aggregate unused ABL availability were to fall below $15.0 million, the fixed charge coverage ratio requirement would be 1:10 to 1:00. The fixed charge coverage ratio is defined as the ratio of earnings before interest, taxes, depreciation, amortization and minority interest (EBITDA) minus capital expenditures to fixed charges (EBITDA minus capital expenditures / fixed charges). Among the items included in the calculation of fixed charges are cash interest expense, scheduled principal payments on outstanding debt and capital lease obligations, taxes paid in cash, dividends paid in cash and required cash contributions to our pension plans in excess of expense.

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

The available total borrowing base is offset by real estate and ERISA reserves totaling $9.2 million and mark-to-market reserves for natural gas and interest rate swaps of $17.7 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 March 31, 2009, we had $8.4 million in letters of credit outstanding under the ABL Facility. Remaining unused availability on the ABL Facility was $49.0 million at March 31, 2009.

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 9.57 percent at March 31, 2009.

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 March 31, 2009, excluding applicable fees, is 5.24 percent per year and the total interest rate, including applicable fees, is 12.24 percent per year. These Rate Agreements expire on December 1, 2009. Total remaining Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted average rate of 9.57 percent per year at March 31, 2009. If the counterparties to these Rate Agreements were to fail to perform, these Rate Agreements would no longer protect us from interest rate fluctuations. However, we do not anticipate nonperformance by the counterparties. All interest rate swap counterparties were rated A+ or better, as of March 31, 2009, by Standard and Poor’s.

The fair market value for the Rate Agreements at March 31, 2009 was a $6.6 million liability. The fair values of the Rate Agreements are based on the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves. We do not expect to cancel these agreements and expect them to expire as originally contracted.

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 11). The Senior Notes and related guarantees have the benefit of a second-priority lien, subject to permitted liens, on collateral consisting of substantially all the tangible and intangible assets of Libbey Glass and its domestic subsidiary guarantors that secure all of the indebtedness under Libbey 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 March 31, 2009, the total principal amount of PIK notes was $148.9 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 11). The PIK Notes and related guarantees are senior subordinated obligations of Libbey Glass and the guarantors of the PIK Notes and are entitled to the benefit of a third-priority lien, subject to permitted liens, on the collateral that secures the Senior Notes.

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 March 31, 2009, we had $1.6 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 $2.8 million outstanding at March 31, 2009, was the U.S. dollar equivalent under the euro-based overdraft line, and the interest rate was 4.72 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 March 31, 2009, the annual interest rate was 6.60 percent. As of March 31, 2009, 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 5.40 percent, and is secured by a Libbey Inc. guarantee. At March 31, 2009, 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 March 31, 2009, are $0.1 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 $14.5 million) with BANCO ESPÍRITO SANTO, S.A. (BES). The $14.5 million outstanding at March 31, 2009 was the U.S. dollar equivalent under the line at an interest rate of 4.18 percent. Payment of principal in the amount of €1.1 million (approximately $1.5 million) is due in January 2010, payment of €1.6 million (approximately $2.1 million) is due in January 2011, payment of €2.2 million (approximately $2.9 million) is due in January 2012, payment of €2.8 million (approximately $3.7 million) is due in January 2013 and payment of €3.3 million (approximately $4.3 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.

Historically, cash flows generated from operations and our borrowing capacity under our ABL facility have allowed us to meet our cash requirements, including capital expenditures and working capital needs. Remaining unused availability on the ABL Facility was $49.0 million at March 31, 2009 and $44.6 million at December 31, 2008. We were impacted by recessionary pressures in 2008, especially during the fourth quarter of the year and the current quarter of 2009, and we anticipate that the global economic recession will continue throughout 2009 and perhaps beyond. In addition, interest on our PIK Notes will be payable in cash beginning December 1, 2009. We began taking a number of steps to enhance our liquidity in 2008, have continued with further steps in 2009 (including those announced in February, 2009), and have begun to see the benefits of these measures in our positive free cash flow for the first quarter. However, if cash generated from operations is insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or arrange additional debt financing. Global financial markets and economic conditions have been, and continue to be, disrupted and volatile. The credit and capital markets have become distressed. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions, have made it difficult, and will likely continue to make it difficult, to obtain funding in future periods. If cash from operations and cash available from our ABL Facility are not sufficient to meet our needs, we cannot assure you that we will be able to obtain additional financing in sufficient amounts and/or on acceptable terms in the near future or when our debt obligations reach maturity. Our ABL Facility expires in December 2010, the Senior Notes expire in June 2011, and the PIK notes expire in December 2011. Furthermore, because of the current price of our stock, we cannot anticipate that it would be desirable to sell additional equity, even if we were able to do so. However, based upon our operating plans and current forecast expectations (including expectations that the global economy will not deteriorate further) we anticipate that we will generate positive cash flow from operations and, if necessary, have sufficient cash availability from our ABL Facility to meet our liquidity needs for at least one year.

5. Special Charges

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. See Form 10-K for the year ended December 31, 2008 for further discussion. We incurred additional charges of approximately $2.4 million in the three months ended March 31, 2009 related to these planned closures. The Syracuse China facility was closed on April 9, 2009.

A charge of $1.1 million was incurred to write down certain raw materials and work in process inventory that could not be converted to finished product. This amount was included in cost of sales on the Condensed Consolidated Statement of Operations in the North American Other segment.

Additional depreciation expense of $0.7 million was recorded to reflect the shorter remaining useful life of the assets. This amount was included in cost of sales on the Condensed Consolidated Statement of Operations in the North American Other segment.

Special charges of $0.4 million included various legal, consulting and employee severance related costs. This amount was included in special charges on the Condensed Consolidated Statement of Operations in the North American Other segment.

Other (expense) income on the Condensed Consolidated Statement of Operations included a charge of $0.2 million for the change in fair value of ineffective natural gas hedges related to our Syracuse China operation. This amount was included in the North American Other segment.

The following table summarizes the facility closure charge in the first quarter of 2009:

		Three months ended March 31, 2009
		North				North
		American				American
(Dollars in thousands)		Glass				Other				Total
Inventory write-down		$	—			$	1,118			$	1,118
Fixed asset depreciation			—				705				705
Included in cost of sales			—				1,823				1,823
Employee termination cost & other			2				351				353
Fixed asset write-down			—				43				43
Included in special charges			2				394				396
Ineffectiveness of natural gas hedge			—				(229	)			(229	)
Included in other (expense) income			—				(229	)			(229	)
Total pretax charge		$	2			$	2,446			$	2,448

The following reflects the balance sheet activity related to the facility closure charge or the quarter ended March 31, 2009:

		Reserve																				Reserve
		Balances				Total								Inventory &								Balances
		at December 31,				Charge to				Cash				Fixed asset				Non-cash				at March 31,
(Dollars in thousands)		2008				Earnings				Payments				Write Downs				Utilization				2009
Inventory write-down		$	—			$	1,118			$	—			$	(1,118	)		$	—			$	—
Fixed asset depreciation			—				705				—				—				(705	)			—
Fixed asset write-down			—				43				—				(43	)			—				—
Employee termination cost & other			4,248				353				(205	)			—				—				4,396
Ineffectiveness of natural gas hedges			—				229				—				—				(229	)			—
Total		$	4,248			$	2,448			$	(205	)		$	(1,161	)		$	(934	)		$	4,396

The ending balance of $4.4 million at March 31, 2009 was included in accrued special charges on the Condensed Consolidated Balance Sheets and we expect this to result in cash payments in 2009. These charges were recorded in the North American Other and North American Glass reporting segments in 2009.

6. 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 (benefit from) income taxes for 2009 is significantly impacted by the valuation allowances. In the United States and China, we have recorded a full valuation allowance against our deferred income tax assets. In addition, partial valuation allowances have been recorded in the Netherlands, Portugal and Mexico. The Company intends to maintain these allowances until it is more likely than not that the deferred income tax assets will be realized.

7. Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation for salaried employees and job grade and length of service for hourly employees. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees. The non-U.S. pension plans cover the employees of our wholly owned subsidiaries Royal Leerdam and Crisa. The Crisa plan is not funded.

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

		U.S. Plans								Non-U.S. Plans								Total
Three months ended March 31,		2009				2008				2009				2008				2009				2008
Service cost		$	1,274			$	1,473			$	338			$	442			$	1,612			$	1,915
Interest cost			4,097				3,930				1,037				1,226				5,134				5,156
Expected return on plan assets			(4,526	)			(4,375	)			(632	)			(830	)			(5,158	)			(5,205	)
Amortization of unrecognized:
Prior service cost (gain)			560				585				(24	)			(18	)			536				567
Loss			317				354				94				91				411				445
Settlement charge			2,500				—				—				—				2,500				—
Pension expense		$	4,222			$	1,967			$	813			$	911			$	5,035			$	2,878

We incurred pension settlement charges of $2.5 million during the quarter ended March 31, 2009. The pension settlement charges were triggered by excess lump sum distributions to retirees, which required us to record unrecognized gains and losses in our pension plan accounts.

We provide certain retiree health care and life insurance benefits covering our U.S and Canadian salaried and non-union hourly employees hired before January 1, 2004 and a majority of our union hourly employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey. During the second quarter of 2008, we amended our U.S. non-pension postretirement plans to cover employees and retirees of Syracuse China previously covered under a multi-employer plan. This plan amendment was effective September 1, 2008. The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.

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

		U.S. Plans								Non-U.S. Plans								Total
Three months ended March 31,		2009				2008				2009				2008				2009				2008
Service cost		$	325			$	296			$	—			$	—			$	325			$	296
Interest cost			937				713				29				28				966				741
Amortization of unrecognized:
Prior service gain			(128	)			(136	)			—				—				(128	)			(136	)
Loss / (Gain)			205				48				(8	)			(15	)			197				33
Non-pension postretirement benefit expense		$	1,339			$	921			$	21			$	13			$	1,360			$	934

In 2009, we expect to utilize $20.8 million to fund our pension plans and pay for non-pension postretirement benefits. Of that amount, $4.1 million was utilized in the three months ended March 31, 2009.

8. Net Income per Share of Common Stock

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

		Three Months
		Ended March 31,
		2009				2008
Numerator for earnings per share — net loss that is available to common shareholders		$	(27,893	)		$	(3,477	)
Denominator for basic earnings per share — weighted average shares outstanding			14,740,886				14,579,507
Effect of dilutive securities (1)			—				—
Denominator for diluted earnings per share — adjusted weighted average shares and assumed conversions			14,740,886				14,579,507
Basic loss per share		$	(1.89	)		$	(0.24	)
Diluted loss per share		$	(1.89	)		$	(0.24	)

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

9. Derivatives

We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt, commodity price risks associated with forecasted future natural gas requirements and foreign exchange rate risks associated with transactions denominated in a currency other than the U.S. dollar. Most of these derivatives, except for certain natural gas contracts at Syracuse China and the foreign currency contracts, qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. Changes in fair value of these hedges are recorded in Other Comprehensive Income (OCI). While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective or if we do not believe that the forecasted transactions will occur, the changes in the fair value of the derivatives used as hedges will be reflected in our earnings. All of these contracts were accounted for under FASB Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133).

We use Interest Rate Protection Agreements (Rate Agreements) to manage our exposure to variable interest rates. These Rate Agreements effectively convert a portion of our borrowings from variable rate debt to fixed-rate debt, thus reducing the impact of interest rate changes on future results. These instruments are valued using the market standard methodology of netting the discounted expected future variable cash receipts and the discounted future fixed cash payments. The variable cash receipts are based on an expectation of future interest rates derived from observed market interest rate forward curves.

We also use commodity futures contracts related to forecasted future North American natural gas requirements. The objective of these futures contracts and other derivatives is to limit the fluctuations in prices paid due to adverse price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 70 percent of our anticipated requirements, up to eighteen months in the future. The fair values of these instruments are determined from market quotes. Certain of our natural gas futures contracts are now classified as ineffective, as the forecasted transactions are not probable of occurring due the closure of our Syracuse China facility in April 2009.

Our foreign currency exposure arises from transactions denominated in a currency other than the U.S. dollar, primarily associated with anticipated purchases of new equipment or net investment in a foreign operation. The fair values of these instruments are determined from market quotes. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change.

Notional Amounts

As of March 31, 2009, we had commodity contracts for 4,580,000 million British Thermal Units (BTUs) of natural gas. We also had Interest Rate Protection Agreements for $200.0 million of our variable rate debt, as discussed in Note 4. At December 31, 2008, we had Interest Rate Protection Agreements for $200.0 million of variable rate debt and commodity contracts for 5,280,000 million BTUs of natural gas. In January 2008, we entered into a series of foreign currency contracts to sell Canadian dollars. As of March 31, 2008, we had contracts for 6.8 million Canadian dollars. During April 2007, we entered into a foreign currency contract for 212.0 million pesos for a contractual payment due to Vitro in January 2008. As of December 31, 2008, all of these currency contracts had expired.

Fair Values

The following table provides the fair values of our derivative financial instruments for the periods presented:

Liability Derivatives:

March 31, 2009

December 31, 2008

Derivatives designated as

Balance

Balance

hedging instruments

Sheet

Fair

Sheet

Fair

under SFAS 133:

Location:

Value

Location:

Value

Interest rate contracts

Derivative liability

$

6,586

Derivative liability

$

6,762

Natural gas contracts

Derivative liability

13,482

Derivative liability

11,174

Natural gas contracts

Other long term liability

4,431

Other long term liability

3,693

Total

$

24,499

$

21,629

Change in value of derivatives

Most of our derivatives qualify and are designated as cash flow hedges (except certain natural gas contracts at Syracuse China) at March 31, 2009. Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses would be recorded to earnings immediately. The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in current earnings.

		Amount of derivative gain/								Gain / (loss) reclassified from Accumulated Other
		(loss) recognized in OCI								Comprehensive Income (loss) to income (effective portion)
		(effective portion)								Location				Amount
Derivatives in Cash Flow		Three months ended March 31,												Three months ended March 31,
Hedging relationships:		2009				2008								2009				2008
Interest rate contracts		$	1,496			$	(3,919	)		Cost of sales				$	(3,774	)		$	(1,132	)
Natural gas contracts			(6,421	)			4,262			Total				$	(3,774	)		$	(1,132	)
Total		$	(4,925	)		$	343

We incurred a charge of $1.3 million in interest expense on the Condensed Consolidated Statement of Operations during the period ended March 31, 2009 related to contractual interest payments under these Rate Agreements during the period.

Certain of our natural gas futures contracts are now classified as ineffective, as the forecasted transactions are not probable of occurring due to the closure of our Syracuse China facility in April 2009 as well as decreased production at some of our plants. As a result, $0.4 million was charged to earnings in the period. That amount included an immaterial amount of expense which was reclassified from Accumulated Other Comprehensive Income to earnings during the period ended March 31, 2009, as an immaterial amount of our natural gas futures contracts became ineffective.

The following table provides the impact on the Condensed Consolidated Statement of Operations from derivatives no longer designated as cash flow hedges:

Gain (loss) recognized in income (ineffective portion)						Three months ended March 31,
Derivative		Location				2009				2008
Natural gas contracts		Other (expense) income				$	(399	)		$	—
Total						$	(399	)		$	—

As the natural gas contracts mature, the accumulated gains (losses) for the respective contracts are reclassified from accumulated OCI to current expense in cost of sales in our Condensed Consolidated Statement of Operations. Similarly, as fixed interest payments are made pursuant to the interest rate protection agreements, they are recorded together with the related receipt of variable interest receipts, the payment of contractual interest expense to the banks and the reclassification of accumulated gains (losses) from accumulated OCI related to the interest rate agreements. Based on our current valuation, we estimate that accumulated losses currently carried in accumulated OCI that will be reclassified into earnings over the next twelve months will result in $19.6 million of expense in our Condensed Consolidated Statement of Operations.

Gains and losses for derivatives which were not designated as hedging instruments are recorded in current earnings as follows:

						Three months ended March 31,
Derivative		Location				2009				2008
Currency contracts		Other (expense) income				$	—			$	(170	)
						$	—			$	(170	)

We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate and natural gas hedges, as the counterparties are established financial institutions. The counterparties are rated A+ or better for the Interest Rate Protection Agreements and AA- or better for the other derivative agreements as of March 31, 2009, by Standard and Poor’s.

10. Comprehensive Income (Loss)

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

		Three months ended
		March 31,
		2009				2008
Net loss		$	(27,893	)		$	(3,477	)
Change in pension and nonpension postretirement liability, net of taxes of $(2,575) and $406 in 2009 and 2008 respectively			(955	)			(1,057	)
Change in fair value of derivatives, net of taxes of $(638) and $(523) in 2009 and 2008 respectively			(1,789	)			952
Exchange rate fluctuations			(4,070	)			7,027
Total comprehensive (loss) income		$	(34,707	)		$	3,445

Accumulated other comprehensive loss (net of tax) is as follows:

		March 31,				December 31,
		2009				2008
Minimum pension liability and intangible pension asset		$	(104,362	)		$	(103,407	)
Derivatives			(18,399	)			(16,610	)
Exchange rate fluctuations			161				4,231
Balance at end of period		$	(122,600	)		$	(115,786	)

11. Condensed Consolidated Guarantor Financial Statements

Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and the issuer of the Senior Notes and the PIK Notes. The obligations of Libbey Glass under the Senior Notes and the PIK Notes are fully and unconditionally and jointly and severally guaranteed by Libbey Inc. and by certain indirect, 100 percent owned domestic subsidiaries of Libbey Inc., as described below. All are related parties that are included in the Condensed Consolidated Financial Statements for the three month period ended March 31, 2009 and March 31, 2008.

At March 31, 2009, December 31, 2008 and March 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., 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 March 31, 2009
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	82,766			$	21,377			$	63,109			$	(9,399	)		$	157,853
Freight billed to customers			—				111				205				29				—				345
Total revenues			—				82,877				21,582				63,138				(9,399	)			158,198
Cost of sales			—				76,923				19,896				60,062				(9,399	)			147,482
Gross profit			—				5,954				1,686				3,076				—				10,716
Selling, general and administrative expenses			—				12,500				2,176				7,698				—				22,374
Special charges			—				2				394				—				—				396
Income (loss) from operations			—				(6,548	)			(884	)			(4,622	)			—				(12,054	)
Other income (expense)			—				(54	)			(262	)			279				—				(37	)
Earnings (loss) before interest and income taxes			—				(6,602	)			(1,146	)			(4,343	)			—				(12,091	)
Interest expense			—				15,888				—				1,291				—				17,179
Earnings (loss) before income taxes			—				(22,490	)			(1,146	)			(5,634	)			—				(29,270	)
Provision (benefit) for income taxes			—				(1,087	)			336				(626	)			—				(1,377	)
Net income (loss)			—				(21,403	)			(1,482	)			(5,008	)			—				(27,893	)
Equity in net income (loss) of subsidiaries			(27,893	)			(6,490	)			—				—				34,383				—
Net income (loss)		$	(27,893	)		$	(27,893	)		$	(1,482	)		$	(5,008	)		$	34,383			$	(27,893	)

The following represents the total special charges included in the above Condensed Consolidated Statement of Operations (see note 5):

Three months ended March 31, 2009
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Cost of sales		$	—			$	—			$	1,823			$	—			$	—			$	1,823
Special charges			—				2				394				—				—				396
Other income (expense)			—				—				(229	)			—				—				(229	)
Total pretax special charges		$	—			$	2			$	2,446			$	—			$	—			$	2,448
Special charges net of tax		$	—			$	2			$	2,446			$	—			$	—			$	2,448

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

Three months ended March 31, 2008
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net sales		$	—			$	89,987			$	26,583			$	84,055			$	(13,349	)		$	187,276
Freight billed to customers			—				172				303				193				—				668
Total revenues			—				90,159				26,886				84,248				(13,349	)			187,944
Cost of sales			—				79,775				20,650				70,531				(13,349	)			157,607
Gross profit			—				10,384				6,236				13,717				—				30,337
Selling, general and administrative expenses			—				10,843				2,609				7,407				—				20,859
Income (loss) from operations			—				(459	)			3,627				6,310				—				9,478
Other income (expense)			—				333				38				382				—				753
Earnings (loss) before interest and income taxes			—				(126	)			3,665				6,692				—				10,231
Interest expense			—				15,693				—				1,458				—				17,151
Earnings (loss) before income taxes			—				(15,819	)			3,665				5,234				—				(6,920	)
Provision (benefit) for income taxes			—				(320	)			563				(3,686	)			—				(3,443	)
Net income (loss)			—				(15,499	)			3,102				8,920				—				(3,477	)
Equity in net income (loss) of subsidiaries			(3,477	)			12,022				—				—				(8,545	)			—
Net income (loss)		$	(3,477	)		$	(3,477	)		$	3,102			$	8,920			$	(8,545	)		$	(3,477	)

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

March 31, 2009 (unaudited)
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Cash and equivalents		$	—			$	9,207			$	293			$	6,963			$	—			$	16,463
Accounts receivable — net			—				32,544				6,173				35,838				—				74,555
Inventories — net			—				50,158				24,500				94,768				—				169,426
Other current assets			—				5,270				130				10,914				—				16,314
Total current assets			—				97,179				31,096				148,483				—				276,758
Other non-current assets			—				8,335				—				12,437				—				20,772
Investments in and advances to subsidiaries			(92,015	)			411,133				265,186				135,654				(719,958	)			—
Goodwill and purchased intangible assets — net			—				26,274				15,778				148,194				—				190,246
Total other assets			(92,015	)			445,742				280,964				296,285				(719,958	)			211,018
Property, plant and equipment — net			—				86,074				6,494				211,567				—				304,135
Total assets		$	(92,015	)		$	628,995			$	318,554			$	656,335			$	(719,958	)		$	791,911
Accounts payable		$	—			$	7,418			$	2,206			$	41,272			$	—			$	50,896
Accrued and other current liabilities			—				64,515				13,650				30,616				—				108,781
Notes payable and long-term debt due within one year			—				215				—				12,490				—				12,705
Total current liabilities			—				72,148				15,856				84,378				—				172,382
Long-term debt			—				452,180				—				75,971				—				528,151
Other long-term liabilities			—				142,758				13,917				26,718				—				183,393
Total liabilities			—				667,086				29,773				187,067				—				883,926
Total shareholders’ equity			(92,015	)			(38,091	)			288,781				469,268				(719,958	)			(92,015	)
Total liabilities and shareholders’ equity		$	(92,015	)		$	628,995			$	318,554			$	656,335			$	(719,958	)		$	791,911

December 31, 2008
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Cash and equivalents		$	—			$	6,453			$	413			$	6,438			$	—			$	13,304
Accounts receivable — net			—				32,789				6,076				37,207				—				76,072
Inventories — net			—				58,924				26,892				99,426				—				185,242
Other current assets			—				4,731				316				12,120				—				17,167
Total current assets			—				102,897				33,697				155,191				—				291,785
Other non-current assets			—				9,462				43				12,560				—				22,065
Investments in and advances to subsidiaries			(57,889	)			406,812				272,761				143,459				(765,143	)			—
Goodwill and purchased intangible assets — net			—				28,216				15,780				148,861				—				192,857
Total other assets			(57,889	)			444,490				288,584				304,880				(765,143	)			214,922
Property, plant and equipment — net			—				88,628				7,697				218,522				—				314,847
Total assets		$	(57,889	)		$	636,015			$	329,978			$	678,593			$	(765,143	)		$	821,554
Accounts payable		$	—			$	9,370			$	2,794			$	42,264			$	—			$	54,428
Accrued and other current liabilities			—				36,589				19,700				35,908				—				92,197
Notes payable and long-term debt due within one year			—				215				—				4,186				—				4,401
Total current liabilities			—				46,174				22,494				82,358				—				151,026
Long-term debt			—				451,772				—				94,084				—				545,856
Other long-term liabilities			—				140,936				14,185				27,440				—				182,561
Total liabilities			—				638,882				36,679				203,882				—				879,443
Total shareholders’ equity			(57,889	)			(2,867	)			293,299				474,711				(765,143	)			(57,889	)
Total liabilities and shareholders’ equity		$	(57,889	)		$	636,015			$	329,978			$	678,593			$	(765,143	)		$	821,554

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

Three months ended March 31, 2009
		Libbey				Libbey								Non-
		Inc.				Glass				Subsidiary				Guarantor
		(Parent)				(Issuer)				Guarantors				Subsidiaries				Eliminations				Consolidated
Net income (loss)		$	(27,893	)		$	(27,893	)		$	(1,482	)		$	(5,008	)		$	34,383			$	(27,893	)
Depreciation and amortization			—				3,928				1,343				6,457				—				11,728
Other operating activities			27,893				28,019				179				8,841				(34,383	)			30,549
Net cash provided by (used in) operating activities			—				4,054				40				10,290				—				14,384
Additions to property, plant & equipment			—				(1,364	)			(160	)			(3,416	)			—				(4,940	)
Other investing activities			—				67				—				—				—				67
Net cash (used in) investing activities			—				(1,297	)			(160	)			(3,416	)			—				(4,873	)
Net borrowings			—				(3	)			—				(6,000	)			—				(6,003	)
Other financing activities			—				—				—				—				—				—
Net cash provided by (used in) financing activities			—				(3	)			—				(6,000	)			—				(6,003	)
Exchange effect on cash			—				—				—				(349	)			—				(349	)
Increase (decrease) in cash			—				2,754				(120	)			525				—				3,159
Cash at beginning of period			—				6,453				413				6,438				—				13,304
Cash at end of period		$	—			$	9,207			$	293			$	6,963			$	—			$	16,463