Libbey Inc. 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
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þ |
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QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2007
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 1-12084
Libbey Inc.
(Exact name of registrant as specified in its charter)
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Delaware
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34-1559357 |
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(State or other
jurisdiction of
incorporation or
organization)
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(IRS Employer
Identification No.) |
300 Madison Avenue, Toledo, Ohio 43604
(Address of principal executive offices) (Zip Code)
419-325-2100
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or
a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule
12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer o Accelerated Filer þ Non-Accelerated Filer o
Indicate by check mark whether the registrant is a shell company. Yes o No þ
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
Common Stock, $.01 par value 14,396,319 shares at April 30, 2007.
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited condensed consolidated financial statements of Libbey Inc. and all
majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance
with U.S. generally accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by U.S. generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments (including normal
recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 2007, are not necessarily indicative of the
results that may be expected for the year ended December 31, 2007.
The balance sheet at December 31, 2006, has been derived from the audited financial statements at
that date but does not include all of the information and footnotes required by U.S. generally
accepted accounting principles for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto
included in the Companys Annual Report on Form 10-K for the year ended December 31, 2006.
3
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per-share amounts)
(unaudited)
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Three months ended March 31, |
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2007 |
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2006 |
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Net sales |
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$ |
179,496 |
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$ |
134,866 |
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Freight billed to customers |
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475 |
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457 |
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Total revenues |
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179,971 |
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135,323 |
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Cost of sales |
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147,556 |
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113,177 |
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Gross profit |
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32,415 |
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22,146 |
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Selling, general and administrative expenses |
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22,034 |
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19,086 |
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Income from operations |
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10,381 |
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3,060 |
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Equity earnings pretax |
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1,065 |
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Other income |
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1,845 |
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396 |
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Earnings before interest, income taxes and minority interest |
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12,226 |
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4,521 |
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Interest expense |
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15,564 |
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3,609 |
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(Loss) income before income taxes and minority interest |
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(3,338 |
) |
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912 |
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(Benefit) provision for income taxes |
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(1,584 |
) |
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301 |
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(Loss) income before minority interest |
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(1,754 |
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611 |
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Minority interest |
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(96 |
) |
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Net (loss) income |
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$ |
(1,754 |
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$ |
515 |
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Net (loss) income per share: |
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Basic |
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$ |
(0.12 |
) |
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$ |
0.04 |
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Diluted |
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$ |
(0.12 |
) |
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$ |
0.04 |
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Dividends per share |
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$ |
.025 |
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$ |
.025 |
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See accompanying notes
4
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share amounts)
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March 31, |
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December 31, |
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2007 |
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2006 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and equivalents |
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$ |
28,397 |
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$ |
41,766 |
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Accounts receivable net |
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97,085 |
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99,203 |
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Inventories net |
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168,971 |
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159,123 |
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Deferred taxes |
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5,241 |
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4,120 |
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Prepaid and other current assets |
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11,137 |
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16,632 |
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Total current assets |
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310,831 |
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320,844 |
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Other assets: |
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Repair parts inventories |
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10,836 |
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9,279 |
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Software net |
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4,592 |
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4,704 |
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Deferred taxes |
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13,030 |
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6,974 |
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Other assets |
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15,033 |
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17,717 |
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Purchased intangible assets net |
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31,162 |
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31,492 |
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Goodwill net |
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174,223 |
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174,880 |
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Total other assets |
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248,876 |
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245,046 |
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Property, plant and equipment net |
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313,884 |
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312,241 |
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Total assets |
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$ |
873,591 |
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$ |
878,131 |
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LIABILITIES AND SHAREHOLDERS EQUITY |
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Current liabilities: |
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Notes payable |
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$ |
1,591 |
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$ |
226 |
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Accounts payable |
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65,817 |
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67,493 |
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Salaries and wages |
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19,423 |
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28,679 |
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Accrued liabilities |
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60,375 |
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47,622 |
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Pension liability (current portion) |
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1,389 |
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1,389 |
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Nonpension postretirement benefits (current portion) |
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3,252 |
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3,252 |
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Derivative liability |
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2,340 |
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4,132 |
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Payable to Vitro |
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19,715 |
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Long-term debt due within one year |
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794 |
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794 |
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Total current liabilities |
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174,696 |
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153,587 |
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Long-term debtnet |
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485,974 |
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490,212 |
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Pension liability |
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79,998 |
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77,174 |
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Nonpension postretirement benefits |
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38,295 |
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38,495 |
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Payable to Vitro |
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19,673 |
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Other long-term liabilities |
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8,129 |
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11,140 |
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Total liabilities |
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787,092 |
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790,281 |
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Shareholders equity: |
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Common stock, par value $.01 per share, 50,000,000 shares authorized, 18,689,710 shares issued |
|
|
187 |
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187 |
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Capital in excess of par value (includes warrants of $1,034, based on 485,309 shares as of
March 31, 2007 and at December 31, 2006) |
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291,154 |
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303,381 |
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Treasury stock, at cost, 4,300,137 shares (4,358,175 shares in 2006) |
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(116,333 |
) |
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(129,427 |
) |
Retained deficit |
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(42,395 |
) |
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(40,282 |
) |
Accumulated other comprehensive loss |
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(46,114 |
) |
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(46,009 |
) |
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Total shareholders equity |
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86,499 |
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87,850 |
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Total liabilities and shareholders equity |
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$ |
873,591 |
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$ |
878,131 |
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See accompanying notes
5
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)
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Three months ended March 31, |
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2007 |
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2006 |
|
Net (loss) income |
|
$ |
(1,754 |
) |
|
$ |
515 |
|
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities: |
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Depreciation and amortization |
|
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9,216 |
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|
8,335 |
|
Equity earnings net of tax |
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(832 |
) |
Gain on asset sales |
|
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(1,569 |
) |
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Change in accounts receivable |
|
|
2,404 |
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|
7,238 |
|
Change in inventories |
|
|
(7,903 |
) |
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|
1,788 |
|
Change in accounts payable |
|
|
(4,269 |
) |
|
|
(7,335 |
) |
Pension
& nonpension postretirement benefits |
|
|
2,587 |
|
|
|
1,639 |
|
Other operating activities |
|
|
1,251 |
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(6,550 |
) |
|
|
|
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Net cash (used in) provided by operating activities |
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|
(37 |
) |
|
|
4,798 |
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Investing activities: |
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Additions to property, plant and equipment |
|
|
(9,793 |
) |
|
|
(21,439 |
) |
Proceeds from asset sales and other |
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|
2,069 |
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|
|
|
|
|
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Net cash used in investing activities |
|
|
(7,724 |
) |
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(21,439 |
) |
Financing activities: |
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Net revolving credit facility activity |
|
|
|
|
|
|
13,363 |
|
Net ABL credit facility activity |
|
|
(25,408 |
) |
|
|
|
|
Other net borrowings |
|
|
20,093 |
|
|
|
6,889 |
|
Dividends |
|
|
(359 |
) |
|
|
(351 |
) |
|
|
|
|
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|
Net cash (used in) provided by financing activities |
|
|
(5,674 |
) |
|
|
19,901 |
|
Effect of exchange rate fluctuations on cash |
|
|
66 |
|
|
|
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|
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(Decrease) increase in cash |
|
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(13,369 |
) |
|
|
3,260 |
|
Cash and
equivalents at beginning of period |
|
|
41,766 |
|
|
|
3,242 |
|
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Cash and
equivalents at end of period |
|
$ |
28,397 |
|
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$ |
6,502 |
|
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|
Supplemental disclosure of cash flows information: |
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Cash paid during the quarter for interest |
|
$ |
885 |
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|
$ |
1,981 |
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Cash paid (net of refunds received) during the quarter for income taxes |
|
$ |
1,534 |
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$ |
6,269 |
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See accompanying notes
6
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. With Libbeys roots dating back to 1818, 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, 2006 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. Prior to
June 16, 2006, we recorded our 49 percent interest in Crisa using the equity method. On June 16,
2006, we acquired the remaining 51 percent of Crisa; as a result, effective that date Crisas
results are included in the Condensed Consolidated Financial Statements. Prior to October 13, 2006,
we owned 95 percent of Crisal-Cristalaria Automatica S.A. (Crisal). The 5 percent equity interest
of Crisal that we did not own prior to October 13, 2006 is shown as minority interest in the
Condensed Consolidated Financial Statements. On October 13, 2006, we acquired the remaining 5
percent of Crisal. All material intercompany accounts and transactions have been eliminated. The
preparation of financial statements and related disclosures in conformity with United States
generally accepted accounting principles (U.S. GAAP) requires management to make estimates and
assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and
accompanying notes. Actual results could differ materially from managements estimates.
Condensed Consolidated Statements of Operations
Net sales in our Condensed Consolidated Statements of Operations include revenue earned when
products are shipped and title and risk of loss have passed to the customer. Revenue is recorded
net of returns, discounts and incentives offered to customers. Cost of sales includes cost to
manufacture and/or purchase products, warehouse, shipping and delivery costs, 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 (expense), where the U.S. dollar is the functional currency.
7
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred 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 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 tax assets will not be realized.
Deferred tax assets and liabilities are determined separately for each tax jurisdiction in
which we conduct our operations or otherwise incurs taxable income or losses. In the
United States, we have recorded a net deferred tax asset. Losses before income taxes have
been incurred in recent years and, though the risk of not realizing the net deferred tax asset
exists, we believe it is more likely than not that the net deferred tax asset will be realized
through loss carry backs and the effects of tax planning.
New Accounting Standards
In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes an Interpretation of FASB Statement No. 109, (FIN 48). FIN 48 is effective for the first
interim or annual reporting period for the first fiscal year beginning on or after December 15,
2006. On January 1, 2007, we adopted FIN 48. FIN 48 clarified the accounting for income taxes by
prescribing a minimum recognition threshold a tax position is required to meet before being
recognized in the financial statements. FIN 48 also provides guidance on derecognition,
measurement, classification, interest and penalties, accounting in interim periods, disclosure, and
transition. FIN 48 applies to all tax positions for income taxes accounted for in accordance with
SFAS No. 109, Accounting for Income Taxes. See Note 8 for the impact of applying the provisions
of FIN 48.
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. SFAS No. 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. We will be required to
adopt SFAS No. 157 as of January 1, 2008. We are currently
evaluating the impact that SFAS No. 157
will have on our consolidated results of operations and financial condition.
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, 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 are currently evaluating the potential impact of this statement
on our consolidated results of operations and financial condition.
Reclassifications
Certain amounts in prior years financial statements have been reclassified to conform to the
presentation used in the current year financial statements.
8
3. Balance Sheet Details
The following table provides detail of selected balance sheet items:
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|
March 31, 2007 |
|
December 31, 2006 |
Accounts receivable: |
|
|
|
|
|
|
|
|
Trade receivables |
|
$ |
91,118 |
|
|
$ |
94,490 |
|
Other receivables |
|
|
5,967 |
|
|
|
4,713 |
|
|
Total accounts receivable, less allowances of $12,115 and $11,507 |
|
$ |
97,085 |
|
|
$ |
99,203 |
|
|
|
|
|
|
|
|
|
|
|
Inventories: |
|
|
|
|
|
|
|
|
Finished goods |
|
$ |
158,627 |
|
|
$ |
147,423 |
|
Work in process |
|
|
4,385 |
|
|
|
3,881 |
|
Raw materials |
|
|
4,954 |
|
|
|
4,922 |
|
Operating supplies |
|
|
1,005 |
|
|
|
2,897 |
|
|
Total inventories |
|
$ |
168,971 |
|
|
$ |
159,123 |
|
|
|
|
|
|
|
|
|
|
|
Prepaid and other current assets: |
|
|
|
|
|
|
|
|
Prepaid expenses |
|
$ |
8,806 |
|
|
$ |
8,115 |
|
Prepaid income taxes |
|
|
2,331 |
|
|
|
8,517 |
|
|
Total prepaid and other current assets |
|
$ |
11,137 |
|
|
$ |
16,632 |
|
|
|
|
|
|
|
|
|
|
|
Other assets: |
|
|
|
|
|
|
|
|
Deposits |
|
$ |
941 |
|
|
$ |
1,069 |
|
Finance fees net of amortization |
|
|
13,544 |
|
|
|
14,275 |
|
Other |
|
|
548 |
|
|
|
2,373 |
|
|
Total other assets |
|
$ |
15,033 |
|
|
$ |
17,717 |
|
|
|
|
|
|
|
|
|
|
|
Accrued liabilities: |
|
|
|
|
|
|
|
|
Accrued incentives |
|
$ |
16,566 |
|
|
$ |
15,341 |
|
Workers compensation |
|
|
9,600 |
|
|
|
10,008 |
|
Medical liabilities |
|
|
2,146 |
|
|
|
2,539 |
|
Interest |
|
|
18,839 |
|
|
|
5,519 |
|
Commissions payable |
|
|
1,512 |
|
|
|
1,539 |
|
Accrued liabilities |
|
|
11,712 |
|
|
|
12,676 |
|
|
Total accrued liabilities |
|
$ |
60,375 |
|
|
$ |
47,622 |
|
|
|
|
|
|
|
|
|
|
|
Other long-term liabilities: |
|
|
|
|
|
|
|
|
Deferred liability |
|
$ |
1,165 |
|
|
$ |
754 |
|
Other |
|
|
6,964 |
|
|
|
10,386 |
|
|
Total other long-term liabilities |
|
$ |
8,129 |
|
|
$ |
11,140 |
|
|
4. Acquisitions
On June 16, 2006, we purchased from Vitro, S.A. de C.V. the remaining 51 percent of the shares of
Vitrocrisa Holding, S. de R.L. de C.V. and related companies (Crisa), located in Monterrey, Mexico,
that we did not previously own. The purchase price was $80.0 million in addition to $4.9 million of
acquisition costs. In addition, we refinanced approximately $71.9 million of Crisas existing
indebtedness, $23.0 million of which we guaranteed prior to our purchase of the remaining 51
percent of the shares of Crisa. In connection with the acquisition, Crisa transferred to Vitro the
pension liability for Crisa employees who had retired as of the closing date. Vitro also agreed to
forgive $0.4 million of net intercompany payables owed to it and to defer receipt of approximately
$9.4 million of net intercompany payables until August 15, 2006, and approximately $19.7 million of
net intercompany payables until January 15, 2008. In addition, Vitro waived its right to receive
profit sharing payments of approximately $1.3 million from Libbey under the now-terminated
distribution agreement. Crisa transferred to Vitro real estate (land and buildings) on which one of
Crisas two manufacturing facilities is located, but Crisa retained the right to occupy the
facility transferred to Vitro for up to three years. Concurrently, Vitro transferred to Crisa
ownership of the land on which a leased, state-of-the-art
distribution center is located, along with racks and conveyors that Crisa leased from an affiliate of Vitro. Also, Vitro agreed not to
compete with Crisa anywhere in the world (with limited exceptions) for five years.
9
Crisa is one of the largest glass tableware manufacturers in Latin America and has a significant
percentage of the glass tableware market in Mexico. This acquisition is consistent with our
strategy to expand our manufacturing platform into low-cost countries in order to become a more
cost-competitive source of high-quality glass tableware.
In establishing the opening balance sheet under step acquisition accounting, we recorded 49 percent
of the historical book value of the assets acquired and liabilities assumed of Crisa due to our
existing 49 percent ownership of Crisa, and 51 percent of the fair values of the assets acquired
and liabilities assumed as of the date of acquisition. The following is a summary of 51 percent of
the assigned fair values of the assets acquired and liabilities assumed as of the date of
acquisition.
|
|
|
|
|
Current assets and other assets |
|
$ |
40,639 |
|
Property, plant and equipment |
|
|
36,660 |
|
Intangible assets |
|
|
21,675 |
|
Goodwill |
|
|
54,794 |
|
|
Total assets acquired |
|
|
153,768 |
|
|
Less liabilities assumed: |
|
|
|
|
Current liabilities |
|
|
40,358 |
|
Long-term liabilities |
|
|
28,547 |
|
|
Total liabilities assumed |
|
|
68,905 |
|
|
Cash purchase price, including acquisition costs |
|
|
84,863 |
|
Less: Cash acquired |
|
|
6,429 |
|
|
Cash purchase price, net of cash acquired |
|
$ |
78,434 |
|
|
The purchase price allocation for the Crisa acquisition has been updated in the first quarter
2007 to reflect changes in initial restructuring cost estimates.
The following table is a summary of the goodwill associated with the excess of the purchase price
over the fair value of assets acquired and liabilities assumed as a result of the purchase price
allocation. This table provides the details for 100 percent of the goodwill created by the purchase
of the remaining 51 percent interest in Crisa, which is included in the North American Glass
reporting segment:
|
|
|
|
|
Inferred Enterprise purchase price ($80.0 million divided by 51%) |
|
$ |
156,863 |
|
Less: assets received/liabilities forgiven |
|
|
(4,457 |
) |
Add: acquisition costs |
|
|
4,863 |
|
Add: adjustment to reflect 49% of inferred purchase price to actual |
|
|
2,342 |
|
|
Aggregate enterprise purchase price |
|
|
159,611 |
|
Add: fair value liabilities assumed |
|
|
153,946 |
|
Less: fair value assets acquired |
|
|
(189,416 |
) |
|
Total enterprise goodwill |
|
$ |
124,141 |
|
|
Intangible assets acquired of approximately $21.7 million consist of trademarks and trade
names, patented technologies, customer lists and non-compete covenants. The patented technologies,
customer lists and non-compete covenants are being amortized over an average life of 7.7 years.
Amortization of these intangible assets was $0.3 million for the three months ended March 31, 2007.
Trademarks and trade names are valued at approximately $8.9 million and are not subject to
amortization.
Crisas results of operations are included in our Condensed Consolidated Financial Statements
starting June 16, 2006. Prior to June 16, 2006, 49 percent of Crisas earnings were accounted for
under the equity method.
10
The pro forma unaudited results of operations for the three months ended March 31, 2006, assuming
we consummated the acquisition of Crisa as of January 1, 2006, are as follows:
|
|
|
|
|
Net sales |
|
$ |
175,645 |
|
Earnings before interest and taxes |
|
$ |
10,862 |
|
Net income |
|
$ |
3,177 |
|
Net income per share: |
|
|
|
|
Basic |
|
$ |
0.23 |
|
Diluted |
|
$ |
0.23 |
|
|
Depreciation and amortization |
|
$ |
11,336 |
|
|
5. Investments in Unconsolidated Affiliates
Prior to June 16, 2006, we were a 49 percent equity owner in Crisa. On June 16, 2006, we purchased
the remaining 51 percent of Crisa. See Note 4 for additional information. We recorded our 49
percent interest in Crisa using the equity method for the periods prior to June 16, 2006.
Condensed unaudited statements of operations for the three months ended March 31, 2006 is as
follows:
|
|
|
|
|
Total revenues |
|
$ |
47,566 |
|
Cost of sales |
|
|
38,180 |
|
|
Gross profit |
|
|
9,386 |
|
Selling, general and administrative expenses |
|
|
5,721 |
|
|
Income from operations |
|
|
3,665 |
|
Remeasurement gain |
|
|
878 |
|
|
Earnings before interest and taxes |
|
|
4,543 |
|
Interest expense |
|
|
2,367 |
|
|
Earnings before income taxes |
|
|
2,176 |
|
Income taxes |
|
|
479 |
|
|
Net income |
|
$ |
1,697 |
|
|
6. Borrowings
Our borrowings, prior to the refinancing consummated on June 16, 2006, consisted of a revolving
credit and swing line facility permitting borrowings up to an aggregate total of $195.0 million,
$100.0 million of privately placed senior notes, a $2.7 million promissory note in connection with
the purchase of our Laredo, Texas warehouse, a euro-based working capital line for a maximum of
10 million, and other borrowings including the RMB Loan Contract described below and other debt
related to Crisal.
On June 16, 2006, Libbey Glass Inc. issued, pursuant to private offerings, $306.0 million aggregate
principal amount of floating rate senior secured notes (Senior Notes) and $102.0 million aggregate
principal amount of senior subordinated secured pay-in-kind notes (PIK Notes), both due 2011.
Concurrently, Libbey Glass Inc. entered into a new $150.0 million Asset Based Loan facility (ABL
Facility), expiring in 2010.
Proceeds from these transactions were immediately used to repay existing bank and private placement
indebtedness. In addition, proceeds were used for the acquisition of the remaining 51 percent
equity interest in Crisa, for $80.0 million, bringing our ownership of Crisa to 100 percent; for
repayment of existing Crisa indebtedness of approximately $71.9 million; and for related fees,
expenses and redemption premiums of Libbey and Crisa.
11
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
Interest Rate |
|
Maturity Date |
|
2007 |
|
2006 |
|
Borrowings under ABL facility |
|
floating |
|
December 16, 2010 |
|
$ |
20,802 |
|
|
$ |
46,210 |
|
Senior notes |
|
floating (1) |
|
June 1, 2011 |
|
|
306,000 |
|
|
|
306,000 |
|
PIK notes |
|
|
16.00 |
% |
|
December 1, 2011 |
|
|
109,480 |
|
|
|
109,480 |
|
Promissory note |
|
|
6.00 |
% |
|
April 2007 to September 2016 |
|
|
1,947 |
|
|
|
1,985 |
|
Notes payable |
|
floating |
|
April 2007 |
|
|
1,591 |
|
|
|
226 |
|
RMB loan contract |
|
floating |
|
July 2012 to January 2014 |
|
|
32,375 |
|
|
|
32,050 |
|
RMB working capital loan |
|
floating |
|
March 2010 |
|
|
6,475 |
|
|
|
|
|
Obligations under capital leases |
|
floating |
|
April 2007 to May 2009 |
|
|
1,396 |
|
|
|
1,548 |
|
BES Euro line |
|
floating |
|
January 2010 to January 2014 |
|
|
14,451 |
|
|
|
|
|
Other debt |
|
floating |
|
September 2009 |
|
|
1,613 |
|
|
|
1,954 |
|
|
Total borrowings |
|
|
|
|
|
|
|
|
|
|
496,130 |
|
|
|
499,453 |
|
Less unamortized discounts and warrants |
|
|
|
|
|
|
|
|
|
|
7,771 |
|
|
|
8,221 |
|
|
Total borrowings net |
|
|
|
|
|
|
|
|
|
|
488,359 |
|
|
|
491,232 |
|
Less current portion of borrowings |
|
|
|
|
|
|
|
|
|
|
2,385 |
|
|
|
1,020 |
|
|
Total long-term portion of borrowings net |
|
|
|
|
|
|
|
|
|
$ |
485,974 |
|
|
$ |
490,212 |
|
|
|
|
|
(1) |
|
See Interest Rate Protection Agreements below |
ABL Facility
The ABL Facility is with a group of banks and provides for a revolving credit and swing line
facility permitting borrowings for Libbey Glass and Libbey Europe up to an aggregate of $150.0
million, with Libbey Europes borrowings being limited to $75.0 million. Borrowings under the ABL
Facility mature December 16, 2010. Swing line borrowings are limited to $15.0 million, with swing
line borrowings for Libbey Europe being limited to 7.5 million. 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 percent and 1.75 percent,
respectively, at March 31, 2007. There were no Libbey Glass borrowings under the facility at March
31, 2007, while Libbey Europe had outstanding borrowings of $20.8 million at March 31, 2007, at an
interest rate of 5.79 percent.
All borrowings under the ABL Facility are secured by a first priority security interest in (i)
substantially all assets of (a) Libbey Glass and (b) substantially all of Libbey Glasss present
and future direct and indirect domestic subsidiaries, (ii) (a) 100 percent of the stock of Libbey
Glass, (b) 100 percent of the stock of substantially all of Libbey Glasss present and future
direct and indirect domestic subsidiaries, (c) 100 percent of the non-voting stock of substantially
all of Libbey Glasss first-tier present and future foreign subsidiaries and (d) 65 percent of the
voting stock of substantially all of Libbey Glasss first-tier present and future foreign
subsidiaries, and (iii) substantially all proceeds and products of the property and assets
described in clauses (i) and (ii) of this sentence. 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.
We pay 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 March 31, 2007. 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
12
natural gas and interest rate swaps of $3.9 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, 2007, we had $8.4 million in letters of credit outstanding under the Facility.
Remaining unused availability on the ABL Facility was $71.7 million at March 31, 2007.
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
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 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 12.35 percent at March 31, 2007.
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, 2007, 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 2.7 years at March 31, 2007. Total remaining
Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted
average rate of 12.35 percent per year at March 31, 2007. 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.
The fair market value for the Rate Agreements at March 31, 2007, was a $1.7 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 Glasss existing and future
domestic subsidiaries that guarantee any of Libbey Glasss debt or debt of any subsidiary guarantor
(see Note 14). The Senior Notes and related guarantees have the benefit of a second-priority lien,
subject to permitted liens, on collateral consisting of substantially all the tangible and
intangible assets of Libbey Glass and its domestic subsidiary guarantors that secure all of the
indebtedness under Libbey Glasss new 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 2011 (PIK Notes) and detachable warrants to purchase 485,309 shares of Libbey Inc. common stock
(Warrants) excisable 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.
The obligations of Libbey Glass under the PIK Notes are guaranteed by Libbey Inc. and all of Libbey
Glasss existing and future domestic subsidiaries that guarantee any of Libbey Glasss debt or debt
of any subsidiary guarantor (see Note 14). 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.
13
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, 2007, and December 31, 2006, we had $1.9 million and
$2.0 million, respectively, outstanding on the promissory note. Interest with respect to the
promissory note is paid monthly.
Notes Payable
We have an overdraft line of credit for a maximum of 1.8 million. The $1.6 million outstanding
at March 31, 2007, was the U.S. dollar equivalent under the euro-based overdraft line and the
interest rate was 3.14 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 $32.4 million, for the construction of our production facility in China and the
purchase of related equipment, materials and services. The loan has a term of eight years and bears
interest at a variable rate as announced by the Peoples Bank of China. As of the date of the
initial advance under the Loan Contract, the annual interest rate was 5.51 percent, and as of March
31, 2007, the annual interest rate was 5.93 percent. As of March 31, 2007, the outstanding balance
was RMB 250.0 million (approximately $32.4 million). Interest is payable quarterly. Payments of
principal in the amount of RMB 30.0 million (approximately $3.9 million) and RMB 40.0 million
(approximately $5.1 million) must be made on July 20, 2012, and December 20, 2012, respectively,
and three payments of principal in the amount of RMB 60.0 million (approximately $7.8 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 Loan Working Capital Loan
In March 2007, Libbey China entered into a 50 million RMB 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 6.30 percent, and is secured by a Libbey Inc. guarantee. At March 31, 2007, the
U.S. dollar equivalent on the line was $6.5 million.
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 Sheets 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, 2007 are $635
for year one and $761 for years two and three.
BES Euro Line
In January 2007, Crisal entered into a seven year, 11 million line of credit (approximately
$14.7 million) with BANCO ESPÍRITO SANTO, S.A.(BES). The $14.5 million outstanding at March 31,
2007, was the U.S. dollar equivalent under the line at an interest
rate of 4.94 percent. Payment of
principal in the amount of 1.1 (approximately $1.5 million) is due in January 2010, payment of
1.6 (approximately $2.2 million) is due in January 2011, payment of 2.2 (approximately
$2.9 million) is due in January 2012, payment of 2.8 (approximately $3.7 million) is due in
January 2013 and payment of 3.3 (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 $1.6 million primarily consists of government-subsidized loans for equipment
purchases at Crisal.
14
7. Special Charges
Capacity Realignment
In August 2004, we announced that we were realigning our production capacity in order to improve
our cost structure. In mid-February 2005, we ceased operations at our manufacturing facility in
City of Industry, California, and realigned production among our other domestic glass manufacturing
facilities. See Form 10-K for the year ended December 31, 2006, for further discussion.
The following reflects the balance sheet activity related to the capacity realignment for the three
months ended March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
Cash |
|
Balance at |
|
|
December 31, 2006 |
|
payments |
|
March 31, 2007 |
|
Employee termination costs & other |
|
$ |
105 |
|
|
$ |
|
|
|
$ |
105 |
|
|
Total |
|
$ |
105 |
|
|
$ |
|
|
|
$ |
105 |
|
|
Balance sheet classification is as follows: $0.1 million is included in the line item accrued
liabilities on the Condensed Consolidated Balance Sheets.
Salaried Workforce Reduction Program
In the second quarter of 2005, we announced a ten percent reduction of our North American salaried
workforce, or approximately 70 employees, in order to reduce our overall costs. See form 10-K for
the year ended December 31, 2006 for further discussion.
The following reflects the balance sheet activity related to the salaried workforce reduction
program for the three months ended March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
Cash |
|
Balance at |
|
|
December 31, 2006 |
|
payments |
|
March 31, 2007 |
|
Employee termination costs |
|
$ |
219 |
|
|
$ |
(117 |
) |
|
$ |
102 |
|
|
Total |
|
$ |
219 |
|
|
$ |
(117 |
) |
|
$ |
102 |
|
|
The employee termination costs of $0.1 million are included in the accrued liabilities on the
Condensed Consolidated Balance Sheets.
Crisa Restructuring
In
June 2006, we announced plans to consolidate Crisas two principal manufacturing facilities
into one facility and to discontinue certain product lines in order to reduce fixed costs. As part
of the consolidation plan, a $3.2 million severance reserve was established related to statutory
severance obligations for approximately 650 employees. See form 10-K for the year ended December
31, 2006 for further discussion.
The following reflects the balance sheet activity related to the Crisa restructuring for the three
months ended March 31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
Cash |
|
Non-cash |
|
Balance at |
|
|
December 31, 2006 |
|
payments |
|
utilization |
|
March 31, 2007 |
|
Employee termination costs
& other |
|
$ |
1,163 |
|
|
$ |
(614 |
) |
|
$ |
(68 |
) |
|
$ |
481 |
|
|
Total |
|
$ |
1,163 |
|
|
$ |
(614 |
) |
|
$ |
(68 |
) |
|
$ |
481 |
|
|
The employee termination costs and other of $0.5 million are included in the accrued liabilities on
the Condensed Consolidated Balance Sheets.
15
8. Income Taxes
In July 2006, the FASB issued FIN 48. The Interpretation addresses the determination of whether tax
benefits claimed or expected to be claimed on a tax return should be recorded in the financial
statements. Under FIN 48, we may recognize the tax benefit from an uncertain tax position only if
it is more likely than not that the tax position will be sustained on examination by the taxing
authorities, based on the technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the largest benefit that has
a greater than fifty percent likelihood of being realized upon ultimate settlement. FIN 48 also
provides guidance on derecognition, classification, interest and penalties on income taxes and
accounting in interim periods and requires increased disclosures.
We adopted the provisions of FIN 48 on January 1, 2007. As a result of the implementation of FIN
48, we recorded a $6.7 million decrease in our net tax asset for unrecognized tax benefits, offset
by an increase in our net deferred tax asset of $6.7 million, with no cumulative effect on retained
earnings. The amount of unrecognized tax benefits at January 1, 2007 is $11.1 million, of which
$4.4 million would impact our effective tax rate, if recognized. The amount of unrecognized tax
benefits did not materially change as of March 31, 2007.
It is expected that the amount of the unrecognized tax benefits will change within the next twelve
months; however, we do not expect the change to have a significant impact on our results of
operations or our financial position.
We recognize accrued interest and penalties associated with uncertain tax positions as part of the
tax provision. As of January 1, 2007, we had $3.0 million of accrued interest and penalties. The
liability for the payment of interest and penalties did not materially change as of March 31, 2007.
We are not currently under audit by the Internal Revenue Service for any years. The statutes of
limitation for our income tax returns after 2002 remain open for examination by the IRS. We have
not been contacted by the IRS for examination for any of these years.
Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from three to
five years. The state impact of any federal changes remains subject to examination by various
states for a period of up to one year after formal notification to the states. We have various
foreign and state income tax returns in the process of examination, administrative appeals or
litigation.
Years still open to examination by foreign tax authorities in major jurisdictions include
Netherlands (2001 onward), Portugal (2002 onward), Mexico (2001 onward), and Canada (2001 onward).
9. Pension and Nonpension 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 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, Leerdam
Crystal and Crisa.
The components of our net pension expense (credit), including the SERP, are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Three months ended March 31, |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
Service cost |
|
$ |
1,525 |
|
|
$ |
1,633 |
|
|
$ |
479 |
|
|
$ |
168 |
|
|
$ |
2,004 |
|
|
$ |
1,801 |
|
Interest cost |
|
|
3,695 |
|
|
|
3,519 |
|
|
|
956 |
|
|
|
370 |
|
|
|
4,651 |
|
|
|
3,889 |
|
Expected return on plan assets |
|
|
(4,030 |
) |
|
|
(3,881 |
) |
|
|
(687 |
) |
|
|
(565 |
) |
|
|
(4,717 |
) |
|
|
(4,446 |
) |
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
522 |
|
|
|
521 |
|
|
|
(12 |
) |
|
|
(86 |
) |
|
|
510 |
|
|
|
435 |
|
(Gain)/loss |
|
|
555 |
|
|
|
809 |
|
|
|
74 |
|
|
|
10 |
|
|
|
629 |
|
|
|
819 |
|
|
Pension expense (credit) |
|
$ |
2,267 |
|
|
$ |
2,601 |
|
|
$ |
810 |
|
|
$ |
(103 |
) |
|
$ |
3,077 |
|
|
$ |
2,498 |
|
|
We provide certain retiree health care and life insurance benefits covering a majority of our
salaried and non-union hourly (hired before January 1, 2004) and 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. nonpension postretirement plans cover the hourly and
salaried U.S.-based employees of Libbey. The non-U.S. nonpension postretirement plans cover the
retirees and active employees of Libbey who are located in Canada.
16
The provision for our nonpension postretirement benefit expense consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Plans |
|
Non-U.S. Plans |
|
Total |
Three months ended March 31, |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
Service cost |
|
$ |
208 |
|
|
$ |
208 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
208 |
|
|
$ |
208 |
|
Interest cost |
|
|
564 |
|
|
|
494 |
|
|
|
23 |
|
|
|
34 |
|
|
|
587 |
|
|
|
528 |
|
Amortization of unrecognized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost |
|
|
(220 |
) |
|
|
(220 |
) |
|
|
|
|
|
|
|
|
|
|
(220 |
) |
|
|
(220 |
) |
(Gain)/loss |
|
|
18 |
|
|
|
(8 |
) |
|
|
(13 |
) |
|
|
|
|
|
|
5 |
|
|
|
(8 |
) |
|
Nonpension postretirement
benefit expense |
|
$ |
570 |
|
|
$ |
474 |
|
|
$ |
10 |
|
|
$ |
34 |
|
|
$ |
580 |
|
|
$ |
508 |
|
|
We expect
to utilize $20.5 million to fund our pension plans and nonpension postretirement benefits
in 2007, of which $1.1 million was incurred in the first quarter.
10. 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, |
|
2007 |
|
2006 |
|
Numerator for earnings per share net (loss)
income that is available to common shareholders |
|
$ |
(1,754 |
) |
|
$ |
515 |
|
|
Denominator for basic earnings per share
weighted-average shares outstanding |
|
|
14,361,608 |
|
|
|
14,037,469 |
|
|
Effect of dilutive securities (1) |
|
|
|
|
|
|
20,747 |
|
|
Denominator for diluted earnings per share
adjusted weighted-average shares and assumed
conversions |
|
|
14,361,608 |
|
|
|
14,016,722 |
|
|
Basic (loss) earnings per share |
|
$ |
(0.12 |
) |
|
$ |
0.04 |
|
|
Diluted (loss) earnings per share |
|
$ |
(0.12 |
) |
|
$ |
0.04 |
|
|
|
|
|
(1) |
|
The effect of employee stock options, warrants, restricted stock units
and the employee stock purchase plan (ESPP), 69,605 shares for the three
months March 31, 2007, were anti-dilutive and thus not included in the
earnings per share calculation. These amounts are anti-dilutive due to the
net loss. |
Diluted shares outstanding include the dilutive impact of in-the-money options, which are
calculated based on the average share price for each fiscal period using the treasury stock method.
Under the treasury stock method, the tax-effected proceeds that hypothetically would be received
from the exercise of all in-the-money options are assumed to be used to repurchase shares.
11. Employee Stock Benefit Plans
We have three equity participation plans and we also have an Employee Stock Purchase Plan (ESPP)
under which eligible employees may purchase a limited number of shares of Libbey Inc. common stock
at a discount.
The Company accounts for stock-based awards under Financial Accounting Standards Board (FASB) SFAS
No. 123R. SFAS No. 123R requires that compensation cost relating to share-based payment
transactions be recognized in the financial statements. Share-based compensation cost is measured
based on the fair value of the equity or liability instruments issued. SFAS No. 123R applies to all
of our outstanding unvested share-based payment awards as of January 1, 2006, and all prospective
awards using the modified prospective transition method without restatement of prior periods.
On December 6, 2005, the Companys Board of Directors accelerated the vesting of all outstanding
and unvested nonqualified stock options granted through 2004 under the Companys 1999 Equity
Participation Plan and Amended and Restated 1999 Equity Participation Plan. As a result, options to purchase 258,731 shares of the Companys common stock
became exercisable on December 6, 2005. Of that amount, options that were granted through 2004 to
the Companys named executive officers became immediately exercisable. In the case of each of the
stock options in question, the exercise price greatly exceeded the fair market value of the
Companys common stock on December 6, 2005. The decision to accelerate vesting of these options was
made primarily to avoid recognition of compensation expense related to these underwater stock
options in financial statements relating to future fiscal periods. By accelerating these underwater
stock options, the Company estimates it reduced the stock option expense it otherwise would have
been required to record by approximately $0.1 million in 2007 and $0.04 million in 2008 on a
pre-tax basis.
17
Equity Participation Plan Program Description
We have three equity participation plans: (1) the Libbey Inc. Amended and Restated Stock Option
Plan for Key Employees, (2) the Amended and Restated 1999 Equity Participation Plan of Libbey Inc.
and (3) the Libbey Inc. 2006 Omnibus Incentive Plan. Although options previously granted under the
Libbey Inc. Amended and Restated Stock Option Plan for Key Employees and the Amended and Restated
1999 Equity Participation Plan of Libbey Inc. remain outstanding, no further grants of equity-based
compensation may be made under those plans. However, up to a total of 1,500,000 shares of Libbey
Inc. common stock are available for issuance as equity-based compensation under the Libbey Inc.
2006 Omnibus Incentive Plan. Under the Libbey Inc. 2006 Omnibus Incentive Plan, grants of
equity-based compensation may take the form of stock options, stock appreciation rights,
performance shares or units, restricted stock or restricted stock units or other stock-based
awards. Employees and directors are eligible for awards under this plan. During the first quarter
2007, there were grants of 207,330 stock options, 61,871 performance shares and 157,928 of
restricted stock units. The restricted stock units were granted to employees and have a vesting
period of three to four years. All option grants have an exercise price equal to the fair market
value of the underlying stock on the grant date. The vesting period of options outstanding as of
March 31, 2007, is generally four (4) years. Stock options are amortized over the vesting period.
The impact of applying the provisions of SFAS No. 123R is a pre-tax compensation expense of $.7
million and $.14 million for the three months ended March 31, 2007, and the three months ended
March 31, 2006, respectively.
Employee Stock Purchase Plan (ESPP)
We have an ESPP under which 750,000 shares of common stock have been reserved for issuance.
Eligible employees may purchase a limited number of shares of common stock at a discount of up to
15 percent of the market value at certain plan-defined dates. The ESPP terminates on May 31, 2012.
In the first quarter 2007 no shares were issued under the ESPP, as ESPP grants normally occur
annually on May 31st. At December 31, 2006, 474,782 shares were available for issuance
under the ESPP. At March 31, 2007, the same number of shares was available for issuance under the
ESPP. Repurchased common stock is being used to fund the ESPP.
A participant may elect to have payroll deductions made during the offering period in an amount not
less than 2 percent and not more than 20 percent of the participants compensation during the
option period. The option period starts on the offering date (June 1st) and ends on the exercise
date (May 31st). In no event may the option price per share be less than the par value per share
($.01) of common stock. All options and rights to participate in the ESPP are nontransferable and
subject to forfeiture in accordance with the ESPP guidelines. In the event of certain corporate
transactions, each option outstanding under the ESPP will be assumed or the successor corporation
or a parent or subsidiary of such successor corporation will substitute an equivalent option.
General Stock Option Information
The Black-Scholes option-pricing model was developed for use in estimating the value of traded
options that have no vesting restrictions and are fully transferable. There were 207,330 stock
option grants made during the first quarter 2007. Under the Black-Scholes option-pricing model, the
weighted-average grant-date fair value of options granted during the first quarter 2007 is $6.21.
18
The fair value of each option is estimated on the date of grant with the following weighted-average
assumptions:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2007 |
|
2006 |
|
Stock option grants: |
|
|
|
|
|
|
|
|
Risk-free interest |
|
|
4.63 |
% |
|
|
4.57 |
% |
Expected term |
|
6.2 years |
|
6.1 years |
Expected volatility |
|
|
47.3 |
% |
|
|
38.6 |
% |
Dividend yield |
|
|
0.78 |
% |
|
|
3.19 |
% |
Employee Stock Purchase Plan: |
|
|
|
|
|
|
|
|
Risk-free interest |
|
|
4.99 |
% |
|
|
3.23 |
% |
Expected term |
|
12 months |
|
|
12 months |
|
Expected volatility |
|
|
58.3 |
% |
|
|
36.0 |
% |
Dividend yield |
|
|
2.20 |
% |
|
|
2.10 |
% |
|
|
The risk-free interest rate is based on the U.S. Treasury yield curve
at the time of grant and has a term equal to the expected life. |
|
|
|
The expected term represents the period of time the options are
expected to be outstanding. Additionally, we use historical data to
estimate option exercises and employee forfeitures. The Company uses
the Simplified Method defined by the SEC Staff Accounting Bulletin No.
107, Share-Based Payment (SAB 107), to estimate the expected term of
the option, representing the period of time that options granted are
expected to be outstanding. |
|
|
|
The expected volatility was developed based on historic stock prices
commensurate with the expected term of the option. We use projected
data for expected volatility of our stock options based on the average
of daily, weekly and monthly historical volatilities of our stock
price over the expected term of the option and other economic data
trended into future years. |
|
|
|
The dividend yield is calculated as the ratio based on our most recent
historical dividend payments per share of common stock at the grant
date to the stock price on the date of grant. |
Information with respect to our stock option activity for the first quarter 2007 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
|
Average |
|
|
|
|
|
|
|
|
Weighted- |
|
Remaining |
|
|
|
|
|
|
|
|
Average |
|
Contractual |
|
Aggregate |
|
|
|
|
|
|
exercise price |
|
life |
|
Intrinsic |
Options |
|
Shares |
|
per share |
|
(in years) |
|
Value |
|
Outstanding balance at January 1, 2007 |
|
|
1,411,626 |
|
|
$ |
27.43 |
|
|
|
4.85 |
|
|
$ |
100.3 |
|
Granted |
|
|
207,330 |
|
|
|
12.80 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canceled |
|
|
(12,900 |
) |
|
|
28.79 |
|
|
|
|
|
|
|
|
|
|
Outstanding balance at March 31, 2007 |
|
|
1,606,056 |
|
|
$ |
25.54 |
|
|
|
5.29 |
|
|
$ |
610.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at March 31, 2007 |
|
|
1,303,190 |
|
|
$ |
28.57 |
|
|
|
|
|
|
$ |
128.6 |
|
|
Intrinsic value for share-based instruments is defined as the difference between the current market
value and the exercise price. SFAS No. 123R requires the benefits of tax deductions in excess of
the compensation cost recognized for those stock options (excess tax benefit) to be classified as
financing cash flows. There were no stock options exercised during the first quarter 2007 or 2006.
19
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value,
based on Libbey Inc. closing stock price of $14.02 as of March 31, 2007 and $12.34 as of December
31, 2006, which would have been received by the option holders had all option holders exercised
their options as of that date. As of March 31, 2007, 1,303,190 outstanding options were
exercisable, and the weighted average exercise price was $28.57. December 31, 2006, 1,315,790
outstanding options were exercisable, and the weighted average exercise price was $28.58.
As of March 31, 2007, $1.2 million of total unrecognized compensation expense related to nonvested
stock options is expected to be recognized within the next four years on a weighted-average basis.
The total fair value of shares vested during the three months ended March 31, 2007 is $0. Shares
issued for exercised options are issued from treasury stock. There were no stock options exercised
in the first quarter 2007.
The following table summarizes our nonvested stock option activity for the three months ended March
31, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
Average fair |
|
|
Shares |
|
value (per share) |
|
|
|
|
|
|
|
|
Nonvested at December 31, 2006 |
|
|
95,836 |
|
|
$ |
3.82 |
|
Granted |
|
|
207,330 |
|
|
|
6.21 |
|
Vested |
|
|
|
|
|
|
|
|
Canceled |
|
|
(300 |
) |
|
|
3.82 |
|
|
Nonvested at March 31, 2007 |
|
|
302,866 |
|
|
$ |
5.45 |
|
|
Performance Share Information
Under the Libbey Inc. 2006 Omnibus Incentive Plan, we grant selected executives and key employees
performance shares. The number of performance shares granted to an executive is determined by
dividing the value to be transferred to the executive, expressed in U.S. dollars and determined as
a percentage of the executives long-term incentive target (which in turn is a percentage of the
executives base salary on January 1 of the year in which the performance shares are granted), by
the average closing price of Libbey Inc. common stock over a period of 60 consecutive trading days
ending on the date of the grant.
The performance shares are settled by issuance to the executive of one share of Libbey Inc. common
stock for each performance share earned. Performance shares are earned only if and to the extent we
achieve certain company-wide performance goals over performance cycles of between 1 and 3 years.
A summary of the activity for performance shares under the Libbey Inc. 2006 Omnibus Incentive Plan
as of March 31, 2007 and changes during the quarter then ended is presented below:
|
|
|
|
|
|
|
Shares |
|
|
|
|
|
Outstanding balance at December 31, 2006 |
|
|
71,139 |
|
Granted |
|
|
61,871 |
|
Awarded |
|
|
(29,184 |
) |
Cancelled |
|
|
|
|
|
Outstanding balance at March 31, 2007 |
|
|
103,826 |
|
|
The weighted-average grant-date fair value of the performance shares granted during the first
quarter of 2007 is $11.96. As of March 31, 2007, the weighted-average grant-date fair value of the
performance shares outstanding is $11.75. As of March 31, 2007, there is $1.0 million of total
unrecognized compensation cost related to nonvested performance shares granted. The
weighted-average cost is expected to be recognized over a period of 3 years. Shares issued in
settlement of performance share awards are issued from treasury stock.
12. Derivatives
As of March 31, 2007, we had Interest Rate Protection Agreements for $200.0 million of our variable
rate debt, and commodity contracts for 1,727,000 million British Thermal Units (BTUs) of natural
gas, with a fair value of $(2.3) million, accounted for under Statement No. 133, Accounting for
Derivative Instruments and Hedging Activities (Statement 133).
At December 31, 2006, we had Interest Rate Protection Agreements for $200.0 million of variable rate debt and commodity
contracts for 3,450,000 million BTUs of natural gas with a fair value of $(4.1) million. The fair
value of these derivatives is included in derivative liability on the Condensed Consolidated
Balance Sheets.
20
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.
All of our derivatives qualify and are designated as cash flow hedges at March 31, 2007. Hedge
accounting is applied only when the derivative is deemed to be highly effective at offsetting
changes in anticipated cash flows of the hedged item or transaction. The ineffective portion of the
change in the fair value of a derivative designated as a cash flow hedge is recognized in current
earnings. In the first quarter of 2007, we recognized a gain of $0.7 million, in other income on
the Condensed Consolidated Statement of Operations. In the first quarter of 2006, the ineffective
portion of the change in the fair value of a derivative designated as a cash flow hedge was not
material.
13. Comprehensive (Loss) Income
Components of comprehensive loss (net of tax) are as follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2007 |
|
2006 |
|
Net (loss) income |
|
$ |
(1,754 |
) |
|
$ |
515 |
|
Change in pension liability |
|
|
205 |
|
|
|
|
|
Change in fair value of derivative
instruments (see detail below) |
|
|
759 |
|
|
|
(3,756 |
) |
Effect of exchange rate fluctuation |
|
|
(1,069 |
) |
|
|
110 |
|
|
Comprehensive loss |
|
$ |
(1,859 |
) |
|
$ |
(3,131 |
) |
|
Accumulated other comprehensive loss (net of tax) includes:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
December 31, 2006 |
|
|
|
|
|
|
Change in pension liability |
|
$ |
(41,639 |
) |
|
$ |
(41,844 |
) |
Derivatives |
|
|
(2,327 |
) |
|
|
(3,086 |
) |
Exchange rate fluctuation |
|
|
(2,148 |
) |
|
|
(1,079 |
) |
|
Total |
|
$ |
(46,114 |
) |
|
$ |
(46,009 |
) |
|
The change in other comprehensive income (loss) for derivative instruments for the Company is as
follows:
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2007 |
|
2006 |
|
Change in fair value of derivative instruments |
|
$ |
1,113 |
|
|
$ |
(5,957 |
) |
Less: |
|
|
|
|
|
|
|
|
Income tax effect |
|
|
(354 |
) |
|
|
2,201 |
|
|
Other comprehensive income (loss) related to derivatives |
|
$ |
759 |
|
|
$ |
(3,756 |
) |
|
14. Condensed Consolidated Guarantor Financial Statements
Libbey Glass is a direct, wholly 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, wholly owned domestic subsidiaries of Libbey Inc, as described below. All are related
parties that are included in the Condensed Consolidated Financial Statements for the quarterly
period ended March 31, 2007.
At March 31, 2007 and December 31, 2006, Libbey Inc.s indirect, wholly owned domestic subsidiaries
were Syracuse China Company, World Tableware Inc., LGA4 Corp., LGA3 Corp., The Drummond Glass
Company, LGC Corp., Traex Company, Libbey.com LLC, LGFS Inc. and LGAC LLC (together with Crisa
Industrial LLC, which became an indirect, wholly owned subsidiary of Libbey Inc. on June 16, 2006,
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.
21
Libbey Inc.
Condensed Consolidating Statement of Operations
(dollars in thousands) (unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
90,708 |
|
|
$ |
27,434 |
|
|
$ |
71,505 |
|
|
$ |
(10,151 |
) |
|
$ |
179,496 |
|
Freight billed to customers |
|
|
|
|
|
|
148 |
|
|
|
301 |
|
|
|
26 |
|
|
|
|
|
|
|
475 |
|
|
Total revenues |
|
|
|
|
|
|
90,856 |
|
|
|
27,735 |
|
|
|
71,531 |
|
|
|
(10,151 |
) |
|
|
179,971 |
|
Cost of sales |
|
|
|
|
|
|
74,267 |
|
|
|
22,398 |
|
|
|
61,042 |
|
|
|
(10,151 |
) |
|
|
147,556 |
|
|
Gross profit |
|
|
|
|
|
|
16,589 |
|
|
|
5,337 |
|
|
|
10,489 |
|
|
|
|
|
|
|
32,415 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
11,958 |
|
|
|
2,250 |
|
|
|
7,826 |
|
|
|
|
|
|
|
22,034 |
|
|
Income from operations |
|
|
|
|
|
|
4,631 |
|
|
|
3,087 |
|
|
|
2,663 |
|
|
|
|
|
|
|
10,381 |
|
Other income (expense) |
|
|
|
|
|
|
865 |
|
|
|
1,128 |
|
|
|
(148 |
) |
|
|
|
|
|
|
1,845 |
|
|
Earnings (loss) before interest, income
taxes and minority interest |
|
|
|
|
|
|
5,496 |
|
|
|
4,215 |
|
|
|
2,515 |
|
|
|
|
|
|
|
12,226 |
|
Interest expense |
|
|
|
|
|
|
14,668 |
|
|
|
|
|
|
|
896 |
|
|
|
|
|
|
|
15,564 |
|
|
Earnings (loss) before income taxes and
minority interest |
|
|
|
|
|
|
(9,172 |
) |
|
|
4,215 |
|
|
|
1,619 |
|
|
|
|
|
|
|
(3,338 |
) |
Provision (benefit) for income taxes |
|
|
|
|
|
|
(4,352 |
) |
|
|
2,000 |
|
|
|
768 |
|
|
|
|
|
|
|
(1,584 |
) |
|
Net income (loss) before minority interest |
|
|
|
|
|
|
(4,820 |
) |
|
|
2,215 |
|
|
|
851 |
|
|
|
|
|
|
|
(1,754 |
) |
Minority interest and equity in net income
(loss) of subsidiaries |
|
|
(1,754 |
) |
|
|
3,066 |
|
|
|
|
|
|
|
|
|
|
|
(1,312 |
) |
|
|
|
|
|
Net income (loss) |
|
$ |
(1,754 |
) |
|
$ |
(1,754 |
) |
|
$ |
2,215 |
|
|
$ |
851 |
|
|
$ |
(1,312 |
) |
|
$ |
(1,754 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2006 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net sales |
|
$ |
|
|
|
$ |
84,635 |
|
|
$ |
26,824 |
|
|
$ |
23,596 |
|
|
$ |
(189 |
) |
|
$ |
134,866 |
|
Freight billed to customers |
|
|
|
|
|
|
149 |
|
|
|
300 |
|
|
|
8 |
|
|
|
|
|
|
|
457 |
|
|
Total revenues |
|
|
|
|
|
|
84,784 |
|
|
|
27,124 |
|
|
|
23,604 |
|
|
|
(189 |
) |
|
|
135,323 |
|
Cost of sales |
|
|
|
|
|
|
70,773 |
|
|
|
24,523 |
|
|
|
18,070 |
|
|
|
(189 |
) |
|
|
113,177 |
|
|
Gross profit |
|
|
|
|
|
|
14,011 |
|
|
|
2,601 |
|
|
|
5,534 |
|
|
|
|
|
|
|
22,146 |
|
Selling, general and administrative expenses |
|
|
|
|
|
|
14,713 |
|
|
|
1,439 |
|
|
|
2,934 |
|
|
|
|
|
|
|
19,086 |
|
|
Income (loss) from operations |
|
|
|
|
|
|
(702 |
) |
|
|
1,162 |
|
|
|
2,600 |
|
|
|
|
|
|
|
3,060 |
|
Equity earnings pretax |
|
|
|
|
|
|
|
|
|
|
284 |
|
|
|
781 |
|
|
|
|
|
|
|
1,065 |
|
Other income (expense) |
|
|
|
|
|
|
578 |
|
|
|
(127 |
) |
|
|
(55 |
) |
|
|
|
|
|
|
396 |
|
|
Earnings (loss) before interest, income
taxes and minority interest |
|
|
|
|
|
|
(124 |
) |
|
|
1,319 |
|
|
|
3,326 |
|
|
|
|
|
|
|
4,521 |
|
Interest expense |
|
|
|
|
|
|
2,359 |
|
|
|
1 |
|
|
|
1,249 |
|
|
|
|
|
|
|
3,609 |
|
|
Earnings (loss) before income taxes and
minority interest |
|
|
|
|
|
|
(2,483 |
) |
|
|
1,318 |
|
|
|
2,077 |
|
|
|
|
|
|
|
912 |
|
Provision (benefit) for income taxes |
|
|
|
|
|
|
(820 |
) |
|
|
435 |
|
|
|
686 |
|
|
|
|
|
|
|
301 |
|
|
Net income (loss) before minority interest |
|
|
|
|
|
|
(1,663 |
) |
|
|
883 |
|
|
|
1,391 |
|
|
|
|
|
|
|
611 |
|
Minority interest and equity in net income
(loss) of subsidiaries |
|
|
515 |
|
|
|
2,178 |
|
|
|
|
|
|
|
(96 |
) |
|
|
(2,693 |
) |
|
|
(96 |
) |
|
Net income (loss) |
|
$ |
515 |
|
|
$ |
515 |
|
|
$ |
883 |
|
|
$ |
1,295 |
|
|
$ |
(2,693 |
) |
|
$ |
515 |
|
|
22
Libbey Inc.
Condensed Consolidating Balance Sheet
(dollars in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007 (unaudited) |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash and equivalents |
|
$ |
|
|
|
$ |
12,695 |
|
|
$ |
559 |
|
|
$ |
15,143 |
|
|
$ |
|
|
|
$ |
28,397 |
|
Accounts receivable net |
|
|
|
|
|
|
41,445 |
|
|
|
10,248 |
|
|
|
45,392 |
|
|
|
|
|
|
|
97,085 |
|
Inventories net |
|
|
|
|
|
|
64,889 |
|
|
|
30,984 |
|
|
|
73,098 |
|
|
|
|
|
|
|
168,971 |
|
Other current assets |
|
|
|
|
|
|
9,348 |
|
|
|
181 |
|
|
|
6,849 |
|
|
|
|
|
|
|
16,378 |
|
|
Total current assets |
|
|
|
|
|
|
128,377 |
|
|
|
41,972 |
|
|
|
140,482 |
|
|
|
|
|
|
|
310,831 |
|
Other non-current assets |
|
|
|
|
|
|
39,426 |
|
|
|
(1,834 |
) |
|
|
5,899 |
|
|
|
|
|
|
|
43,491 |
|
Investments in and advances to subsidiaries |
|
|
86,499 |
|
|
|
342,301 |
|
|
|
272,303 |
|
|
|
132,704 |
|
|
|
(833,807 |
) |
|
|
|
|
Goodwill and purchased intangible assets net |
|
|
|
|
|
|
26,833 |
|
|
|
16,126 |
|
|
|
162,426 |
|
|
|
|
|
|
|
205,385 |
|
|
Total other assets |
|
|
86,499 |
|
|
|
408,560 |
|
|
|
286,595 |
|
|
|
301,029 |
|
|
|
(833,807 |
) |
|
|
248,876 |
|
Property, plant and equipment net |
|
|
|
|
|
|
98,989 |
|
|
|
20,124 |
|
|
|
194,771 |
|
|
|
|
|
|
|
313,884 |
|
|
Total assets |
|
$ |
86,499 |
|
|
$ |
635,926 |
|
|
$ |
348,691 |
|
|
$ |
636,282 |
|
|
$ |
(833,807 |
) |
|
$ |
873,591 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
19,036 |
|
|
$ |
2,224 |
|
|
$ |
44,557 |
|
|
$ |
|
|
|
$ |
65,817 |
|
Accrued and other current liabilities |
|
|
|
|
|
|
60,311 |
|
|
|
9,218 |
|
|
|
36,965 |
|
|
|
|
|
|
|
106,494 |
|
Notes payable and long-term debt due within one
year |
|
|
|
|
|
|
115 |
|
|
|
|
|
|
|
2,270 |
|
|
|
|
|
|
|
2,385 |
|
|
Total current liabilities |
|
|
|
|
|
|
79,462 |
|
|
|
11,442 |
|
|
|
83,792 |
|
|
|
|
|
|
|
174,696 |
|
Long-term debt-net |
|
|
|
|
|
|
409,541 |
|
|
|
|
|
|
|
76,433 |
|
|
|
|
|
|
|
485,974 |
|
Other long-term liabilities and minority interest |
|
|
|
|
|
|
88,484 |
|
|
|
8,100 |
|
|
|
29,838 |
|
|
|
|
|
|
|
126,422 |
|
|
Total liabilities |
|
|
|
|
|
|
577,487 |
|
|
|
19,542 |
|
|
|
190,063 |
|
|
|
|
|
|
|
787,092 |
|
Total shareholders equity |
|
|
86,499 |
|
|
|
58,439 |
|
|
|
329,149 |
|
|
|
446,219 |
|
|
|
(833,807 |
) |
|
|
86,499 |
|
|
Total liabilities and shareholders equity |
|
$ |
86,499 |
|
|
$ |
635,926 |
|
|
$ |
348,691 |
|
|
$ |
636,282 |
|
|
$ |
(833,807 |
) |
|
$ |
873,591 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2006 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Cash and equivalents |
|
$ |
|
|
|
$ |
22,849 |
|
|
$ |
509 |
|
|
$ |
18,408 |
|
|
$ |
|
|
|
$ |
41,766 |
|
Accounts receivable net |
|
|
|
|
|
|
47,772 |
|
|
|
10,063 |
|
|
|
41,368 |
|
|
|
|
|
|
|
99,203 |
|
Inventories net |
|
|
|
|
|
|
55,620 |
|
|
|
32,521 |
|
|
|
70,982 |
|
|
|
|
|
|
|
159,123 |
|
Other current assets |
|
|
|
|
|
|
14,221 |
|
|
|
347 |
|
|
|
6,184 |
|
|
|
|
|
|
|
20,752 |
|
|
Total current assets |
|
|
|
|
|
|
140,462 |
|
|
|
43,440 |
|
|
|
136,942 |
|
|
|
|
|
|
|
320,844 |
|
Other non-current assets |
|
|
|
|
|
|
30,247 |
|
|
|
1,296 |
|
|
|
7,131 |
|
|
|
|
|
|
|
38,674 |
|
Investments in and advances to subsidiaries |
|
|
87,850 |
|
|
|
326,705 |
|
|
|
284,384 |
|
|
|
153,011 |
|
|
|
(851,950 |
) |
|
|
|
|
Goodwill and purchased intangible assets net |
|
|
|
|
|
|
26,834 |
|
|
|
16,140 |
|
|
|
163,398 |
|
|
|
|
|
|
|
206,372 |
|
|
Total other assets |
|
|
87,850 |
|
|
|
383,786 |
|
|
|
301,820 |
|
|
|
323,540 |
|
|
|
(851,950 |
) |
|
|
245,046 |
|
Property, plant and equipment net |
|
|
|
|
|
|
100,804 |
|
|
|
21,039 |
|
|
|
190,398 |
|
|
|
|
|
|
|
312,241 |
|
|
Total assets |
|
$ |
87,850 |
|
|
$ |
625,052 |
|
|
$ |
366,299 |
|
|
$ |
650,880 |
|
|
$ |
(851,950 |
) |
|
$ |
878,131 |
|
|
Accounts payable |
|
$ |
|
|
|
$ |
21,513 |
|
|
$ |
4,577 |
|
|
$ |
41,403 |
|
|
$ |
|
|
|
$ |
67,493 |
|
Accrued and other current liabilities |
|
|
|
|
|
|
53,263 |
|
|
|
8,561 |
|
|
|
23,250 |
|
|
|
|
|
|
|
85,074 |
|
Notes payable and long-term debt due within one
year |
|
|
|
|
|
|
155 |
|
|
|
|
|
|
|
865 |
|
|
|
|
|
|
|
1,020 |
|
|
Total current liabilities |
|
|
|
|
|
|
74,931 |
|
|
|
13,138 |
|
|
|
65,518 |
|
|
|
|
|
|
|
153,587 |
|
Long-term debt-net |
|
|
|
|
|
|
409,089 |
|
|
|
|
|
|
|
81,123 |
|
|
|
|
|
|
|
490,212 |
|
Other long-term liabilities and minority interest |
|
|
|
|
|
|
86,354 |
|
|
|
7,924 |
|
|
|
52,204 |
|
|
|
|
|
|
|
146,482 |
|
|
Total liabilities |
|
|
|
|
|
|
570,374 |
|
|
|
21,062 |
|
|
|
198,845 |
|
|
|
|
|
|
|
790,281 |
|
Total shareholders equity |
|
|
87,850 |
|
|
|
54,678 |
|
|
|
345,237 |
|
|
|
452,035 |
|
|
|
(851,950 |
) |
|
|
87,850 |
|
|
Total liabilities and shareholders equity |
|
$ |
87,850 |
|
|
$ |
625,052 |
|
|
$ |
366,299 |
|
|
$ |
650,880 |
|
|
$ |
(851,950 |
) |
|
$ |
878,131 |
|
|
23
Libbey Inc.
Condensed Consolidating Statement of Cash Flows
(dollars in thousands)(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net income (loss) |
|
$ |
(1,754 |
) |
|
$ |
(1,754 |
) |
|
$ |
2,215 |
|
|
$ |
851 |
|
|
$ |
(1,312 |
) |
|
$ |
(1,754 |
) |
Depreciation and amortization |
|
|
|
|
|
|
4,270 |
|
|
|
880 |
|
|
|
4,066 |
|
|
|
|
|
|
|
9,216 |
|
Other operating activities |
|
|
1,754 |
|
|
|
(10,255 |
) |
|
|
(4,343 |
) |
|
|
4,033 |
|
|
|
1,312 |
|
|
|
(7,499 |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
(7,739 |
) |
|
|
(1,248 |
) |
|
|
8,950 |
|
|
|
|
|
|
|
(37 |
) |
Additions to property, plant & equipment |
|
|
|
|
|
|
(2,468 |
) |
|
|
(203 |
) |
|
|
(7,122 |
) |
|
|
|
|
|
|
(9,793 |
) |
Other investing activities |
|
|
|
|
|
|
|
|
|
|
1,501 |
|
|
|
568 |
|
|
|
|
|
|
|
2,069 |
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
(2,468 |
) |
|
|
1,298 |
|
|
|
(6,554 |
) |
|
|
|
|
|
|
(7,724 |
) |
Net borrowings |
|
|
|
|
|
|
412 |
|
|
|
|
|
|
|
(5,727 |
) |
|
|
|
|
|
|
(5,315 |
) |
Other financing activities |
|
|
|
|
|
|
(359 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(359 |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
53 |
|
|
|
|
|
|
|
(5,727 |
) |
|
|
|
|
|
|
(5,674 |
) |
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
66 |
|
|
Increase (decrease) in cash |
|
|
|
|
|
|
(10,154 |
) |
|
|
50 |
|
|
|
(3,265 |
) |
|
|
|
|
|
|
(13,369 |
) |
Cash and
equivalents at beginning of period |
|
|
|
|
|
|
22,849 |
|
|
|
509 |
|
|
|
18,408 |
|
|
|
|
|
|
|
41,766 |
|
|
Cash and
equivalents at end of period |
|
$ |
|
|
|
$ |
12,695 |
|
|
$ |
559 |
|
|
$ |
15,143 |
|
|
$ |
|
|
|
$ |
28,397 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2006 |
|
|
Libbey |
|
Libbey |
|
|
|
|
|
Non- |
|
|
|
|
|
|
Inc. |
|
Glass |
|
Subsidiary |
|
Guarantor |
|
|
|
|
|
|
(Parent) |
|
(Issuer) |
|
Guarantors |
|
Subsidiaries |
|
Eliminations |
|
Consolidated |
|
Net Income (loss) |
|
$ |
515 |
|
|
$ |
515 |
|
|
$ |
883 |
|
|
$ |
1,295 |
|
|
$ |
(2,693 |
) |
|
$ |
515 |
|
Depreciation and amortization |
|
|
|
|
|
|
4,749 |
|
|
|
901 |
|
|
|
2,685 |
|
|
|
|
|
|
|
8,335 |
|
Other operating activities |
|
|
(515 |
) |
|
|
432 |
|
|
|
(2,015 |
) |
|
|
(4,647 |
) |
|
|
2,693 |
|
|
|
(4,052 |
) |
|
Net cash provided by (used in) operating activities |
|
|
|
|
|
|
5,696 |
|
|
|
(231 |
) |
|
|
(667 |
) |
|
|
|
|
|
|
4,798 |
|
Additions to property, plant & equipment |
|
|
|
|
|
|
(14,469 |
) |
|
|
(75 |
) |
|
|
(6,895 |
) |
|
|
|
|
|
|
(21,439 |
) |
Other investing activities |
|
|
|
|
|
|
(4,124 |
) |
|
|
2,218 |
|
|
|
1,906 |
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities |
|
|
|
|
|
|
(18,593 |
) |
|
|
2,143 |
|
|
|
(4,989 |
) |
|
|
|
|
|
|
(21,439 |
) |
Net borrowings |
|
|
|
|
|
|
10,270 |
|
|
|
|
|
|
|
9,982 |
|
|
|
|
|
|
|
20,252 |
|
Other financing activities |
|
|
|
|
|
|
1,576 |
|
|
|
(1,927 |
) |
|
|
|
|
|
|
|
|
|
|
(351 |
) |
|
Net cash provided by (used in) financing activities |
|
|
|
|
|
|
11,846 |
|
|
|
(1,927 |
) |
|
|
9,982 |
|
|
|
|
|
|
|
19,901 |
|
Exchange effect on cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash |
|
|
|
|
|
|
(1,051 |
) |
|
|
(15 |
) |
|
|
4,326 |
|
|
|
|
|
|
|
3,260 |
|
Cash and
equivalents at beginning of period |
|
|
|
|
|
|
2,817 |
|
|
|
300 |
|
|
|
125 |
|
|
|
|
|
|
|
3,242 |
|
|
Cash and
equivalents at end of period |
|
$ |
|
|
|
$ |
1,766 |
|
|
$ |
285 |
|
|
$ |
4,451 |
|
|
$ |
|
|
|
$ |
6,502 |
|
|
24
15. Segments
Our segments are described as follows:
|
|
North American Glassincludes sales of glass tableware from subsidiaries throughout the United States, Canada
and Mexico. |
|
|
|
North American Otherincludes sales of ceramic dinnerware; metal tableware, holloware and serveware; and
plastic items for sale primarily in the foodservice, retail and industrial markets from subsidiaries in the United
States. |
|
|
|
Internationalincludes worldwide sales of glass tableware from subsidiaries outside the United States, Canada and
Mexico. |
Some operating segments were aggregated to arrive at the disclosed reportable segments. The
accounting policies of the segments are the same as those described in Note 1 of the Notes to
Condensed Consolidated Financial Statements. We do not have any customers who represent 10 percent
or more of total net sales. We evaluate the performance of our segments based upon net sales and
Earnings Before Interest and Taxes (EBIT). Intersegment sales are consummated at arms length and
are reflected in eliminations in the table below.
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
March 31, |
Three months ended |
|
2007 |
|
2006 |
|
Net Sales |
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
124,726 |
|
|
$ |
84,635 |
|
North American Other |
|
|
27,435 |
|
|
|
26,824 |
|
International |
|
|
29,782 |
|
|
|
23,596 |
|
Eliminations |
|
|
(2,447 |
) |
|
|
(189 |
) |
|
Consolidated |
|
$ |
179,496 |
|
|
$ |
134,866 |
|
|
|
|
|
|
|
|
|
|
EBIT |
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
10,935 |
|
|
$ |
634 |
|
North American Other |
|
|
3,769 |
|
|
|
462 |
|
International |
|
|
(2,478 |
) |
|
|
3,425 |
|
|
Consolidated |
|
$ |
12,226 |
|
|
$ |
4,521 |
|
|
|
|
|
|
|
|
|
|
Equity Earnings |
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
|
|
|
$ |
|
|
North American Other |
|
|
|
|
|
|
|
|
International |
|
|
|
|
|
|
1,065 |
|
|
Consolidated |
|
$ |
|
|
|
$ |
1,065 |
|
|
|
|
|
|
|
|
|
|
Depreciation & Amortization |
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
5,762 |
|
|
$ |
4,789 |
|
North American Other |
|
|
881 |
|
|
|
874 |
|
International |
|
|
2,573 |
|
|
|
2,672 |
|
|
Consolidated |
|
$ |
9,216 |
|
|
$ |
8,335 |
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
5,479 |
|
|
$ |
10,111 |
|
North American Other |
|
|
203 |
|
|
|
75 |
|
International |
|
|
4,111 |
|
|
|
11,253 |
|
|
Consolidated |
|
$ |
9,793 |
|
|
$ |
21,439 |
|
|
|
|
|
|
|
|
|
|
Reconciliation of EBIT to Net Income |
|
|
|
|
|
|
|
|
Segment EBIT |
|
$ |
12,226 |
|
|
$ |
4,521 |
|
Interest Expense |
|
|
15,564 |
|
|
|
3,609 |
|
Provision (Benefit) for Income Taxes |
|
|
(1,584 |
) |
|
|
301 |
|
Minority Interest |
|
|
|
|
|
|
(96 |
) |
|
Net (Loss) income |
|
$ |
(1,754 |
) |
|
$ |
515 |
|
|
25
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should
be read in conjunction with our condensed consolidated financial statements and the related notes
thereto appearing elsewhere in this report and in our Annual Report filed with the Securities and
Exchange Commission. This discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ from those anticipated in these
forward-looking statements as a result of many factors. These factors are discussed in Other
Information in the section Qualitative and Quantitative Disclosures About Market Risk.
Results of Operations First Quarter 2007 Compared with First Quarter 2006
Dollars in thousands, except percentages and per-share amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance |
Three months ended March 31, |
|
2007 |
|
2006 |
|
In dollars |
|
In percent |
|
Net sales |
|
$ |
179,496 |
|
|
$ |
134,866 |
|
|
$ |
44,630 |
|
|
|
33.1 |
% |
Gross profit |
|
$ |
32,415 |
|
|
$ |
22,146 |
|
|
$ |
10,269 |
|
|
|
46.4 |
% |
Gross profit margin |
|
|
18.1 |
% |
|
|
16.4 |
% |
|
|
|
|
|
|
|
|
Income from operations (IFO) |
|
$ |
10,381 |
|
|
$ |
3,060 |
|
|
$ |
7,321 |
|
|
|
239.2 |
% |
IFO margin |
|
|
5.8 |
% |
|
|
2.3 |
% |
|
|
|
|
|
|
|
|
Earnings before interest and
income taxes after minority
interest adjustment (EBIT)(1) |
|
$ |
12,226 |
|
|
$ |
4,425 |
|
|
$ |
7,801 |
|
|
|
176.3 |
% |
EBIT margin |
|
|
6.8 |
% |
|
|
3.3 |
% |
|
|
|
|
|
|
|
|
Earnings before interest, taxes,
depreciation and amortization
after minority interest adjustment
(EBITDA)(1) |
|
$ |
21,442 |
|
|
$ |
12,707 |
|
|
$ |
8,735 |
|
|
|
68.7 |
% |
EBITDA margin |
|
|
11.9 |
% |
|
|
9.4 |
% |
|
|
|
|
|
|
|
|
Net (loss) income |
|
$ |
(1,754 |
) |
|
$ |
515 |
|
|
$ |
(2,269 |
) |
|
|
(440.6 |
)% |
Net (loss) income margin |
|
|
(1.0 |
)% |
|
|
0.4 |
% |
|
|
|
|
|
|
|
|
Diluted net (loss) income per share |
|
$ |
(0.12 |
) |
|
$ |
.04 |
|
|
$ |
(0.16 |
) |
|
|
(400.0 |
)% |
|
|
|
|
(1) |
|
We believe that EBIT and EBITDA, non-GAAP financial measures, are useful metrics for
evaluating our financial performance, as they are measures that we use internally to assess
our performance. See Table 1 for a reconciliation of (loss) income before income taxes to
EBIT and EBITDA. |
Net Sales
For the quarter ended March 31, 2007, net sales increased 33.1 percent to $179.5 million from
$134.9 million in the year-ago quarter. The increase in net sales was attributable to
the consolidation of sales of Crisa, the Companys former joint
venture in Mexico, a 30.0 percent increase in shipments to
export customers outside of North America and a more than 18.0
percent increase in shipments to retail glassware customers. In
addition, shipments of World Tableware products were up over 14.0 percent, shipments to Syracuse China
customers were down approximately 7.0 percent and sales from our
International segment were up 26.2 percent.
Gross Profit
For the quarter ended March 31, 2007, gross profit increased by $10.3 million, or 46.4 percent, to
$32.4 million, compared to $22.1 million in the year-ago quarter. Gross profit as a percentage of
net sales increased to 18.1 percent, compared to 16.4 percent in the year-ago quarter. The increase
in gross profit and gross profit margin is primarily attributable to higher sales and higher
production activity. Partially offsetting these improvements were higher natural gas expense and
expenses related to the start up of our new facility in China.
26
Income From Operations
We reported income from operations of $10.4 million during the quarter, compared to income from
operations of $3.1 million in the year-ago quarter. Income from operations as a percentage of net
sales increased to 5.8 percent in the first quarter 2007,
compared to 2.3 percent in the year-ago
quarter. Factors contributing to the $7.3 million increase in income from operations were higher
gross profit discussed above offset by higher selling, general and administrative expenses due to
the consolidation of Crisa.
Earnings Before Interest and Income Taxes (EBIT)
Earnings
before interest and taxes (EBIT) increased by $7.8 million in the first quarter 2007,
compared to the year-ago quarter. EBIT as a percentage of net sales increased to 6.8 percent in
the first quarter 2007, compared to 3.3 percent in the year-ago quarter. Key contributors to the
increase in EBIT compared to the prior year are the same as those discussed above under Income From
Operations. In addition, we recognized a $1.1 million gain on the sale of excess land in Syracuse,
NY.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA increased by $8.7 million, or 68.7 percent for the first quarter 2007, compared to the
year-ago quarter. As a percentage of net sales, EBITDA was 11.9 percent for the first quarter
2007, compared to 9.4 percent in the year-ago quarter. The key contributors to the increase in
EBITDA were those factors discussed above. Depreciation and amortization increased by $0.9 million
to $9.2 million primarily due to the consolidation of Crisa.
Net Income and Diluted Net Income Per Share
We recorded a net loss of $1.8 million, or $(0.12) per diluted share, in the first quarter 2007,
compared to net income of $0.5 million, or $.04 per diluted share, in the year-ago quarter. Net
loss as a percentage of net sales was 1.0 percent in the first quarter 2007, compared to net income
of 0.4 percent in the year-ago quarter. A $12.0 million increase in interest expense compared with
the year-ago quarter is the result of the refinancing consummated on June 16, 2006, which resulted
in higher debt from the purchase of Crisa and higher average interest rates. The effective tax
rate increased to 47.5 percent for the quarter ended March 31, 2007, as compared to 33.0 percent in
the year-ago quarter. This increase was primarily driven by a $1.6 million credit that was awarded
to Crisa in the first quarter of 2007 related to new furnace technology.
Segment Results of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands |
|
|
|
|
|
|
|
|
|
Variance |
Three Months Ended March 31, |
|
2007 |
|
2006 |
|
In Dollars |
|
In Percent |
|
Net Sales: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
124,726 |
|
|
$ |
84,635 |
|
|
$ |
40,091 |
|
|
|
47.4 |
% |
North American Other |
|
|
27,435 |
|
|
|
26,824 |
|
|
|
611 |
|
|
|
2.3 |
% |
International |
|
|
29,782 |
|
|
|
23,596 |
|
|
|
6,186 |
|
|
|
26.2 |
% |
Eliminations |
|
|
(2,447 |
) |
|
|
(189 |
) |
|
|
|
|
|
|
|
|
|
Consolidated |
|
$ |
179,496 |
|
|
$ |
134,866 |
|
|
$ |
44,630 |
|
|
|
33.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North American Glass |
|
$ |
10,935 |
|
|
$ |
634 |
|
|
$ |
10,301 |
|
|
|
1,624.8 |
% |
North American Other |
|
|
3,769 |
|
|
|
462 |
|
|
|
3,307 |
|
|
|
715.8 |
% |
International |
|
|
(2,478 |
) |
|
|
3,425 |
|
|
|
(5,903 |
) |
|
|
(172.4 |
)% |
|
Consolidated |
|
$ |
12,226 |
|
|
$ |
4,521 |
|
|
$ |
7,705 |
|
|
|
170.4 |
% |
|
North American Glass
For the quarter ended March 31, 2007, net sales increased 47.4 percent to $124.7 million from $84.6
million in the year-ago quarter. The increase in net sales was primarily attributable to the
consolidation of Crisa, a more than 18.0 percent increase in shipments to retail customers and a
more than 30.0 percent increase in shipments to export customers outside of North America.
EBIT increased to $10.9 million for the first quarter 2007, compared to $0.6 for the year-ago
quarter. EBIT, as a percentage of net sales, increased to 8.8 percent in the first quarter 2007,
compared to 0.8 percent in the year-ago quarter. The key
contributors to the improvement in EBIT compared to the year-ago quarter were the consolidation of Crisa and
significantly higher operating activity in the U.S. operations.
27
North American Other
For the quarter ended March 31, 2007, net sales increased 2.3 percent to $27.4 million from $26.8
million in the year-ago quarter. The increase in net sales was primarily attributable to a more
than 14.3 percent increase in shipments of World Tableware products. This increase was partially
offset by a 7.2 percent decrease in shipments of Syracuse China products.
EBIT increased by $3.3 million for the first quarter of 2007, compared to the year-ago quarter.
EBIT as a percentage of net sales increased to 13.7 percent in the first quarter 2007 compared to
1.7 percent in the year-ago quarter. The key contributors to the increased EBIT were higher sales
of World Tableware products, significantly higher production activity levels at Syracuse China and
a $1.1 million gain on the sale of excess land at Syracuse China.
International
For the quarter ended March 31, 2007, net sales increased 26.2 percent to $29.8 million from $23.6
million in the year-ago quarter. The increase in net sales was primarily attributable to an
increase in shipments to customers of Royal Leerdam and Crisal along with a stronger euro compared
to the year-ago quarter.
EBIT decreased by $5.9 million for the first quarter of 2007, compared to the year-ago quarter.
EBIT as a percentage of net sales decreased to (8.3) percent in the first quarter 2007, compared to
14.5 percent in the year-ago quarter. The key contributors to the decrease in EBIT compared to the
year-ago quarter is primarily related to start-up expenses at our new glass plant in China, lower
production activity in Portugal and higher natural gas costs in Europe.
Capital Resources and Liquidity
Balance Sheet and Cash flows
Cash and Equivalents
At March 31, 2007, our cash balance decreased $28.4 million from $41.8 million on December 31,
2006. We used a large portion of the cash to repay debt under the ABL Facility.
Working Capital
The following table presents working capital components:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Variance |
Dollars in thousands, except percentages and DSO, DIO, DPO and DWC |
|
March 31, 2007 |
|
December 31, 2006 |
|
In dollars |
|
In percent |
|
Accounts receivable |
|
$ |
97,085 |
|
|
$ |
99,203 |
|
|
$ |
(2,118 |
) |
|
|
(2.1 |
)% |
DSO (1)(6) |
|
|
46.2 |
|
|
|
48.3 |
|
|
|
|
|
|
|
|
|
Inventories |
|
|
168,971 |
|
|
|
159,123 |
|
|
|
9,848 |
|
|
|
6.2 |
% |
DIO (2)(6) |
|
|
80.4 |
|
|
|
77.4 |
|
|
|
|
|
|
|
|
|
Accounts payable |
|
|
65,817 |
|
|
|
67,493 |
|
|
|
(1,676 |
) |
|
|
(2.5 |
)% |
DPO (3)(6) |
|
|
31.3 |
|
|
|
32.8 |
|
|
|
|
|
|
|
|
|
|
Working capital (4) |
|
$ |
200,239 |
|
|
$ |
190,833 |
|
|
$ |
9,406 |
|
|
|
4.9 |
% |
DWC (5)(6) |
|
|
95.2 |
|
|
|
92.9 |
|
|
|
|
|
|
|
|
|
Percentage of net sales (6) |
|
|
26.1 |
% |
|
|
25.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
DSO, DIO and DWC are all calculated using net sales as the denominator and are based on a 365-day
calendar year. |
|
(1) |
|
Days sales outstanding (DSO) measures the number of days it takes to turn receivables into
cash. |
|
(2) |
|
Days inventory outstanding (DIO) measures the number of days it takes to turn inventory into
cash. |
|
(3) |
|
Days payable outstanding (DPO) measures the number of days it takes to pay the balances of our
accounts payable. |
|
(4) |
|
Working capital is defined as inventories and accounts receivable less accounts payable. |
|
(5) |
|
Days working capital (DWC) measures the number of days it takes to turn our working capital
into cash. |
|
(6) |
|
The calculations for both 2007 and 2006 include Crisa proforma net sales. |
28
Working capital defined as accounts receivable and inventories less accounts payable, was $200.2
million at March 31, 2007. Working capital increased $9.4 million from December 31, 2006 primarily
because of normal seasonal inventory build up and the start up of our new glass plant in China.
However, as a percentage of net sales, working capital decreased from 27.0 percent in the year-ago
quarter to 26.1 percent in the first quarter of 2007, as of a result of our continued inventory
reduction efforts.
Borrowings
The following table presents our total borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
|
Interest Rate |
|
Maturity Date |
|
2007 |
|
2006 |
|
Borrowings under ABL facility |
|
floating |
|
December 16, 2010 |
|
$ |
20,802 |
|
|
$ |
46,210 |
|
Senior notes |
|
floating (1) |
|
June 1, 2011 |
|
|
306,000 |
|
|
|
306,000 |
|
PIK notes |
|
|
16.00 |
% |
|
December 1, 2011 |
|
|
109,480 |
|
|
|
109,480 |
|
Promissory notes |
|
|
6.00 |
% |
|
April 2007 to September 2016 |
|
|
1,947 |
|
|
|
1,985 |
|
Notes payable |
|
floating |
|
April 2007 |
|
|
1,591 |
|
|
|
226 |
|
RMB loan contract |
|
floating |
|
July 2012 to January 2014 |
|
|
32,375 |
|
|
|
32,050 |
|
RMB working capital loan |
|
floating |
|
March 2010 |
|
|
6,475 |
|
|
|
|
|
Obligations under capital leases |
|
floating |
|
April 2007 to May 2009 |
|
|
1,396 |
|
|
|
1,548 |
|
BES euro line |
|
floating |
|
January 2010 to January 2014 |
|
|
14,451 |
|
|
|
|
|
Other debt |
|
floating |
|
September 2009 |
|
|
1,613 |
|
|
|
1,954 |
|
|
Total borrowings |
|
|
|
|
|
|
|
|
|
|
496,130 |
|
|
|
499,453 |
|
Less unamortized discounts and warrants |
|
|
|
|
|
|
|
|
|
|
7,771 |
|
|
|
8,221 |
|
|
Total borrowings net |
|
|
|
|
|
|
|
|
|
|
488,359 |
|
|
|
491,232 |
|
Less current portion of borrowings |
|
|
|
|
|
|
|
|
|
|
2,385 |
|
|
|
1,020 |
|
|
Total long-term portion of borrowings net |
|
|
|
|
|
|
|
|
|
$ |
485,974 |
|
|
$ |
490,212 |
|
|
|
|
|
(1) |
|
See Interest Rate Protection Agreements below |
We had total borrowings of $496.1 million at March 31, 2007, compared to total borrowings of
$499.5 million at December 31, 2006. The $3.3 million reduction in borrowings was the result of
using cash on hand to repay borrowings under the ABL facility.
During the quarter, we entered into new credit facilities in China and Portugal to fund our working
capital requirements.
Of our total indebtedness, $184.7 million is subject to fluctuating interest rates at March 31,
2007. A change in one percentage point in such rates would result in a change in interest expense
of approximately $1.8 million on an annual basis.
Included in Interest Expense is the amortization of discounts and warrants on the Senior Notes and
PIK Notes and financing fees of $0.5 million for the three months ended March 31, 2007.
Cash Flow
The following table presents key drivers to free cash flow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dollars in thousands, except percentages |
|
|
|
|
|
|
|
|
|
Variance |
Three months ended March 31, |
|
2007 |
|
2006 |
|
In dollars |
|
In percent |
|
Net cash (used in) provided by operating activities |
|
$ |
(37 |
) |
|
$ |
4,798 |
|
|
$ |
(4,835 |
) |
|
|
(100.8 |
)% |
Capital expenditures |
|
|
9,793 |
|
|
|
21,439 |
|
|
|
(11,646 |
) |
|
|
54.3 |
% |
Proceeds from asset sales and other |
|
|
2,069 |
|
|
|
|
|
|
|
2,069 |
|
|
|
100.0 |
% |
|
Free cash flow (a) |
|
$ |
(7,761 |
) |
|
$ |
(16,641 |
) |
|
$ |
8,880 |
|
|
|
53.4 |
% |
|
|
|
|
(a) |
|
We believe that Free Cash Flow (net cash (used in) provided by operating activities, less
capital expenditures, plus proceeds from assets sales and other) is a useful metric for
evaluating our financial performance, as it is a measure we use internally to assess
performance. |
Our net cash used by operating activities was $0.04 million in the first quarter of 2007, compared
to $4.8 million in the year-ago quarter, or a decrease of $4.8 million. The major components
impacting cash flow from operations were an increase in EBITDA offset by an increase in working capital and payments relating to the prior year accrued profit sharing.
29
Our free cash flow was $(7.8) million during the first quarter 2007, compared to $(16.6) million in
the year-ago quarter, an increase of $8.9 million. The primary contributors were a $11.6 million
decrease in capital expenditures, which was driven by a reduction in spending related to our new facility in China which was being constructed in 2006, and proceeds from asset sales and other items of $2.1 million, which is
primarily attributable to the sale of excess land in Syracuse, NY.
Derivatives
We have Interest Rate Protection Agreements (Rate Agreements) with respect to $200.0 million of
debt as a means to manage our exposure to fluctuating interest rates. The Rate Agreements
effectively convert this portion of our long-term borrowings from variable rate debt to fixed-rate
debt, thus reducing the impact of interest rate changes on future income. The fixed interest rate
for our borrowings related to the Rate Agreements at March 31, 2007, 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 2.7 years at March 31, 2007. Total remaining
Senior Notes not covered by the Rate Agreements have fluctuating interest rates with a weighted
average rate of 12.35 percent per year at March 31, 2007. 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.
The fair market value for the Rate Agreements at March 31, 2007, was a $1.7 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.
We also use commodity futures contracts related to forecasted future U.S. natural gas requirements.
The objective of these futures contracts is to limit the fluctuations in prices paid and potential
losses in earnings or cash flows from adverse price movements in the underlying 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% to 60% of our anticipated requirements,
generally six or more months in the future. The fair values of these instruments are determined
from market quotes. At March 31, 2007, we had commodity future contracts for 1,727,000 million
British Thermal Units (BTUs) of natural gas with a fair market value of $(0.7) million. We have
hedged forecasted transactions through March 2008. At December 31, 2006, we had commodity futures
contracts for 3,450,000 million BTUs of natural gas with a fair market value of $(5.3) million.
Capital Resources and Liquidity
Based on our current level of operations, we believe our cash flow from operations and available
borrowings under our senior credit facility and various other facilities will be adequate to meet
our liquidity needs for at least the next twelve months. Our ability to fund our working capital
needs, debt payments and other obligations, capital expenditures program and other funding
requirements, and to comply with debt agreements, depends on our future operating performance and
cash flow (see Part II, Item 1A. Risk Factors).
Reconciliation of Non-GAAP Financial Measures
We sometimes refer to data derived from condensed consolidated financial information but not
required by GAAP to be presented in financial statements. Certain of these data are considered
non-GAAP financial measures under Securities and Exchange Commission (SEC) Regulation G. We
believe that non-GAAP data provide investors with a more complete understanding of underlying
results in our core business and trends. In addition, we use non-GAAP data internally to assess
performance. Although we believe that the non-GAAP financial measures presented enhance investors
understanding of our business and performance, these non-GAAP measures should not be considered an
alternative to GAAP.
30
Table 1
Reconciliation of (loss) income before income taxes and minority interest to EBIT and EBITDA
Dollars in thousands
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2007 |
|
2006 |
|
(Loss) income before income taxes after minority interest adjustment |
|
$ |
(3,338 |
) |
|
$ |
816 |
|
Add: Interest expense |
|
|
15,564 |
|
|
|
3,609 |
|
|
Earnings before interest and income taxes after minority interest adjustment (EBIT) |
|
|
12,226 |
|
|
|
4,425 |
|
Add: Depreciation and amortization (adjusted for minority interest) |
|
|
9,216 |
|
|
|
8,282 |
|
|
Earnings before interest, taxes, deprecation and amortization after minority
interest adjustment (EBITDA) |
|
$ |
21,442 |
|
|
$ |
12,707 |
|
|
Table 2
Reconciliation of net cash provided by operating activities to free cash flow
Dollars in thousands
|
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
2007 |
|
2006 |
|
Net cash (used in) provided by operating activities |
|
$ |
(37 |
) |
|
$ |
4,798 |
|
Less: |
|
|
|
|
|
|
|
|
Capital expenditures |
|
|
9,793 |
|
|
|
21,439 |
|
Plus: |
|
|
|
|
|
|
|
|
Proceeds from asset sales and other |
|
|
2,069 |
|
|
|
|
|
|
Free cash flow |
|
$ |
(7,761 |
) |
|
$ |
(16,641 |
) |
|
Table 3
Reconciliation of working capital
|
|
|
|
|
|
|
|
|
|
|
March 31, |
|
December 31, |
Dollars in thousands |
|
2007 |
|
2006 |
|
Accounts receivable (net) |
|
$ |
97,085 |
|
|
$ |
99,203 |
|
Plus: |
|
|
|
|
|
|
|
|
Inventories (net) |
|
|
168,971 |
|
|
|
159,123 |
|
Less: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
65,817 |
|
|
|
67,493 |
|
|
Working capital |
|
$ |
200,239 |
|
|
$ |
190,833 |
|
|
Item 3. Qualitative and Quantitative Disclosures about Market Risk
Currency
We are exposed to market risks due to changes in currency values, although the majority of our
revenues and expenses are denominated in the U.S. dollar. The currency market risks include
devaluations and other major currency fluctuations relative to the U.S. dollar, euro, RMB or
Mexican peso that could reduce the cost competitiveness of our products compared to foreign
competition.
Interest Rates
We are exposed to market risk associated with changes in interest rates on our floating debt and
have entered into Interest Rate Protection Agreements (Rate Agreements) with respect to $200
million of debt as a means to manage our exposure to fluctuating interest rates. The Rate
Agreements effectively convert a 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. We had $184.7
million of debt subject to fluctuating interest rates at March 31, 2007. A change of one percentage
point in such rates would result in a change in interest expense of approximately $1.8 million on
an annual basis. If the counterparties to these Rate Agreements were to fail to perform, we would
no longer be protected from interest rate fluctuations by these Rate Agreements. However, we do not anticipate
nonperformance by the counterparties.
31
Natural Gas
We are also exposed to market risks associated with changes in the price of natural gas. We use
commodity futures contracts related to forecasted future natural gas requirements of our
manufacturing operations. The objective of these futures contracts is to limit the fluctuations in
prices paid and potential losses in earnings or cash flows from adverse price movements in the
underlying natural gas commodity. We consider the forecasted natural gas requirements of our
manufacturing operations in determining the quantity of natural gas to hedge. We combine the
forecasts with historical observations to establish the percentage of forecast eligible to be
hedged, typically ranging from 40 percent to 60 percent of our anticipated requirements, generally
six or more months in the future. For our natural gas requirements that are not hedged, we are
subject to changes in the price of natural gas, which affect our earnings. If the counter parties
to these futures contracts were to fail to perform, we would no longer be protected from natural
gas fluctuations by the futures contracts. However, we do not anticipate nonperformance by these
counter parties.
Retirement Plans
We are exposed to market risks associated with changes in the various capital markets. Changes in
long-term interest rates affect the discount rate that is used to measure our benefit obligations
and related expense. Changes in the equity and debt securities markets affect the performance of
our pension plans asset performance and related pension expense. Sensitivity to these key market
risk factors is as follows:
|
|
|
A change of 1 percent in the discount rate would change our annual expense by approximately $3.9 million. |
|
|
|
|
A change of 1 percent in the expected long-term rate of return on plan assets would change annual
expense by approximately $2.4 million. |
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our Securities Exchange Act of 1934 (the Exchange Act) reports are
recorded, processed, summarized and reported within the time periods specified in the Securities
and Exchange Commissions rules and forms and that such information is accumulated and communicated
to our management, including our Chief Executive Officer and Chief Financial Officer, as
appropriate, to allow for timely decisions regarding required disclosure. In designing and
evaluating the disclosure controls and procedures, management recognizes that any controls and
procedures, no matter how well-designed and operated, can provide only reasonable assurance of
achieving the desired control objectives, and management is required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
As required by SEC Rule 13a-15(b), we carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive Officer and our Chief Financial
Officer, of the effectiveness of the design and operation of our disclosure controls and procedures
as of the end of the quarter covered by this report. Based on the foregoing, our Chief Executive
Officer and Chief Financial Officer concluded that our disclosure controls and procedures were
effective at the reasonable assurance level.
There has been no change in our controls over financial reporting during our most recent fiscal
quarter that has materially affected, or is reasonably likely to materially affect, our internal
controls over financial reporting.
PART II OTHER INFORMATION
This document and supporting schedules contain statements that are not historical facts and
constitute projections, forecasts or forward-looking statements. These forward-looking statements
reflect only our best assessment at this time, and may be identified by the use of words or phrases
such as anticipate, believe, expect, intend, may, planned, potential, should,
will, would or similar phrases. Such forward-looking statements involve risks and uncertainty;
actual results may differ materially from such statements, and undue reliance should not be placed
on such statements. Readers are cautioned that these forward-looking statements are only
predictions and are subject to risks, uncertainties and assumptions that are difficult to predict.
Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements.
We undertake no obligation to revise or update any forward-looking statements for any reason.
32
Item 1A. Risk Factors
The following factors are the most significant factors that can impact year-to-year comparisons and
may affect the future performance of our businesses. New risks may emerge, and management cannot
predict those risks or estimate the extent to which they may affect our financial performance.
|
|
|
Slowdowns in the retail, travel, restaurant and bar, or entertainment industries, such
as those caused by general economic downturns, terrorism, health concerns or strikes or
bankruptcies within those industries, could reduce our revenues and production activity
levels. |
|
|
|
|
We face intense competition and competitive pressures that could adversely affect our
results of operations and financial condition. |
|
|
|
|
International economic and political factors could affect demand for imports and
exports, and our financial condition and results of operations could be adversely impacted
as a result. |
|
|
|
|
We may not be able to effectively integrate Crisa or future businesses we acquire. |
|
|
|
|
We may not be able to achieve the objectives of our strategic plan. |
|
|
|
|
Natural gas, the principal fuel we use to manufacture our products, is subject to
fluctuating prices; fluctuations in natural gas prices could adversely affect our results
of operations and financial condition. |
|
|
|
|
If we are unable to obtain sourced products or materials at favorable prices, our
operating performance may be adversely affected. |
|
|
|
|
Charges related to our employee pension and postretirement welfare plans resulting from
market risk and headcount realignment may adversely affect our results of operations and
financial condition. |
|
|
|
|
Our business requires significant capital investment and maintenance expenditures that we may be unable to fulfill. |
|
|
|
|
Our business requires us to maintain a large fixed cost base that can affect our profitability. |
|
|
|
|
Unexpected equipment failures may lead to production curtailments or shutdowns. |
|
|
|
|
If our investments in new technology and other capital expenditures do not yield
expected returns, our results of operations could be reduced. |
|
|
|
|
An inability to meet targeted production and profit margin goals in connection with the
operation of our new production facility in China could result in significant additional
costs or lost sales. |
|
|
|
|
We may not be able to renegotiate collective bargaining agreements successfully when
they expire; organized strikes or work stoppages by unionized employees may have an adverse
effect on our operating performance. |
|
|
|
|
We are subject to risks associated with operating in foreign countries. These risks
could adversely affect our results of operations and financial condition. |
|
|
|
|
High levels of inflation and high interest rates in Mexico could adversely affect the
operating results and cash flows of Crisa. |
|
|
|
|
Fluctuation of the currencies in which we conduct operations could adversely affect our
financial condition and results of operations. |
33
|
|
|
Fluctuations in the value of the foreign currencies in which we operate relative to the
U.S. dollar could reduce the cost competitiveness of our products or those of our
subsidiaries. |
|
|
|
|
Devaluation or depreciation of, or governmental conversion controls over, the foreign
currencies in which we operate could affect our ability to convert the earnings of our
foreign subsidiaries into U.S. dollars. |
|
|
|
|
If our hedges do not qualify as highly effective or if we do not believe that forecasted
transactions would occur, the changes in the fair value of the derivatives used as hedges
would be reflected in our earnings. |
|
|
|
|
We are subject to various environmental legal requirements and may be subject to new
legal requirements in the future; these requirements could have a material adverse effect
on our operations. |
|
|
|
|
Our failure to protect our intellectual property or prevail in any intellectual property
litigation could materially and adversely affect our competitive position, reduce revenue
or otherwise harm our business. |
|
|
|
|
Our business may suffer if we do not retain our senior management. |
|
|
|
|
Our high level of debt, as well as incurrence of additional debt, may limit our
operating flexibility, which could adversely affect our results of operations and financial
condition and prevent us from fulfilling our obligations. |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuers Purchases of Equity Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Number of |
|
|
|
|
|
|
|
|
|
|
|
|
Shares Purchased as |
|
Maximum Number of |
|
|
|
|
|
|
|
|
|
|
Part of Publicly |
|
Shares that May Yet Be |
|
|
Total Number of |
|
Average Price |
|
Announced Plans or |
|
Purchased Under the |
Period |
|
Shares Purchased |
|
Paid per Share |
|
Programs |
|
Plans or Programs(1) |
January 1 to January 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
February 1 to February 28, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
March 1 to March 31, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
We announced on December 10, 2002, that our Board of Directors authorized the purchase of up to
2,500,000 shares of our common stock in the open market and negotiated purchases. There is no
expiration date for this plan. In 2003, 1,500,000 shares of our common stock were purchased for
$38.9 million. Our ABL Facility and the indentures governing the Senior Secured Notes and the PIK
Notes significantly restrict our ability to repurchase additional shares. |
Item 5. Other Information
(b) |
|
There has been no material change to the procedures by which security holders may recommend
nominees to the Companys board of directors. |
Item 6. Exhibits
Exhibits: The exhibits listed in the accompanying Exhibit Index are filed as part of this report.
34
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Number |
|
Description |
|
|
|
|
|
|
3.1 |
|
|
Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrants Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993 and incorporated herein by reference). |
|
|
|
|
|
|
3.2 |
|
|
Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.01 to Registrants Form 8-K filed
February 7, 2005 and incorporated herein by reference). |
|
|
|
|
|
|
4.1 |
|
|
Credit Agreement, dated June 16, 2006, among Libbey Glass Inc. and Libbey Europe B.V., Libbey Inc.,
the other loan parties party thereto, the lenders party thereto, JPMorgan Chase Bank, N.A., J.P.
Morgan Europe Limited, LaSalle Bank Midwest National Association, Wells Fargo Foothill, LLC, Fifth
Third Bank, and J.P. Morgan Securities Inc., as Sole Bookrunner and Sole Lead Arranger. (filed as
Exhibit 4.1 to Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.2 |
|
|
Indenture, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors
party thereto and The Bank of New York Trust Company, N.A., as trustee. (filed as Exhibit 4.2 to
Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.3 |
|
|
Form of Floating Rate Senior Secured Note due 2011. (filed as Exhibit 4.3 to Registrants Form 8-K
filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.4 |
|
|
Registration Rights Agreement, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the
Subsidiary Guarantors party thereto and the Initial Purchasers named therein. (filed as Exhibit 4.4
to Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.5 |
|
|
Indenture, dated June 16, 2006, among Libbey Glass Inc., Libbey Inc., the Subsidiary Guarantors
party thereto and Merrill Lynch PCG, Inc. (filed as Exhibit 4.5 to Registrants Form 8-K filed June
21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.6 |
|
|
Form of 16% Senior Subordinated Secured Pay-in-Kind Note due 2011. (filed as Exhibit 4.6 to
Registrants Form 8-K filed June 21, 2006 and incorporated herein by reference). |
|
|
|
|
|
|
4.7 |
|
|
Warrant, issued June 16, 2006. (filed as Exhibit 4.7 to Registrants Form 8-K filed June 21, 2006
and incorporated herein by reference). |
|
|
|
|
|
|
4.8 |
|
|
Registration Rights Agreement, dated June 16, 2006, among Libbey Inc. and Merrill Lynch PCG, Inc.
(filed as Exhibit 4.8 to Registrants Form 8-K filed June 21, 2006 and incorporated herein by
reference). |
|
|
|
|
|
|
4.9 |
|
|
Intercreditor Agreement, dated June 16, 2006, among Libbey Glass Inc., JPMorgan Chase Bank, N.A.,
The Bank of New York Trust Company, N.A., Merrill Lynch PCG, Inc. and the Loan Parties party
thereto. (filed as Exhibit 4.9 to Registrants Form 8-K filed June 21, 2006 and incorporated herein
by reference). |
|
|
|
|
|
|
10.5 |
|
|
2006 Omnibus Incentive Plan of Libbey Inc. (filed as Exhibit 10.1 to Registrants Quarterly Report
on Form 10-Q for the quarter ended March 31, 2006 and incorporated herein by reference) |
|
|
|
|
|
|
31.1 |
|
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
|
|
|
|
|
|
31.2 |
|
|
Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (filed herein). |
|
|
|
|
|
|
32.1 |
|
|
Chief Executive Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein). |
|
|
|
|
|
|
32.2 |
|
|
Chief Financial Officer Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To
Section 906 Of The Sarbanes-Oxley Act of 2002 (filed herein). |
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
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|
LIBBEY INC. |
|
|
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|
|
|
Date May 10, 2007
|
|
By
|
|
/s/ Scott M. Sellick
|
|
|
|
|
|
|
|
|
|
|
|
Scott M. Sellick,
Vice President, Chief Financial Officer |
|
|
(duly authorized principal financial officer) |
36