UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2013
OR
o | 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)
Delaware | 34-1559357 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) |
300 Madison Avenue, Toledo, Ohio 43604 | ||
(Address of principal executive offices) (Zip Code) | ||
419-325-2100 | ||
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer | o | Accelerated Filer | þ | Non-Accelerated Filer | o | Smaller reporting company | o |
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value 20,997,945 shares at April 30, 2013.
TABLE OF CONTENTS
EX-31.1 | |
EX-31.2 | |
EX-32.1 | |
EX-32.2 | |
EX-101 INSTANCE DOCUMENT | |
EX-101 SCHEMA DOCUMENT | |
EX-101 CALCULATION LINKBASE DOCUMENT | |
EX-101 LABELS LINKBASE DOCUMENT | |
EX-101 PRESENTATION LINKBASE DOCUMENT | |
EX-101 DEFINITION LINKBASE DOCUMENT |
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PART I — FINANCIAL INFORMATION
Item 1. | Financial Statements |
The accompanying unaudited Condensed Consolidated Financial Statements of Libbey Inc. and all majority-owned subsidiaries (collectively, Libbey or the Company) have been prepared in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Item 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (including normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013.
The balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements.
For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.
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Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands)
(unaudited)
Three months ended March 31, | |||||||
2013 | 2012 | ||||||
Net sales | $ | 183,476 | $ | 187,829 | |||
Freight billed to customers | 752 | 708 | |||||
Total revenues | 184,228 | 188,537 | |||||
Cost of sales | 141,996 | 145,481 | |||||
Gross profit | 42,232 | 43,056 | |||||
Selling, general and administrative expenses | 26,397 | 28,126 | |||||
Special charges | 4,314 | — | |||||
Income from operations | 11,521 | 14,930 | |||||
Other income (expense) | (435 | ) | (591 | ) | |||
Earnings before interest and income taxes | 11,086 | 14,339 | |||||
Interest expense | 8,435 | 10,408 | |||||
Income before income taxes | 2,651 | 3,931 | |||||
Provision for income taxes | 662 | 3,290 | |||||
Net income | $ | 1,989 | $ | 641 | |||
Net income per share: | |||||||
Basic | $ | 0.09 | $ | 0.03 | |||
Diluted | $ | 0.09 | $ | 0.03 | |||
Dividends per share | $ | — | $ | — |
See accompanying notes
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Libbey Inc.
Condensed Consolidated Statements of Comprehensive Income
(dollars in thousands)
(unaudited)
Three months ended March 31, | ||||||||
2013 | 2012 | |||||||
Net income | $ | 1,989 | $ | 641 | ||||
Other comprehensive income (loss): | ||||||||
Pension and other postretirement benefit adjustments, net of tax | 2,671 | 2,207 | ||||||
Change in fair value of derivative instruments, net of tax | 1,045 | (532 | ) | |||||
Foreign currency translation adjustments | (2,925 | ) | 3,437 | |||||
Other comprehensive income, net of tax | 791 | 5,112 | ||||||
Comprehensive income | $ | 2,780 | $ | 5,753 |
See accompanying notes
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Libbey Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
March 31, 2013 | December 31, 2012 | ||||||
(unaudited) | |||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 45,949 | $ | 67,208 | |||
Accounts receivable — net | 86,264 | 80,850 | |||||
Inventories — net | 167,374 | 157,549 | |||||
Prepaid and other current assets | 16,834 | 12,997 | |||||
Total current assets | 316,421 | 318,604 | |||||
Pension asset | 10,176 | 10,196 | |||||
Purchased intangible assets — net | 19,828 | 20,222 | |||||
Goodwill | 167,496 | 166,572 | |||||
Deferred income taxes | 9,816 | 9,830 | |||||
Derivative asset | — | 298 | |||||
Other assets | 16,429 | 18,300 | |||||
Total other assets | 223,745 | 225,418 | |||||
Property, plant and equipment — net | 253,009 | 258,154 | |||||
Total assets | $ | 793,175 | $ | 802,176 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||
Accounts payable | $ | 57,259 | $ | 65,712 | |||
Salaries and wages | 27,976 | 41,405 | |||||
Accrued liabilities | 53,865 | 42,863 | |||||
Accrued income taxes | 219 | 2,282 | |||||
Pension liability (current portion) | 660 | 613 | |||||
Non-pension postretirement benefits (current portion) | 4,739 | 4,739 | |||||
Derivative liability | — | 420 | |||||
Deferred income taxes | 3,217 | 3,213 | |||||
Long-term debt due within one year | 14,031 | 4,583 | |||||
Total current liabilities | 161,966 | 165,830 | |||||
Long-term debt | 452,122 | 461,884 | |||||
Pension liability | 62,389 | 60,909 | |||||
Non-pension postretirement benefits | 71,587 | 71,468 | |||||
Deferred income taxes | 7,477 | 7,537 | |||||
Other long-term liabilities | 9,423 | 10,072 | |||||
Total liabilities | 764,964 | 777,700 | |||||
Shareholders’ equity: | |||||||
Common stock, par value $.01 per share, 50,000,000 shares authorized, 20,919,330 shares issued at March 31, 2013 (20,835,489 shares issued in 2012) | 210 | 209 | |||||
Capital in excess of par value | 314,331 | 313,377 | |||||
Retained deficit | (146,081 | ) | (148,070 | ) | |||
Accumulated other comprehensive loss | (140,249 | ) | (141,040 | ) | |||
Total shareholders’ equity | 28,211 | 24,476 | |||||
Total liabilities and shareholders’ equity | $ | 793,175 | $ | 802,176 |
See accompanying notes
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Libbey Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
Three months ended March 31, | |||||||
2013 | 2012 | ||||||
Operating activities: | |||||||
Net income | $ | 1,989 | $ | 641 | |||
Adjustments to reconcile net income to net cash used by operating activities: | |||||||
Depreciation and amortization | 10,774 | 10,536 | |||||
(Gain) loss on asset sales and disposals | 2 | (1 | ) | ||||
Change in accounts receivable | (6,043 | ) | 1,604 | ||||
Change in inventories | (10,635 | ) | (12,166 | ) | |||
Change in accounts payable | (7,745 | ) | (5,218 | ) | |||
Accrued interest and amortization of discounts and finance fees | 8,131 | (7,375 | ) | ||||
Pension & non-pension postretirement benefits | 3,700 | (560 | ) | ||||
Restructuring charges | 4,314 | — | |||||
Accrued liabilities & prepaid expenses | (15,792 | ) | (9,336 | ) | |||
Income taxes | (1,626 | ) | 1,977 | ||||
Share-based compensation expense | 824 | 727 | |||||
Other operating activities | (573 | ) | 73 | ||||
Net cash used in operating activities | (12,680 | ) | (19,098 | ) | |||
Investing activities: | |||||||
Additions to property, plant and equipment | (8,882 | ) | (6,446 | ) | |||
Proceeds from asset sales and other | 4 | 180 | |||||
Net cash used in investing activities | (8,878 | ) | (6,266 | ) | |||
Financing activities: | |||||||
Other repayments | (59 | ) | (394 | ) | |||
Stock options exercised | 537 | 28 | |||||
Net cash provided by (used in) financing activities | 478 | (366 | ) | ||||
Effect of exchange rate fluctuations on cash | (179 | ) | 257 | ||||
Increase (decrease) in cash | (21,259 | ) | (25,473 | ) | |||
Cash at beginning of period | 67,208 | 58,291 | |||||
Cash at end of period | $ | 45,949 | $ | 32,818 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid during the period for interest | $ | 288 | $ | 17,731 | |||
Cash paid during the period for income taxes | $ | 1,884 | $ | 885 |
See accompanying notes
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Libbey Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. | Description of the Business |
Libbey is a leading global manufacturer and marketer of glass tableware products. We believe we have the largest manufacturing, distribution and service network among glass tableware manufacturers in the Western Hemisphere, in addition to supplying to key markets throughout the world. We produce glass tableware in five countries and sell to customers in over 100 countries. We design and market, under our Libbey®, Crisa®, Royal Leerdam®, World® Tableware, Syracuse® China and Crisal Glass® brand names (among others), an extensive line of high-quality glass tableware, ceramic dinnerware, metal flatware, hollowware and serveware items for sale primarily in the foodservice, retail and business-to-business markets. Our sales force presents our products to the global marketplace in a coordinated fashion. We own and operate two glass tableware manufacturing plants in the United States as well as glass tableware manufacturing plants in the Netherlands (Libbey Holland), Portugal (Libbey Portugal), China (Libbey China) and Mexico (Libbey Mexico). In addition, we import products from overseas in order to complement our line of manufactured items. The combination of manufacturing and procurement allows us to compete in the global tableware market by offering an extensive product line at competitive prices.
Our website can be found at www.libbey.com. We make available, free of charge, at this website all of our reports filed or furnished pursuant to Section 13(a) or 15(d) of Securities Exchange Act of 1934, including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, as well as amendments to those reports. These reports are made available on our website as soon as reasonably practicable after their filing with, or furnishing to, the Securities and Exchange Commission and can also be found at www.sec.gov.
Our shares are traded on the NYSE MKT exchange under the ticker symbol LBY.
2. | Significant Accounting Policies |
See our Form 10-K for the year ended December 31, 2012 for a description of significant accounting policies not listed below.
Basis of Presentation
The Condensed Consolidated Financial Statements include Libbey Inc. and its majority-owned subsidiaries (collectively, Libbey or the Company). Our fiscal year end is December 31st. All material intercompany accounts and transactions have been eliminated. The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from management’s estimates.
Condensed Consolidated Statements of Operations
Net sales in our Condensed Consolidated Statements of Operations include revenue earned when products are shipped and title and risk of loss have passed to the customer. Revenue is recorded net of returns, discounts and incentives offered to customers. Cost of sales includes cost to manufacture and/or purchase products, warehouse, shipping and delivery costs and other costs.
Foreign Currency Translation
Assets and liabilities of non-U.S. subsidiaries that operate in a local currency environment, where that local currency is the functional currency, are translated to U.S. dollars at exchange rates in effect at the balance sheet date, with the resulting translation adjustments directly recorded to a separate component of accumulated other comprehensive loss. Income and expense accounts are translated at average exchange rates during the year. The effect of exchange rate changes on transactions denominated in currencies other than the functional currency is recorded in other income (expense).
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax attribute carry-forwards. Deferred income tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. Financial Accounting Standards Board Accounting Standards Codification™ (FASB ASC) Topic 740, “Income Taxes,”
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requires that a valuation allowance be recorded when it is more likely than not that some portion or all of the deferred income tax assets will not be realized. Deferred income tax assets and liabilities are determined separately for each tax jurisdiction in which we conduct our operations or otherwise incur taxable income or losses. In the United States, Portugal and the Netherlands, we have recorded valuation allowances against our deferred income tax assets. See note 6 for further discussion.
Stock-Based Compensation Expense
We account for stock-based compensation expense in accordance with FASB ASC Topic 718, “Compensation — Stock Compensation,” and FASB ASC Topic 505-50, “Equity — Equity-Based Payments to Non-Employees”. Stock-based compensation cost is measured based on the fair value of the equity instruments issued. FASB ASC Topics 718 and 505-50 apply to all of our outstanding unvested stock-based payment awards. Stock-based compensation expense charged to the Condensed Consolidated Statements of Operations is as follows:
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Stock-based compensation expense | $ | 824 | $ | 727 |
New Accounting Standards
In February 2013, the FASB issued Accounting Standards Update 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income” (ASU 2013-02). ASU 2013-02 requires companies to present, either in a note or parenthetically on the face of the financial statements, the effect of amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. This update is effective for interim and annual reporting periods beginning after December 15, 2012. Required interim disclosures have been made in our Condensed Consolidated Financial Statements at March 31, 2013.
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3. | Balance Sheet Details |
The following table provides detail of selected balance sheet items:
(dollars in thousands) | March 31, 2013 | December 31, 2012 | |||||
Accounts receivable: | |||||||
Trade receivables | $ | 84,859 | $ | 79,624 | |||
Other receivables | 1,405 | 1,226 | |||||
Total accounts receivable, less allowances of $5,828 and $5,703 | $ | 86,264 | $ | 80,850 | |||
Inventories: | |||||||
Finished goods | $ | 149,650 | $ | 139,888 | |||
Work in process | 1,271 | 1,188 | |||||
Raw materials | 4,525 | 4,828 | |||||
Repair parts | 10,537 | 10,283 | |||||
Operating supplies | 1,391 | 1,362 | |||||
Total inventories, less allowances of $4,604 and $4,091 | $ | 167,374 | $ | 157,549 | |||
Prepaid and other current assets: | |||||||
Value added tax | $ | 6,280 | $ | 3,850 | |||
Prepaid expenses | 5,401 | 5,036 | |||||
Deferred income taxes | 4,068 | 4,070 | |||||
Derivative asset | 1,085 | 41 | |||||
Total prepaid and other current assets | $ | 16,834 | $ | 12,997 | |||
Other assets: | |||||||
Deposits | $ | 1,298 | $ | 936 | |||
Finance fees — net of amortization | 13,043 | 13,539 | |||||
Other assets | 2,088 | 3,825 | |||||
Total other assets | $ | 16,429 | $ | 18,300 | |||
Accrued liabilities: | |||||||
Accrued incentives | $ | 16,705 | $ | 17,783 | |||
Workers compensation | 6,943 | 7,128 | |||||
Medical liabilities | 4,351 | 3,537 | |||||
Interest | 11,372 | 3,732 | |||||
Commissions payable | 1,545 | 1,478 | |||||
Contingency liability | 2,719 | 2,719 | |||||
Restructuring liability | 2,195 | — | |||||
Other accrued liabilities | 8,035 | 6,486 | |||||
Total accrued liabilities | $ | 53,865 | $ | 42,863 | |||
Other long-term liabilities: | |||||||
Deferred liability | $ | 5,629 | $ | 5,591 | |||
Derivative liability | 58 | — | |||||
Other long-term liabilities | 3,736 | 4,481 | |||||
Total other long-term liabilities | $ | 9,423 | $ | 10,072 |
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4. | Borrowings |
Borrowings consist of the following:
(dollars in thousands) | Interest Rate | Maturity Date | March 31, 2013 | December 31, 2012 | ||||||
Borrowings under ABL Facility | floating | May 18, 2017 | $ | — | $ | — | ||||
Senior Secured Notes | 6.875% | (1) | May 15, 2020 | 450,000 | 450,000 | |||||
Promissory Note | 6.00% | April, 2013 to September, 2016 | 848 | 903 | ||||||
RMB Loan Contract | floating | January, 2014 | 9,576 | 9,522 | ||||||
BES Euro Line | floating | December, 2013 | 4,231 | 4,362 | ||||||
AICEP Loan | 0.00% | January, 2016 to July 30, 2018 | 1,224 | 1,272 | ||||||
Total borrowings | 465,879 | 466,059 | ||||||||
Plus — carrying value adjustment on debt related to the Interest Rate Agreement (1) | 274 | 408 | ||||||||
Total borrowings — net | 466,153 | 466,467 | ||||||||
Less — long term debt due within one year | 14,031 | 4,583 | ||||||||
Total long-term portion of borrowings — net | $ | 452,122 | $ | 461,884 |
_____________________________
(1) | See Interest Rate Agreements under “Senior Secured Notes” below and in note 9. |
Amended and Restated ABL Credit Agreement
Libbey Glass and Libbey Europe entered into an Amended and Restated Credit Agreement, dated as of February 8, 2010 and amended as of April 29, 2011 and May 18, 2012 (as amended, the ABL Facility), with a group of four financial institutions. The ABL Facility provides for borrowings of up to $100.0 million, subject to certain borrowing base limitations, reserves and outstanding letters of credit.
All borrowings under the ABL Facility are secured by:
• | a first-priority security interest in substantially all of the existing and future personal property of Libbey Glass and its domestic subsidiaries (Credit Agreement Priority Collateral); |
• | a first-priority security interest in: |
• | 100 percent of the stock of Libbey Glass and 100 percent of the stock of substantially all of Libbey Glass’s present and future direct and indirect domestic subsidiaries; |
• | 100 percent of the non-voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries; and |
• | 65 percent of the voting stock of substantially all of Libbey Glass’s first-tier present and future foreign subsidiaries |
• | a first priority security interest in substantially all proceeds and products of the property and assets described above; and |
• | a second-priority security interest in substantially all of the owned real property, equipment and fixtures in the United States of Libbey Glass and its domestic subsidiaries, subject to certain exceptions and permitted liens (Notes Priority Collateral). |
Additionally, borrowings by Libbey Europe under the ABL Facility are secured by:
• | a first-priority lien on substantially all of the existing and future real and personal property of Libbey Europe and its Dutch subsidiaries; and |
• | a first-priority security interest in: |
• | 100 percent of the stock of Libbey Europe and 100 percent of the stock of substantially all of the Dutch subsidiaries; and |
• | 100 percent (or a lesser percentage in certain circumstances) of the outstanding stock issued by the first-tier foreign subsidiaries of Libbey Europe and its Dutch subsidiaries. |
Swingline borrowings are limited to $15.0 million, with swingline borrowings for Libbey Europe being limited to the US equivalent of $7.5 million. Loans comprising each CBFR (CB Floating Rate) Borrowing, including each Swingline Loan, bear interest at the CB Floating Rate plus the Applicable Rate, and euro-denominated swingline borrowings (Eurocurrency Loans) bear interest calculated at the Netherlands swingline rate, as defined in the ABL Facility. The Applicable Rates for CBFR Loans and Eurocurrency Loans vary depending on our aggregate remaining availability. The Applicable Rates for CBFR Loans and
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Eurocurrency Loans were 0.50 percent and 1.50 percent, respectively, at March 31, 2013. Libbey pays a quarterly Commitment Fee, as defined by the ABL Facility, on the total credit provided under the ABL Facility. The Commitment Fee was 0.375 percent at March 31, 2013. No compensating balances are required by the Agreement. The Agreement does not require compliance with a fixed charge coverage ratio covenant, unless aggregate unused availability falls below $10.0 million. If our aggregate unused ABL availability were to fall below $10.0 million, the fixed charge coverage ratio requirement would be 1:00 to 1:00. Libbey Glass and Libbey Europe have the option to increase the ABL Facility by $25.0 million. There were no Libbey Glass or Libbey Europe borrowings under the facility at March 31, 2013, or at December 31, 2012. Interest is payable on the last day of the interest period, which can range from one month to six months depending on the maturity of each individual borrowing on the facility.
The borrowing base under the ABL Facility is determined by a monthly analysis of the eligible accounts receivable and inventory. The borrowing base is the sum of (a) 85 percent of eligible accounts receivable and (b) the lesser of (i) 85 percent of the net orderly liquidation value (NOLV) of eligible inventory, (ii) 65 percent of eligible inventory, or (iii) $75.0 million.
The available total borrowing base is offset by rent reserves totaling $0.7 million as of March 31, 2013. The ABL Facility also provides for the issuance of $30.0 million of letters of credit, which are applied against the $100.0 million limit. At March 31, 2013, we had $8.5 million in letters of credit outstanding under the ABL Facility. Remaining unused availability under the ABL Facility was $73.3 million at March 31, 2013, compared to $68.6 million under the ABL Facility at December 31, 2012.
Senior Secured Notes
On May 18, 2012, Libbey Glass closed its offering of the $450.0 million Senior Secured Notes. The notes offering was issued at par and had related fees of approximately $13.6 million. These fees will be amortized to interest expense over the life of the notes.
The Senior Secured Notes were issued pursuant to an Indenture, dated May 18, 2012 (Notes Indenture), between Libbey Glass, the Company, the domestic subsidiaries of Libbey Glass listed as guarantors therein (Subsidiary Guarantors and together with the Company, Guarantors), and The Bank of New York Mellon Trust Company, N.A., as trustee (Notes Trustee) and collateral agent. Under the terms of the Notes Indenture, the Senior Secured Notes bear interest at a rate of 6.875 percent per year and will mature on May 15, 2020. Although the Notes Indenture does not contain financial covenants, the Notes Indenture contains other covenants that restrict the ability of Libbey Glass and the Guarantors to, among other things:
• | incur, assume or guarantee additional indebtedness; |
• | pay dividends, make certain investments or other restricted payments; |
• | create liens; |
• | enter into affiliate transactions; |
• | merge or consolidate, or otherwise dispose of all or substantially all the assets of Libbey Glass and the Guarantors; and |
• | transfer or sell assets. |
The Notes Indenture provides for customary events of default. In the case of an event of default arising from bankruptcy or insolvency as defined in the Notes Indenture, all outstanding Senior Secured Notes will become due and payable immediately without further action or notice. If any other event of default under the Notes Indenture occurs or is continuing, the Notes Trustee or holders of at least 25 percent in aggregate principal amount of the then outstanding Senior Secured Notes may declare all the Senior Secured Notes to be due and payable immediately.
The Senior Secured Notes and the related guarantees under the Notes Indenture are secured by (i) first priority liens on the Notes Priority Collateral and (ii) second priority liens on the Credit Agreement Priority Collateral.
Prior to May 15, 2015, we may redeem in the aggregate up to 35 percent of the Senior Secured Notes with the net cash proceeds of one or more equity offerings at a redemption price of 106.875 percent of the principal amount, provided that at least 65 percent of the original principal amount of the Senior Secured Notes must remain outstanding after each redemption and that each redemption occurs within 90 days of the closing of the equity offering. In addition, prior to May 15, 2015, but not more than once in any twelve-month period, we may redeem up to 10 percent of the Senior Secured Notes at a redemption price of 103 percent plus accrued and unpaid interest. The Senior Secured Notes are redeemable at our option, in whole or in part, at any time on or after May 15, 2015 at set redemption prices together with accrued and unpaid interest.
We had an Interest Rate Agreement (Old Rate Agreement) in place through April 18, 2012 with respect to $80.0 million of our former Senior Secured Notes as a means to manage our fixed to variable interest rate ratio. The Old Rate Agreement effectively converted this portion of our long-term borrowings from fixed rate debt to variable rate debt. The variable interest rate for our
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borrowings related to the Old Rate Agreement at April 18, 2012, excluding applicable fees, was 7.79 percent. Total remaining Senior Secured Notes not covered by the Old Rate Agreement had a fixed interest rate of 10.0 percent per year. On April 18, 2012, the swap was called at fair value. We received proceeds of $3.6 million. During the second quarter of 2012, $0.1 million of the carrying value adjustment on debt related to the Old Rate Agreement was amortized into interest expense. Upon the refinancing of the former Senior Secured Notes, the remaining unamortized balance of $3.5 million of the carrying value adjustment on debt related to the Old Rate Agreement was recognized as a gain in the loss on redemption of debt on the Condensed Consolidated Statements of Operations.
On June 18, 2012, we entered into an Interest Rate Agreement (New Rate Agreement) with respect to $45.0 million of our Senior Secured Notes as a means to manage our fixed to variable interest rate ratio. The New Rate Agreement effectively converts this portion of our long-term borrowings from fixed rate debt to variable rate debt. Prior to May 15, 2015, but not more than once in any twelve-month period, the counterparty may call up to 10 percent of the New Rate Agreement at a call price of 103 percent. The New Rate Agreement is callable at the counterparty’s option, in whole or in part, at any time on or after May 15, 2015 at set call premiums. The variable interest rate for our borrowings related to the New Rate Agreement at March 31, 2013, excluding applicable fees, is 5.6 percent. The New Rate Agreement expires on May 15, 2020. Total remaining Senior Secured Notes not covered by the New Rate Agreement have a fixed interest rate of 6.875 percent per year through May 15, 2020. If the counterparty to this New Rate Agreement were to fail to perform, this New Rate Agreement would no longer afford us a variable rate. However, we do not anticipate non-performance by the counterparty. The interest rate swap counterparty was rated A+, as of March 31, 2013, by Standard and Poor’s.
The fair market value and related carrying value adjustment are as follows:
(dollars in thousands) | March 31, 2013 | December 31, 2012 | |||||
Fair market value of Rate Agreements - asset (liability) | $ | (58 | ) | $ | 298 | ||
Adjustment to increase (decrease) carrying value of the related long-term debt | $ | 274 | $ | 408 |
The net impact recorded on the Condensed Consolidated Statements of Operations is as follows:
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Income (expense) on hedging activities in other income (expense) | $ | (222 | ) | $ | 419 |
The fair value of the Old and New Rate Agreements are based on the market standard methodology of netting the discounted expected future fixed cash receipts and the discounted future variable cash payments. The variable cash payments are based on an expectation of future interest rates derived from observed market interest rate forward curves. See note 9 for further discussion.
Promissory Note
In September 2001, we issued a $2.7 million promissory note at an interest rate of 6.0 percent in connection with the purchase of our Laredo, Texas warehouse facility. At March 31, 2013, we had $0.8 million outstanding on the promissory note. Principal and interest with respect to the promissory note are paid monthly.
Notes Payable
We have an overdraft line of credit for a maximum of €1.0 million. At March 31, 2013, there were no borrowings under the facility, which has an interest rate of 5.80 percent. Interest with respect to the note 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 $39.9 million, for the construction of our production facility in China and the purchase of related equipment, materials and services. The loan has a term of eight years and bears interest at a variable rate as announced by the People’s Bank of China. As of the date of the initial advance under the Loan Contract, the annual interest rate
13
was 5.51 percent, and as of March 31, 2013, the annual interest rate was 5.90 percent. As of March 31, 2013, the outstanding balance was RMB 60.0 million (approximately $9.6 million) which is due on January 20, 2014. Interest is payable quarterly. The obligations of Libbey China are secured by a guarantee executed by Libbey Inc. for the benefit of CCB and a mortgage lien on the Libbey China facility.
BES Euro Line
In January 2007, Crisal (Libbey Portugal) entered into a seven-year €11.0 million line of credit (approximately $14.1 million) with Banco Espírito Santo, S.A. (BES). The $4.2 million outstanding at March 31, 2013, was the U.S. dollar equivalent of the €3.3 million outstanding under the line at an interest rate of 5.32 percent. Payment of principal in the amount of €3.3 million (approximately $4.2 million) is due in December 2013. Interest with respect to the line is paid semi-annually.
AICEP Loan
In July 2012, Libbey Portugal entered into a loan agreement with Agencia para Investmento Comercio Externo de Portugal, EPE (AICEP), the Portuguese Agency for investment and external trade. The amount of the loan is €1.0 million (approximately $1.2 million) and has an interest rate of 0.0 percent. Semi-annual installments of principal are due beginning in January 2016 through the maturity date of July 2018.
Fair Value of Borrowings
The fair value of our debt has been calculated based on quoted market prices (Level 1 in the fair value hierarchy) for the same or similar issues. Our $450.0 million Senior Secured Notes had an estimated fair value of $483.8 million and $488.3 million at March 31, 2013 and December 31, 2012, respectively. The fair value of the remainder of our debt approximates carrying value at March 31, 2013 and December 31, 2012 due to variable rates.
Capital Resources and Liquidity
Historically, cash flows generated from operations, cash on hand and our borrowing capacity under our ABL Facility have enabled us to meet our cash requirements, including capital expenditures and working capital requirements. At March 31, 2013 we had no borrowings under our ABL Facility, although we had $8.5 million of letters of credit issued under that facility. As a result, we had $73.3 million of unused availability remaining under the ABL Facility at March 31, 2013. In addition, we had $45.9 million of cash on hand at March 31, 2013.
Based on our operating plans and current forecast expectations, we anticipate that our level of cash on hand, cash flows from operations and our borrowing capacity under our ABL Facility will provide sufficient cash availability to meet our ongoing liquidity needs.
As previously announced on March 22, 2013, Libbey Glass Inc. redeemed, on May 7, 2013, an aggregate principal amount of $45.0 million of our outstanding Senior Secured Notes due 2020. We funded this redemption using cash on hand and borrowings under our ABL Facility.
5. | Restructuring Charges |
Capacity Realignment
In February 2013, we announced our plans to discontinue production of certain glassware in North America and reduce manufacturing capacity at our Shreveport, Louisiana manufacturing facility. As a result, on May 30, 2013, we will cease production of certain glassware in North America, discontinue the use of a furnace at our Shreveport, Louisiana manufacturing plant and relocate a portion of the production from the idled furnace to our Toledo, Ohio and Monterrey, Mexico locations. These activities are all within the Americas segment and are expected to be completed by the end of the first quarter of 2014. In connection with this plan, we expect to incur a pretax charge in the range of approximately $8.0 million to $10.0 million. This estimate consists of: (i) up to $4.5 million in fixed asset impairment charges, (ii) up to $2.5 million in severance and other employee related costs and (iii) up to $3.0 million in production transfer expenses. We expect approximately $5.0 million of the pretax charge to result in cash expenditures, most of which is expected to be paid throughout the remainder of 2013. For the three months ended March 31, 2013, we recorded a pretax charge of $4.9 million, which included employee termination costs, fixed asset impairment charges and depreciation expense. Employee termination costs include severance, medical benefits and outplacement services for the employees that will be terminated. The write-down of fixed assets is to adjust certain machinery and equipment to the estimated fair market value.
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The following table summarizes the pretax charge incurred through March 31, 2013:
(dollars in thousands) | Three months ended March 31, 2013 | ||
Accelerated depreciation | $ | 566 | |
Included in cost of sales | 566 | ||
Employee termination cost & other | 2,322 | ||
Fixed asset write-down | 1,992 | ||
Included in special charges | 4,314 | ||
Total pretax charge | $ | 4,880 |
The following is the capacity realignment reserve activity for the three months ended March 31, 2013:
(dollars in thousands) | Reserve Balance at January 1, 2013 | Total Charge to Earnings | Cash (payments) receipts | Non-cash Utilization | Reserve Balance at March 31, 2013 | ||||||||||||||
Accelerated depreciation | $ | — | $ | 566 | $ | — | $ | (566 | ) | $ | — | ||||||||
Employee termination cost & other | — | 2,322 | (127 | ) | — | 2,195 | |||||||||||||
Fixed asset write-down | — | 1,992 | — | (1,992 | ) | — | |||||||||||||
Total | $ | — | $ | 4,880 | $ | (127 | ) | $ | (2,558 | ) | $ | 2,195 |
6. | Income Taxes |
Our effective tax rate was 25.0 percent for the quarter ended March 31, 2013, compared to 83.7 percent for the quarter ended March 31, 2012. Our effective tax rate differs from the United States statutory tax rate primarily due to valuation allowances, changes in the mix of earnings in countries with differing statutory tax rates, changes in accruals related to uncertain tax positions and tax planning structures. At March 31, 2013 and December 31, 2012, we had $1.0 million and $1.5 million, respectively, of gross unrecognized tax benefits, exclusive of interest and penalties. During the quarter ended March 31, 2013, we recorded an income tax benefit, exclusive of interest and penalties, of $0.5 million due to the reversal of an accrual for an uncertain tax position that expired under the statute of limitations.
Our current and future provision for income taxes for 2013 is significantly impacted by valuation allowances. In the United States, the Netherlands and Portugal, we have recorded valuation allowances against our deferred income tax assets. We did not change our conclusion related to entities with a recorded valuation allowance for the three months ended March 31, 2013, or the three months ended March 31, 2012. In assessing the need for recording or releasing a valuation allowance, we weigh all available positive and negative evidence. Examples of the evidence we consider are cumulative losses in recent years, losses expected in early future years, a history of potential tax benefits expiring unused, prudent and feasible tax planning strategies that could be implemented, and whether there was an unusual, infrequent or extraordinary item to be considered. Based on our analysis of all available evidence, we intend to maintain these allowances until it is more likely than not that the deferred income tax assets will be realized. We will continue to monitor and assess the need for these allowances quarterly in each jurisdiction.
Income tax payments consisted of the following:
Three months ended March 31, | |||||||
(dollars in thousands) | 2013 | 2012 | |||||
Total income tax payments, net of refunds | $ | 2,269 | $ | 1,493 | |||
Less: credits or offsets | 385 | 608 | |||||
Cash paid, net | $ | 1,884 | $ | 885 |
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7. | Pension and Non-pension Postretirement Benefits |
We have pension plans covering the majority of our employees. Benefits generally are based on compensation for salaried employees and job grade and length of service for hourly employees. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers certain salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). Effective January 1, 2013, we ceased annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. The non-U.S. pension plans cover the employees of our wholly owned subsidiaries in the Netherlands and Mexico. The plan in Mexico is not funded.
The components of our net pension expense, including the SERP, are as follows:
Three months ended March 31, | U.S. Plans | Non-U.S. Plans | Total | ||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Service cost | $ | 1,278 | $ | 1,555 | $ | 722 | $ | 442 | $ | 2,000 | $ | 1,997 | |||||||||||
Interest cost | 3,481 | 4,019 | 1,256 | 1,256 | 4,737 | 5,275 | |||||||||||||||||
Expected return on plan assets | (5,599 | ) | (4,485 | ) | (481 | ) | (607 | ) | (6,080 | ) | (5,092 | ) | |||||||||||
Amortization of unrecognized: | |||||||||||||||||||||||
Prior service cost | 293 | 521 | 62 | 66 | 355 | 587 | |||||||||||||||||
Loss | 2,087 | 1,801 | 238 | 135 | 2,325 | 1,936 | |||||||||||||||||
Settlement charge | — | 420 | — | — | — | 420 | |||||||||||||||||
Pension expense | $ | 1,540 | $ | 3,831 | $ | 1,797 | $ | 1,292 | $ | 3,337 | $ | 5,123 |
During the first three months of 2012, we incurred pension settlement charges totaling $0.4 million. The pension settlement charges were triggered by excess lump sum distributions, which required us to record unrecognized gains and losses in our pension plan accounts. We have contributed $0.7 million of cash into our pension plans for the three months ended March 31, 2013. Pension contributions for the remainder of 2013 are estimated to be $5.7 million.
We provide certain retiree health care and life insurance benefits covering our U.S and Canadian salaried and non-union hourly employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Effective January 1, 2013, we ended our existing healthcare benefit for salaried retirees age 65 and older and are now providing a Retiree Health Reimbursement Arrangement (RHRA) that supports retirees in purchasing a Medicare plan that meets their needs. Also effective January 1, 2013, we reduced the maximum life insurance benefit for salaried retirees to $10,000. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.
The provision for our non-pension postretirement benefit expense consists of the following:
Three months ended March 31, | U.S. Plans | Non-U.S. Plans | Total | ||||||||||||||||||||
(dollars in thousands) | 2013 | 2012 | 2013 | 2012 | 2013 | 2012 | |||||||||||||||||
Service cost | $ | 392 | $ | 368 | $ | — | $ | — | $ | 392 | $ | 368 | |||||||||||
Interest cost | 701 | 857 | 23 | 26 | 724 | 883 | |||||||||||||||||
Amortization of unrecognized: | |||||||||||||||||||||||
Prior service cost | 34 | 105 | — | — | 34 | 105 | |||||||||||||||||
Loss / (gain) | 291 | 229 | (1 | ) | — | 290 | 229 | ||||||||||||||||
Non-pension postretirement benefit expense | $ | 1,418 | $ | 1,559 | $ | 22 | $ | 26 | $ | 1,440 | $ | 1,585 |
Our 2013 estimate of non-pension cash payments is $4.7 million, and we have paid $1.0 million for the three months ended March 31, 2013.
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8. | Net Income per Share of Common Stock |
The following table sets forth the computation of basic and diluted earnings per share:
Three months ended March 31, | |||||||
(dollars in thousands, except earnings per share) | 2013 | 2012 | |||||
Numerators for earnings per share: | |||||||
Net income that is available to common shareholders | $ | 1,989 | $ | 641 | |||
Denominator for basic earnings per share: | |||||||
Weighted average shares outstanding | 21,114,963 | 20,769,415 | |||||
Denominator for diluted earnings per share: | |||||||
Effect of stock options and restricted stock units | 478,785 | 414,942 | |||||
Adjusted weighted average shares and assumed conversions | 21,593,748 | 21,184,357 | |||||
Basic earnings per share | $ | 0.09 | $ | 0.03 | |||
Diluted earnings per share | $ | 0.09 | $ | 0.03 |
When applicable, diluted shares outstanding include the dilutive impact of restricted stock units. Diluted shares also include the impact of in-the-money employee stock options, which are calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock method, the tax-effected proceeds that hypothetically would be received from the exercise of all in-the-money options are assumed to be used to repurchase shares.
9. | Derivatives |
We utilize derivative financial instruments to hedge certain interest rate risks associated with our long-term debt, commodity price risks associated with forecasted future natural gas requirements and foreign exchange rate risks associated with transactions denominated in a currency other than the U.S. dollar. Most of these derivatives, except for the foreign currency contracts, qualify for hedge accounting since the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. While we intend to continue to meet the conditions for hedge accounting, if hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings. All of these contracts were accounted for under FASB ASC 815 “Derivatives and Hedging.”
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Fair Values
The following table provides the fair values of our derivative financial instruments for the periods presented:
Asset Derivatives: | ||||||||||||
(dollars in thousands) | March 31, 2013 | December 31, 2012 | ||||||||||
Derivatives designated as hedging instruments under FASB ASC 815: | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Interest rate contract | Derivative asset | $ | — | Derivative asset | $ | 298 | ||||||
Natural gas contracts | Prepaid and other current assets | 793 | — | |||||||||
Total designated | 793 | 298 | ||||||||||
Derivatives not designated as hedging instruments under FASB ASC 815: | ||||||||||||
Currency contracts | Prepaid and other current assets | 292 | Prepaid and other current assets | 41 | ||||||||
Total undesignated | 292 | 41 | ||||||||||
Total | �� | $ | 1,085 | $ | 339 | |||||||
Liability Derivatives: | ||||||||||||
(dollars in thousands) | March 31, 2013 | December 31, 2012 | ||||||||||
Derivatives designated as hedging instruments under FASB ASC 815: | Balance Sheet Location | Fair Value | Balance Sheet Location | Fair Value | ||||||||
Natural gas contracts | $ | — | Derivative liability | $ | 420 | |||||||
Interest rate contract | Other long-term liabilities | 58 | — | |||||||||
Total designated | 58 | 420 | ||||||||||
Total | $ | 58 | $ | 420 |
Interest Rate Swaps as Fair Value Hedges
On June 18, 2012, we entered into an interest rate swap agreement (New Rate Agreement) with a notional amount of $45.0 million that is to mature in 2020. The New Rate Agreement was executed in order to convert a portion of the Senior Secured Notes fixed rate debt into floating rate debt and maintain a capital structure containing fixed and floating rate debt.
Our fixed-to-floating interest rate swaps are designated and qualify as a fair value hedges. The change in the fair value of the derivative instrument related to the future cash flows (gain or loss on the derivative), as well as the offsetting change in the fair value of the hedged long-term debt attributable to the hedged risk, are recognized in current earnings. We include the gain or loss on the hedged long-term debt in other income (expense), along with the offsetting loss or gain on the related interest rate swap on the Condensed Consolidated Statements of Operations.
The following table provides a summary of the gain (loss) recognized on the Condensed Consolidated Statements of Operations:
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Interest rate swap | $ | (356 | ) | $ | 13 | |||
Related long-term debt | 134 | 406 | ||||||
Net impact | $ | (222 | ) | $ | 419 |
Commodity Futures Contracts Designated as Cash Flow Hedges
We use commodity futures contracts related to forecasted future North American natural gas requirements. The objective of these futures contracts and other derivatives is to limit the fluctuations in prices paid due to price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically
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ranging from 40 percent to 70 percent of our anticipated requirements, up to eighteen months in the future. The fair values of these instruments are determined from market quotes. As of March 31, 2013, we had commodity contracts for 1,720,000 million British Thermal Units (BTUs) of natural gas. At December 31, 2012, we had commodity contracts for 2,400,000 million BTUs of natural gas.
All of our natural gas derivatives qualify and are designated as cash flow hedges at March 31, 2013. Hedge accounting is applied only when the derivative is deemed to be highly effective at offsetting changes in fair values or anticipated cash flows of the hedged item or transaction. For hedged forecasted transactions, hedge accounting is discontinued if the forecasted transaction is no longer probable to occur, and any previously deferred gains or losses would be recorded to earnings immediately. Changes in the effective portion of the fair value of these hedges are recorded in other comprehensive income (loss). The ineffective portion of the change in the fair value of a derivative designated as a cash flow hedge is recognized in current earnings. As the natural gas contracts mature, the accumulated gains (losses) for the respective contracts are reclassified from accumulated other comprehensive loss to current expense in cost of sales in our Condensed Consolidated Statements of Operations. We paid additional cash of $0.2 million and $1.5 million in the three months ended March 31, 2013 and 2012, respectively, due to the difference between the fixed unit rate of our natural gas contracts and the variable unit rate of our natural gas cost from suppliers. Based on our current valuation, we estimate that accumulated losses currently carried in accumulated other comprehensive gain that will be reclassified into earnings over the next twelve months will result in $0.8 million of income in our Condensed Consolidated Statements of Operations.
The following table provides a summary of the effective portion of derivative gain (loss) recognized in other comprehensive income (loss):
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Derivatives in Cash Flow Hedging relationships: | ||||||||
Natural gas contracts | $ | 967 | $ | (2,104 | ) | |||
Total | $ | 967 | $ | (2,104 | ) |
The following table provides a summary of the effective portion of derivative gain (loss) reclassified from accumulated other comprehensive loss to the Condensed Consolidated Statements of Operations:
Three months ended March 31, | |||||||||
(dollars in thousands) | 2013 | 2012 | |||||||
Derivative: | Location: | ||||||||
Natural gas contracts | Cost of sales | $ | (246 | ) | $ | (1,460 | ) | ||
Total impact on net income (loss) | $ | (246 | ) | $ | (1,460 | ) |
Currency Contracts
Our foreign currency exposure arises from transactions denominated in a currency other than the U.S. dollar primarily associated with our Canadian dollar denominated accounts receivable. We enter into a series of foreign currency contracts to sell Canadian dollars. As of March 31, 2013 and December 31, 2012, we had contracts for C$11.7 million and C$14.8 million, respectively. The fair values of these instruments are determined from market quotes. The values of these derivatives will change over time as cash receipts and payments are made and as market conditions change.
Gains (losses) for derivatives that were not designated as hedging instruments are recorded in current earnings as follows:
Three months ended March 31, | |||||||||
(dollars in thousands) | 2013 | 2012 | |||||||
Derivative: | Location: | ||||||||
Currency contracts | Other income (expense) | $ | 251 | $ | (162 | ) | |||
Total | $ | 251 | $ | (162 | ) |
We do not believe we are exposed to more than a nominal amount of credit risk in our interest rate swap, natural gas hedges and currency contracts as the counterparties are established financial institutions. The counterparty for the New Rate
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Agreement is rated A+ and the counterparties for the other derivative agreements are rated BBB+ or better as of March 31, 2013, by Standard and Poor’s.
10. | Comprehensive Income (Loss) |
Accumulated other comprehensive loss, net of tax, is as follows:
(dollars in thousands) | Foreign Currency Translation | Derivative Instruments | Pension and Other Postretirement Benefits | Total Accumulated Comprehensive Loss | ||||||||||||
Balance on December 31, 2012 | $ | (1,641 | ) | $ | 489 | $ | (139,888 | ) | $ | (141,040 | ) | |||||
Other comprehensive income (loss) | (2,925 | ) | 967 | — | (1,958 | ) | ||||||||||
Currency impact | — | — | (352 | ) | (352 | ) | ||||||||||
Amounts reclassified from accumulated other comprehensive income (loss): | ||||||||||||||||
Amortization of actuarial loss (1) | — | — | 2,600 | 2,600 | ||||||||||||
Amortization of prior service cost (1) | — | — | 369 | 369 | ||||||||||||
Amortization of transition obligation (1) | — | — | 21 | 21 | ||||||||||||
Cost of sales | — | 246 | — | 246 | ||||||||||||
Current-period other comprehensive income (loss) | (2,925 | ) | 1,213 | 2,638 | 926 | |||||||||||
Tax effect | — | (168 | ) | 33 | (135 | ) | ||||||||||
Balance on March 31, 2013 | $ | (4,566 | ) | $ | 1,534 | $ | (137,217 | ) | $ | (140,249 | ) |
_____________________________
(1) These accumulated other comprehensive income components are included in the computation of net periodic benefit cost within the cost of sales and selling, general and administrative expenses on the Condensed Consolidated Statements of Operations.
11. | Condensed Consolidated Guarantor Financial Statements |
Libbey Glass is a direct, 100 percent owned subsidiary of Libbey Inc. and is the issuer of the Senior Secured Notes. The obligations of Libbey Glass under the Senior Secured Notes are fully and unconditionally and jointly and severally guaranteed by Libbey Inc. and by certain indirect, 100 percent owned domestic subsidiaries of Libbey Inc., as described below. All are related parties that are included in the Condensed Consolidated Financial Statements for the three months ended March 31, 2013 and March 31, 2012.
At March 31, 2013, December 31, 2012 and March 31, 2012, Libbey Inc.’s indirect, 100 percent owned domestic subsidiaries were Syracuse China Company, World Tableware Inc., LGA4 Corp., LGA3 Corp., The Drummond Glass Company, LGC Corp., Libbey.com LLC, LGFS Inc., and LGAC LLC (collectively, 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.
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Libbey Inc.
Condensed Consolidating Statements of Comprehensive Income
(unaudited)
Three months ended March 31, 2013 | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Net sales | $ | — | $ | 86,930 | $ | 18,360 | $ | 89,379 | $ | (11,193 | ) | $ | 183,476 | ||||||||||
Freight billed to customers | — | 99 | 234 | 419 | — | 752 | |||||||||||||||||
Total revenues | — | 87,029 | 18,594 | 89,798 | (11,193 | ) | 184,228 | ||||||||||||||||
Cost of sales | — | 62,600 | 14,360 | 76,229 | (11,193 | ) | 141,996 | ||||||||||||||||
Gross profit | — | 24,429 | 4,234 | 13,569 | — | 42,232 | |||||||||||||||||
Selling, general and administrative expenses | — | 15,057 | 2,669 | 8,671 | — | 26,397 | |||||||||||||||||
Special charges | — | 4,314 | — | — | — | 4,314 | |||||||||||||||||
Income (loss) from operations | — | 5,058 | 1,565 | 4,898 | — | 11,521 | |||||||||||||||||
Other income (expense) | — | (1 | ) | (9 | ) | (425 | ) | — | (435 | ) | |||||||||||||
Earnings (loss) before interest and income taxes | — | 5,057 | 1,556 | 4,473 | — | 11,086 | |||||||||||||||||
Interest expense | — | 6,420 | — | 2,015 | — | 8,435 | |||||||||||||||||
Income (loss) before income taxes | — | (1,363 | ) | 1,556 | 2,458 | — | 2,651 | ||||||||||||||||
Provision (benefit) for income taxes | — | (819 | ) | 2 | 1,479 | — | 662 | ||||||||||||||||
Net income (loss) | — | (544 | ) | 1,554 | 979 | — | 1,989 | ||||||||||||||||
Equity in net income (loss) of subsidiaries | 1,989 | 2,533 | — | — | (4,522 | ) | — | ||||||||||||||||
Net income (loss) | $ | 1,989 | $ | 1,989 | $ | 1,554 | $ | 979 | $ | (4,522 | ) | $ | 1,989 | ||||||||||
Comprehensive income (loss) | $ | 2,780 | $ | 2,780 | $ | 1,696 | $ | (1,552 | ) | $ | (2,924 | ) | $ | 2,780 |
Three months ended March 31, 2012 | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Net sales | $ | — | $ | 93,480 | $ | 17,445 | $ | 93,159 | $ | (16,255 | ) | $ | 187,829 | ||||||||||
Freight billed to customers | — | 166 | 183 | 359 | — | 708 | |||||||||||||||||
Total revenues | — | 93,646 | 17,628 | 93,518 | (16,255 | ) | 188,537 | ||||||||||||||||
Cost of sales | — | 74,311 | 13,013 | 74,412 | (16,255 | ) | 145,481 | ||||||||||||||||
Gross profit | — | 19,335 | 4,615 | 19,106 | — | 43,056 | |||||||||||||||||
Selling, general and administrative expenses | — | 17,942 | 1,516 | 8,668 | — | 28,126 | |||||||||||||||||
Special charges | — | — | — | — | — | — | |||||||||||||||||
Income (loss) from operations | — | 1,393 | 3,099 | 10,438 | — | 14,930 | |||||||||||||||||
Other income (expense) | — | 297 | 12 | (900 | ) | — | (591 | ) | |||||||||||||||
Earnings (loss) before interest and income taxes | — | 1,690 | 3,111 | 9,538 | — | 14,339 | |||||||||||||||||
Interest expense | — | 8,193 | — | 2,215 | — | 10,408 | |||||||||||||||||
Income (loss) before income taxes | — | (6,503 | ) | 3,111 | 7,323 | — | 3,931 | ||||||||||||||||
Provision (benefit) for income taxes | — | 225 | — | 3,065 | — | 3,290 | |||||||||||||||||
Net income (loss) | — | (6,728 | ) | 3,111 | 4,258 | — | 641 | ||||||||||||||||
Equity in net income (loss) of subsidiaries | 641 | 7,369 | — | — | (8,010 | ) | — | ||||||||||||||||
Net income (loss) | $ | 641 | $ | 641 | $ | 3,111 | $ | 4,258 | $ | (8,010 | ) | $ | 641 | ||||||||||
Comprehensive income (loss) | $ | 5,753 | $ | 5,753 | $ | 3,235 | $ | 7,044 | $ | (16,032 | ) | $ | 5,753 |
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Libbey Inc.
Condensed Consolidating Balance Sheet
March 31, 2013 (unaudited) | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Cash and equivalents | $ | — | $ | 29,134 | $ | 93 | $ | 16,722 | $ | — | $ | 45,949 | |||||||||||
Accounts receivable — net | — | 32,082 | 5,823 | 48,359 | — | 86,264 | |||||||||||||||||
Inventories — net | — | 61,300 | 19,473 | 86,601 | — | 167,374 | |||||||||||||||||
Other current assets | — | 19,107 | 736 | 14,321 | (17,330 | ) | 16,834 | ||||||||||||||||
Total current assets | — | 141,623 | 26,125 | 166,003 | (17,330 | ) | 316,421 | ||||||||||||||||
Other non-current assets | — | 19,889 | 349 | 20,373 | (4,190 | ) | 36,421 | ||||||||||||||||
Investments in and advances to subsidiaries | 28,211 | 394,758 | 191,367 | (40,824 | ) | (573,512 | ) | — | |||||||||||||||
Goodwill and purchased intangible assets — net | — | 27,757 | 12,347 | 147,220 | — | 187,324 | |||||||||||||||||
Total other assets | 28,211 | 442,404 | 204,063 | 126,769 | (577,702 | ) | 223,745 | ||||||||||||||||
Property, plant and equipment — net | — | 68,698 | 282 | 184,029 | — | 253,009 | |||||||||||||||||
Total assets | $ | 28,211 | $ | 652,725 | $ | 230,470 | $ | 476,801 | $ | (595,032 | ) | $ | 793,175 | ||||||||||
Accounts payable | $ | — | $ | 11,990 | $ | 1,578 | $ | 43,691 | $ | — | $ | 57,259 | |||||||||||
Accrued and other current liabilities | — | 60,435 | 20,485 | 27,085 | (17,329 | ) | 90,676 | ||||||||||||||||
Notes payable and long-term debt due within one year | — | 224 | — | 13,807 | — | 14,031 | |||||||||||||||||
Total current liabilities | — | 72,649 | 22,063 | 84,583 | (17,329 | ) | 161,966 | ||||||||||||||||
Long-term debt | — | 450,898 | — | 1,224 | — | 452,122 | |||||||||||||||||
Other long-term liabilities | — | 93,302 | 9,517 | 52,247 | (4,190 | ) | 150,876 | ||||||||||||||||
Total liabilities | — | 616,849 | 31,580 | 138,054 | (21,519 | ) | 764,964 | ||||||||||||||||
Total shareholders’ equity (deficit) | 28,211 | 35,876 | 198,890 | 338,747 | (573,513 | ) | 28,211 | ||||||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 28,211 | $ | 652,725 | $ | 230,470 | $ | 476,801 | $ | (595,032 | ) | $ | 793,175 |
22
Libbey Inc.
Condensed Consolidating Balance Sheet
December 31, 2012 | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Cash and equivalents | $ | — | $ | 43,558 | $ | 70 | $ | 23,580 | $ | — | $ | 67,208 | |||||||||||
Accounts receivable — net | — | 33,987 | 3,560 | 43,303 | — | 80,850 | |||||||||||||||||
Inventories — net | — | 52,627 | 18,477 | 86,445 | — | 157,549 | |||||||||||||||||
Other current assets | — | 17,931 | 810 | 10,446 | (16,190 | ) | 12,997 | ||||||||||||||||
Total current assets | — | 148,103 | 22,917 | 163,774 | (16,190 | ) | 318,604 | ||||||||||||||||
Other non-current assets | — | 22,373 | 54 | 20,387 | (4,190 | ) | 38,624 | ||||||||||||||||
Investments in and advances to subsidiaries | 24,476 | 384,414 | 194,316 | (35,962 | ) | (567,244 | ) | — | |||||||||||||||
Goodwill and purchased intangible assets — net | — | 26,833 | 12,347 | 147,614 | — | 186,794 | |||||||||||||||||
Total other assets | 24,476 | 433,620 | 206,717 | 132,039 | (571,434 | ) | 225,418 | ||||||||||||||||
Property, plant and equipment — net | — | 72,780 | 298 | 185,076 | — | 258,154 | |||||||||||||||||
Total assets | $ | 24,476 | $ | 654,503 | $ | 229,932 | $ | 480,889 | $ | (587,624 | ) | $ | 802,176 | ||||||||||
Accounts payable | $ | — | $ | 15,339 | $ | 2,854 | $ | 47,519 | $ | — | $ | 65,712 | |||||||||||
Accrued and other current liabilities | — | 63,674 | 20,194 | 27,857 | (16,190 | ) | 95,535 | ||||||||||||||||
Notes payable and long-term debt due within one year | — | 221 | — | 4,362 | — | 4,583 | |||||||||||||||||
Total current liabilities | — | 79,234 | 23,048 | 79,738 | (16,190 | ) | 165,830 | ||||||||||||||||
Long-term debt | — | 451,090 | — | 10,794 | — | 461,884 | |||||||||||||||||
Other long-term liabilities | — | 94,434 | 9,691 | 50,051 | (4,190 | ) | 149,986 | ||||||||||||||||
Total liabilities | — | 624,758 | 32,739 | 140,583 | (20,380 | ) | 777,700 | ||||||||||||||||
Total shareholders’ equity (deficit) | 24,476 | 29,745 | 197,193 | 340,306 | (567,244 | ) | 24,476 | ||||||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | 24,476 | $ | 654,503 | $ | 229,932 | $ | 480,889 | $ | (587,624 | ) | $ | 802,176 |
23
Libbey Inc.
Condensed Consolidating Statements of Cash Flows
(unaudited)
Three months ended March 31, 2013 | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Net income (loss) | $ | 1,989 | $ | 1,989 | $ | 1,554 | $ | 979 | $ | (4,522 | ) | $ | 1,989 | ||||||||||
Depreciation and amortization | — | 4,114 | 17 | 6,643 | — | 10,774 | |||||||||||||||||
Other operating activities | (1,989 | ) | (19,007 | ) | (1,548 | ) | (7,421 | ) | 4,522 | (25,443 | ) | ||||||||||||
Net cash provided by (used in) operating activities | — | (12,904 | ) | 23 | 201 | — | (12,680 | ) | |||||||||||||||
Additions to property, plant & equipment | — | (2,004 | ) | — | (6,878 | ) | — | (8,882 | ) | ||||||||||||||
Other investing activities | — | 1 | — | 3 | — | 4 | |||||||||||||||||
Net cash (used in) investing activities | — | (2,003 | ) | — | (6,875 | ) | — | (8,878 | ) | ||||||||||||||
Net borrowings (repayments) | — | (54 | ) | — | (5 | ) | — | (59 | ) | ||||||||||||||
Other financing activities | — | 537 | — | — | — | 537 | |||||||||||||||||
Net cash provided by (used in) financing activities | — | 483 | — | (5 | ) | — | 478 | ||||||||||||||||
Exchange effect on cash | — | — | — | (179 | ) | — | (179 | ) | |||||||||||||||
Increase (decrease) in cash | — | (14,424 | ) | 23 | (6,858 | ) | — | (21,259 | ) | ||||||||||||||
Cash at beginning of period | — | 43,558 | 70 | 23,580 | — | 67,208 | |||||||||||||||||
Cash at end of period | $ | — | $ | 29,134 | $ | 93 | $ | 16,722 | $ | — | $ | 45,949 |
Three months ended March 31, 2012 | |||||||||||||||||||||||
(dollars in thousands) | Libbey Inc. (Parent) | Libbey Glass (Issuer) | Subsidiary Guarantors | Non- Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
Net income (loss) | $ | 641 | $ | 641 | $ | 3,111 | $ | 4,258 | $ | (8,010 | ) | $ | 641 | ||||||||||
Depreciation and amortization | — | 3,538 | 19 | 6,979 | — | 10,536 | |||||||||||||||||
Other operating activities | (641 | ) | (30,332 | ) | (3,128 | ) | (4,184 | ) | 8,010 | (30,275 | ) | ||||||||||||
Net cash provided by (used in) operating activities | — | (26,153 | ) | 2 | 7,053 | — | (19,098 | ) | |||||||||||||||
Additions to property, plant & equipment | — | (3,181 | ) | — | (3,265 | ) | — | (6,446 | ) | ||||||||||||||
Other investing activities | — | — | — | 180 | — | 180 | |||||||||||||||||
Net cash (used in) investing activities | — | (3,181 | ) | — | (3,085 | ) | — | (6,266 | ) | ||||||||||||||
Net borrowings (repayments) | — | (51 | ) | — | (343 | ) | — | (394 | ) | ||||||||||||||
Other financing activities | — | 28 | — | — | — | 28 | |||||||||||||||||
Net cash provided by (used in) financing activities | — | (23 | ) | — | (343 | ) | — | (366 | ) | ||||||||||||||
Exchange effect on cash | — | — | — | 257 | — | 257 | |||||||||||||||||
Increase (decrease) in cash | — | (29,357 | ) | 2 | 3,882 | — | (25,473 | ) | |||||||||||||||
Cash at beginning of period | — | 39,249 | 155 | 18,887 | — | 58,291 | |||||||||||||||||
Cash at end of period | $ | — | $ | 9,892 | $ | 157 | $ | 22,769 | $ | — | $ | 32,818 |
24
12. | Segments |
Effective January 1, 2013, we revised our reporting segments to align with our previously announced regionally focused organizational structure which will enable us to better serve customers across the globe. Under this structure, we now report financial results for the Americas; Europe, the Middle East and Africa (EMEA); and Other. In addition, sales and segment EBIT reflect end market reporting pursuant to which sales and related costs are included in segment EBIT based on the geographical destination of the sale. The revised segment results do not affect any previously reported consolidated financial results. Our two reportable segments are defined below. Our operating segments that do not meet the criteria for reportable segments are disclosed as Other.
Americas—includes worldwide sales of manufactured and sourced glass tableware having an end market destination in North
and South America.
EMEA—includes worldwide sales of manufactured and sourced glass tableware having an end market destination in Europe,
the Middle East and Africa.
Other —includes worldwide sales of manufactured and sourced glass tableware having an end market destination in
Asia Pacific and worldwide sales of sourced ceramic dinnerware, metal tableware, hollowware, and serveware.
Our measure of profit for our reportable segments is Segment Earnings before Interest and Taxes (Segment EBIT) and excludes amounts related to certain items we consider not representative of ongoing operations as well as certain retained corporate costs. We use Segment EBIT, along with net sales and selected cash flow information, to evaluate performance and to allocate resources. Segment EBIT for reportable segments includes an allocation of some corporate expenses based on the costs of services performed.
Certain activities not related to any particular reportable segment are reported within retained corporate costs. These costs include certain headquarter, administrative and facility costs, and other costs that are global in nature and are not allocable to the reporting segments.
The accounting policies of the reportable segments are the same as those described in note 2. We do not have any customers who represent 10 percent or more of total sales. Inter-segment sales are consummated at arm’s length and are reflected at end market reporting below.
25
Three months ended March 31, | |||||||
(dollars in thousands) | 2013 | 2012 | |||||
Net Sales: | |||||||
Americas | $ | 123,535 | $ | 129,675 | |||
EMEA | 34,242 | 30,792 | |||||
Other | 25,699 | 27,362 | |||||
Consolidated | $ | 183,476 | $ | 187,829 | |||
Segment EBIT: | |||||||
Americas | $ | 18,152 | $ | 15,674 | |||
EMEA | (1,483 | ) | (580 | ) | |||
Other | 3,797 | 5,125 | |||||
Total Segment EBIT | $ | 20,466 | $ | 20,219 | |||
Reconciliation of Segment EBIT to Net Income: | |||||||
Segment EBIT | $ | 20,466 | $ | 20,219 | |||
Retained corporate costs | (4,500 | ) | (5,880 | ) | |||
Restructuring charges (note 5) | (4,880 | ) | — | ||||
Interest expense | (8,435 | ) | (10,408 | ) | |||
Income taxes | (662 | ) | (3,290 | ) | |||
Net income | $ | 1,989 | $ | 641 | |||
Depreciation & Amortization: | |||||||
Americas | $ | 6,528 | $ | 6,182 | |||
EMEA | 2,486 | 2,548 | |||||
Other | 1,383 | 1,417 | |||||
Corporate | 377 | 389 | |||||
Consolidated | $ | 10,774 | $ | 10,536 | |||
Capital Expenditures: | |||||||
Americas | $ | 6,875 | $ | 5,164 | |||
EMEA | 1,296 | 717 | |||||
Other | 335 | 513 | |||||
Corporate | 376 | 52 | |||||
Consolidated | $ | 8,882 | $ | 6,446 |
(dollars in thousands) | March 31, 2013 | December 31, 2012 | |||||
Segment Assets(1): | |||||||
Americas | $ | 160,827 | $ | 150,923 | |||
EMEA | 48,292 | 49,981 | |||||
Other | 44,519 | 37,495 | |||||
Consolidated | $ | 253,638 | $ | 238,399 |
______________________________
(1) Segment assets are defined as net accounts receivable plus net inventory.
26
The following table contains 2012 segment information by quarter presented to conform with our new segment structure and end market reporting effective January 1, 2013.
2012 Quarter Ending | |||||||||||||||||||
(dollars in thousands) | March 31 | June 30 | September 30 | December 31 | Total 2012 | ||||||||||||||
Net Sales: | |||||||||||||||||||
Americas | $ | 129,675 | $ | 148,584 | $ | 146,169 | $ | 156,306 | $ | 580,734 | |||||||||
EMEA | 30,792 | 33,723 | 34,454 | 35,809 | 134,778 | ||||||||||||||
Other | 27,362 | 26,940 | 28,527 | 26,946 | 109,775 | ||||||||||||||
Consolidated | $ | 187,829 | $ | 209,247 | $ | 209,150 | $ | 219,061 | $ | 825,287 | |||||||||
Segment EBIT: | |||||||||||||||||||
Americas | $ | 15,674 | $ | 31,014 | $ | 27,020 | $ | 22,125 | $ | 95,833 | |||||||||
EMEA | (580 | ) | 302 | 1,804 | (2,240 | ) | (714 | ) | |||||||||||
Other | 5,125 | 5,508 | 5,378 | 4,216 | 20,227 | ||||||||||||||
Total Segment EBIT | $ | 20,219 | $ | 36,824 | $ | 34,202 | $ | 24,101 | $ | 115,346 | |||||||||
Reconciliation of Segment EBIT to Net Income (Loss): | |||||||||||||||||||
Segment EBIT | $ | 20,219 | $ | 36,824 | $ | 34,202 | $ | 24,101 | $ | 115,346 | |||||||||
Retained corporate costs | (5,880 | ) | (7,428 | ) | (6,289 | ) | (4,816 | ) | (24,413 | ) | |||||||||
Severance | — | — | (3,911 | ) | (1,239 | ) | (5,150 | ) | |||||||||||
Loss on redemption of debt | — | (31,075 | ) | — | — | (31,075 | ) | ||||||||||||
Pension curtailment and settlement | — | — | 125 | (4,431 | ) | (4,306 | ) | ||||||||||||
Interest expense | (10,408 | ) | (9,957 | ) | (8,720 | ) | (8,642 | ) | (37,727 | ) | |||||||||
Income taxes | (3,290 | ) | 1,493 | (546 | ) | (3,366 | ) | (5,709 | ) | ||||||||||
Net income (loss) | $ | 641 | $ | (10,143 | ) | $ | 14,861 | $ | 1,607 | $ | 6,966 | ||||||||
Depreciation & Amortization: | |||||||||||||||||||
Americas | $ | 6,182 | $ | 6,021 | $ | 6,045 | $ | 6,413 | $ | 24,661 | |||||||||
EMEA | 2,548 | 2,466 | 2,375 | 2,357 | 9,746 | ||||||||||||||
Other | 1,417 | 1,414 | 1,325 | 1,661 | 5,817 | ||||||||||||||
Corporate | 389 | 387 | 328 | 143 | 1,247 | ||||||||||||||
Consolidated | $ | 10,536 | $ | 10,288 | $ | 10,073 | $ | 10,574 | $ | 41,471 | |||||||||
Capital Expenditures: | |||||||||||||||||||
Americas | $ | 5,164 | $ | 3,259 | $ | 3,839 | $ | 11,759 | $ | 24,021 | |||||||||
EMEA | 717 | 1,301 | 942 | 2,499 | 5,459 | ||||||||||||||
Other | 513 | 510 | 152 | 1,021 | 2,196 | ||||||||||||||
Corporate | 52 | 316 | 479 | 197 | 1,044 | ||||||||||||||
Consolidated | $ | 6,446 | $ | 5,386 | $ | 5,412 | $ | 15,476 | $ | 32,720 |
27
13. | Fair Value |
FASB ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. FASB ASC 820 establishes a fair value hierarchy that prioritizes the inputs used in measuring fair value into three broad levels as follows:
• | Level 1 — Quoted prices in active markets for identical assets or liabilities. |
• | Level 2 — Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly. |
• | Level 3 — Unobservable inputs based on our own assumptions. |
Fair Value at | Fair Value at | ||||||||||||||||||||||||||||||
Asset / (Liability) (dollars in thousands) | March 31, 2013 | December 31, 2012 | |||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Commodity futures natural gas contracts | $ | — | $ | 793 | $ | — | $ | 793 | $ | — | $ | (420 | ) | $ | — | $ | (420 | ) | |||||||||||||
Currency contracts | — | 292 | — | 292 | — | 41 | — | 41 | |||||||||||||||||||||||
Interest rate agreements | — | (58 | ) | — | (58 | ) | — | 298 | — | 298 | |||||||||||||||||||||
Net derivative asset (liability) | $ | — | $ | 1,027 | $ | — | $ | 1,027 | $ | — | $ | (81 | ) | $ | — | $ | (81 | ) |
The fair values of our commodity futures natural gas contracts and currency contracts are determined using observable market inputs. The fair value of our interest rate agreement is based on the market standard methodology of netting the discounted expected future fixed cash receipts and the discounted future variable cash payments. The variable cash payments are based on an expectation of future interest rates derived from observed market interest rate forward curves. Since these inputs are observable in active markets over the terms that the instruments are held, the derivatives are classified as Level 2 in the hierarchy. We also evaluate Company and counterparty risk in determining fair values. The commodity futures natural gas contracts, interest rate protection agreements and currency contracts are hedges of either recorded assets or liabilities or anticipated transactions. Changes in values of the underlying hedged assets and liabilities or anticipated transactions are not reflected in the above table.
The total derivative position is recorded on the Condensed Consolidated Balance Sheets as follows:
Asset / (Liability) (dollars in thousands) | March 31, 2013 | December 31, 2012 | ||||||
Prepaid and other current assets | $ | 1,085 | $ | 41 | ||||
Derivative asset | — | 298 | ||||||
Derivative liability | — | (420 | ) | |||||
Other long-term liabilities | (58 | ) | — | |||||
Net derivative asset (liability) | $ | 1,027 | $ | (81 | ) |
14. | Other Income (Expense) |
Items included in other income (expense) in the Condensed Consolidated Statements of Operations are as follows:
Three months ended March 31, | |||||||
(dollars in thousands) | 2013 | 2012 | |||||
Gain (loss) on currency translation | $ | (283 | ) | $ | (969 | ) | |
Hedge ineffectiveness | (222 | ) | 419 | ||||
Other non-operating income (expense) | 70 | (41 | ) | ||||
Other income (expense) | $ | (435 | ) | $ | (591 | ) |
28
15. | Contingencies |
We are currently undergoing an unclaimed property audit that is being conducted by various state authorities. The property subject to review in this audit process generally includes unclaimed wages, vendor payments and customer refunds. State escheat laws generally require entities to report and remit abandoned and unclaimed property. Failure to timely report and remit the property can result in assessments that include interest and penalties, in addition to the payment of the escheat liability itself. We may have obligations associated with unclaimed property in an estimated amount of approximately $2.7 million at March 31, 2013 and December 31, 2012. While we have recorded this estimate as an expense in the third quarter of 2011, it is too early to determine the ultimate outcome of these audits and, as a result, our actual obligations may be less than or greater than the amount we have recorded. At this time, we believe that the impact of these adjustments is not material to our results of operations.
29
Item 2. | Management’s 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. Our risk factors are set forth in Part I, Item 1A. “Risk Factors” in our 2012 Annual Report on Form 10-K for the year ended December 31, 2012.
Overview
While the Mexican economy appears to have stabilized, the other economies in which we operate continued to be challenging during the first quarter of 2013 and we expect them to remain as such for the balance of the year. The U.S. economy during the first quarter of 2013 experienced the negative effects of the increased 2.0 percent FICA tax, slower receipt by consumers of income tax refunds and a more severe winter season compared to the mild winter season in the first quarter of 2012. The European economy remains soft, and the rate of growth has slowed considerably in China as compared to the first half of 2012. As a result of these factors, our net sales declined 2.3 percent in the first quarter 2013 as compared to the first quarter of 2012. Despite these conditions, we achieved record first quarter Adjusted EBITDA of $26.2 million, an improvement of 5.2 percent over our previous best first quarter in 2012 of $24.9 million, as a result of our commitment to improving our cost structure while leveraging our leadership positions in key lines of business and strengthening our balance sheet.
Strengthening our balance sheet remains a high priority. As of March 31, 2013, we had available capacity of $73.3 million under our ABL credit facility, with no loans currently outstanding and $45.9 million in cash on hand. Libbey Glass Inc. redeemed $45.0 million of our Senior Secured Notes on May 7, 2013.
We continue to successfully implement "Libbey 2015", our comprehensive business strategy launched in the second half of 2012 to improve our financial position and our ability to compete effectively in the market today and into the future. Libbey 2015 is centered on reducing our costs and boosting efficiency, reinforcing our leadership position in key channels (particularly U.S. foodservice and Mexico foodservice and retail), accelerating growth in the Asia Pacific region and reducing our liabilities and the working capital required to operate the core business. In February 2013, we announced our plans to discontinue production of certain glassware in North America and reduce manufacturing capacity at our Shreveport, Louisiana manufacturing facility. As a result, on May 30, 2013, we will cease production of certain glassware in North America, discontinue the use of a furnace at our Shreveport, Louisiana manufacturing plant and relocate a portion of the production from the idled furnace to our Toledo, Ohio and Monterrey, Mexico locations. These activities are all within the Americas segment and are expected to be completed by the end of the first quarter of 2014. In connection with this plan, we expect to incur a pretax charge in the range of approximately $8.0 million to $10.0 million. Of that amount, we recorded a pretax charge of $4.9 million for the three months ended March 31, 2013, which included employee termination costs, fixed asset impairment charges and depreciation expense. (See note 5 to the Condensed Consolidated Financial Statements for a further discussion.)
Effective January 1, 2013, we revised our reporting segments to align with our previously announced regionally focused organizational structure which will enable us to better serve customers across the globe. Under this structure, we now report financial results for the Americas; Europe, the Middle East and Africa (EMEA); and Other. In addition, sales and segment EBIT reflect end market reporting pursuant to which sales and related costs are included in segment EBIT based on the geographical destination of the sale. The revised segment results do not affect any previously reported consolidated financial results. Our two reportable segments are defined below. Our operating segments that do not meet the criteria for reportable segments are disclosed as Other.
Americas—includes worldwide sales of manufactured and sourced glass tableware having an end market destination in North
and South America.
EMEA—includes worldwide sales of manufactured and sourced glass tableware having an end market destination in Europe,
the Middle East and Africa.
Other —includes worldwide sales of manufactured and sourced glass tableware having an end market destination in
Asia Pacific and worldwide sales of sourced ceramic dinnerware, metal tableware, hollowware, and serveware.
30
Results of Operations
The following table presents key results of our operations for the three months ended March 31, 2013 and 2012:
Three months ended March 31, | |||||||
(dollars in thousands, except percentages and per-share amounts) | 2013 | 2012 | |||||
Net sales | $ | 183,476 | $ | 187,829 | |||
Gross profit (2) | $ | 42,232 | $ | 43,056 | |||
Gross profit margin | 23.0 | % | 22.9 | % | |||
Income from operations (IFO) (3) | $ | 11,521 | $ | 14,930 | |||
IFO margin | 6.3 | % | 7.9 | % | |||
Earnings before interest and income taxes(EBIT)(1)(2)(3) | $ | 11,086 | $ | 14,339 | |||
EBIT margin | 6.0 | % | 7.6 | % | |||
Earnings before interest, taxes, depreciation and amortization (EBITDA)(1)(3) | $ | 21,860 | $ | 24,875 | |||
EBITDA margin | 11.9 | % | 13.2 | % | |||
Adjusted EBITDA(1) | $ | 26,174 | $ | 24,875 | |||
Adjusted EBITDA margin | 14.3 | % | 13.2 | % | |||
Net income (2)(3) | $ | 1,989 | $ | 641 | |||
Net income margin | 1.1 | % | 0.3 | % | |||
Diluted net income per share | $ | 0.09 | $ | 0.03 |
__________________________________
(1) | We believe that EBIT, EBITDA and Adjusted EBITDA, all non-GAAP financial measures, are useful metrics for evaluating our financial performance, as they are measures that we use internally to assess our performance. For a reconciliation from net income to EBIT, EBITDA, and Adjusted EBITDA, see the "Adjusted EBITDA" section below in the Discussion of First Quarter 2013 Compared to First Quarter 2012 and the reasons we believe these non-GAAP financial measures are useful. |
(2) | The three month period ended March 31, 2013 includes $0.6 million of accelerated depreciation on fixed assets that were impaired from discontinuing production of certain glassware in North America and reducing manufacturing capacity at our Shreveport, Louisiana, manufacturing facility. (See note 5 to the Condensed Consolidated Financial Statements.) |
(3) | In addition to item (2) above, the three month period ended March 31, 2013 includes $4.3 million in charges related to discontinuing production of certain glassware in North America and reducing manufacturing capacity at our Shreveport, Louisiana, manufacturing facility. (See note 5 to the Condensed Consolidated Financial Statements.) |
Discussion of First Quarter 2013 Compared to First Quarter 2012
Net Sales
For the quarter ended March 31, 2013, net sales decreased 2.3 percent to $183.5 million, compared to $187.8 million in the year-ago quarter. When adjusted for currency impact, net sales were down 2.8 percent. The decrease in net sales was attributable to decreased sales of $6.1 million in the Americas, partially offset by a $3.5 million increase in EMEA net sales.
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Americas | $ | 123,535 | $ | 129,675 | ||||
EMEA | 34,242 | 30,792 | ||||||
Other | 25,699 | 27,362 | ||||||
Consolidated | $ | 183,476 | $ | 187,829 |
Net Sales — Americas
Net sales in the Americas were $123.5 million, compared to $129.7 million in the first quarter of 2012, a decrease of 4.7 percent (a decrease of 5.2 percent excluding currency fluctuation). The primary contributor was an 8.6 percent decrease in sales within our US and Canadian end market due to weaker retail and foodservice sales. The negative impact was caused by the increased 2.0 percent FICA tax, slower receipt by consumers of income tax refunds and a more severe winter season, in the
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northern part of the country, compared to the mild winter season in the first quarter of 2012. Partially offsetting this was a 4.5 percent increase in sales to customers within our Mexican and Latin American end market driven by foodservice and retail sales resulting from a more favorable mix of product sold.
Net Sales — EMEA
Net sales in EMEA were $34.2 million, compared to $30.8 million in the first quarter of 2012, an increase of 11.2 percent (an increase of 10.4 percent excluding currency fluctuation). The primary contributor to the increased net sales was increased shipments to EMEA customers.
Gross Profit
Gross profit decreased to $42.2 million in the first quarter of 2013, compared to $43.1 million in the prior year quarter. Gross profit as a percentage of net sales remained flat as compared to the prior year period. The primary drivers of the $0.8 million gross profit decrease were $6.2 million attributable to decreased production activity net of volume-related production costs due to a significant furnace rebuild within the Americas and a $0.5 million impact of lower sales. Partially offsetting these are a favorable currency impact of $1.3 million and lower non-volume related production costs of $4.6 million.
Income From Operations
Income from operations for the quarter ended March 31, 2013 decreased $3.4 million, to $11.5 million, compared to $14.9 million in the prior year quarter. Income from operations as a percentage of net sales was 6.3 percent for the quarter ended March 31, 2013, compared to 7.9 percent in the prior year quarter. The decrease in income from operations is the result of the decrease in gross profit (discussed above) and the $4.3 million special charge related to discontinuing production of certain glassware in North America and reducing manufacturing capacity at our Shreveport, Louisiana, manufacturing facility, partially offset by a $1.7 million reduction in selling, general and administrative expenses. The reduction in selling, general and administrative expenses was driven in large part by the staffing reductions and benefit changes implemented in the second half of 2012.
Earnings Before Interest and Income Taxes (EBIT)
EBIT for the quarter ended March 31, 2013 decreased by $3.3 million, to $11.1 million from $14.3 million in the first quarter of 2012. EBIT as a percentage of net sales decreased to 6.0 percent in the first quarter of 2013, compared to 7.6 percent in the prior year quarter. The decrease in EBIT is a result of the decrease in income from operations (discussed above).
Segment EBIT
The following table summarizes the change in Segment EBIT(1) by reportable segments:
Three months ended March 31, | ||||||||
(dollars in thousands) | Americas | EMEA | ||||||
Segment EBIT, March 31, 2012 | $ | 15,674 | $ | (580 | ) | |||
Sales, excluding currency | 259 | 267 | ||||||
Manufacturing and distribution | (806 | ) | (1,047 | ) | ||||
Selling, general, administrative and other income/expense | 1,675 | (96 | ) | |||||
Effects of changing foreign currency rates | 1,350 | (27 | ) | |||||
Segment EBIT, March 31, 2013 | $ | 18,152 | $ | (1,483 | ) |
____________________________________
(1) | Segment EBIT represents earnings before interest and taxes and excludes amounts related to certain items we consider not representative of ongoing operations as well as certain retained corporate costs. See note 12 to the Condensed Consolidated Financial Statements for reconciliation of Segment EBIT to net income. |
Segment EBIT — Americas
Segment EBIT increased to $18.2 million in the first quarter of 2013, compared to $15.7 million in the first quarter of 2012. Segment EBIT as a percentage of net sales for the Americas increased to 14.7 percent in the first quarter of 2013, compared to 12.1 percent in the prior year period. The primary drivers of the $2.5 million increase in Segment EBIT were a $1.4 million
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favorable currency impact and a $1.7 million favorable impact from changes in selling, general, administrative and other income (expense) primarily related to a decrease in labor and benefits expense and translation gains. An additional favorable impact came from lower non-volume related manufacturing and distribution costs of $4.9 million primarily within repairs and maintenance, labor and benefits and direct materials (primarily packaging). Partially offsetting these are a $5.9 million reduction to Segment EBIT attributable to decreased production activity net of volume-related production costs due to a significant furnace rebuild.
Segment EBIT — EMEA
Segment EBIT decreased to a loss of $1.5 million in the first quarter of 2013, compared to a loss of $0.6 million in the first quarter of 2012. Segment EBIT as a percentage of net sales for EMEA decreased to (4.3) percent in the first quarter of 2013, compared to (1.9) percent in the prior-year period. The primary driver of the $0.9 million decrease in Segment EBIT was the impact of our Libbey 2015 Strategy to improve cash generation in Europe.
Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)
EBITDA decreased by $3.0 million in the first quarter 2013, to $21.9 million, compared to $24.9 million in the year-ago quarter. As a percentage of net sales, EBITDA decreased to 11.9 percent in the first quarter of 2013, from 13.2 percent in the year-ago quarter. The key contributors to the decrease in EBITDA were those factors discussed above under Earnings Before Interest and Income Taxes (EBIT).
Adjusted EBITDA
Adjusted EBITDA increased by $1.3 million in the first quarter of 2013, to $26.2 million, compared to $24.9 million in the first quarter of 2012. As a percentage of net sales, Adjusted EBITDA was 14.3 percent for the first quarter of 2013, compared to 13.2 percent in the year-ago quarter. The key contributors to the increase in Adjusted EBITDA were those factors discussed above under Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA) and the elimination of the special item noted below, in the reconciliation of net income to EBIT, EBITDA and Adjusted EBITDA, with respect to our decision to discontinue production of certain glassware in North America and reduce manufacturing capacity at our Shreveport Louisiana manufacturing facility.
Three months ended March 31, | ||||||||
(dollars in thousands) | 2013 | 2012 | ||||||
Net income | $ | 1,989 | $ | 641 | ||||
Add: Interest expense | 8,435 | 10,408 | ||||||
Add: Provision provision for income taxes | 662 | 3,290 | ||||||
Earnings before interest and income taxes (EBIT) | 11,086 | 14,339 | ||||||
Add: Depreciation and amortization | 10,774 | 10,536 | ||||||
Earnings before interest, taxes, deprecation and amortization (EBITDA) | 21,860 | 24,875 | ||||||
Add: Special item before interest and taxes: | ||||||||
Restructuring charges (1) | 4,880 | — | ||||||
Less: Accelerated depreciation expense included in special items and also in depreciation and amortization above | (566 | ) | — | |||||
Adjusted EBITDA | $ | 26,174 | $ | 24,875 |
__________________________________
(1) | Relates to discontinuing production of certain glassware in North America and reducing manufacturing capacity at our Shreveport, Louisiana, manufacturing facility. |
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 certain 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.
We define EBIT as net income before interest expense and income taxes. The most directly comparable U.S. GAAP financial measure is net income.
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We believe that EBIT is an important supplemental measure for investors in evaluating operating performance in that it provides insight into company profitability. Libbey’s senior management uses this measure internally to measure profitability. EBIT also allows for a measure of comparability to other companies with different capital and legal structures, which accordingly may be subject to different interest rates and effective tax rates.
The non-GAAP measure of EBIT does have certain limitations. It does not include interest expense, which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand operations. Because this is a material and recurring item, any measure that excludes it has a material limitation. EBIT may not be comparable to similarly titled measures reported by other companies.
We define EBITDA as net income before interest expense, income taxes, depreciation and amortization. The most directly comparable U.S. GAAP financial measure is net income.
We believe that EBITDA is an important supplemental measure for investors in evaluating operating performance in that it provides insight into company profitability and cash flow. Libbey’s senior management uses this measure internally to measure profitability. EBITDA also allows for a measure of comparability to other companies with different capital and legal structures, which accordingly may be subject to different interest rates and effective tax rates, and to companies that may incur different depreciation and amortization expenses or impairment charges.
The non-GAAP measure of EBITDA does have certain limitations. It does not include interest expense, which is a necessary and ongoing part of our cost structure resulting from debt incurred to expand operations. EBITDA also excludes depreciation and amortization expenses. Because these are material and recurring items, any measure that excludes them has a material limitation. EBITDA may not be comparable to similarly titled measures reported by other companies.
We present Adjusted EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use Adjusted EBITDA internally to measure profitability and to set performance targets for managers.
Adjusted EBITDA has limitations as an analytical tool. Some of these limitations are:
• | Adjusted EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments; |
• | Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; |
• | Adjusted EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; |
• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; |
• | Adjusted EBITDA does not reflect the impact of certain cash charges resulting from matters we consider not to be indicative of our ongoing operations; and |
• | Other companies in our industry may calculate Adjusted EBITDA differently than we do, limiting its usefulness as a comparative measure. |
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.
Net Income and Diluted Net Income Per Share
We recorded net income of $2.0 million, or $0.09 per diluted share, in the first quarter of 2013, compared to net income of $0.6 million, or $0.03 per diluted share, in the year-ago quarter. Net income as a percentage of net sales was 1.1 percent in the first quarter of 2013, compared to 0.3 percent in the year-ago quarter. The increase in net income and diluted net income per share is due to a $2.0 million reduction in interest expense and $2.6 million decrease in the provision for income taxes, partially offset by factors discussed in Earnings Before Interest and Income Taxes (EBIT) above. The reduction in interest expense is primarily the result of lower interest rates resulting from our May 2012 refinancing. The effective tax rate was 25.0 percent for the first quarter of 2013, compared to 83.7 percent in year-ago quarter. The effective tax rate was influenced by jurisdictions with recorded valuation allowances, changes in the mix of earnings in countries with differing statutory tax rates and changes in accruals related to uncertain tax positions.
Capital Resources and Liquidity
Historically, cash flows generated from operations, cash on hand and our borrowing capacity under our ABL Facility have enabled us to meet our cash requirements, including capital expenditures and working capital requirements. At March 31, 2013,
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we had no borrowings outstanding under our ABL Facility, although we had $8.5 million of letters of credit issued under that facility. As a result, we had $73.3 million of unused availability remaining under the ABL Facility at March 31, 2013. In addition, we had $45.9 million of cash on hand at March 31, 2013.
Based on our operating plans and current forecast expectations, we anticipate that our level of cash on hand, cash flows from operations and our borrowing capacity under our ABL Facility will provide sufficient cash availability to meet our ongoing liquidity needs.
As previously announced on March 22, 2013, Libbey Glass Inc. redeemed, on May 7, 2013, an aggregate principal amount of $45.0 million of our outstanding Senior Secured Notes due 2020. We funded this redemption using cash on hand and borrowings under our ABL Facility.
Balance Sheet and Cash Flows
Cash and Equivalents
See the cash flow section below for a discussion of our cash balance.
Working Capital
The following table presents our working capital components:
(dollars in thousands, except percentages and DSO, DIO, DPO and DWC) | March 31, 2013 | December 31, 2012 | ||||||
Accounts receivable — net | $ | 86,264 | $ | 80,850 | ||||
DSO (1) | 38.4 | 35.8 | ||||||
Inventories — net | $ | 167,374 | $ | 157,549 | ||||
DIO (2) | 74.4 | 69.7 | ||||||
Accounts payable | $ | 57,259 | $ | 65,712 | ||||
DPO (3) | 25.5 | 29.1 | ||||||
Working capital (4) | $ | 196,379 | $ | 172,687 | ||||
DWC (5) | 87.3 | 76.4 | ||||||
Percentage of net sales | 23.9 | % | 20.9 | % |
___________________________________________________
(1) | Days sales outstanding (DSO) measures the number of days it takes to turn receivables into cash. |
(2) | Days inventory outstanding (DIO) measures the number of days it takes to turn inventory into cash. |
(3) | Days payable outstanding (DPO) measures the number of days it takes to pay the balances of our accounts payable. |
(4) | Working capital is defined as net accounts receivable plus net inventories less accounts payable. See below for further discussion as to the reasons we believe this non-GAAP financial measure is useful. |
(5) | Days working capital (DWC) measures the number of days it takes to turn our working capital into cash. |
DSO, DIO, DPO and DWC are calculated using the last twelve months' net sales as the denominator and are based on a 365-day year.
We believe that working capital is important supplemental information for investors in evaluating liquidity in that it provides insight into the availability of net current resources to fund our ongoing operations. Working capital is a measure used by management in internal evaluations of cash availability and operational performance.
Working capital is used in conjunction with and in addition to results presented in accordance with U.S. GAAP. Working capital is neither intended to represent nor be an alternative to any measure of liquidity and operational performance recorded under U.S. GAAP. Working capital may not be comparable to similarly titled measures reported by other companies.
Working capital (as defined above) was $196.4 million at March 31, 2013, an increase of $23.7 million from December 31, 2012. Our working capital normally increases during the first quarter of the year due to the seasonality of our business. In particular, inventory normally increases to prepare for seasonally higher orders that typically exceed production levels in the later part of the year. Our increase is primarily due to additional inventories resulting from seasonality and building inventory in anticipation of upcoming furnace rebuilds. The impact of currency increased total working capital by $1.4 million at March 31, 2013, primarily driven by the Mexican peso, with a partial offset by the euro. As a result of the factors above, working
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capital as a percentage of last twelve-month net sales increased to 23.9 percent at March 31, 2013 from 20.9 percent at December 31, 2012, but was essentially flat compared to the period ended March 31, 2012.
Borrowings
The following table presents our total borrowings:
(dollars in thousands) | Interest Rate | Maturity Date | March 31, 2013 | December 31, 2012 | |||||||
Borrowings under ABL Facility | floating | May 18, 2017 | $ | — | $ | — | |||||
Senior Secured Notes | 6.875% | (1) | May 15, 2020 | 450,000 | 450,000 | ||||||
Promissory Note | 6.00% | April, 2013 to September, 2016 | 848 | 903 | |||||||
RMB Loan Contract | floating | January, 2014 | 9,576 | 9,522 | |||||||
BES Euro Line | floating | December, 2013 | 4,231 | 4,362 | |||||||
AICEP Loan | 0.00% | January, 2016 to July 30, 2018 | 1,224 | 1,272 | |||||||
Total borrowings | 465,879 | 466,059 | |||||||||
Plus — carrying value adjustment on debt related to the Interest Rate Agreement (1) | 274 | 408 | |||||||||
Total borrowings — net (2) | $ | 466,153 | $ | 466,467 |
____________________________________
(1) | See “Derivatives” below and notes 4 and 9 to the Condensed Consolidated Financial Statements. |
(2) | The total borrowings — net includes long-term debt due within one year and long-term debt as stated in our Condensed Consolidated Balance Sheets. |
We had total borrowings of $465.9 million and $466.1 million at March 31, 2013 and December 31, 2012, respectively.
Of our total borrowings, $58.8 million, or approximately 12.6 percent, was subject to variable interest rates at March 31, 2013. A change of one percentage point in such rates would result in a change in interest expense of approximately $0.6 million on an annual basis.
Included in interest expense is the amortization of discounts and financing fees. These items amounted to $0.5 million and $1.0 million for the three months ended March 31, 2013 and 2012, respectively.
Cash Flow
The following table presents key drivers to our free cash flow for the periods presented.
Three months ended March 31, | |||||||
(dollars in thousands) | 2013 | 2012 | |||||
Net cash used in operating activities | $ | (12,680 | ) | $ | (19,098 | ) | |
Capital expenditures | (8,882 | ) | (6,446 | ) | |||
Proceeds from asset sales and other | 4 | 180 | |||||
Free Cash Flow (1) | $ | (21,558 | ) | $ | (25,364 | ) |
________________________________________
(1) | We define Free Cash Flow as net cash provided by (used in) operating activities less capital expenditures plus proceeds from asset sales and other. The most directly comparable U.S. GAAP financial measure is net cash provided by (used in) operating activities. |
We believe that Free Cash Flow is important supplemental information for investors in evaluating cash flow performance in that it provides insight into the cash flow available to fund such things as discretionary debt service, acquisitions and other strategic investment opportunities. It is a measure of performance we use to internally evaluate the overall performance of the business.
Free Cash Flow is used in conjunction with and in addition to results presented in accordance with U.S. GAAP. Free Cash Flow is neither intended to represent nor be an alternative to the measure of net cash provided by (used in) operating activities recorded under U.S. GAAP. Free Cash Flow may not be comparable to similarly titled measures reported by other companies.
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Discussion of First Quarter 2013 vs. First Quarter 2012 Cash Flow
Our net cash used in operating activities was $(12.7) million and $(19.1) million in the first quarter of 2013 and 2012, respectively, an improvement of $6.4 million. The major factors impacting cash flow from operations were a $17.4 million reduction in interest payments on our Senior Secured Notes and a $7.6 million reduction in pension and postretirement welfare payments primarily due to the funding of our U.S. pension plans in 2012. Partially offsetting these are an increase of $8.6 million in working capital (discussed above), primarily inventory; an increase of $6.1 million in labor related payments, primarily related to incentive compensation; and an increase in income tax payments and prepaid expenses of $1.0 million and $1.6 million, respectively. The decrease in interest payments was the result of the change in the timing of interest payments on the Senior Secured Notes compared to interest payments under the Senior Secured Notes that they replaced. Under the Senior Secured Notes, interest is payable in May and November whereas the interest was payable on the prior Senior Secured Notes in February and August.
Our net cash used in investing activities was $(8.9) million and $(6.3) million in the first quarter of 2013 and 2012, respectively, primarily representing capital expenditures.
Net cash provided by financing activities was $0.5 million in the first quarter of 2013, compared to net cash used of $(0.4) million in the year-ago quarter. We received $0.5 million in the first quarter 2013 from the exercise of stock options. In the first quarter of 2012, we made other debt repayments of $0.4 million.
Our Free Cash Flow was $(21.6) million during the first quarter of 2013, compared to $(25.4) million in the year-ago quarter, an improvement of $3.8 million. The primary contributors to this change were the $6.4 million favorable cash flow impact from operating activities in the current period, as discussed above, offset by an additional $2.4 million in capital expenditures.
Derivatives
We had an Interest Rate Agreement (Old Rate Agreement) in place through April 18, 2012 with respect to $80.0 million of our former Senior Secured Notes as a means to manage our fixed to variable interest rate ratio. On April 18, 2012, we called the Old Rate Agreement at fair value and received proceeds of $3.6 million.
On June 18, 2012, we entered into an Interest Rate Agreement (New Rate Agreement) with a notional amount of $45.0 million that is to mature in 2020. The New Rate Agreement was executed in order to convert a portion of the Senior Secured Notes fixed rate debt into floating rate debt and maintain a capital structure containing fixed and floating rate debt. Prior to May 15, 2015, but not more than once in any twelve-month period, the counterparty may call up to 10 percent of the New Rate Agreement at a call price of 103 percent. The New Rate Agreement is callable at the counterparty’s option, in whole or in part, at any time on or after May 15, 2015 at set call premiums. The variable interest rate for our borrowings related to the New Rate Agreement at March 31, 2013, excluding applicable fees, is 5.6 percent. This New Rate Agreement expires on May 15, 2020. Total remaining Senior Secured Notes not covered by the New Rate Agreement have a fixed interest rate of 6.875 percent per year through May 15, 2020. If the counterparty to this New Rate Agreement were to fail to perform, this New Rate Agreement would no longer afford us a variable rate. However, we do not anticipate non-performance by the counterparty. The interest rate swap counterparty was rated A+, as of March 31, 2013, by Standard and Poor’s.
The fair market value for the New Rate Agreement at March 31, 2013, was a $0.1 million liability. The fair market value of the New Rate Agreement is based on the market standard methodology of netting the discounted expected future fixed cash receipts and the discounted future variable cash payments. The variable cash payments are based on an expectation of future interest rates derived from observed market interest rate forward curves.
We also use commodity futures contracts related to forecasted future North American natural gas requirements. The objective of these futures contracts is to reduce the effects of fluctuations and price movements in the underlying commodity. We consider our forecasted natural gas requirements in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 70 percent of our anticipated requirements up to eighteen months in the future. The fair values of these instruments are determined from market quotes. At March 31, 2013, we had commodity futures contracts for 1,720,000 million British Thermal Units (BTUs) of natural gas with a fair market value of a $0.8 million asset. We have hedged a portion of our forecasted transactions through December 2013. At December 31, 2012, we had commodity futures contracts for 2,400,000 million BTUs of natural gas with a fair market value of a $(0.4) million liability. The counterparties for these derivatives were rated BBB+ or better as of March 31, 2013, by Standard & Poor’s.
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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, Canadian dollar, euro, RMB or Mexican peso that could reduce the cost competitiveness of our products compared to foreign competition.
Interest Rates
We have an Interest Rate Agreement (New Rate Agreement) with respect to $45.0 million of debt in order to convert a portion of the Senior Secured Notes fixed rate debt into floating rate debt and maintain a capital structure containing fixed and floating rate debt. The interest rate for our borrowings related to the New Rate Agreement at March 31, 2013 is 5.6 percent per year. The New Rate Agreement expires on May 15, 2020. Total remaining Senior Secured Notes not covered by the New Rate Agreement have a fixed interest rate of 6.875 percent. If the counterparty to the New Rate Agreement were to fail to perform, the New Rate Agreement would no longer provide the desired results. However, we do not anticipate nonperformance by the counterparty. The counterparty was rated A+ as of March 31, 2013 by Standard and Poor’s.
Natural Gas
We are 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 in North America. The objective of these futures contracts is to limit the fluctuations in prices paid and potential volatility in earnings or cash flows from price movements in the underlying natural gas commodity. We consider the forecasted natural gas requirements of our manufacturing operations in determining the quantity of natural gas to hedge. We combine the forecasts with historical observations to establish the percentage of forecast eligible to be hedged, typically ranging from 40 percent to 70 percent of our anticipated requirements up to six quarters 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 counterparties to these futures contracts were to fail to perform, we would no longer be protected from natural gas fluctuations by the futures contracts. However, we do not anticipate nonperformance by these counterparties. All counterparties were rated BBB+ or better by Standard and Poor’s as of March 31, 2013.
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 our pension plans' asset performance and related pension expense. Sensitivity to these key market risk factors is as follows:
• | A change of 1.0 percent in the discount rate would change our total annual pension and nonpension postretirement expense by approximately $4.5 million. |
• | A change of 1.0 percent in the expected long-term rate of return on plan assets would change annual pension expense by approximately $3.4 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 Commission’s 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.
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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,” “target,” “believe,” “expect,” “intend,” “may,” “planned,” “potential,” “should,” “will,” “would” or similar phrases. Such forward-looking statements involve risks and uncertainty; actual results may differ materially from such statements, and undue reliance should not be placed on such statements. Readers are cautioned that these forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
Item 1A. Risk Factors
Our risk factors are set forth in Part I, Item 1A. "Risk Factors" in our 2012 Annual Report on Form 10-K.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Issuer’s Purchases of Equity Securities
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs (1) | |||||||
January 1 to January 31, 2013 | — | — | — | 1,000,000 | |||||||
February 1 to February 28, 2013 | — | — | — | 1,000,000 | |||||||
March 1 to March 31, 2013 | — | — | — | 1,000,000 | |||||||
Total | — | — | — | 1,000,000 |
__________________________________
(1) | We announced on December 10, 2002, that our Board of Directors authorized the purchase of up to 2,500,000 shares of our common stock in the open market and negotiated purchases. There is no expiration date for this plan. In 2003, 1,500,000 shares of our common stock were purchased for $38.9 million. No additional shares were purchased from 2004 through the three months ended March 31, 2013. Our ABL Facility and the indentures governing the Senior Secured Notes significantly restrict our ability to repurchase additional shares. |
Item 6. | Exhibits |
Exhibits: The exhibits listed in the accompanying “Exhibit Index” are filed as part of this report.
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EXHIBIT INDEX | ||
S-K Item 601 No. | Document | |
3.1 | Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). | |
3.2 | Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.2 to Libbey Inc.’s Current Report on Form 8-K filed August 1, 2011, and incorporated herein by reference). | |
3.3 | Certificate of Incorporation of Libbey Glass Inc. (filed as Exhibit 3.3 to Libbey Glass Inc.’s Form S-4 (Reg No. 333-139358) filed December 14, 2006, and incorporated herein by reference). | |
3.4 | Amended and Restated By-Laws of Libbey Glass Inc. (filed as Exhibit 3.4 to Libbey Glass Inc.’s Form S-4 (Reg No. 333-139358) filed December 14, 2006, and incorporated herein by reference). | |
4.1 | Amended and Restated Registration Rights Agreement, dated October 29, 2009, among Libbey Inc. and Merrill Lynch PCG, Inc. (filed as Exhibit 4.4 to Registrant’s Form 8-K filed October 29, 2009 and incorporated herein by reference). | |
4.2 | Amended and Restated Credit Agreement, dated February 8, 2010, among Libbey Glass Inc. and Libbey Europe B.V., as borrowers, Libbey Inc., as a loan guarantor, the other loan parties party thereto as guarantors, JPMorgan Chase Bank, N.A., as administrative agent with respect to the U.S. loans, J.P. Morgan Europe Limited, as administrative agent with respect to the Netherlands loans, Bank of America, N.A. and Barclays Capital, as Co-Syndication Agents, Wells Fargo Capital Finance, LLC, as Documentation Agent and the other lenders and agents party thereto (filed as Exhibit 4.1 to Libbey Inc.’s Current Report on Form 8-K filed on February 12, 2010 and incorporated herein by reference). | |
4.3 | Amendment No. 1 to Amended and Restated Credit Agreement dated as of January 14, 2011 among Libbey Glass Inc. and Libbey Europe B.V. as borrowers, the other loan parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders with respect to the U.S. loans, and J.P. Morgan Europe Limited, as Administrative Agent for the Lenders with respect to the Netherlands loans (filed as Exhibit 4.6 to Libbey Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference). | |
4.4 | Amendment No. 2 to the Amended and Restated Credit Agreement dated as of April 29, 2011 (filed as Exhibit 10.1 to Libbey Inc.’s Current Report on Form 8-K filed on May 3, 2011 and incorporated herein by reference). | |
4.5 | Amendment No. 3 to Amended and Restated Credit Agreement dated as of September 14, 2011 among Libbey Glass Inc. and Libbey Europe B.V., as borrowers, the other loan parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders with respect to the U.S. loans, and J.P. Morgan Europe Limited, as Administrative Agent for the Lenders with respect to the Netherlands loans (filed as Exhibit 4.8 to Libbey Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference). | |
4.6 | Amendment No. 4 to Amended and Restated Credit Agreement dated as of May 18, 2012 among Libbey Glass Inc. and Libbey Europe B.V., as borrowers, the other loan parties thereto, JPMorgan Chase Bank, N.A., as Administrative Agent for the Lenders with respect to the U.S. loans, and J.P. Morgan Europe Limited, as Administrative Agent for the Lenders with respect to the Netherlands loans (filed as Exhibit 4.1 to Libbey Inc.'s Current Report on Form 8-K filed on May 18, 2012 and incorporated herein by reference). | |
4.7 | Indenture, dated May 18, 2012, among Libbey Glass Inc., Libbey Inc., the domestic subsidiaries of Libbey Glass Inc. listed as guarantors therein, and The Bank of New York Mellon Trust Company, N.A., as trustee and collateral agent (filed as Exhibit 4.2 to Libbey Inc.’s Current Report on Form 8-K filed on May 18, 2012 and incorporated herein by reference). | |
4.8 | Registration Rights Agreement, dated May 18, 2012, among Libbey Glass Inc., Libbey Inc., and the domestic subsidiaries of Libbey Glass Inc. listed as guarantors (filed as Exhibit 4.4 to Libbey Inc.’s Current Report on Form 8-K filed on May 18, 2012 and incorporated herein by reference). | |
4.9 | Intercreditor Agreement, dated May 18, 2012, among Libbey Glass Inc., Libbey Inc., and the domestic subsidiaries of Libbey Glass Inc. listed as guarantors (filed as Exhibit 4.5 to Libbey Inc.’s Current Report on Form 8-K filed on May 18, 2012 and incorporated herein by reference). | |
10.1 | Pension and Savings Plan Agreement dated as of June 17, 1993 between Owens-Illinois, Inc. and Libbey Inc. (filed as Exhibit 10.4 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). | |
10.2 | Cross-Indemnity Agreement dated as of June 24, 1993 between Owens-Illinois, Inc. and Libbey Inc. (filed as Exhibit 10.5 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). | |
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S-K Item 601 No. | Document | |
10.3 | Libbey Inc. Guarantee dated as of October 10, 1995 in favor of The Pfaltzgraff Co., The Pfaltzgraff Outlet Co. and Syracuse China Company of Canada Ltd. guaranteeing certain obligations of LG Acquisition Corp. and Libbey Canada Inc. under the Asset Purchase Agreement for the Acquisition of Syracuse China (Exhibit 2.0) in the event certain contingencies occur (filed as Exhibit 10.17 to Libbey Inc.’s Current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). | |
10.4 | Susquehanna Pfaltzgraff Co. Guarantee dated as of October 10, 1995 in favor of LG Acquisition Corp. and Libbey Canada Inc. guaranteeing certain obligations of The Pfaltzgraff Co., The Pfaltzgraff Outlet Co. and Syracuse China Company of Canada, Ltd. under the Asset Purchase Agreement for the Acquisition of Syracuse China (Exhibit 2.0) in the event certain contingencies occur (filed as Exhibit 10.18 to Libbey Inc.’s Current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). | |
10.5 | First Amended and Restated Libbey Inc. Executive Savings Plan (filed as Exhibit 10.23 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). | |
10.6 | Form of Non-Qualified Stock Option Agreement between Libbey Inc. and certain key employees participating in The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.69 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). | |
10.7 | The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.67 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). | |
10.8 | RMB Loan Contract between Libbey Glassware (China) Company Limited and China Construction Bank Corporation Langfang Economic Development Area Sub-branch entered into January 23, 2006 (filed as exhibit 10.75 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference). | |
10.9 | Guarantee Contract executed by Libbey Inc. for the benefit of China Construction Bank Corporation Langfang Economic Development Area Sub-branch (filed as exhibit 10.76 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005 and incorporated herein by reference). | |
10.1 | Guaranty, dated May 31, 2006, executed by Libbey Inc. in favor of Fondo Stiva S.A. de C.V. (filed as exhibit 10.2 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference). | |
10.11 | Guaranty Agreement, dated June 16, 2006, executed by Libbey Inc. in favor of Vitro, S.A. de C.V. (filed as exhibit 10.3 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006 and incorporated herein by reference). | |
10.12 | Libbey Inc. Amended and Restated Deferred Compensation Plan for Outside Directors (incorporated by reference to Exhibit 10.61 to Libbey Glass Inc.’s Registration Statement on Form S-4; File No. 333-139358). | |
10.13 | 2009 Director Deferred Compensation Plan (filed as Exhibit 10.51 to Libbey Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference). | |
10.14 | Executive Deferred Compensation Plan (filed as Exhibit 10.52 to Libbey Inc’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 and incorporated herein by reference). | |
10.15 | Form of Amended and Restated Indemnity Agreement dated as of December 31, 2008 between Libbey Inc. and the respective officers identified on Appendix 1 thereto (filed as exhibit 10.36 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference). | |
10.16 | Form of Amended and Restated Indemnity Agreement dated as of December 31, 2008 between Libbey Inc. and the respective outside directors identified on Appendix 1 thereto (filed as exhibit 10.37 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference). | |
10.17 | Amended and Restated Libbey Inc. Supplemental Retirement Benefit Plan effective December 31, 2008 (filed as exhibit 10.38 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference). | |
10.18 | Amendment to the First Amended and Restated Libbey Inc. Executive Savings Plan effective December 31, 2008 (filed as exhibit 10.39 to Libbey Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008 and incorporated herein by reference). | |
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S-K Item 601 No. | ||
Document | ||
10.19 | Amended and Restated 2006 Omnibus Incentive Plan of Libbey Inc. (filed as Exhibit 10.29 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 and incorporated herein by reference). | |
10.20 | Employment Agreement dated as of June 22, 2011 between Libbey Inc. and Stephanie A. Streeter (filed as Exhibit 10.30 to Libbey Inc.’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 and incorporated herein by reference). | |
10.21 | Form of Employment Agreement dated as of October 31, 2011 (filed as Exhibit 10.1 to Libbey Inc.’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference) (as to each of Kenneth A. Boerger, Daniel P. Ibele, Timothy T. Paige and Roberto B Rubio). | |
10.22 | Form of Employment Agreement dated as of October 31, 2011 (filed as Exhibit 10.2 to Libbey Inc.’s Current Report on Form 8-K filed on November 3, 2011 and incorporated herein by reference) (as to each of Richard I. Reynolds and Susan A. Kovach). | |
10.23 | Form of Indemnity Agreement dated as of February 7, 2012 between Libbey Inc. and Stephanie A. Streeter (filed as Exhibit 10.25 to Libbey Inc.'s Annual Report on Form 10-K for the year ended December 31, 2011 and incorporated herein by reference). | |
10.24 | Form of Change in Control Agreement dated as of August 1, 2012 (filed as Exhibit 10.1 to Libbey Inc.’s Current Report on Form 8-K filed on July 19, 2012 and incorporated herein by reference) (as to Sherry Buck). | |
10.25 | Executive Severance Compensation Policy dated as of August 1, 2012 (filed as Exhibit 10.2 to Libbey Inc.’s Current Report on Form 8-K filed on July 19, 2012 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). | |
101.INS* | XBRL Instance Document | |
101.SCH* | XBRL Taxonomy Extension Schema Document | |
101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document | |
101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB* | XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document | |
* - Furnished, not filed. |
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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.
Libbey Inc. | ||||
Date: | May 10, 2013 | by: | /s/ Sherry L. Buck | |
Sherry L. Buck | ||||
Vice President, Chief Financial Officer |
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