EXHIBIT 99.1
SAFE HARBOR PROVISION OF THE PRIVATE SECURITIES LITIGATION
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REFORM ACT OF 1995
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Libbey desires to take advantage of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995.
Libbey wishes to caution readers that the following important factors, among
others, could affect Libbey's actual results and could cause Libbey's actual
consolidated results to differ materially from those expressed in any
forward-looking statements made by, or on behalf of Libbey.
CURRENCY
We are exposed to market risks due to changes in currency values, although the
majority of our revenues and expenses are denominated in the U.S. dollar. The
currency market risks include devaluations and other major currency fluctuations
relative to the U.S. dollar, euro or Mexican peso that could reduce the cost
competitiveness of our products or those of Vitrocrisa compared to foreign
competition and the impact of exchange rate changes in the Mexican peso relative
to the U.S. dollar on the earnings of Vitrocrisa expressed under accounting
principles generally accepted in the United States.
INTEREST RATES
We are exposed to market risk associated with changes in interest rates in the
U.S. and have entered into Interest Rate Protection Agreements (Rate Agreements)
with respect to $50 million of debt as a means to manage our exposure to
fluctuating interest rates. The Rate Agreements effectively convert a portion of
our long-term borrowings from variable rate debt to fixed-rate debt, thus
reducing the impact of interest rate changes on future income. The average fixed
rate of interest for our borrowings related to the Rate Agreements at December
31, 2004, excluding applicable fees, is 6.0% per year, and the total interest
rate, including applicable fees, is 7.8% per year. The average maturity of these
Rate Agreements is 1.0 year at December 31, 2004. Debt not covered by the Rate
Agreements has fluctuating interest rates with a weighted average rate of 3.5%
per year at December 31, 2004. We had $93.1 million of debt subject to
fluctuating interest rates at December 31, 2004. A change of one percentage
point in such rates would result in a change in interest expense of
approximately $0.9 million on an annual basis. If the counterparts to these Rate
Agreements were to fail to perform, we would no longer be protected from
interest rate fluctuations by these Rate Agreements. However, we do not
anticipate nonperformance by the counterparts.
NATURAL GAS
We are also exposed to market risks associated with changes in the price of
natural gas. We use commodity futures contracts related to forecasted future
natural gas requirements of our domestic manufacturing operations. The objective
of these futures contracts is to limit the fluctuations in prices paid and
potential losses in earnings or cash flows from adverse price movements in the
underlying natural gas commodity. We consider our forecasted natural gas
requirements of our domestic 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% to 60% of our anticipated requirements, generally
twelve or eighteen months in the future. For our natural gas requirements that
are not hedged, we are subject to changes in the price of natural gas, which
affects our earnings.
PENSION
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 pension benefit obligations and related pension expense.
Changes in the equity and debt securities markets affect the performance of our
pension plan asset performance and related pension expense. Sensitivity to these
key market risks factors are as follows:
- - A change of .50% in the expected long-term rate of return on plan assets
would change total pension expense by approximately $1.2 million based on
year-end data.
- - A change of .50% in the discount rate would change our total pension
expense by approximately $1.9 million.
We do not believe that we are exposed to more than a nominal amount of credit
risk in its interest rate, natural gas and foreign currency hedges as the
counterparts are established financial institutions.
Other important factors potentially affecting performance include:
- - major slowdowns in the retail, travel, restaurant and bar or entertainment
industries, including the impact of armed hostilities or any other
international or national calamity, including any act of terrorism, on the
retail, travel, restaurant and bar or entertainment industries;
- - significant increases in interest rates that increase our borrowing costs;
- - significant increases in per-unit costs for natural gas, electricity,
corrugated packaging, aragonite, resins and other purchased materials;
- - increases in expenses associated with higher medical costs, increased
pension expense associated with lower returns on pension investments and
lower interest rates on pension obligations;
- - currency fluctuations relative to the U.S. dollar, euro or Mexican peso
that could reduce the cost competitiveness of our or Vitrocrisa's products
compared to foreign competition;
- - the effect of high inflation in Mexico on the operating results and cash
flows of Vitrocrisa;
- - the impact of exchange rate changes in the Mexican peso relative to the
U.S. dollar on the earnings of Vitrocrisa expressed under accounting
principles generally accepted in the United States;
- - the inability to achieve savings and profit improvements at targeted levels
at Libbey and Vitrocrisa from capacity realignment, re-engineering and
operational restructuring programs or within the intended time periods;
- - protracted work stoppages related to collective bargaining agreements;
- - increased competition from foreign suppliers endeavoring to sell glass
tableware in the United States, Mexico, Europe and other key markets
worldwide, including the impact of lower duties for imported products; and
- - whether we complete any significant acquisitions and whether such
acquisitions can operate profitably.