<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
(X)Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
or
( )Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Libbey Inc.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12084 34-1559357
- - - -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation or
organization)
420 Madison Avenue, Toledo, Ohio 43604
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
419-727-2100
- - - --------------------------------------------------------------------------------
(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 X No
----- -------
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 - 15,032,200 shares at July 31, 1996.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to present
fairly such information for the periods and at the dates indicated. Since the
following condensed unaudited financial statements have been prepared in
accordance with Article 10 of Regulation S-X, they do not contain all
information and footnotes normally contained in annual consolidated financial
statements; accordingly they should be read in conjunction with the Consolidated
Financial Statements and notes thereto appearing in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995. The interim results of
operations are not necessarily indicative of results for the entire year.
2
<PAGE> 3
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended June 30,
Revenues: 1996 1995
--------- --------
<S> <C> <C>
Net sales $ 103,804 $ 84,006
Royalties and net technical
assistance income 756 614
--------- --------
Total revenues 104,560 84,620
Costs and expenses:
Cost of sales 73,838 58,235
Selling, general and administrative
expenses 12,561 9,793
--------- --------
86,399 68,028
--------- --------
Income from operations 18,161 16,592
Other income (expense):
Interest expense - net (3,812) (3,725)
Other - net 35 (21)
--------- --------
(3,777) (3,746)
--------- --------
Income before income taxes 14,384 12,846
Provision for income taxes 5,682 5,173
--------- --------
Net income $ 8,702 $ 7,673
========= ========
Net income per share $ 0.56 $ 0.50
========= ========
Dividends per share $ 0.075 $ 0.075
========= ========
</TABLE>
See accompanying notes.
3
<PAGE> 4
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
Revenues: 1996 1995
--------- ---------
<S> <C> <C>
Net sales $ 187,805 $ 155,022
Royalties and net technical
assistance income 1,232 1,128
--------- ---------
Total revenues 189,037 156,150
Costs and expenses:
Cost of sales 137,864 111,321
Selling, general and administrative
expenses 23,102 19,482
--------- ---------
160,966 130,803
--------- ---------
Income from operations 28,071 25,347
Other income (expense):
Interest expense - net (7,932) (6,676)
Other - net 759 86
--------- ---------
(7,173) (6,590)
--------- ---------
Income before income taxes 20,898 18,757
Provision for income taxes 8,255 7,597
--------- ---------
Net income $ 12,643 $ 11,160
========= =========
Net income per share $ 0.81 $ 0.72
========= =========
Dividends per share $ 0.15 $ 0.15
========= =========
</TABLE>
See accompanying notes.
4
<PAGE> 5
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- --------
(unaudited) (Note)
ASSETS
Current assets:
<S> <C> <C>
Cash $ 1,770 $ 2,095
Trade receivables, less allowances
of $3,494 and $3,289 42,561 38,775
Other receivables 1,409 1,582
-------- --------
Total receivables 43,970 40,357
Finished goods 76,313 69,987
Work in process 6,083 5,245
Raw materials 3,122 3,246
Operating supplies 711 714
-------- --------
Total inventories 86,229 79,192
Prepaid expenses 6,260 9,199
-------- --------
Total current assets 138,229 130,843
Other assets:
Repair parts inventories 5,783 5,528
Goodwill, net of accumulated
amortization of $9,728 and $9,118 38,881 39,755
Other assets and investments 23,367 21,711
-------- --------
Total other assets 68,031 66,994
Property, plant and equipment,
at cost 225,392 220,675
Less accumulated depreciation 105,282 96,697
-------- --------
Net property, plant and
equipment 120,110 123,978
-------- --------
Total assets $326,370 $321,815
======== ========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1995 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
</TABLE>
See accompanying notes.
5
<PAGE> 6
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
(unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Notes payable $ 3,059 --
Accounts payable 16,057 $ 20,088
Accrued liabilities 27,196 22,792
Other current liabilities 15,626 13,168
--------- ---------
Total current liabilities 61,938 56,048
Long-term debt 236,561 248,721
Nonpension retirement benefits 51,120 48,945
Deferred taxes and other liabilities 13,332 15,217
Commitments
Shareholders' equity:
Common stock, par value $.01
per share, 50,000,000 shares
authorized, 15,032,200 shares
issued and outstanding
(15,023,500 in 1995) 150 150
Capital in excess of par value 191,376 191,226
Deficit (228,018) (238,407)
Cumulative foreign currency
translation adjustment (89) (85)
--------- ---------
Total shareholders' equity (36,581) (47,116)
--------- ---------
Total liabilities and
shareholders' equity $ 326,370 $ 321,815
========= =========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1995 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
</TABLE>
See accompanying notes.
6
<PAGE> 7
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
1996 1995
---- ----
Operating activities
<S> <C> <C>
Net income $ 12,643 $ 11,160
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation and amortization 11,223 8,828
Other non-cash charges 468 1,242
Net change in components of working
capital and other assets (7,105) (29,023)
-------- --------
Net cash provided by (used in)
operating activities 17,229 (7,793)
Investing activities--additions
to property, plant and equipment (6,355) (13,981)
Financing activities
Net borrowings (repayments) under Bank
Credit Agreement (12,155) 22,805
Other net borrowings 3,059
Stock options exercised 150 --
Dividends (2,254) (2,250)
-------- --------
Net cash provided by (used in)
financing activities (11,200) 20,555
Effect of exchange rate fluctuations
on cash 1 --
-------- --------
Decrease in cash (325) (1,219)
Cash at beginning of year 2,095 3,700
-------- --------
Cash at end of period $ 1,770 $ 2,481
======== ========
</TABLE>
See accompanying notes.
7
<PAGE> 8
LIBBEY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands, except per share data
(unaudited)
1. LONG-TERM DEBT
The Company and its Canadian subsidiary have an unsecured agreement ("Bank
Credit Agreement" or "Agreement") with a group of banks which provides for a
Revolving Credit and Swing Line Facility ("Facility") permitting borrowings up
to an aggregate total of $300 million, maturing October 1999. Swing Line
borrowings are limited to $15 million with interest calculated at the prime rate
minus the Commitment Fee Percentage. Revolving Credit borrowings bear interest
at the Company's option at either the prime rate minus the Commitment Fee
Percentage, or a Eurodollar rate plus the Applicable Eurodollar Margin. The
Commitment Fee Percentage and Applicable Eurodollar Margin will vary depending
on the Company's performance against certain financial ratios. The Commitment
Fee Percentage and the Applicable Eurodollar Margin were 1/4% and 3/8%,
respectively, at June 30, 1996. The Company may also elect to borrow under a
Negotiated Rate loan alternative of the Revolving Credit and Swing Line Facility
at floating rates of interest, up to a maximum of $150 million. The Revolving
Credit and Swing Line Facility also provides for the issuance of $22 million of
letters of credit, with such usage applied against the $300 million limit. At
June 30, 1996, the Company had $5.1 million in letters of credit outstanding.
The Company has entered into interest rate protection agreements ("Rate
Agreements") with respect to $175 million of debt under its Bank Credit
Agreement as a means to manage its exposure to fluctuating interest rates. The
Rate Agreements effectively convert this portion of the Company's Bank Credit
Agreement borrowings from variable rate debt to a fixed rate basis, thus
reducing the impact of interest rate changes on future income. The average
interest rate for the Company's borrowings related to the Rate Agreements at
June 30, 1996 was 5.75% for an average remaining period of 2.2 years. The
remaining debt not covered by the Rate Agreements has fluctuating interest rates
with a weighted average rate of 5.9% at June 30, 1996.
The interest rate differential to be received or paid under the Rate Agreements
is being recognized over the life of the Rate Agreements as an adjustment to
interest expense. Should the counterparts to these Rate Agreements fail to
perform, the Company would no longer be protected from interest rate
fluctuations by these Rate Agreements. However, the Company does not anticipate
nonperformance by the counterparts.
The Company must pay a commitment fee ("Commitment Fee Percentage") on the total
credit provided under the Bank Credit Agreement. No compensating balances are
required by the Agreement. The Agreement requires the maintenance of certain
financial ratios, restricts the incurrence of indebtedness and other contingent
financial obligations, and restricts certain types of business activities and
investments.
2. CASH FLOW INFORMATION
Interest paid in cash aggregated $7,535 and $6,504 for the first six months of
1996 and 1995, respectively. Income taxes paid in cash aggregated $5,169 and
$10,652 for the first six months of 1996 and 1995, respectively.
8
<PAGE> 9
3. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed using the weighted average
number of shares of common stock outstanding, including common stock
equivalents. Weighted average shares were 15,615,263 and 15,565,853 for the
three and six month periods ending June 30, 1996, respectively; and 15,430,822
and 15,369,564 for the three and six month periods ending June 30, 1995.
The following table shows the 1995 and 1996 earnings per share results using the
average shares outstanding including and excluding common stock equivalents.
<TABLE>
<CAPTION>
Including Equivalents Excluding Equivalents
--------------------- ---------------------
Quarter Ending Quarter Year-to-date Quarter Year-to-date
-------------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C>
March 31, 1995 $0.23 $0.23 $0.23 $0.23
June 30, 1995 $0.50 $0.72 $0.51 $0.74
September 30, 1995 $0.64 $1.36 $0.66 $1.40
December 31, 1995 $0.58 $1.95 $0.60 $2.00
March 31, 1996 $0.25 $0.25 $0.26 $0.26
June 30, 1996 $0.56 $0.81 $0.58 $0.84
</TABLE>
9
<PAGE> 10
4. ACQUISITION
On October 10, 1995, the Company completed the acquisition of certain assets and
liabilities of the business operated as Syracuse China from the Pfaltzgraff Co.,
The Pfaltzgraff Outlet Co., and Syracuse China Company of Canada Ltd. The
purchase price approximated $40.0 million and the acquisition has been recorded
using the purchase method of accounting. The excess of the aggregate purchase
price over the fair market value of net assets acquired of approximately $7.2
million was recognized as goodwill. The operating results of Syracuse China have
been included in the consolidated financial statements since the date of
acquisition.
The following unaudited pro forma results of operations assume the acquisition
occurred as of January 1, 1994 (in thousands except per-share amounts):
<TABLE>
<CAPTION>
Quarter ended June 30, 1996 1995
---- ----
<S> <C> <C>
Net sales $103,804 $92,325
Net income 8,702 8,054
Net income per share (including
common stock equivalents) $ 0.56 $ 0.52
</TABLE>
<TABLE>
<CAPTION>
Six Months ended June 30, 1996 1995
---- ----
<S> <C> <C>
Net sales $187,805 $170,811
Net income 12,643 11,809
Net income per share (including
common stock equivalents) $ 0.81 $ 0.77
</TABLE>
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Syracuse China acquisition
been consummated as of January 1, 1994, nor are they necessarily indicative of
future operating results.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER 1996 COMPARED WITH SECOND QUARTER 1995
<TABLE>
<CAPTION>
Three months ended
June 30,
----------------------
(dollars in thousands)
1996 1995
-------- -------
<S> <C> <C>
Net sales $103,804 $84,006
Gross profit 29,966 25,771
As a percentage of sales 28.9% 30.7%
Income from operations $ 18,161 $16,592
As a percentage of sales 17.5% 19.8%
Net income $ 8,702 $ 7,673
</TABLE>
Net sales for the second quarter of 1996 of $103.8 million increased 23.6% from
the net sales of $84.0 million reported in the comparable period in 1995. The
increase in sales is due primarily to higher sales to the Company's foodservice
and industrial markets in the U.S. and the acquisition of Syracuse China in the
fourth quarter of 1995. Sales benefited from increased unit volume, particularly
with industrial customers. Export sales were up 41.8%, increasing to $7.8
million from $5.5 million in the year-ago period.
Gross profit increased 16.3% to $30.0 million in the second quarter of 1996 from
$25.8 million in the second quarter of 1995, but decreased as a percentage of
sales to 28.9% from 30.7%. Gross margins were affected by product mix, with
greater sales of lower margin items in the industrial and export markets,
increased natural gas expense and increased compensation costs.
Income from operations increased 9.5% to $18.2 million from $16.6 million in the
year-ago period. Operating income as a percentage of sales fell to 17.5% from
19.8% in the comparable year-ago period, as a result of the lower gross profit
percentage and the inclusion of Syracuse China in 1996 and
re-engineering-related expenses.
Net income increased by $1.0 million due to higher revenues and a reduction in
the Company's effective tax rate from 40.3% to 39.5%, principally due to lower
state income taxes, offset by lower operating profits and increased interest
expense due to additional debt associated with the Syracuse China acquisition.
11
<PAGE> 12
RESULTS OF OPERATIONS - SIX MONTHS 1996 COMPARED WITH SIX MONTHS 1995
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
(dollars in thousands)
1996 1995
-------- --------
<S> <C> <C>
Net sales $187,805 $155,022
Gross profit 49,941 43,701
As a percentage of sales 26.6% 28.2%
Income from operations $ 28,071 $ 25,347
As a percentage of sales 14.9% 16.4%
Net income $ 12,643 $ 11,160
</TABLE>
Net sales for the first six months of 1996 of $187.8 million increased 21.1%
from the sales of $155.0 million reported in the comparable period in 1995. The
increase in sales is due primarily to higher sales to the Company's foodservice
and industrial markets in the U.S. and the acquisition of Syracuse China in the
fourth quarter of 1995. Sales benefited from increased unit volume, particularly
with industrial customers. Export sales were up 24.9%, increasing to $14.3
million from $11.4 million in the year-ago period.
Gross profit increased 14.3% to $49.9 million in the first six months of 1996
from $43.7 million in the comparable period in 1995, but decreased as a
percentage of sales to 26.6% from 28.2%. Gross margins primarily were affected
by product mix, with greater sales of lower margin items in the industrial and
export markets and the inclusion of Syracuse China, contributed to a
lower-margin sales mix. In addition, higher energy and compensation costs were
factors.
Income from operations increased 10.7% to $28.1 million from $25.3 million in
the year-ago period. Operating income as a percentage of sales fell to 14.9%
from 16.4% in the comparable year-ago period, as a result of the lower gross
profit percentage. In the selling, general and administrative expense category,
reduced health care expenses were almost completely offset by the effects of
Syracuse China.
Net income increased by $1.5 million due to higher revenues, increased machinery
sales, and a reduction in the Company's effective tax rate from 40.5% to 39.5%,
principally due to lower state income taxes, offset by lower operating profits
and increased interest expense due to additional debt associated with the
Syracuse China acquisition.
12
<PAGE> 13
CAPITAL RESOURCES AND LIQUIDITY
The Company had total debt of $239.6 million at June 30, 1996, compared to
$248.7 million at December 31, 1995. The decrease in debt from December 31, 1995
is due to operating cash flows supplemented by aggressive working capital
management and timing of capital expenditures. Inventories at June 30, 1996,
were $7.0 million higher than at December 31, 1995, principally due to the
seasonal nature of the Company's business, however, because of improved
inventory management, this increase is not as large as in previous years. The
Company had additional capacity at June 30, 1996 under the Bank Credit Agreement
of $58.3 million. Of Libbey's outstanding indebtedness, $64.6 million is subject
to fluctuating interest rates at June 30, 1996. A change of one percentage point
in such rates would result in a change in interest expense of approximately $.6
million on an annual basis.
The Company is not aware of any trends, demands, commitments, or uncertainties
which will result or which are reasonably likely to result in a material change
in Libbey's liquidity. The Company believes that its cash from operations and
available borrowings under the Bank Credit Agreement will be sufficient to fund
its operating requirements, capital expenditures and all other obligations
(including debt service and dividends) throughout the five-year term of the Bank
Credit Agreement. The Company continues to be engaged in various efforts to
expand through acquisitions as well as through internal growth and may seek
further amendments to its Bank Credit Agreement if such indebtedness is
required. In addition, the Company anticipates refinancing the Bank Credit
Agreement at or prior to the maturity date of October 1999 to meet the Company's
longer term funding requirements.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1996 at the annual meeting of stockholders, Messrs.
William A. Foley and Terry L. Wilkison were elected as members of
Class III of the board of directors for three year terms expiring
on the date of the 1999 annual meeting. The results of the voting
were:
Directors
<TABLE>
<CAPTION>
Name For Against
---- --- -------
<S> <C> <C> <C>
Mr. Foley 12,468,787 213,320
Mr. Wilkison 12,454,887 227,220
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
Exhibit
Number Description
- - - ------ -----------
10.22* The Amended and Restated Libbey Inc. Senior Management Incentive
Plan
27 Financial Data Schedule
* Management Contract or Compensation Plan or Arrangement
(b.) No reports on Form 8-K were filed during the quarter.
13
<PAGE> 14
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 August 8, 1996 By /s/ Kenneth G. Wilkes
----------------------------------
Kenneth G. Wilkes,
Vice President, Chief Financial
Officer and Treasurer
(Principal Accounting Officer)
14
<PAGE> 1
Exhibit 10.22
LIBBEY INC.
SENIOR MANAGEMENT INCENTIVE PLAN
AMENDED AS OF JANUARY 1, 1996
<PAGE> 2
LIBBEY INC.
SENIOR MANAGEMENT INCENTIVE PLAN
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
<S> <C> <C>
1. Purpose 1
2. Definitions 1
3. Administration 2
4. Eligibility and Participation 3
5. Target Bonuses 3
6. Performance Objectives 4
7. Operating Results 4
8. Determination of Annual Bonuses 4
9. Payment of Annual Bonuses 5
10. Amendment or Termination of the Plan 5
11. Miscellaneous 5
12. Effective Date 5
</TABLE>
<PAGE> 3
LIBBEY INC.
SENIOR MANAGEMENT INCENTIVE PLAN
AS AMENDED EFFECTIVE AS OF JANUARY 1, 1996
1. PURPOSE
-------
The purposes of this Libbey Inc. Senior Management Incentive Plan are to
reward officers and other management employees who contribute to the
success of the Company, by making the amount of their compensation
significantly contingent upon the Company's financial performance, and to
attract and retain officers and other management employees of exceptional
ability.
2. DEFINITIONS (as used herein):
-----------
"Annual Bonus" means the compensation payable to an Executive under this
Plan and will consist of the Performance Component and, except for the
Chief Executive Officer, a Discretionary Component, as described in
paragraph 5.1 hereof;
"Board" means the Board of Directors of Libbey Inc.;
"Bonus Pool" means, for each year, the sum of all Target Bonuses for such
year and will consist of the Performance Components and Discretionary
Components, as described in paragraph 5.1 hereof;
"CEO" means the Chief Executive Officer of Libbey Inc.;
"Committee" means the Compensation Committee of the Board or any other
committee of the Board to which administrative authority with respect to
the Plan may be delegated by the Board;
"Company" means Libbey Inc., a Delaware corporation, together with any
corporation (or unincorporated business entity) 50 percent or more of the
voting shares (or other ownership interests) of which are owned, directly
or indirectly, by Libbey Inc.;
-2-
<PAGE> 4
"Deferred Compensation Plan" means any plan or arrangement adopted by the
Company whereby an Executive may be permitted, at his option, to defer
the actual receipt of an Annual Bonus otherwise payable to him under this
Plan;
"Discretionary Component" means the component of a Target Bonus Pool
payable in the discretion of the Board or the CEO in accordance with
paragraph 8 hereof;
"Executive" means an officer or other management employee of the Company
who is eligible to participate in this Plan in accordance with paragraph
4 hereof;
"Operating Results" means the Company's annual results from operations
for any year, determined in accordance with paragraph 7 hereof and
expressed as a percentage of the year's Performance Objective;
"Performance Component" means the components of a Target Bonus, Annual
Bonus, or Bonus Pool measured by the Company's attainment of its
Performance Objective for a year in accordance with paragraph 7 hereof;
"Performance Objective" means the annual objective established in
accordance with paragraph 6 hereof for the operating performance of the
Company;
"Plan" means this Libbey Inc. Senior Management Incentive Plan as set
forth herein or as from time to time amended;
"Target Bonus" means an amount established each year in accordance with
paragraph 5 hereof equal to a stated percentage of an Executive's annual
base salary and will consist of the Performance Component and the
Discretionary Component, as described in paragraph 5.1 hereof;
Words of the masculine gender include correlative words of the feminine
and neuter genders and vice versa, and words denoting the singular
include the plural and vice versa.
3. ADMINISTRATION
--------------
3.1 Subject to the overall responsibility of the Committee, the Plan will
be administered by the CEO, whose administrative powers hereunder shall
include the powers to interpret the Plan and to exercise full and
complete discretion to adopt, modify, and/or rescind (or to authorize one
or more other
-3-
<PAGE> 5
appropriate officers of the Company to adopt, modify, and/or rescind) any
rulings, determinations, policies, and/or procedures deemed necessary or
appropriate for the maintenance and administration of the Plan. All such
interpretations, rulings, determinations, policies, and procedures shall
be final, conclusive, and binding upon all interested persons.
3.2 The Committee, in its discretion on recommendation of the CEO, shall
be authorized at any time and from time to time to modify any Performance
Objective, and the Committee, in its discretion or recommendation of the
CEO, shall be authorized at any time and from time to time to adjust the
amount of any Target Bonus, the size of the Bonus Pool, and/or the
relative proportions of the Performance and Discretionary Components and
to accelerate or defer the payment of Annual Bonuses.
4. ELIGIBILITY AND PARTICIPATION
-----------------------------
4.1 Each person who, as of the beginning of the initial Plan year or any
subsequent calendar year, is an elected corporate officer of the Company,
shall be an Executive eligible to participate in the Plan for such
initial Plan year or subsequent calendar year. Each person who first
becomes an elected corporate officer of the Company during the initial
Plan year or during a subsequent calendar year shall be an Executive
eligible to participate in the Plan for at least the balance of such
initial Plan year or subsequent calendar year or, if approved by the
Committee on recommendation of the CEO, for the entire year.
4.2 Any other officer or management employee of the Company shall be an
Executive eligible to participate in the Plan for all or any part of any
year during or before which such participation has been approved by the
CEO. The CEO may prospectively or retroactively suspend or withdraw such
approval with respect to any such Executive for all or any part of any
year.
5. TARGET BONUSES
--------------
5.1 A Target Bonus shall be established each year for each Executive,
equal in amount to a stated percentage, not to exceed 100 percent, of the
Executive's base salary for such year. Each Target Bonus shall consist of
the Performance Component and a Discretionary Component.
5.2 The Committee shall establish the CEO's Target Bonus, and the CEO
shall establish the Target Bonuses of all other Executives. Target
Bonuses shall be established based on an evaluation of the
responsibilities of each Executive and of each Executive's potential to
contribute to the Company's attainment of its Performance Objective for
such year. Target Bonuses shall
-4-
<PAGE> 6
be established before or as soon as practicable after the beginning of
each year, and each Executive shall thereupon be notified of his Target
Bonus.
5.3 If the rate of an Executive's base salary is changed during a year
after the Executive's Target Bonus has been established, the amount of
the Executive's Target Bonus shall be adjusted to equal the stated
percentage of the Executive's actual base salary before and after the
change.
6. PERFORMANCE OBJECTIVES
----------------------
The Board, on recommendation of the CEO, shall establish a Performance
Objective for the Company for each year for payment of one hundred
percent of each target bonus, which Performance Objective shall include
the range over which greater or lesser amounts of bonus shall be paid,
provided however, payment of any bonus in excess of 200% of the target
bonus shall be at the discretion of the Committee. Each year's
Performance Objective shall be established before or as soon as
practicable after the beginning of such year, and each Executive shall
thereupon be notified thereof. The Performance Objective for such year
shall be based on one or more key financial indicators such as earnings
per share, income from operations, economic value added, cash flow,
return on equity, return on assets or any other financial measure deemed
appropriate for the situation of the Company.
7. OPERATING RESULTS
-----------------
As soon as practicable after the end of each year, the operating
performance for such year for the Company shall be determined and
reported to the Board and the CEO. The Company's Operating Results for
each year for the purposes of the Plan, shall be the percentage which the
financial performance achieved for the selected financial measures for
such year, as so reported, is of the Company's financial Performance
Objectives for such year.
8. DETERMINATION OF ANNUAL BONUSES
-------------------------------
8.1 The Operating Results shall determine the extent to which the
Discretionary and Performance Components of the Bonus Pool are payable as
Annual Bonuses. However, the CEO, in his discretion, may reduce or
eliminate the Annual Bonus of any Executive for any year to the extent
the CEO determines that such Executive's performance for such year did
not materially contribute to the Operating Results for such year or that
any act or omission by such Executive has adversely affected (or can be
reasonably expected to adversely affect) the Company.
-5-
<PAGE> 7
8.2 A Discretionary Component of the Bonus Pool shall be paid to
Executives as Annual Bonuses in the discretion of the CEO taking into
consideration, in addition to the Company's Operating Results as defined
for purposes of this Plan, an Executive's contributions to the Company's
other financial and non-financial objectives, such as quality of service
and products, customer satisfaction, adherence to or furtherance of the
Company's legal and ethical policies, product development, market share,
improvement in financial indicators of the Company's success other than
the Performance Objective, and effective response to adverse economic
conditions or to unforeseen adverse events beyond the control of the
Company.
9. PAYMENT OF ANNUAL BONUSES
-------------------------
9.1 Except to the extent deferred at the option of an Executive in
accordance with a Deferred Compensation Plan, each Executive's Annual
Bonus for each year, determined in accordance with paragraph 8 hereof,
shall be paid in cash no later than March 15 of the following year.
9.2 In the event of an Executive's death after the end of a year but
before payment of the Annual Bonus, if any, for such year has been paid
to the Executive, it shall be paid to the beneficiary or beneficiaries
designated by the Executive in writing filed with the Company or, in the
absence of any such designation or if no such designated beneficiary
survives the Executive, to the beneficiary or beneficiaries of the
Executive's life insurance under the Company's Life Insurance Plan. If
there is no such designated beneficiary or life insurance beneficiary,
such Executive's Annual Bonus shall be paid to the Executive's estate.
9.3 If an Executive's employment with the Company is terminated for any
reason during the course of a year, or if the Executive is transferred to
a position with the Company which the CEO determines no longer qualifies
to participate in this Plan, the extent, if any, to which the Annual
Bonus for such year will be paid to the Executive will be determined by
the CEO, in the CEO's discretion.
10. AMENDMENT OR TERMINATION OF THE PLAN
------------------------------------
The Board, in its sole discretion, may amend, suspend, or terminate the
Plan at any time, except that no such action shall adversely affect the
rights of any person with respect to an Annual Bonus that has become
payable in accordance with paragraph 8 hereof without such person's
consent.
-6-
<PAGE> 8
11. MISCELLANEOUS
-------------
11.1 Nothing in the Plan shall confer on any Executive or other employee
of the Company any right to continue in the employ of the Company or
limit in any way the right of the Company to terminate any such person's
employment at any time.
11.2 No rights under this Plan shall be assignable or transferable, or
subject to encumbrance of any nature, except to the extent that an
Executive may designate a beneficiary to receive any payment to be made
following his death. If any Executive or beneficiary shall attempt to
assign, transfer, encumber or charge any such right, or should such right
be subjected to attachment, execution, garnishment, sequestration or
other legal, equitable or other process, it shall thereupon pass to such
one or more persons as may be designated by the Committee from among the
Executive, any beneficiary theretofore designated by the Executive, and
any spouse, parent, or child of such Executive or beneficiary.
11.3 With respect to the rights of Executives under the Plan, the
obligations of the Company under the Plan shall be wholly unsecured. The
Company shall be under no obligation to reserve, segregate or earmark any
cash or other property for the payment of any amounts under the Plan.
12. EFFECTIVE DATE
--------------
This Plan, when duly executed, shall become effective as amended as of
January 1, 1996.
-7-
<PAGE> 9
IN WITNESS WHEREOF, the Board of Directors of Libbey Inc. has caused this
Libbey Inc. Senior Management Incentive Plan to be executed by a duly authorized
officer of the corporation this _____ day of ______________, 1996.
LIBBEY INC.
By:____________________________________________________
John F. Meier
Chairman of the Board and Chief Executive Officer
Attest:
By:______________________________
Arthur H. Smith
Secretary
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
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0
0
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