As filed with the Securities and Exchange Commission on December 14, 2006

Registration No. 333-          

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

 

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

 

 

 

 

 

 

See Table of Additional Co-Registrants Included in this Registration Statement

 

 

 

 

300 Madison Avenue
Toledo, Ohio 43604
Telephone: (419) 325-2100
(Address, including zip code, and telephone number, including area code, of registrants’ principal executive offices)

 

 

 

 

Susan A. Kovach, Esq.
Vice President, General Counsel and Secretary
Libbey Glass Inc.
300 Madison Avenue
Toledo, Ohio 43604
Telephone: (419) 325-2100
(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

 

Copy to:

Christopher D. Lueking, Esq.
Latham & Watkins LLP
Sears Tower, Suite 5800
233 South Wacker Drive
Chicago, Illinois 60606
Telephone: (312) 876-7700
Facsimile: (312) 993-9767

 

 

 

 

Approximate date of commencement of proposed sale to the public:   As soon as practicable after the effective date of this registration statement.

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.   o

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

 

 

 

Table of Additional Co-Registrants

 

 

 

TABLE OF CONTENTS

 

 

Until          , 2007, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

We have not authorized any dealer, salesman or other person to give any information or to make any representation other than those contained or incorporated by reference in this prospectus. You must not rely upon any information or representation not contained or incorporated by reference in this prospectus as if we had authorized it. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the registered securities to which it relates, nor does this prospectus constitute an offer to sell or a solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful to make such offer or solicitation in such jurisdiction.

 

We have filed with the SEC a registration statement on Form S-4 under the Securities Act. This prospectus does not contain all of the information set forth in the registration statement and the exhibits filed as part of the registration statement. For further information, we refer you to the registration statement and the exhibits filed as a part of the registration statement and the documents incorporated herein. Statements contained in this prospectus concerning the contents of any contract or any other document are not necessarily complete. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.

 

In addition, Libbey Inc. is subject to the periodic reporting and other informational requirements of the Securities Exchange Act of 1934. Libbey Inc. files annual, quarterly and current reports and other information with the SEC. The reports and other information we or Libbey Inc. file with the SEC can be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580 Washington D.C. 20549. Copies of these materials can be obtained at prescribed rates from the Public Reference Section of the SEC at the principal offices of the SEC, 100 F Street, N.E., Room 1580 Washington D.C. 20549. You may obtain information regarding the operation of the public reference room by calling 1 (800) SEC-0330. The SEC also maintains a web site ( www.sec.gov ) that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

 

The SEC allows us to “incorporate by reference” certain documents, which means that we can disclose important information to you by referring you to those documents. The information in the documents incorporated by reference is considered to be part of this prospectus, and information in documents that we file later with the SEC will automatically update and supersede this information. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superceded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any other subsequently filed document which also is, or is deemed to be, incorporated by reference herein modifies or supercedes such statement. Any such statement so modified or superceded shall not be deemed, except as so modified or superceded, to constitute a part of this prospectus. We incorporate by reference the documents listed below and any future filings we will make with the SEC under Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act (excluding any information furnished to the SEC pursuant to Items 2.02 or Item 7.01 on any current report on Form 8-K) until the earlier date that the exchange offer is consummated or the date the exchange offer is terminated:

 

 

We will provide to you, at no charge, a copy of the documents we incorporate by reference in this prospectus. To request a copy of any or all of these documents, you should write or telephone us at the

following address and telephone number: Libbey Inc., 300 Madison Avenue, Toledo, Ohio, and Telephone: (419) 325-2100., Attention: Investor Relations. Our telephone number is: (419) 325-2100.

 

In order for you to receive timely delivery of these documents in advance of the exchange offer, Libbey must receive your request no later than          , 2006.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus includes statements that are, or may be deemed to be, “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward- looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “intends,” “may,” “will” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this prospectus and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods.

 

The following listing represents some, but not necessarily all, of the factors that may cause actual results to differ from those anticipated or predicted:

 

 

 

With respect to our expectations regarding the Acquisition, additional factors that may cause actual results to differ from those anticipated or predicted include:

 

 

See “The Transactions” for further discussion of the Acquisition. You should also read carefully the factors described in “Risk Factors” to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. Any forward-looking statements that we make in this prospectus speak only as of the date of the statement, and we undertake no obligation to update any forward-looking statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should be viewed only as historical data.

 

PROSPECTUS SUMMARY

	•	Leading market position.   We believe we are the largest glass tableware manufacturer in North America and one of the largest glass tableware manufacturers in the world. More importantly, we are the leading manufacturer of glass tableware for the attractive U.S. foodservice channel. We are also a leading provider of ceramic dinnerware, metalware and plastics to the U.S. foodservice industry through our Syracuse China, World Tableware and Traex subsidiaries. In the North American retail channel, we are a leading manufacturer of branded glass beverageware. We also believe that the combined businesses of our Dutch and Portuguese subsidiaries, Royal Leerdam and Crisal, make us one of the leading glass tableware manufacturers in Europe.
	•	Product innovation and proprietary technology.   Our in-house research and development efforts, which are focused on both product design and manufacturing technology, are important contributors to our leadership in the highly competitive glass tableware industry. Our proprietary furnace, manufacturing and mold technologies enable us to introduce innovative products in a timely and cost-efficient manner to take advantage of continuously changing customer demands. In recent years, our new products have included two-stem martini glasses, multi-colored glasses and stemless wine glasses. We believe that innovation is instrumental in enhancing our brand’s reputation and achieving profitable growth. In addition, we believe that because full-service foodservice establishments earn a high margin on their beverage service, they are more willing to purchase our innovative beverageware at premium prices.
	•	Strong brand names.   We believe that our brand recognition in the foodservice and retail channels of distribution is the result of our long operating history and reputation for innovation, consistent quality, reliable service and speed to market. Libbey ® is one of the most recognized brand names in glass beverageware for the foodservice and retail channels of distribution in the U.S. and Canada. Libbey ® was the number one brand in purchased glass beverageware in 2005, as measured by NPD Houseworld, an independent provider of retail sales tracking data in the housewares industry. In addition, Crisa ® is recognized as the leading glass tableware brand in Mexico.
	•	Extensive manufacturing base and distribution capabilities.   Through our glassware, Syracuse ® China and Traex ® manufacturing facilities, as well as our five distribution centers in the U.S., we service over 500 national, regional and local foodservice distributors and foodservice customers across the U.S. and Canada. Our nationwide presence provides us with significant distribution flexibility, which distinguishes us as a preferred provider to the U.S. foodservice industry. Our top 10 foodservice distributor customers, representing more than 54% of our glassware sales to foodservice distributors, have been our customers for an average of 20 years. Notably, in October 2006, FE&S magazine, one of the foodservice industry’s leading distributor publications, selected us as the “leading” manufacturer in the tabletop category in its annual “Best in Class” survey. Through the Acquisition, we believe we are also the leading manufacturer of glass tableware in the Mexican market. In addition, from our distribution centers located in the Netherlands and Portugal, we distribute our products manufactured in those locations to retail, business-to-business and foodservice customers located in Europe.
	•	Significant installed foodservice base.   A significant portion of our sales to the U.S. and Canadian foodservice industry, which includes more than 300,000 full-service foodservice establishments, is attributable to replacement revenue from sales of our large installed base of products. Due to the

		significant investment in glass tableware by foodservice establishments, there are substantial costs associated with switching to other manufacturers’ product lines. We have developed our large installed base through a long history of providing an extensive line of glass shapes and sizes, including new shapes and designs of glass beverageware. This ability to offer a variety of glass beverageware sizes to full-service foodservice establishments enables us to meet the portion control requirements that are critical to the profitability of their beverage sales.

	•	Experienced management team.   We have an experienced management team averaging 19 years of industry experience. Led by John F. Meier, our chairman and chief executive officer, our management team has implemented and continues to implement initiatives to increase operational efficiencies, enhance our product lines and expand our business globally.

	•	Reduce enterprise cost and expand our manufacturing platform into low-cost countries in order to become a more cost-competitive source of high-quality glass tableware.   In order to achieve this goal, we intend to:

	•	Realize cost savings and manufacturing efficiencies.   We have implemented a number of cost reduction initiatives, and have identified additional cost reduction opportunities, targeted at reducing our manufacturing costs and increasing efficiency in our North American facilities. These initiatives include:

	•	The closure of our City of Industry, California manufacturing facility in February 2005;
	•	The reduction of our North American salaried workforce by 10% in the first half of 2005;
	•	The consolidation of Royal Leerdam’s (Netherlands) warehousing and distribution facilities into a single, modern distribution center in the third quarter of 2005, and a similar consolidation of Shreveport’s (Louisiana) warehousing and distribution facilities into a modern distribution center completed in November of 2006;
	•	The implementation of a new warehouse management system, including the use of warehouse management software, to improve productivity and labor utilization within our distribution facilities;
	•	The consolidation of Crisa’s two manufacturing facilities in Mexico into a single manufacturing facility with production capacity sufficient to maintain Crisa’s pre-consolidation output; and
	•	The planned investment to update and upgrade Crisa’s manufacturing capabilities, including further implementation of our proprietary furnace, manufacturing and mold technology at Crisa.

	•	Implement LEAN initiatives.   We have implemented a number of operational excellence initiatives, which we refer to as LEAN initiatives, in our domestic operations, and we began our implementation of LEAN initiatives in our European operations in 2006, all in order to improve our operating performance through cost control and process improvements. LEAN is a disciplined manufacturing process system designed to eliminate waste and instill a culture of continuous improvement, and we intend to extend LEAN into all aspects and locations of our organization. We believe that our commitment to the training and involvement of our employees in the use of the LEAN process will provide our organization with the ability to effect rapid positive change, enabling us to continue to provide high-quality products at higher efficiency rates.

	•	Expand our manufacturing platform into low-cost countries.   The manufacturing of glass tableware is highly labor-intensive. The cost of labor and benefits represents approximately 50% of our U.S. glass tableware manufacturing costs. In addition to improved process and productivity initiatives in North America, we intend to improve results of operations by expanding our manufacturing platform into countries where the cost of labor and other critical resources is low relative to our existing cost base. Through this expansion, we seek to grow our sales in local markets and compete more effectively in lower-priced product categories in the U.S. and Canadian markets that we previously exited. Our acquisition of Crisal in Portugal and Crisa in Mexico, along with the construction of a new production facility in China, will enable us to realize average hourly labor rates that are approximately 35%, 16% and 4%, respectively, of our current U.S. average hourly labor rates.

	•	Grow North American sales, while improving profit margins.   In order to achieve this goal, we intend to:

	•	Grow our share in core foodservice market.   In North America, we intend to grow sales and improve margins by increasing our share of our existing customers’ glass and other tableware purchases. This will be accomplished primarily through the continued introduction of innovative products, product line extensions, increased global sourcing capabilities and aggressive marketing programs.
	•	Focus on customer service.   We maintain high levels of customer service by providing reliable shipments of glass tableware, ceramic dinnerware, metalware and plastics to our more than 500 U.S. and Canadian foodservice distributors and by continuing to design, develop and manufacture the innovative products our foodservice and retail customers demand. We seek to improve our distribution network by consolidating into advanced distribution centers in the Netherlands, Mexico and Shreveport, Louisiana. We expect that our investment in distribution facilities and our warehouse management system initiative will enhance our distribution and service capabilities by improving inventory accuracy and order management and reducing delivery times.
	•	Improve product mix and cross-selling opportunities.   We intend to increase our revenue, margins and market share in North America by improving our North American glass manufacturing capabilities and the mix of products produced in North America. For example, we plan to reduce the number and variety of lower margin products produced at Crisa in favor of more profitable products targeted at the Mexican, U.S. and Canadian markets. In addition, we intend to capitalize on cross-selling opportunities with our European operations.

	•	Increase our international sales in existing and new markets.   In order to achieve this goal, we intend to:

	•	Capitalize on growth in the Asia-Pacific market.   The rapidly growing Asia-Pacific market is a key target of our plan to expand our international sales. In anticipation of the construction of our new manufacturing facility in China, we have, over the past three years, established our presence in the Chinese market with sales of Libbey ® glass tableware. We have established a relationship with a key distributor through which Libbey ® products are now distributed in China. Once our China manufacturing facility is operational in early 2007, we intend to leverage this relationship, as well as our relationships with a growing list of other Asian foodservice distributors and multinational retail customers, to grow our presence in the Asia-Pacific market.
	•	Increase revenue opportunities created by the integration of our European operations.   We intend to continue to integrate our Royal Leerdam and Crisal product offerings and sales organizations in order to strengthen our presence as a supplier of a broad array of high quality, machine-made glass tableware products to the fragmented European retail, business-to-business and foodservice markets. For example, in the retail market, we have packaged beverageware sets combining Royal Leerdam stemware with Crisal tumblers. In addition, in the European business-to-business market, we have sold Royal Leerdam ® brand pilsner glasses manufactured at our Crisal facility in Portugal.

The Acquisition and Related Transactions

 

On June 16, 2006, pursuant to the terms of a purchase agreement with Vitro, S.A. de C.V. and one of its affiliates (“Vitro”), we acquired Vitro’s 51% equity stake in Crisa, the largest glass tableware manufacturer in Mexico, for a purchase price of $80.0 million, plus the assumption of certain Crisa indebtedness and other liabilities. Prior to the Acquisition, we were a joint venture partner with Vitro in Crisa. As a result of the Acquisition, we own 100% of Crisa and we no longer are required to make profit sharing payments to Vitro.

 

In connection with the Acquisition:

 

	•	we sold $306.0 million in aggregate principal amount of our floating rate senior secured notes due 2011, which we refer to as the outstanding notes, in a private placement transaction;
	•	we sold $102.0 million in aggregate principal amount of senior subordinated secured pay-in-kind notes due 2011, in a private placement to an investor (with an issue price of 98%), together with warrants to purchase 485,309 shares of Libbey Inc.’s common stock (the “private placement notes”);
	•	we entered into a senior secured credit facility, consisting of a revolving credit facility in an aggregate principal amount of $150.0 million, providing for borrowings by Libbey Glass and Libbey Europe B.V. (a non-guarantor subsidiary);
	•	we discharged our outstanding 4.69% senior note due 2008, all of our outstanding floating rate senior notes due 2010 and all of our outstanding 6.08% senior notes due 2013, including accrued interest and a redemption premium;
	•	we repaid substantially all existing senior secured indebtedness of Libbey and Crisa, including accrued interest and redemption premiums; and
	•	we paid approximately $20.0 million of transaction fees and expenses.

 

The Acquisition and related transactions described above were financed with the proceeds from the offering of the outstanding notes together with the sale of the private placement notes and the borrowings under our senior secured credit facility (the “Refinancing”).

 

Corporate Information

 

We are a Delaware corporation and our headquarters are located at 300 Madison Avenue, Toledo, Ohio 43604. Our telephone number is (419) 325-2100 and our website is located at http://www.libbey.com. The contents of our website are not part of this prospectus.

 

We own or have the rights to various trademarks and trade names used in our business and appearing in this prospectus, including Libbey ^® , Syracuse ^® China, World ^® Tableware, Royal Leerdam ^® , Crisal Glass ^® , and Traex ^® and Crisa ^® . This prospectus also includes trade names and trademarks of other companies. Our use or display of other parties’ trade names, trademarks or products is not intended to and does not imply a relationship with, or endorsement or sponsorship of us by, the trade name or trademark owners.

Securities Offered		$306.0 million in aggregate principal amount of Floating Rate Senior Secured Notes due 2011.
Exchange Offer		The exchange notes are being offered in exchange for a like principal amount of outstanding notes. We will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on          , 2007. Holders may tender some or all of their outstanding notes pursuant to the exchange offer. However, outstanding notes may be tendered only in integral multiples of $1,000 in principal amount. The form and terms of the exchange notes are the same as the form and terms of the outstanding notes except that:
		• the exchange notes have been registered under the federal securities laws and will not bear any legend restricting their transfer;
		• the exchange notes bear a different CUSIP number than the outstanding notes; and
		• the holders of the exchange notes will not be entitled to certain rights under the registration rights agreement, including the provisions for an increase in the interest rate on the outstanding notes in some circumstances relating to the timing of the exchange offer. See “The Exchange Offer.”
Expiration Date		The exchange offer will expire at 5:00 p.m., New York City time, on          , 2007, unless we decide to extend the exchange offer.
Conditions to the Exchange Offer		The exchange offer is subject to certain customary conditions, some of which we may waive. See “The Exchange Offer — Conditions to the Exchange Offer.”
Procedures for Tendering Outstanding Notes		If you wish to accept the exchange offer, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, in accordance with the instructions contained in this prospectus and in the letter of transmittal. You should then mail or otherwise deliver the letter of transmittal, or facsimile, together with the outstanding notes to be exchanged and any other required documentation, to the exchange agent at the address set forth in this prospectus and in the letter of transmittal.
		By executing the letter of transmittal, you will represent to us that, among other things:
		• any exchange notes to be received by you will be acquired in the ordinary course of business;
		• you have no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the exchange notes in violation of the provisions of the Securities Act;

		• you are not an “affiliate” (within the meaning of Rule 405 under the Securities Act) of Libbey; and
		• if you are a broker-dealer that will receive exchange notes for your own account in exchange for outstanding notes that were acquired as a result of market-making or other trading activities, then you will deliver a prospectus in connection with any resale of the exchange notes. See “The Exchange Offer — Procedures for Tendering Outstanding Notes” and “Plan of Distribution.”
Effect of Not Tendering		Any outstanding notes that are not tendered or that are tendered but not accepted will remain subject to the restrictions on transfer. Since the outstanding notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of a specific exemption from registration. Upon the completion of the exchange offer, we will have no further obligations, except under limited circumstances, to provide for registration of the outstanding notes under the federal securities laws. See “The Exchange Offer — Purpose and Effect.”
Interest on the Exchange Notes and the Outstanding Notes		The exchange notes will bear interest from the most recent interest payment date to which interest has been paid on the notes or, if no interest has been paid, from June 16, 2006. Interest on the outstanding notes accepted for exchange will cease to accrue upon the issuance of the exchange notes.
Withdrawal Rights		Tenders of outstanding notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.
U.S. Federal Income Tax Consequences		The exchange of outstanding notes for exchange notes pursuant to this exchange offer will not be a taxable event to holders for U.S. federal income tax purposes. See “Material U.S. Federal Income Tax Considerations.”
Accounting Treatment		We will not recognize any gain or loss for accounting purposes upon the completion of the exchange offer. The expenses of the exchange offer that we pay will increase our deferred financing costs in accordance with generally accepted accounting principles. See “The Exchange Offer — Accounting Treatment.”
Use of Proceeds		We will not receive any proceeds from the issuance of exchange notes pursuant to the exchange offer.
Exchange Agent		The Bank of New York Trust Company, N.A., the trustee under the indenture, is serving as exchange agent in connection with the exchange offer.

		• create liens;
		• redeem debt that is junior in right of payment to the notes;
		• sell or otherwise dispose of assets, including capital stock of subsidiaries;
		• enter into agreements that restrict dividends from subsidiaries;
		• enter into mergers or consolidations;
		• enter into transactions with affiliates;
		• guarantee indebtedness;
		• enter into sale/leaseback transactions; and
		• enter into new lines of business.
		These covenants will be subject to a number of important exceptions and qualifications. For more details, see “Description of Exchange Notes.”
Absence of Public Market for the Exchange Notes		The exchange notes are a new issue of securities and will not be listed on any securities exchange or included in any automated quotation system. The initial purchasers of the outstanding notes have advised us that they intend to make a market in the exchange notes. The initial purchasers are not obligated, however, to make a market in the exchange notes and any market making with respect to the exchange notes, may be discontinued without notice. For more information, see “Plan of Distribution.”
PORTAL Trading of the Exchange Notes		We expect the exchange notes to be eligible for trading on the Private Offerings, Resales and Trading through Automated Linkages, or “PORTAL,” System of the National Association of Securities Dealers, Inc.

Risk Factors

 

You should carefully consider all the information in this prospectus prior to participating in the exchange offer. In particular, we urge you to consider carefully the factors set forth under “Risk Factors” beginning immediately after this “Prospectus Summary.”

 

Market and Industry Data and Forecasts

 

This prospectus includes market share and industry data and forecasts that we obtained from industry publications and surveys and internal company sources. As noted in this prospectus, NPD Houseworld and FE&S Magazine were the primary sources for third-party industry data and forecasts. Industry publications and surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but there can be no assurance as to the accuracy or completeness of included information. We have not independently verified any of the data from third-party sources nor have we ascertained the underlying economic assumptions relied upon therein. Statements as to our market position are based on market data currently available to us. While we are not aware of any misstatements regarding our industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

														(Unaudited)
		Year Ended												Nine Months Ended
		December 31,												September 30,
		2003				2004				2005				2005				2006
		(Dollars in thousands, except credit statistics)
Statement of operations data:
Net sales		$	513,632			$	544,767			$	568,133			$	409,895			$	476,120
Freight billed to customers			1,965				2,030				1,932				1,422				2,387
Total revenues			515,597				546,797				570,065				411,317				478,507
Cost of sales(1)			407,391				446,335				483,523				335,955				396,621
Gross profit			108,206				100,462				86,542				75,362				81,886
Selling, general and administrative expenses(1)			68,479				68,574				71,535				55,109				59,511
Impairment of goodwill and other intangible assets(1)			—				—				9,179				—				—
Special charges(1)			—				7,993				14,745				7,681				12,587
Income (loss) from operations			39,727				23,895				(8,917	)			12,572				9,788
Equity earnings (loss) — pretax(2)			4,429				(1,435	)			(4,100	)			(1,381	)			1,986
Other income (expense)			3,484				2,369				2,567				1,655				(2,244	)
Earnings (loss) before interest, income taxes and minority interest			47,640				24,829				(10,450	)			12,846				9,530
Interest expense(3)			13,436				13,049				15,255				10,240				29,360
Earnings (loss) before income taxes and minority interest			34,204				11,780				(25,705	)			2,606				(19,830	)
Provision (credit) for income taxes			5,131				3,528				(6,384	)			860				(7,535	)
Minority interest(4)			—				—				34				(98	)			(66	)
Net income (loss)		$	29,073			$	8,252			$	(19,355	)		$	1,648			$	(12,361	)
Other financial data:
EBITDA (as defined)(5)		$	75,749			$	54,334			$	21,997			$	38,359			$	36,676
Capital expenditures			25,718				40,482				44,270				26,503				54,557
Depreciation			25,457				27,764				30,359				23,952				25,553
Amortization			2,652				1,741				2,122				1,659				1,659
Net cash provided by operating activities			29,210				42,750				38,113				12,746				31,524
Net cash (used in) investing activities			(19,921	)			(22,879	)			(73,006	)			(55,270	)			(132,552	)
Net cash provided by (used in) financing activities			(8,229	)			(16,376	)			31,891				37,522				135,412

		(Unaudited)
		As of
		September 30,
		2006
Balance sheet data (at end of period):
Working Capital(6)		$	199,008
Total assets			889,565
Total debt (including current maturities)(7)			485,282
Shareholders’ equity			104,304

(1)		The table below reflects charges relating to the impact of a capacity realignment undertaken in 2004 and completed in 2005, a salaried workforce reduction program implemented in 2005, asset impairment and other charges affecting our Syracuse China unit, a pension settlement charge due to reductions in our workforce, a plant restructuring at our Crisa facility and a write-off of financing fees and the classification of such charges on our consolidated statements of operations.

										(Unaudited)
		Year Ended								Nine Months Ended
		December 31,								September 30,
		2004				2005				2005				2006
		(Dollars in thousands)
Cost of sales		$	6,526			$	1,965			$	867			$	2,543
Selling, general and administrative expenses			—				1,347				1,347				—
Impairment of goodwill and other intangible assets			—				9,179				—				—
Special charges			7,993				14,745				7,681				12,587
Interest expense			—				—				—				4,906
Total special charges		$	14,519			$	27,236			$	9,985			$	20,036

(2)		Prior to the Acquisition, we were a 49% equity owner in Crisa, and we recorded our interest in Crisa using the equity method of accounting.
(3)		Interest expense is net of interest income. See footnotes to “Unaudited Pro Forma Consolidated and Combined Financial Data.”
(4)		Prior to October 13, 2006, we owned 95% of Crisal. Our 95% controlling interest required that Crisal’s operations be consolidated in our consolidated financial statements. The 5% equity interest of Crisal that we did not own prior to October 13, 2006, is shown as a minority interest in our consolidated financial statements.
(5)		As used herein, “EBITDA” represents net income (loss) plus (i) provision/(credit) for income taxes, (ii) interest expense, (iii) depreciation and (iv) amortization.

•	EBITDA does not reflect our current cash expenditure requirements, or future requirements, for capital expenditures or contractual commitments;
•	EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
•	EBITDA does not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debt;
•	EBITDA does not reflect our significant pension and nonpension retirement obligations;
•	although depreciation and amortization are non-cash charges, the assets being depreciated and amortized often will have to be replaced in the future, and EBITDA does not reflect any cash requirements for that replacement; and
•	our measure of EBITDA is not necessarily comparable to other similarly titled captions of other companies due to potential inconsistencies in the methods of calculation.

														(Unaudited)
		Year Ended												Nine Months Ended
		December 31,												September 30,
		2003				2004				2005				2005				2006
		(Dollars in thousands)
Net income (loss)		$	29,073			$	8,252			$	(19,355	)		$	1,648			$	(12,361	)
Provision (credit) for income taxes			5,131				3,528				(6,384	)			860				(7,535	)
Interest expense			13,436				13,049				15,255				10,240				29,360
Depreciation and amortization			28,109				29,505				32,481				25,611				27,212
EBITDA			75,749				54,334				21,997				38,359				36,676

(6)		Represents the sum of our accounts receivable and inventories, less accounts payable. The table below represents a reconciliation of GAAP working capital to working capital as measured by Libbey:

		(Unaudited)
		September 30, 2006
Current Assets		$	327,975
Current Liabilities			(155,623	)
GAAP working capital			172,352
Exclude all current assets other than accounts receivable and inventory			(55,408	)
Exclude all current liabilities other than accounts payable			82,064
Libbey’s measure of working capital		$	199,008

(7)		We entered into a line of credit with China Construction Bank Corporation Langfang Economic Development Area Sub-Branch in the amount of RMB 250 million, or the equivalent of $31.0 million, in connection with the construction of our production facility in China. As of September 30, 2006, total debt includes RMB 220 million (approximately $27.9 million) of borrowings under that line of credit. We

		expect to draw down the remaining balance of the facility by the end of 2006. Total debt also includes $52.0 million drawn under our senior secured credit facility as of September 30, 2006.

Ratios of Earnings to Fixed Charges

 

																						(unaudited)
		(unaudited)																				Nine Months Ended
		Year Ended December 31,																				September 30,
		2001				2002				2003				2004				2005				2005				2006
		(Dollars in thousands)
Ratio of earnings to fixed charges			6.2				4.4				3.2				1.9				—	(1)			1.3				—	(2)

 

For purposes of determining the ratio of earnings to fixed charges, earnings are defined as earnings before income taxes, minority interest, income from investees and extraordinary items, plus fixed charges and distributed income from investees less interest capitalized. Fixed charges include interest expense on all indebtedness, interest capitalized and one fifth of rental expense on operating leases representing that portion of rental expense deemed attributable to interest.

 

 

(1)		Due to the Company’s loss in 2005, the ratio coverage was less than 1:1. The Company must generate additional earnings of $21.9 million to achieve a coverage ratio of 1:1.
(2)		Due to the Company’s loss in 2006, the ratio coverage was less than 1:1. The Company must generate additional earnings of $22.3 million to achieve a coverage ratio of 1:1.

 

Our business, operations and financial condition are subject to various risks. You should carefully consider the risks described below as well as other information and data included in this prospectus, before making an investment decision. If any of the events described in the risk factors below occurs, our business, financial condition, operating results and prospects could be materially adversely affected, which in turn could adversely affect our ability to repay the exchange notes.

 

Risks Related to Our Business

 

Slowdowns in the retail, travel, restaurant and bar or entertainment industries, such as those caused by general economic downturns, terrorism, health concerns or strikes or bankruptcies within those industries could reduce our revenues and production activity levels.

 

Our business is affected by the health of the retail, travel, restaurant, bar or entertainment industries. Expenditures in these industries are sensitive to business and personal discretionary spending levels and may decline during general economic downturns. Additionally, travel is sensitive to safety concerns, and thus may decline after incidents of terrorism, during periods of geopolitical conflict in which travelers become concerned about safety issues, or when travel might involve health-related risks. For example, demand for our products in the foodservice industry, which is critical to our success, was significantly impacted by the events of September 11, 2001. In addition, demand for glassware in some of the industrial markets that we supply has declined in recent years. This decline is due, in part, to a decrease in retail sales of candle items by candle item manufacturers for whom we supply glassware. Demand for glassware with external enamel decorations that we supply to the foodservice, retail and premium channels and for undecorated glassware that buyers decorate and redistribute to retail and industrial customers also has decreased as a result of marketplace confusion related to California’s Proposition 65. Proposition 65 requires that clear and reasonable warnings be given in connection with the sale or distribution of products that expose consumers to certain chemicals, such as the lead contained in some enamels used to decorate glassware, that the State of California has determined either are carcinogenic or pose a risk of reproductive toxicity. We have received claims from retailers for indemnification in litigation relating to Proposition 65, but we have not made any payments on the claims. Further declines in these sectors may lead to continued adverse effect on our results of operations. The long-term effects of events or trends such as these could include, among other things, a protracted decrease in demand for our products. These effects, depending on their scope and duration, which we cannot predict at this time, could significantly impact our results of operations and financial condition.

 

We face intense competition and competitive pressures that could adversely affect our results of operations and financial condition.

 

Our business is highly competitive, with the principal competitive factors being customer service, price, product quality, new product development, brand name, and delivery time. Advantages or disadvantages in any of these competitive factors may be sufficient to cause the customer to consider changing manufacturers.

 

Competitors in glass tableware include, among others: Imports from varied and numerous factories from China; Arc International (a private French company), which manufactures and distributes glass tableware worldwide; Pasabahce (a unit of Sisecam, a Turkish company), which manufactures glass tableware in various sites throughout the world and sells to all sectors of the glass industry worldwide; Oneida Ltd., which sources glass tableware from foreign and domestic manufacturers and recently emerged from bankruptcy; Anchor Hocking (a unit of Global Home Products, which is in bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code) which manufactures and distributes glass beverageware, industrial products and bakeware primarily to retail, foodservice and industrial markets; Indiana Glass Company (a unit of Lancaster Colony Corporation), which manufactures in the U.S. and sells glassware; Bormioli Rocco Group, which manufactures glass tableware in Europe, where the majority of its sales are to retail and foodservice customers; and numerous other sourcing companies. In addition, tableware made of other materials such as plastics compete with glassware.

Some of our competitors have greater financial and capital resources than we do and continue to invest heavily to achieve increased production efficiencies. Competitors may have incorporated more advanced technology in their manufacturing processes, including more advanced automation techniques. Our labor and energy costs may also be higher than those of some foreign producers of glass and ceramic tableware. We may not be successful in managing our labor and energy costs or gaining operating efficiencies that may be necessary to remain competitive. In addition, our products may be subject to competition from low-cost imports that intensify the price competition we face in our markets. Finally, we may need to increase incentive payments in our marketing incentive program in order to remain competitive. Increases in these payments would adversely affect our operating margins.

 

Competitors in the U.S. market for ceramic dinnerware include, among others: Homer Laughlin; Oneida Ltd.; Steelite; and various sourcing companies. Competitors in metalware include, among others: Oneida Ltd.; Walco, Inc.; and various sourcing companies. Competitors in plastic products include, among others: Cambro Manufacturing Company; Carlisle Companies Incorporated; and various sourcing companies. In Mexico, where a larger portion of our sales are in the retail market, our primary competitors include Vidriera Santos and Vitro Par in the candle category and imports from foreign manufacturers located in countries such as China, France, Italy and Colombia in other categories. Competitive pressures from these competitors and producers could adversely affect our results of operations and financial condition.

 

International economic and political factors could affect demand for imports and exports, and our financial condition and results of operations could be adversely impacted as a result.

 

Our operations may be affected by actions of foreign governments and global or regional economic developments. Global economic events, such as changes in foreign import/export policy, the cost of complying with environmental regulations or currency fluctuations, could also affect the level of U.S. imports and exports, thereby affecting our sales. Foreign subsidies, foreign trade agreements and each country’s adherence to the terms of these agreements can raise or lower demand for our products. National and international boycotts and embargoes of other countries’ or U.S. imports and/or exports, together with the raising or lowering of tariff rates, could affect the level of competition between us and our foreign competitors. Foreign competition has, in the past, and may, in the future, result in increased low-cost imports that drive prices downward. The World Trade Organization met in November 2001 in Doha, Qatar, where members launched new multilateral trade negotiations aimed at improving market access, reducing and eventually phasing out all forms of export subsidies and substantial reductions in trade-distorting domestic support. The current range of tariff rates applicable to glass tableware products that are imported into the U.S. and are of the type we manufacture in North America is approximately 12.5% to 28.5%. However, any negative changes to international agreements that lower duties or improve access to U.S. markets for our competitors, particularly changes arising out of the World Trade Organization’s ongoing discussions in Doha, could have an adverse effect on our financial condition and results of operations. As we execute our strategy of acquiring manufacturing platforms in lower cost regions and increasing our volume of sales in overseas markets, our dependence on international markets and our ability to effectively manage these risks has increased and will continue to increase significantly.

 

We may not be able to effectively integrate Crisa or future businesses we acquire.

 

On June 16, 2006, we completed the acquisition of Vitro’s 51% equity interests in Crisa, bringing our ownership in Crisa to 100%. See “The Transactions.” The acquisition of Crisal (completed in January 2005), Crisa and any future acquisitions are subject to various risks and uncertainties, including:

 

 

 

In addition, we cannot assure you that the integration and consolidation of newly acquired businesses, including Crisa, will achieve any anticipated cost savings and operating synergies. For example, integration and consolidation at Crisa entails operational risks in moving and rebuilding machines and furnaces, reducing headcount and developing internal information technology and other services that were previously provided by Vitro. The separation of Crisa from Vitro requires us to renegotiate or replace shared contracts and obtain consents and assignments from third parties, all of which may result in additional costs. In connection with the consolidation of Crisa’s two principal manufacturing facilities, we incurred charges of approximately $15.1 million in the second quarter of 2006 for writedowns of property, plant and equipment and writeoff of inventory. In addition, we incurred a charge of approximately $4.9 million in the second quarter of 2006 due to the writeoff of deferred financing fees resulting from the Refinancing. We also expect to make significant capital expenditures as part of the capital rationalization plan at Crisa. We estimate that these capital expenditures will total approximately $17.6 million over the next three years. The inability to integrate and consolidate operations and improve operating efficiencies at Crisa could have a material adverse effect on our business, financial condition and results of operations.

 

We may not be able to achieve the objectives of our strategic plan.

 

Our strategy to improve our operating performance depends on our ability to defend our leadership position in the U.S. foodservice market for glass tableware and reduce our enterprise costs through LEAN initiatives while expanding into low-cost manufacturing platforms and increasing our international sales. The execution of this multi-pronged strategy depends on our ability to maintain our margins in the U.S. and Canadian foodservice industry, historically the most profitable portion of our business but also an increasingly competitive market. We must also be successful in reducing our cost structure and obtaining the cooperation of our largely union workforce in doing so. The success of our plan also will depend on our ability to increase sales in international markets in which we have significantly less experience than our domestic operations, the successful integration of Crisa into our North American operations and the successful integration of Royal Leerdam and Crisal to create a more efficient and effective competitor in Europe. In addition to the significant investment of management time and attention to these international initiatives, our strategy also will require significant capital to complete the rationalization and upgrade of the Crisa operations and significant capital in connection with the construction and operation of our facility in China that we expect to be operational in early 2007. Since we intend to benefit from our international initiatives primarily by expanding our sales in the local markets of other countries, our success depends on continued growth in these markets, including Europe, Latin America and Asia-Pacific.

 

Natural gas, the principal fuel we use to manufacture our products, is subject to fluctuating prices; fluctuations in natural gas prices could adversely affect our results of operations and financial condition.

 

Natural gas is the primary source of energy in most of our production processes. We do not have long-term contracts for natural gas and are therefore subject to market variables and widely fluctuating prices. Consequently, our operating results are strongly linked to the cost of natural gas. As of September 30, 2006, we had forward contracts in place to hedge approximately 60% of our estimated 2007 natural gas needs with respect to our North American manufacturing facilities and approximately 75% of our estimated 2007 natural gas needs with respect to Royal Leerdam. For the year ended December 31, 2005 and the nine months ended

September 30, 2006, on a historical basis, we spent approximately $51.7 million and $39.6 million, respectively, and Crisa spent approximately $21.1 million and $13.9 million, respectively, on natural gas. We have no way of predicting to what extent natural gas prices will rise in the future. To the extent that we are not able to offset increases in natural gas prices, such as by passing along the cost to our customers, these increases could adversely impact our margins and operating performance.

 

If we are unable to obtain sourced products or raw materials at favorable prices, our operating performance may be adversely affected.

 

Sand, soda ash, lime, corrugated packaging materials and resin are the principal raw materials we use. In addition, we obtain glass tableware, metal flatware and holloware from third parties. We may experience temporary shortages due to disruptions in supply caused by weather, transportation, production delays or other factors that would require us to secure our sourced products or raw materials from sources other than our current suppliers. If we are forced to procure sourced products or raw materials from alternative suppliers, we may not be able to do so on terms as favorable as our current terms or at all. In addition, resins are a primary raw material for our Traex operation and, historically, the price for resins has fluctuated with the price of oil, directly impacting our profitability. Material increases in the cost of any of these items on an industry-wide basis may have an adverse impact on our operating performance and cash flows if we are unable to pass on these increased costs to our customers.

 

Charges related to our employee pension and postretirement welfare plans resulting from market risk and headcount realignment may adversely affect our results of operations and financial condition.

 

In connection with our employee pension and postretirement welfare 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 obligations and related expense. Our total pension and postretirement welfare expense, including pension settlement and curtailment charges, for all U.S. and non-U.S. plans was $16.4 million for the year ended December 31, 2005. We expect that expense to decrease to $14.8 million (including $1.6 million related to Crisa) in 2006. Changes in the equity and debt securities markets affect our pension plan asset performance and related pension expense. Sensitivity to these key market risk factors is as follows:

 

 

Because the market rate for high-quality fixed income investments is lower than in previous years, our assumed discount rate has been reduced from 6.25% in 2003 to 5.60% in 2005 for our U.S. pension and postretirement welfare plans. A lower discount rate increases the present value of benefit obligations and increases pension expense. In addition, at December 31, 2005, we had significant nonpension postretirement obligations in the U.S. and Canada totaling $38.3 million, none of which is funded. A change of 1% in the discount rate changes our nonpension postretirement expense by $0.2 million.

 

As part of our pension expense, we incurred pension settlement charges of $4.9 million in 2005 and pension curtailment charges of $4.0 million during 2004. These charges were triggered by excess lump sum distributions taken by employees in connection with headcount reductions related to our capacity realignment and salaried workforce reduction programs and by headcount reductions related to the closure of our City of Industry, California manufacturing facility. For further discussion of these charges, see notes 10 and 12 to our consolidated financial statements in our annual report on Form 10-K for the fiscal year ended December 31, 2005, previously filed and incorporated by reference herein. To the extent that we experience additional headcount shifts or changes as we continue to implement our capacity realignment programs, we may incur further expenses related to our employee pension plans, which could have a material adverse effect on our results of operations and financial condition. For example, we anticipate an additional $2.5 million pension settlement charge in 2006 as a result of excess lump sum distributions taken by employees.

Our business requires significant capital investment and maintenance expenditures that we may be unable to fulfill.

 

Our operations are capital intensive, requiring us to maintain a large fixed cost base. Our total capital expenditures were $40.5 million for the year ended December 31, 2004 and $44.3 million for the year ended December 31, 2005, including $13.4 million relating to the construction of our China facility. Excluding capital expenditures relating to the construction of our facility in China, capital expenditures in 2006 are expected to be approximately $43.0 million, including approximately $15.4 million of capital expenditures relating to our Crisa operations. Our capital expenditures associated with Crisa’s operations include approximately $11.4 million in 2006 relating to capacity rationalization as we consolidate Crisa’s two manufacturing facilities into a single facility. In addition, we have incurred capital expenditures of approximately $29.2 million in the first three quarters of 2006 related to construction of our facility in China, and we expect to incur an additional $5.8 million in order to complete the facility.

 

In the first nine months of 2006, we incurred $25.4 million of our expected 2006 capital expenditures, excluding $29.2 million of capital expenditures relating to construction of our facility in China. We anticipate capital expenditures of $17.6 million for the remaining quarter of 2006, excluding $5.8 million related to construction of our facility in China. We expect to fund the balance of the 2006 capital expenditures through our lines of credit.

 

Our business may not generate sufficient operating cash flow and external financing sources may not be available in an amount sufficient to enable us to make anticipated capital expenditures.

 

Our business requires us to maintain a large fixed cost base that can affect our profitability.

 

The high levels of fixed costs associated with operating glass production plants encourage plant managers to maintain high levels of output, even during periods of reduced demand, which can lead to excess inventory levels and exacerbate the pressure on profit margins. For example, in 2005, we liquidated approximately $13.0 million of inventory at reduced margins; and slowed production in certain areas of our operations, to restore our inventory levels. Our profitability is dependent, in part, on our ability to spread fixed costs over an increasing number of products sold and shipped, and if we reduce our rate of production, as we did in 2005, our costs per unit increase, negatively impacting our gross margins. Decreased demand or the need to reduce inventories can lower our ability to absorb fixed costs and materially impact our results of operations.

 

Unexpected equipment failures may lead to production curtailments or shutdowns.

 

Our manufacturing processes are dependent upon critical glass-producing equipment, such as furnaces, forming machines and lehrs. This equipment may incur downtime as a result of unanticipated failures. We may in the future experience facility shutdowns or periods of reduced production as a result of these equipment failures. Unexpected interruptions in our production capabilities would adversely affect our productivity and results of operations for the affected period.

 

If our investments in new technology and other capital expenditures do not yield expected returns, our results of operations could be reduced.

 

The manufacture of our tableware products involves the use of automated processes and technologies. We designed much of our glass tableware production machinery internally and have continued to develop and refine this equipment to incorporate advancements in technology. We will continue to invest in equipment and make other capital expenditures to further improve our production efficiency and reduce our cost profile. To the extent that these investments do not generate targeted levels of returns in terms of efficiency or improved cost profile, our financial condition and results of operations could be adversely affected.

Delays and budget increases related to the construction of our new production facility in China, or an inability to meet targeted production and profit margin goals after construction, could result in significant additional costs or lost sales.

 

We began construction of our new production facility in China during the third quarter of 2005. We expect that the total cost of this facility will be approximately $52.0 million. We also expect to incur startup losses in connection with the operation of this new facility in China. We intend to use this production facility to better supply China and the rest of the Asia-Pacific market and to improve our competitive position in that region. We plan to begin production of glass tableware at this facility in early 2007.

 

Construction delays, regulatory approvals and other factors beyond our control could delay the start-up of operations in our Chinese facility or significantly increase the costs of its construction. If we are unable to expand our manufacturing capacity in our Chinese production facility as planned, we may be unable to satisfy demand for our products in the Asia-Pacific market, we may lose future sales and our results of operations and financial condition may be adversely affected. In addition, if we are unable to meet targeted production and profit margin goals in connection with the operation of our Chinese facility after construction, our profits could be reduced, which would adversely affect our results of operations and financial condition.

 

We may not be able to renegotiate collective bargaining agreements successfully when they expire; organized strikes or work stoppages by unionized employees may have an adverse effect on our operating performance.

 

We are party to collective bargaining agreements that cover most of our manufacturing employees. The agreements with our unionized employees in Toledo, Ohio expire on September 30, 2007, and the agreement with our unionized employees in Shreveport, Louisiana expires on December 15, 2008. The agreement with our unionized employees at our Syracuse China facility expires on May 15, 2009, and the agreement with the 26 hourly employees at our Mira Loma, California distribution center expires on November 15, 2009. Crisa’s collective bargaining agreements with its unionized employees have no expiration, but wages are reviewed annually and benefits are reviewed every two years. Crisal does not have a written collective bargaining agreement with its unionized employees but does have an oral agreement that is revisited annually. Royal Leerdam’s collective bargaining agreement with its unionized employees expires on July 1, 2007.

 

We may not be able to successfully negotiate new collective bargaining agreements without any labor disruption. If any of our unionized employees were to engage in a strike or work stoppage prior to expiration of their existing collective bargaining agreements, or if we are unable in the future to negotiate acceptable agreements with our unionized employees in a timely manner, we could experience a significant disruption of operations. In addition, we could experience increased operating costs as a result of higher wages or benefits paid to union members upon the execution of new agreements with our labor unions. We could also experience operating inefficiencies as a result of preparations for disruptions in production, such as increasing production and inventories. Finally, companies upon which we are dependent for raw materials, transportation or other services could be affected by labor difficulties. These factors and any such disruptions or difficulties could have an adverse impact on our operating performance and financial condition.

 

In addition, we are dependent on the cooperation of our largely unionized workforce to implement and adopt the LEAN initiatives that are critical to our ability to improve our production efficiency. The effect of strikes and other slowdowns may adversely affect the degree and speed with which we can adopt LEAN optimization objectives and the success of that program.

 

We are subject to risks associated with operating in foreign countries. These risks could adversely affect our results of operations and financial condition.

 

We operate manufacturing and other facilities throughout the world. As a result of our international operations, we are subject to risks associated with operating in foreign countries, including:

 

 

 

The risks associated with operating in foreign countries may have a material adverse effect on our results of operations and financial condition.

 

High levels of inflation and high interest rates in Mexico could adversely affect the operating results and cash flows of Crisa.

 

Mexico has experienced high levels of inflation and high domestic interest rates. The annual rate of inflation, as measured by changes in the Mexican National Consumer Price Index, was 3.3% for 2005 and 5.2% for 2004. If Mexico experiences high levels of inflation, Crisa’s operating results and cash flows could be adversely affected, and, more generally, high inflation might result in lower demand or lower growth in demand for Crisa’s glass tableware products, thereby adversely affecting our results of operations and financial condition.

 

Fluctuation of the currencies in which we conduct operations could adversely affect our financial condition and results of operations.

 

Changes in the value of the various currencies in which we conduct operations relative to the U.S. dollar, including the euro and the Chinese yuan (“RMB”), may result in significant changes in the indebtedness of our non-U.S. subsidiaries.

 

Currency fluctuations between the U.S. dollar and the currencies of our non-U.S. subsidiaries affect our results as reported in U.S. dollars, particularly the earnings of Crisa as expressed under U.S. GAAP, and will continue to affect our financial income and expense, our revenues from international settlements and the calculation of financial covenants related to our U.S. dollar-denominated debt.

 

Fluctuations in the value of the foreign currencies in which we operate relative to the U.S. dollar could reduce the cost competitiveness of our products or those of our subsidiaries.

 

Major fluctuations in the value of the euro, the Mexican peso or the RMB relative to the U.S. dollar and other major currencies could reduce the cost competitiveness of our products or those of our subsidiaries, as compared to foreign competition. For example, if the U.S. dollar appreciates against the euro, the Mexican peso or the RMB, the purchasing power of those currencies effectively would be reduced against the U.S. dollar, making our U.S.-manufactured products more expensive in the euro zone, Mexico and China compared to local competitors. An appreciation of the U.S. dollar against the euro, the Mexican peso or the RMB also would increase the cost of U.S. dollar-denominated purchases for our operations in the euro zone, Mexico and China, including raw materials. We would be forced to deduct these cost increases from our profit margin or pass them along to consumers. These fluctuations could adversely affect our results of operations and financial condition.

Devaluation or depreciation of, or governmental conversion controls over, the foreign currencies in which we operate could affect our ability to convert the earnings of our foreign subsidiaries into U.S. dollars.

 

Major devaluation or depreciation of the Mexican peso could result in disruption of the international foreign exchange markets and may limit our ability to transfer or to convert Crisa’s Mexican peso earnings into U.S. dollars and other currencies, upon which we will rely in part to satisfy our debt obligations. While the Mexican government does not currently restrict, and for many years has not restricted, the right or ability of Mexican or foreign persons or entities to convert pesos into U.S. dollars or to transfer other currencies out of Mexico, the government could institute restrictive exchange rate policies in the future; restrictive exchange rate policies could adversely affect our results of operations and financial condition.

 

In addition, the government of China imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. Shortages in the availability of foreign currency may restrict the ability of our Chinese subsidiaries to remit sufficient foreign currency to make payments to us. Under existing Chinese foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the Chinese State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB are to be converted into foreign currencies and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. In the future, the Chinese government could institute restrictive exchange rate policies for current account transactions. These policies could adversely affect our results of operations and financial condition.

 

If our hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges would be reflected in our earnings.

 

We account for derivatives in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended by SFAS Nos. 137 and 138. We hold derivative financial instruments to hedge certain of our interest rate risks associated with 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. These derivatives qualify for hedge accounting if the hedges are highly effective, and we have designated and documented contemporaneously the hedging relationships involving these derivative instruments. If our hedges do not qualify as highly effective or if we do not believe that forecasted transactions would occur, the changes in the fair value of the derivatives used as hedges will impact our results of operations and could significantly impact our earnings.

 

We are subject to various environmental legal requirements and may be subject to new legal requirements in the future; these requirements could have a material adverse effect on our operations.

 

Our operations and properties, both in the U.S. and abroad, are subject to extensive laws, ordinances, regulations and other legal requirements relating to environmental protection, including legal requirements governing investigation and clean-up of contaminated properties as well as water discharges, air emissions, waste management and workplace health and safety. These legal requirements frequently change and vary among jurisdictions. Our operations and properties, both in the U.S. and abroad, must comply with these legal requirements. These requirements may have a material adverse effect on our operations.

 

We have incurred, and expect to incur, costs to comply with environmental legal requirements, and these costs could increase in the future. Many environmental legal requirements provide for substantial fines, orders (including orders to cease operations) and criminal sanctions for violations. These legal requirements may apply to conditions at properties that we presently or formerly owned or operated, as well as at other properties for which we may be responsible, including those at which wastes attributable to the Company were disposed. A significant order or judgment against us, the loss of a significant permit or license or the imposition of a significant fine may have a material adverse effect on operations.

Our failure to protect our intellectual property or prevail in any intellectual property litigation could materially and adversely affect our competitive position, reduce revenue or otherwise harm our business.

 

Our success depends in part on our ability to protect our intellectual property rights. We rely on a combination of patent, trademark, copyright and trade secret laws, licenses, confidentiality and other agreements to protect our intellectual property rights. However, this protection may not be fully adequate. Our intellectual property rights may be challenged or invalidated, an infringement suit by us against a third party may not be successful and/or third parties could adopt trademarks similar to our own. In particular, third parties could design around or copy our proprietary furnace, manufacturing and mold technologies, which are important contributors to our competitive position in the glass tableware industry. We may be particularly susceptible to these challenges in countries where protection of intellectual property is not strong. In addition, we may be accused of infringing or violating the intellectual property rights of third parties. Any such claims, whether or not meritorious, could result in costly litigation and divert the efforts of our personnel. Our failure to protect our intellectual property or prevail in any intellectual property litigation could materially and adversely affect our competitive position, reduce revenue or otherwise harm our business.

 

Our business may suffer if we do not retain our senior management.

 

We depend on our senior management. The loss of services of any of the members of our senior management team could adversely affect our business until a suitable replacement can be found. There may be a limited number of persons with the requisite skills to serve in these positions, and we may be unable to locate or employ such qualified personnel on acceptable terms.

 

Our high level of debt, as well as incurrences of additional debt, may limit our operating flexibility, which could adversely affect our results of operations and financial condition and prevent us from fulfilling our obligations under the notes.

 

We have a high degree of financial leverage. As of September 30, 2006, we had $485.3 million of debt outstanding, net of discount, of which approximately $52.0 million consists of debt secured by a first-priority lien on our assets and the remainder consists of the outstanding notes, which are secured by a second-priority lien on our collateral, and the private placement notes, which are secured by a third-priority lien on our collateral. Our senior secured credit facility provides for borrowings up to $150.0 million by Libbey Glass and Libbey Europe B.V. (a non-guarantor subsidiary), of which as of September 30, 2006, we had borrowed $52.0 million, with another $8.4 million of availability being used for outstanding letters of credit. As a result of borrowing base limitations, only an additional $36.7 million was immediately available for borrowing. We have also obtained a loan in the amount of RMB 250 million (approximately $31.0 million) from China Construction Bank Corporation Langfang Economic Development Area Sub-Branch (“CCBC”) to finance the construction of our greenfield facility in China (“China Construction Loan”). As September 30, 2006, we had borrowed RMB 220 million (approximately $27.9 million) under that line of credit. In addition, we have a payable of approximately $19.5 million that will be due and payable to Vitro in the first quarter of 2008. Our senior secured credit facility, the indenture governing the private placement notes and the indenture governing the outstanding notes and the exchange notes will require us to comply with certain covenants, including limits on additional indebtedness, certain business activities and investments and, in the case of our senior secured credit facility, the maintenance of financial ratios under certain circumstances. See “The Transactions.” We may also incur additional debt in the future.

 

Our high degree of leverage, as well as the incurrence of additional debt, could have important consequences for our business, such as:

 

 

 

If we cannot service our debt or if we fail to meet our covenants, we could have substantial liquidity problems. In those circumstances, we might have to sell assets, delay planned investments, obtain additional equity capital or restructure our debt. Depending on the circumstances at the time, we may not be able to accomplish any of these actions on favorable terms or at all.

 

In addition, the indenture governing the outstanding notes and the exchange notes and the indenture governing the private placement notes contains financial and other restrictive covenants that limit our ability to engage in activities that may be in our long-term best interests. Our failure to comply with those covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all of our indebtedness.

 

Risks Related to the Exchange Notes

 

You will be required to include original issue discount on the exchange notes in your gross income for U.S. federal income tax purposes in advance of the receipt of cash payments to which the income is attributable.

 

The outstanding notes were issued with original issue discount, and U.S. holders of exchange notes will be required to include the original issue discount in gross income for U.S. federal income tax purposes in advance of the receipt of cash payments to which the income is attributable. See “Material U.S. Federal Income Tax Considerations.”

 

We may not be able to generate sufficient cash to service all of our indebtedness, including the exchange notes, and may be forced to take other actions that may not be successful in order to satisfy our obligations under our indebtedness.

 

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. See “Cautionary Note Regarding Forward-Looking Statements.”

 

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness, including the exchange notes. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our senior secured credit facility, the indenture governing the private placement notes or the indenture governing the outstanding notes and the exchange notes. In the absence of operating results and resources sufficient to fund our debt service and other obligations, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our senior secured credit facility, the indenture governing the private placement notes and the indenture governing the outstanding notes and the exchange notes will restrict our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them. In addition, these proceeds may not be adequate to meet any debt service obligations then due. See “Description of Other Indebtedness” and “Description of Exchange Notes.”

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

 

 

We and our subsidiaries may be able to incur substantial additional indebtedness in the future, exacerbating the risks described above. The terms of the indenture governing the notes offered hereby do not fully prohibit us or our subsidiaries from doing so. If we incur any additional indebtedness that ranks equally with the exchange notes and is, subject to certain limitations, secured equally and ratably with the exchange notes, the holders of that debt will be entitled to share ratably with holders of the exchange notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding-up of us. This may have the effect of reducing the amount of proceeds paid to you. Additionally, our senior secured credit facility provides commitments of up to $150.0 million in the aggregate, including $52.0 million of loans we had drawn as of September 30, 2006. All of these borrowings are secured on a first-priority basis by substantially all of our and our subsidiary guarantors’ tangible and intangible assets (with the exception of pledges of stock of our subsidiary guarantors to the extent that they would require the filing with the SEC of separate financial statements of the subsidiary guarantors). If new debt is added to our current debt levels, the related risks that we and our subsidiaries now face could intensify. The subsidiaries that guarantee the exchange notes are also guarantors under our senior secured credit facility and of our indebtedness under the private placement notes. See “Description of Exchange Notes” and “Description of Other Indebtedness.”

 

All indebtedness, including indebtedness incurred by Libbey Europe B.V., a non-guarantor subsidiary, under our senior secured credit facility is secured by first-priority liens on collateral that includes the collateral securing the exchange notes. As a result, the exchange notes will be effectively junior to all that indebtedness, to the extent of the value of the collateral.

 

All indebtedness, including indebtedness incurred by Libbey Europe B.V., a non-guarantor subsidiary, under our senior secured credit facility is secured by first-priority liens on collateral that includes the collateral securing the exchange notes, which are secured by a second-priority lien on the collateral, and the private placement notes, which are secured by a third-priority lien on such collateral. As a result, the exchange notes will be effectively junior to all of that indebtedness (other than the indebtedness under the private placement notes), to the extent of the value of the collateral. The effect of this subordination is that upon a default in payment of, or the acceleration of, any indebtedness under our senior secured credit facility, or in the event of our, or our subsidiary guarantors’, bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding, the proceeds from the sale of the property that secures our senior secured credit facility will be available to pay obligations on the exchange notes only after all indebtedness under our senior secured credit facility has been paid in full.

 

There may not be sufficient collateral to pay all or any of the exchange notes.

 

No appraisal of the value of the collateral has been made in connection with this offering, and the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the collateral securing the exchange notes may not produce proceeds in an amount sufficient to pay any amounts due on the exchange notes.

 

Substantially all of our domestic tangible and intangible assets, and all proceeds from them, are subject to first-priority liens in favor of the lenders under our senior secured credit facility. The holders of the exchange notes will have second-priority liens on the assets, excluding pledges of stock of subsidiaries to the extent they would require the filing of separate financial statements in SEC filings. Because obligations under our senior secured credit facility are secured on a first-priority basis, our failure to comply with the terms of that

agreement would entitle those lenders to declare all funds borrowed under it to be immediately due and payable. If we were unable to service the indebtedness under the senior secured credit facility, the lenders could foreclose on our assets that serve as collateral for that facility. As a result, upon any distribution to our creditors, liquidation, reorganization or similar proceedings, or following acceleration of any of our indebtedness or an event of default under our indebtedness, the lenders under our senior secured credit facility will be entitled to be repaid in full from the proceeds of our tangible and intangible assets securing the indebtedness to them before any payment is made to you from the proceeds of that collateral.

 

In addition, we have the ability to incur indebtedness that is pari passu with the exchange notes and, subject to certain limitations, secured equally and ratably with the exchange notes. Upon any distribution to our creditors, liquidation, reorganization or similar proceedings, or following acceleration of our indebtedness or an event of default under our indebtedness, you may be required to share, on a pro rata basis, with the holders of the pari passu debt in the proceeds from the collateral securing the exchange notes on a second-priority basis. We cannot assure you that the shared collateral will produce proceeds sufficient to pay both amounts due on the exchange notes and the pari passu secured debt after the indebtedness secured by the collateral on a first-priority basis has been repaid.

 

The fair market value of the collateral is subject to fluctuations based on factors that include, among others, the condition of our facilities, the conditions of the glass tableware industry, the ability to sell the collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount received upon a sale of the collateral would be dependent on numerous factors, including but not limited to the actual fair market value of the collateral at such time and the timing and the manner of the sale. By its nature, portions of the collateral may be illiquid and may have no readily ascertainable market value. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, we cannot assure you that the proceeds from any sale or liquidation of this collateral will be sufficient to pay our obligations under our senior secured credit facility or under the exchange notes. The rights of the holders of the exchange notes with respect to the collateral securing the exchange notes will also be materially limited pursuant to the terms of an intercreditor agreement.

 

The rights of holders of exchange notes to the collateral will be governed, and materially limited, by the intercreditor agreement.

 

The holders of indebtedness under our senior secured credit facility, which is secured on a first-priority basis, will control substantially all matters related to the collateral securing the indebtedness, the exchange notes and the private placement notes pursuant to the terms of the intercreditor agreement. Under the intercreditor agreement, at any time that the indebtedness secured on a first-priority basis remains outstanding, any actions that may be taken in respect of the collateral, including the ability to commence enforcement proceedings against the collateral and to control the conduct of the proceedings, and the approval of amendments to, releases of collateral from the lien of, and waivers of past defaults under, the collateral documents, will be at the direction of the holders of the indebtedness. The trustee on behalf of the holders of the exchange notes (as well as the holders of the private placement notes), with limited exceptions, will not have the ability to control or direct these actions, even if the rights of the holders of the exchange notes (or the holders of the private placement notes) are adversely affected. Any release of all first-priority liens upon any collateral approved by the holders of first-priority liens will also release the second-priority liens securing the exchange notes on the same collateral, as well as release the third-priority liens in favor of the holders of the private placement notes. See “Description of Exchange Notes — Collateral.”

 

Guarantees of the exchange notes may be released.

 

In addition, the exchange notes will be guaranteed by each of our future restricted subsidiaries that guarantees any of the debt of Libbey Glass or debt of any subsidiary guarantor. Under the terms of the indenture, a guarantee of the exchange notes made by a note guarantor will be released without any action on the part of the trustee or any holder of exchange notes if the collateral agent under our senior secured credit facility releases the guarantee of the obligations under our senior secured credit facility made by that note guarantor and it is released from all other guarantees of our indebtedness (unless the note guarantor remains a

guarantor of our other debt) so long as the remaining debt of the subsidiary is permitted to have been incurred by a non-guarantor subsidiary. See “Description of Exchange Notes — Note Guarantees.”

 

The rights of holders of exchange notes in the collateral may be adversely affected by the failure to perfect security interests in certain collateral acquired in the future.

 

Applicable law requires that certain property and rights acquired after the grant of a general security interest can only be perfected only at the time the property and rights are acquired and identified. There can be no assurance that the collateral agent under the senior secured credit facility or the trustee or the collateral agent for the exchange notes will monitor, or that we will inform the collateral agent under the senior secured credit facility or the trustee or the collateral agent for the exchange notes of, the future acquisition of property and rights that constitute collateral, and that the necessary action will be taken to properly perfect the security interest in the after-acquired collateral. The collateral agent for the exchange notes has no obligation to monitor the acquisition of additional property or rights that constitute collateral or the perfection of any security interest in favor of the exchange notes against third parties.

 

In the event of our bankruptcy, the ability of the holders of the exchange notes to realize upon the collateral will be subject to certain bankruptcy law limitations.

 

The ability of holders of the exchange notes to realize upon the collateral will be subject to certain bankruptcy law limitations in the event of our bankruptcy. Under applicable federal bankruptcy laws, secured creditors are prohibited from repossessing their security from a debtor in a bankruptcy case, or from disposing of security repossessed from such a debtor, without bankruptcy court approval. Moreover, applicable federal bankruptcy laws generally permit the debtor to continue to retain collateral even though the debtor is in default under the applicable debt instruments, provided generally that the secured creditor is given “adequate protection.” The meaning of the term “adequate protection” may vary according to the circumstances, but is intended in general to protect the value of the secured creditor’s interest in the collateral at the commencement of the bankruptcy case and may include cash payments or the granting of additional security, if and at such times as the presiding court in its discretion determines, for any diminution in the value of the collateral as a result of the stay of repossession or disposition of the collateral during the pendency of the bankruptcy case. In view of the lack of a precise definition of the term “adequate protection” and the broad discretionary powers of a U.S. bankruptcy court, we cannot predict whether payments under the exchange notes would be made following commencement of and during a bankruptcy case, whether or when the trustee under the indenture for the exchange notes could foreclose upon or sell the collateral or whether or to what extent holders of exchange notes would be compensated for any delay in payment or loss of value of the collateral through the provision of “adequate protection.”

 

Restrictive covenants may adversely affect our operations.

 

Our senior secured credit facility, the indenture governing the private placement notes and the indenture governing the outstanding notes and the exchange notes contain various covenants that limit our ability to, among other things:

 

 

 

In addition, the restrictive covenants in our senior secured credit facility require us, in certain circumstances, to maintain a specified financial ratio and satisfy other financial condition tests. Our ability to meet the financial ratio and financial condition tests can be affected by events beyond our control. We cannot assure you that we will meet those tests. A breach of any of these covenants could result in a default under our senior secured credit facility. Upon the occurrence of an event of default under our senior secured credit facility, the lenders could elect to declare all amounts outstanding under our senior secured credit facility to be immediately due and payable and terminate all commitments to extend further credit. If we were unable to repay those amounts, the lenders under our senior secured credit facility could proceed against the collateral granted to them to secure that indebtedness. We have pledged a significant portion of our assets as collateral under our senior secured credit facility. If the lenders under our senior secured credit facility were to accelerate the repayment of borrowings, we cannot assure you that we would have sufficient assets to repay our senior secured credit facility and our other indebtedness, including the exchange notes, or to borrow sufficient funds to refinance the indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms or on other terms that are acceptable to us. See “Description of Other Indebtedness.”

 

Variable rate indebtedness subjects us to interest rate risk that could cause our debt service obligations to increase significantly.

 

A significant portion of our indebtedness, primarily indebtedness under the outstanding notes and under our senior secured credit facility, is, and is expected to continue to be, at variable rates of interest, exposing us to interest rate risk. At September 30, 2006, we had interest rate protection agreements for $200 million of variable rate debt. However, if interest rates increase, our debt service obligations on the variable rate indebtedness that is not covered by interest rate protection agreements would increase even though the amount borrowed remained the same, and our net income would decrease. The applicable margin with respect to loans under the senior secured credit facility will be a percentage per annum equal to 1.75% for LIBOR rate revolving loans for the first six months and subject to an availability-based schedule thereafter. Assuming all revolving loans are fully drawn, each quarter point change in interest rates would result in a $0.4 million change in annual interest expense on our senior secured credit facility and a $0.3 million change in annual interest expense on the outstanding notes or the exchange notes. In the future we may enter into additional interest rate swaps that involve the exchange of floating for fixed rate interest payments in order to further reduce interest rate volatility.

 

The exchange notes will be structurally subordinated to all indebtedness of our existing or future subsidiaries that do not become guarantors of the exchange notes.

 

You will not have any claim as a creditor against any of our existing subsidiaries that are not guarantors of the exchange notes or against any of our future subsidiaries that do not become guarantors of the exchange notes. Indebtedness and other liabilities, including trade payables, whether secured or unsecured, of those subsidiaries will be effectively senior to your claims against those subsidiaries. The exchange notes are not secured by any of the assets of non-guarantor subsidiaries.

 

At September 30, 2006, the issuer and the guarantor subsidiaries collectively represented 45% of our total assets and 77% of our total liabilities, including trade payables but excluding intercompany liabilities.

 

In addition, subject to some limitations, the indenture governing the private placement notes and the indenture governing the outstanding notes and exchange notes permit these subsidiaries to incur additional indebtedness and do not contain any limitation on the amount of other liabilities, such as trade payables, that may be incurred by these subsidiaries.

If we default on our obligations to pay our indebtedness, we may not be able to make payments on the exchange notes.

 

Any default under the agreements governing our indebtedness, including a default under our senior secured credit facility that is not waived by the required lenders or, in the case of the indenture governing the private placement notes, by the required private placement noteholders, and the remedies sought by the holders of the indebtedness, could make us unable to pay principal, premium, if any, and interest on the exchange notes and substantially decrease the market value of the exchange notes. If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium (if any) and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness (including covenants in the indenture governing the outstanding notes and the exchange notes, the indenture governing the private placement notes and our senior secured credit facility), we could be in default under the terms of the agreements governing our indebtedness, including our senior secured credit facility, the indenture governing the outstanding notes and the exchange notes and the indenture governing the private placement notes. In the event of default, the holders of our indebtedness could elect to declare all the borrowed funds to be due and payable, together with accrued and unpaid interest, and the lenders under our senior secured credit facility could elect to terminate their commitments and cease making further loans and institute foreclosure proceedings against our assets. In addition, we could be forced into bankruptcy or liquidation. If our operating performance declines, we may in the future need to obtain waivers from the required lenders under our senior secured credit facility to avoid being in default. In the past, we were required to seek similar amendments from the holders of our indebtedness that we repaid in connection with the Refinancing. If we breach our covenants under our senior secured credit facility or the indenture governing the private placement notes and seek a waiver, we may not be able to obtain a waiver from the required lenders or private placement noteholders, as applicable. If this were to occur, we would be in default under our senior secured credit facility and/or the indenture governing the private placement notes; the lenders or private placement noteholders, as applicable, could exercise their rights, as described above; and we could be forced into bankruptcy or liquidation. See “Description of Other Indebtedness” and “Description of Exchange Notes.”

 

Despite current indebtedness levels, we and our future subsidiaries may still be able to incur substantially more debt. This could further exacerbate the risks associated with our substantial leverage.

 

We may be able to incur substantial additional indebtedness in the future. The terms of the indenture governing the outstanding notes and the exchange notes, the indenture governing the private placement notes and our senior secured credit facility do not fully prohibit us from doing so. Our senior secured credit facility provides for borrowings up to $150.0 million, of which, as of September 30, 2006, we had drawn $52.0 million, with another $8.4 million in availability being used for outstanding letters of credit. As a result of borrowing base limitations, only an additional $36.7 million remained immediately available for borrowing under our senior secured credit facility as of September 30, 2006. If new indebtedness is added to our current debt levels, the related risks that we now face could intensify.

 

We may not be able to repurchase the exchange notes upon a change of control.

 

Upon the occurrence of specific kinds of change of control events, we will be required to offer to repurchase all outstanding notes, exchange notes and private placement notes at 101% of their principal amount, plus accrued and unpaid interest. We may not be able to repurchase the outstanding notes, the exchange notes and the private placement notes upon a change of control because we may not have sufficient funds. Further, we may be contractually restricted under the terms of our senior secured credit facility or other future senior indebtedness from repurchasing all of the outstanding notes, exchange notes and private placement notes tendered by holders upon a change of control. Accordingly, we may not be able to satisfy our obligations to purchase your exchange notes unless we are able to refinance or obtain waivers under our senior secured credit facility or other senior indebtedness, as applicable. Our failure to repurchase the exchange notes upon a change of control would cause a default under the indenture governing the outstanding notes and the exchange notes and a cross-default under the senior secured credit facility, and a possible cross-default under

the indenture governing the private placement notes. Our failure to repurchase the private placement notes upon a change of control would cause a default under the indenture governing the private placement notes and a cross-default under the senior secured credit facility, and a possible cross-default under the indenture governing the outstanding notes and the exchange notes. Our senior secured credit facility also provides that a change of control, as defined in our senior credit agreement, will be a default that permits lenders to accelerate the maturity of borrowings under that agreement and, if the debt is not paid, to enforce security interests in the collateral securing that debt, thereby limiting our ability to raise cash to purchase the exchange notes, and reducing the practical benefit of the offer-to-purchase provisions to the holders of the exchange notes. Any of our future debt agreements may contain similar provisions.

 

In addition, the change of control provisions in the indenture may not protect you from certain important corporate events, such as a leveraged recapitalization (which would increase the level of our indebtedness), reorganization, restructuring, merger or other similar transaction, unless the transaction constitutes a “Change of Control” under the indenture. Such a transaction may not involve a change in voting power or beneficial ownership or, even if it does, may not involve a change that constitutes a “Change of Control,” as defined in the indenture, that would trigger our obligation to repurchase the exchange notes. Therefore, if an event occurs that does not constitute a “Change of Control,” as defined in the indenture, we will not be required to make an offer to repurchase the exchange notes and you may be required to continue to hold your exchange notes despite the event. See “Description of Other Indebtedness” and “Description of Exchange Notes — Change of Control.”

 

Federal and state fraudulent transfer laws permit a court to void the exchange notes and the guarantees. If that were to occur, you may not receive any payments on the exchange notes.

 

The issuance of the exchange notes and the guarantees may be subject to review under federal and state fraudulent transfer and conveyance statutes. While the relevant laws may vary from state to state, under these laws the payment of consideration would be a fraudulent conveyance if (1) we paid the consideration with the intent of hindering, delaying or defrauding creditors or (2) we or any of our guarantors, as applicable, received less than reasonably equivalent value or fair consideration in return for issuing either the exchange notes or a guarantee and, in the case of (2) only, one of the following is also true:

 

 

If a court were to find that the issuance of the exchange notes or a guarantee was a fraudulent conveyance, the court could void the payment obligations under the exchange notes or guarantee or subordinate the exchange notes or guarantee to presently existing and future indebtedness of ours or the guarantor, or require the holders of the exchange notes to repay any amounts received with respect to the exchange notes or guarantee. If the court were to find that a fraudulent conveyance had occurred, you may not receive any repayment on the exchange notes. Further, the voidance of the exchange notes could result in an event of default with respect to our other debt and that of our guarantors that could result in acceleration of the debt.

 

Generally, an entity would be considered insolvent if, at the time it incurred indebtedness:

 

 

We cannot be certain as to the standards a court would use to determine whether or not we or the guarantors were solvent at the relevant time, or, regardless of the standard that a court were to use, that the issuance of the exchange notes and the guarantees would not be subordinated to our or any guarantor’s other debt.

 

If the guarantees were legally challenged, any guarantee could also be subject to the claim that, since the guarantee was incurred for our benefit, and only indirectly for the benefit of the guarantor, the obligations of the applicable guarantor were incurred for less than fair consideration. A court could thus void the obligations under the guarantees, subordinate them to the applicable guarantor’s other debt or take other action detrimental to the holders of the exchange notes.

 

There is no public market for the exchange notes, and there is no assurance that any active trading market for the exchange notes will develop or that you will be able to sell your exchange notes.

 

The exchange notes are new issues of securities for which there is no established public market. We do not intend to have the outstanding notes or any exchange notes listed on a national securities exchange or to arrange for quotation on any automated dealer quotation systems, although we expect that they will be eligible for trading in The PORTAL ^sm Market. The initial purchasers have advised us that they intend to make a market in the exchange notes, if issued, as permitted by applicable laws and regulations; however, the initial purchasers are not obligated to make a market in the exchange notes and they may discontinue their market-making activities at any time without notice. In addition, the market-making activities may be limited during the exchange offer or while the effectiveness of a shelf registration statement is pending. Therefore, we cannot assure you as to the development or liquidity of any trading market for the exchange notes. The liquidity of any market for the exchange will depend on a number of factors, including:

 

 

Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the notes. We cannot assure you that the market, if any, for the exchange notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your exchange notes. Therefore, we cannot assure you that you will be able to sell your exchange notes at a particular time or that the price you receive when you sell will be favorable.

 

The Acquisition

 

Overview

 

In April 2006, through our wholly owned subsidiaries, we entered into a purchase agreement with Vitro and Crisa (the “Purchase Agreement”). Pursuant to the Purchase Agreement, on June 16, 2006 we acquired the 51.0% equity interests in Crisa that we did not previously own. Prior to the Acquisition, Crisa conveyed to Vitro ownership of certain real estate on which one of Crisa’s two manufacturing facilities is located, and Vitro conveyed to Crisa ownership of the real estate on which the recently constructed distribution center is located (and the racks and conveyors located in it) and that Crisa formerly leased from Vitro and used as its primary distribution center. Although Crisa no longer owns the manufacturing property that it conveyed to Vitro, Crisa has the right to occupy and utilize that facility until June 16, 2009, subject to certain limitations. Crisa is not obligated to pay any rent or other occupancy charge to Vitro, but Crisa is responsible for paying real estate taxes, maintaining insurance and paying for utilities during that three-year period.

 

In addition, prior to the closing of the Acquisition, Crisa transferred to Vitro all assets and liabilities associated with the manufacture, distribution, marketing and sale of lead crystal glass articles that are commonly referred to as “Taller de Colección.” The assets associated with Taller de Colección represented 0.5% of Crisa’s total assets as of December 31, 2005, and the net sales associated with Taller de Colección represented 0.8% of Crisa’s net sales for the year ended December 31, 2005.

 

Purchase Price

 

The purchase price for the Acquisition was $80.0 million in cash (excluding fees, expenses and the assumption of debt and other liabilities). In connection with the Acquisition, Crisa transferred to Vitro the pension liability for Crisa employees who had retired as of the closing date. Vitro also forgave approximately $0.4 million of accounts payable owed by Crisa to Vitro. In addition, purchase price proceeds of $8.0 million were deposited into a Mexican trust to secure Vitro’s indemnification obligations to us. In connection with the Transactions, we refinanced, using the proceeds of the outstanding notes and private placement notes, Crisa’s existing debt of approximately $71.9 million. See “— The Refinancing.”

 

Certain Terms and Conditions

 

The Purchase Agreement contains customary terms and conditions, including representations and warranties of Vitro.

 

$80.0 million cap. Our indemnification obligations with respect to breaches of representations and warranties survive for two years, and those with respect to covenants survive indefinitely.

 

Transition Services

 

In connection with Acquisition, Vitro is obligated to provide certain transition services to Crisa until June 16, 2009. These services include the services of Crisa’s general manager, who is employed by Vitro.

 

Non-competition Agreement

 

At the closing of the Acquisition, the parties to the Purchase Agreement entered into a Non-Competition Agreement that requires Vitro to make certain payments to us if Vitro directly or indirectly engages in competition with Crisa in Mexico or certain other regions at any time within five years after the closing. Subject to limited exceptions, the Purchase Agreement prohibits Vitro from competing with Crisa in other regions at any time within five years after the closing.

 

Profit sharing

 

In April 2006, we and our parent entered into the Second Amendment to the Amended and Restated Distribution Agreement (the “Second Amendment”), dated April 2 ,2006 with Vitro; Crisa Texas Ltd DBA Crisa Ltd., a Texas limited partnership (“Crisa Ltd”), as successor to Crisa Corporation, a Texas corporation; and VC Comercial, as successor to Crisa (collectively, the “Vitro Parties”). The Second Amendment provides that we are not be obligated to pay Crisa Ltd any profit-sharing payments with respect to products of VC Comercial shipped and invoiced by us on or after February 1, 2006.

 

The Refinancing

 

The proceeds from the offering of the outstanding notes, together with the proceeds from the private placement notes and the borrowings under our senior secured credit facility, were used to finance the Transactions, including the repayment of certain then-existing indebtedness of Libbey Glass Inc. and Libbey Europe B.V., the repayment of all of Crisa’s then-existing indebtedness and the payment of related fees and expenses, as described more fully under “Use of Proceeds.”

 

Our senior secured credit facility provides for borrowings of up to $150.0 million, of which, as of September 30, 2006, we had drawn approximately $52.0, with another $8.4 million of availability being used for outstanding letters of credit. As a result of borrowing base limitations, only an additional $36.7 million was immediately available for borrowing under our senior secured credit facility as of September 30, 2006. See “Description of Other Indebtedness — Senior Secured Credit Facility” for a more detailed description of the senior secured credit facility.

 

In addition, we issued $102.0 million of senior subordinated secured pay-in-kind notes due 2011 in a private placement to an investor (with an issue price of 98%), together with warrants to purchase 485,309 shares of Libbey Inc.’s common stock at an exercise price equal to $11.25. See “Description of Other Indebtedness — Private Placement Notes” for a more detailed description of the private placement notes.

 

Purpose and Effect

 

In connection with the sale by us of the outstanding notes on June 16, 2006, we and the guarantors entered into a registration rights agreement, dated June 16, 2006, with the initial purchasers of the outstanding notes, which requires that we use our reasonable best efforts to file with the Securities and Exchange Commission, and to cause to become effective a registration statement under the Securities Act with respect to the exchange notes and, upon effectiveness of that registration statement, to offer to the holders of the outstanding notes the opportunity to exchange their outstanding notes for a like principal amount of exchange notes. The exchange notes will be issued without a restrictive legend and generally may be reoffered and resold without registration under the Securities Act. The registration rights agreement further provides that we must use our reasonable best efforts to complete the exchange offer within 60 days after the effective date of our registration statement.

 

Except as described below, upon the completion of the exchange offer, our obligations with respect to the registration of the outstanding notes will terminate. A copy of the registration rights agreement has been filed as an exhibit to the registration statement of which this prospectus is a part, and this is a summary of the material provisions of the registration rights agreement. For a more complete understanding of the registration rights agreement, we encourage you to read the actual agreement as it, and not this description, governs your rights as holders of the outstanding notes. As a result of the timely filing and the effectiveness of the registration statement, we will not have to pay certain additional interest on the outstanding notes provided in the registration rights agreement. Following the completion of the exchange offer, holders of outstanding notes that are not tendered will not have any further registration rights other than as set forth in the paragraphs below, and those outstanding notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for the outstanding notes could be adversely affected upon consummation of the exchange offer.

 

In order to participate in the exchange offer, a holder must represent to us, among other things, that:

 

 

In the event that:

 

 

we must use commercially reasonable efforts to cause to be filed a “shelf” registration statement for a continuous offering in connection with the outstanding notes pursuant to Rule 415 under the Securities Act.

 

Based on an interpretation by the SEC’s staff set forth in no-action letters issued to third parties unrelated to us, we believe that, with the exceptions set forth below, exchange notes issued in the exchange offer may be

offered for resale, resold and otherwise transferred by the holder of exchange notes without compliance with the registration and prospectus delivery requirements of the Securities Act, unless the holder:

 

 

Any holder who tenders in the exchange offer for the purpose of participating in a distribution of the exchange notes cannot rely on this interpretation by the SEC’s staff and must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where the outstanding notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. See “Plan of Distribution.” Broker-dealers who acquired outstanding notes directly from us and not as a result of market-making activities or other trading activities may not rely on the SEC’s staff’s interpretations discussed above or participate in the exchange offer and must comply with the prospectus delivery requirements of the Securities Act in order to sell the outstanding notes.

 

Terms of the Exchange Offer

 

Upon the terms and subject to the conditions set forth in this prospectus and in the letter of transmittal, we will accept any and all outstanding notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time, on          , 2007 or such date and time to which we extend the offer. We will issue $1,000 in principal amount of exchange notes in exchange for each $1,000 principal amount of outstanding notes accepted in the exchange offer. Holders may tender some or all of their outstanding notes pursuant to the exchange offer. However, outstanding notes may be tendered only in integral multiples of $1,000 in principal amount.

 

The exchange notes will evidence the same debt as the outstanding notes and will be issued under the terms of, and entitled to the benefits of, the applicable indenture relating to the outstanding notes.

 

As of the date of this prospectus, outstanding notes representing $306.0 million in aggregate principal amount of notes were outstanding and there was one registered holder, a nominee of The Depository Trust Company. This prospectus, together with the letter of transmittal, is being sent to the registered holder and to others believed to have beneficial interests in the outstanding notes. We intend to conduct the exchange offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the SEC promulgated under the Exchange Act.

 

We will be deemed to have accepted validly tendered outstanding notes when, as and if we have given oral or written notice thereof to The Bank of New York Trust Company, N.A., the exchange agent. The exchange agent will act as agent for the tendering holders for the purpose of receiving the exchange notes from us. If any tendered outstanding notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth under the heading “— Conditions to the Exchange Offer” or otherwise, certificates for any such unaccepted outstanding notes will be returned, without expense, to the tendering holder of those outstanding notes promptly after the expiration date unless the exchange offer is extended.

 

Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes with respect to the exchange of outstanding notes in the exchange offer. We will pay all charges and expenses, other than certain applicable taxes, applicable to the exchange offer. See “— Fees and Expenses.”

Expiration Date; Extensions; Amendments

 

The expiration date shall be 5:00 p.m., New York City time, on          , 2007, unless we, in our sole discretion, extend the exchange offer, in which case the expiration date shall be the latest date and time to which the exchange offer is extended. In order to extend the exchange offer, we will notify the exchange agent and each registered holder of any extension by press release or other public announcement prior to 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. We reserve the right, in our sole discretion:

 

 

If we make a fundamental change to the terms of the exchange offer, we will file a post-effective amendment to the registration statement.

 

Procedures for Tendering Outstanding Notes

 

Only a holder of outstanding notes may tender outstanding notes in the exchange offer. Except as set forth under the heading “— Book-Entry Transfer,” to tender in the exchange offer a holder must complete, sign and date the letter of transmittal, or a copy of the letter of transmittal, have the signatures on the letter of transmittal guaranteed if required by the letter of transmittal, and mail or otherwise deliver the letter of transmittal or copy to the exchange agent prior to the expiration date. In addition:

 

 

To be tendered effectively, the letter of transmittal and other required documents must be received by the exchange agent at the address set forth under the heading “— Exchange Agent” prior to the expiration date.

 

Your tender, if not withdrawn before the expiration date, will constitute an agreement between you and us in accordance with the terms and subject to the conditions set forth herein and in the letter of transmittal.

 

The method of delivery of outstanding notes and the letter of transmittal and all other required documents to the exchange agent is at your election and risk. We recommend that, instead of using delivery by mail, you use an overnight or hand delivery service. In all cases, sufficient time should be allowed to assure delivery to the exchange agent before the expiration date. No letter of transmittal or outstanding notes should be sent to us. You may request your brokers, dealers, commercial banks, trust companies or nominees to effect these transactions for you.

 

Any beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company, or other nominee and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner’s behalf. If the beneficial owner wishes to tender on the owner’s own behalf, the owner must, prior to completing and executing the letter of transmittal and delivering the owner’s outstanding notes, either make appropriate arrangements to register ownership of the outstanding notes in the beneficial owner’s name or obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time.

Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an “eligible guarantor institution” within the meaning of Rule 17Ad-15 under the Exchange Act, which we refer to as an eligible institution, unless outstanding notes tendered pursuant thereto are tendered:

 

 

If signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantee must be by any eligible guarantor institution that is a member of or participant in the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Program or an eligible institution.

 

If the letter of transmittal is signed by a person other than the registered holder of any outstanding notes listed in the letter of transmittal, the outstanding notes must be endorsed or accompanied by a properly completed bond power, signed by the registered holder as that registered holder’s name appears on the outstanding notes.

 

If the letter of transmittal or any outstanding notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations, or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and evidence satisfactory to us of their authority to so act must be submitted with the letter of transmittal unless waived by us.

 

All questions as to the validity, form and eligibility, including time of receipt, acceptance and withdrawal of tendered outstanding notes, will be determined by us in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any and all outstanding notes not properly tendered or any outstanding notes our acceptance of which would, in the opinion of our counsel, be unlawful. We also reserve the right to waive any defects, irregularities or conditions of tender as to particular outstanding notes. Our interpretation of the terms and conditions of the exchange offer, including the instructions in the letter of transmittal, will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of outstanding notes must be cured within such time as we shall determine. Although we intend to notify holders of defects or irregularities with respect to tenders of outstanding notes, neither we, the exchange agent, nor any other person shall incur any liability for failure to give that notification. Tenders of outstanding notes will not be deemed to have been made until the defects or irregularities have been cured or waived. Any outstanding notes received by the exchange agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the exchange agent to the tendering holders, unless otherwise provided in the letter of transmittal, promptly following the expiration date, unless the exchange offer is extended.

 

In addition, we reserve the right in our sole discretion to purchase or make offers for any outstanding notes that remain outstanding after the expiration date or, as set forth under the heading “— Conditions to the Exchange Offer,” to terminate the exchange offer and, to the extent permitted by applicable law, purchase outstanding notes in the open market, in privately negotiated transactions, or otherwise. The terms of any such purchases or offers could differ from the terms of the exchange offer.

 

By tendering, you will be representing to us that, among other things:

 

 

In all cases, issuance of exchange notes for outstanding notes that are accepted for exchange in the exchange offer will be made only after timely receipt by the exchange agent of certificates for the outstanding notes or a timely book-entry confirmation of the outstanding notes into the exchange agent’s account at the book-entry transfer facility, a properly completed and duly executed letter of transmittal or, with respect to The Depository Trust Company and its participants, electronic instructions in which the tendering holder acknowledges its receipt of and agreement to be bound by the letter of transmittal, and all other required documents. If any tendered outstanding notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if outstanding notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged outstanding notes will be returned without expense to the tendering holder or, in the case of outstanding notes tendered by book-entry transfer into the exchange agent’s account at the book-entry transfer facility according to the book-entry transfer procedures described below, those non-exchanged outstanding notes will be credited to an account maintained with that book-entry transfer facility, in each case, promptly after the expiration or termination of the exchange offer.

 

Each broker-dealer that receives exchange notes for its own account in exchange for outstanding notes, where those outstanding notes were acquired by the broker-dealer as a result of market making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of those exchange notes. See “Plan of Distribution.”

 

Book-Entry Transfer

 

The exchange agent will make a request to establish an account with respect to the outstanding notes at the book-entry transfer facility for purposes of the exchange offer within two business days after the date of this prospectus, and any financial institution that is a participant in the book-entry transfer facility’s systems may make book-entry delivery of outstanding notes being tendered by causing the book-entry transfer facility to transfer the outstanding notes into the exchange agent’s account at the book-entry transfer facility in accordance with that book-entry transfer facility’s procedures for transfer. However, although delivery of outstanding notes may be effected through book-entry transfer at the book-entry transfer facility, the letter of transmittal or copy of the letter of transmittal, with any required signature guarantees and any other required documents, must, in any case other than as set forth in the following paragraph, be transmitted to and received by the exchange agent at the address set forth under the heading “— Exchange Agent” on or prior to the expiration date or the guaranteed delivery procedures described below must be complied with.

 

The Depository Trust Company’s Automated Tender Offer Program, or “ATOP,” is the only method of processing exchange offers through The Depository Trust Company. To accept the exchange offer through ATOP, participants in The Depository Trust Company must send electronic instructions to The Depository Trust Company through The Depository Trust Company’s communication system instead of sending a signed, hard copy letter of transmittal. The Depository Trust Company is obligated to communicate those electronic instructions to the exchange agent. To tender outstanding notes through ATOP, the electronic instructions sent to The Depository Trust Company and transmitted by The Depository Trust Company to the exchange agent must contain the character by which the participant acknowledges its receipt of and agrees to be bound by the letter of transmittal.

 

Guaranteed Delivery Procedures

 

If a registered holder of the outstanding notes desires to tender outstanding notes and the outstanding notes are not immediately available, or time will not permit that holder’s outstanding notes or other required documents to reach the exchange agent before the expiration date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected if:

 

 

 

Withdrawal Rights

 

Tenders of outstanding notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the expiration date.

 

For a withdrawal of a tender of outstanding notes to be effective, a written or, for The Depository Trust Company participants, electronic ATOP transmission notice of withdrawal, must be received by the exchange agent at its address set forth under the heading “— Exchange Agent” prior to 5:00 p.m., New York City time, on the expiration date. Any such notice of withdrawal must:

 

 

All questions as to the validity, form, eligibility and time of receipt of the notices will be determined by us, whose determination shall be final and binding on all parties. Any outstanding notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any outstanding notes that have been tendered for exchange but that are not exchanged for any reason will be returned to the holder of those outstanding notes without cost to that holder promptly after withdrawal, rejection of tender, or termination of the exchange offer. Properly withdrawn outstanding notes may be retendered by following one of the procedures under the heading “— Procedures for Tendering” at any time on or prior to the expiration date.

 

Conditions to the Exchange Offer

 

Notwithstanding any other provision of the exchange offer, we will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes and may terminate or amend the exchange offer if at any time before the acceptance of those outstanding notes for exchange or the exchange of the exchange notes for those outstanding notes, we determine that the exchange offer violates any applicable law or applicable interpretation of the Staff of the SEC.

 

The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any such condition or may be waived by us in whole or in part at any time and from time to time prior to the expiration of the exchange offer in our sole discretion. The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any of those rights and each of those rights shall be deemed an ongoing right that may be asserted at any time and from time to time prior to the expiration of the exchange offer.

In addition, we will not accept for exchange any outstanding notes tendered, and no exchange notes will be issued in exchange for those outstanding notes, if at the time any stop order shall be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part. We are required to use commercially reasonable efforts to obtain the withdrawal of any stop order at the earliest possible time.

 

Accounting Treatment

 

The exchange notes will be recorded at the same carrying value as the outstanding notes as reflected in our accounting records on the date of the exchange. Accordingly, we will not recognize any gain or loss for accounting purposes upon the completion of the exchange offer. The expenses of the exchange offer that we pay will increase our deferred financing costs in accordance with generally accepted accounting principles.

 

 

The exchange offer is intended to satisfy our obligations under the registration rights agreement, dated June 16, 2006, by and among us, the guarantors and the initial purchasers of the outstanding notes. We will not receive any proceeds from the issuance of the exchange notes in the exchange offer. We will receive in exchange outstanding notes in like principal amount. We will retire or cancel all of the outstanding notes tendered in the exchange offer.

 

On June 16, 2006, we issued and sold the outstanding notes and used the net proceeds from the offering of the outstanding notes to finance the Acquisition, discharge all of our then existing 4.19% senior notes due 2008, 5.58% senior notes due 2013 and floating rate senior notes due 2010 and repay a portion of our outstanding indebtedness under our then-existing credit facility. See “The Transactions.”

 

The following table sets forth our actual capitalization on a consolidated and combined basis as of September 30, 2006. This table should be read in conjunction with “Unaudited Pro Forma Consolidated and Combined Financial Data,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated and combined financial statements and the notes thereto included in, or incorporated by reference into, this prospectus.

 

 

 

 

The following unaudited pro forma consolidated and combined financial information is based on our audited and unaudited consolidated and combined financial statements included elsewhere in, or incorporated by reference into, this prospectus, adjusted to illustrate the pro forma effect of the Transactions.

 

An unaudited pro forma consolidated and combined balance sheet is not provided in this section as the unaudited September 30, 2006 Libbey Inc. Consolidated Balance Sheet reflects the effect of the Transactions as they occurred on June 16, 2006. The unaudited September 30, 2006 Libbey Inc. Consolidated Balance Sheet is included in a previous filing with the United States Securities and Exchange Commission (the “SEC”) and is incorporated by reference herein. The unaudited pro forma consolidated and combined statements of operations for the year ended December 31, 2005 and for the nine months ended September 30, 2005 and 2006 give effect to the Transactions as if they had occurred on January 1, 2005.

 

The unaudited pro forma adjustments are based upon currently available information and certain assumptions that we believe to be reasonable under the circumstances. The pro forma adjustments reflect our preliminary estimates of the purchase price allocation for the purchase of Crisa under step acquisition accounting, which are expected to change upon finalization of appraisals of the net assets acquired that we will arrange to obtain and the completion of our plan to restructure certain manufacturing operations and reduce the headcount at Crisa. The final allocation will be based on the actual assets and liabilities that exist as of the date of the completion of the Transactions. Any additional purchase price allocation to inventory for production profit would impact cost of goods sold subsequent to the Acquisition. Any additional purchase price allocation to property, plant and equipment or other finite-lived intangible assets would result in additional depreciation and amortization expense, which may be significant. Additionally, the structure of the Transactions and certain tax planning that we may undertake in connection with the Transactions and subsequent tax filings may impact income tax expense.

 

The unaudited pro forma consolidated and combined financial information is for informational purposes only and is not intended to represent the consolidated and combined results of operations or financial position that we would have reported had the Transactions been completed as of the date presented, and should not be taken as indicative of our future consolidated results of operations or financial position.

 

The unaudited pro forma consolidated and combined financial information should be read in conjunction with the information contained in “The Transactions,” “Use of Proceeds,” “Capitalization,” “Selected Historical Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and consolidated and combined financial statements of the Company and Crisa and related notes included elsewhere in, or incorporated by reference into, this prospectus.

 

Notes to Unaudited Pro Forma Consolidated and Combined Statements of Operations
(Dollars in thousands)