10-K 1 l87109ae10-k.txt LIBBEY INC. 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K (Mark One) [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2000 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 LIBBEY INC. (Exact name of registrant as specified in its charter) Delaware 1-12084 34-1559357 (State or other jurisdiction of (Commission (IRS Employer incorporation or organization) file number) Identification No.) 300 Madison Avenue, Toledo, Ohio 43604 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (419)325-2100 Securities registered pursuant to Section 12(b) of the Act:

Name of each exchange on Title of each class which registered ------------------- ---------------- Common Stock, $.01 par value New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- (Cover page 1 of 2 pages) 2 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value (based on the consolidated tape closing price on March 16, 2001) of the voting stock beneficially held by non-affiliates of the registrant was approximately $468,673,562. For the sole purpose of making this calculation, the term "non-affiliate" has been interpreted to exclude directors and executive officers of the registrant. Such interpretation is not intended to be, and should not be construed to be, an admission by the registrant or such directors or executive officers that any such persons are "affiliates" of the registrant, as that term is defined under the Securities Act of 1934. The number of shares of common stock, $.01 par value, of the registrant outstanding as of March 16, 2001 was 15,283,631 DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Items 10, 11, 12 and 13 of Form 10-K is incorporated by reference into Part III hereof from the registrant's Proxy Statement for The Annual Meeting of Shareholders to be held Thursday, May 10, 2001 ("Proxy Statement"). (Cover page 2 of 2 pages) 3 TABLE OF CONTENTS PART I ITEM 1. BUSINESS................................................................................... 1 ITEM 2. PROPERTIES................................................................................. 9 ITEM 3. LEGAL PROCEEDINGS.......................................................................... 9 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........................................ 9 EXECUTIVE OFFICERS OF THE REGISTRANT .................................................................... 10 PART II ITEM 5. MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS.................................... 12 ITEM 6. SELECTED FINANCIAL DATA.................................................................... 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ..... 14 ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK ................................ 18 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................................................ 20 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE....... 44 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT......................................... 44 ITEMS 11. and 13. EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ............. 44 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................. 44 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K............................ 45 SIGNATURES .............................................................................................. 46 INDEX TO FINANCIAL STATEMENT SCHEDULE AND SEPARATE FINANCIAL STATEMENTS OF AFFILIATE .................... 48 EXHIBIT INDEX ......................................................................................... E-1 4 PART I ITEM 1. BUSINESS GENERAL Libbey is a leading supplier of tableware products in the U.S. and Canada. The products are also exported to more than 80 countries. Libbey designs and markets, under the LIBBEY(R) brand name, an extensive line of high-quality glass tableware, ceramic dinnerware and metal flatware. Libbey also manufactures and markets ceramic dinnerware under the Syracuse China(R) brand name through its subsidiary Syracuse China. Through its World Tableware subsidiary, Libbey also imports and sells flatware, holloware and ceramic dinnerware. Through its joint venture, Vitrocrisa, the Company has established reciprocal distribution agreements giving Libbey exclusive distribution rights for Vitrocrisa's glass tableware products in the U.S. and Canada, and Vitrocrisa the exclusive distribution rights for Libbey's glass tableware products in Latin America. Libbey also has an agreement to be the exclusive distributor of Luigi Bormioli glassware in the U.S. and Canada for foodservice users. Luigi Bormioli is a highly regarded supplier of high-end glassware which is used in the finest eating and drinking establishments. Acquisitions have been and will be a critical part of the strategy to grow sales and profits. The Company's strategy is to be a more global provider of glass tableware and a provider of a broader supply of products to the foodservice industry. This strategy is primarily focused on two fronts: 1) acquiring foodservice supply companies, enabling Libbey to become a broader supplier of products to its foodservice distributors and 2) leveraging its proprietary glass-making technology through joint ventures, outright acquisitions or new green meadow facilities. The acquisitions of the business of Libbey Canada in 1993 and the joint venture investment in Vitrocrisa in 1997 have made Libbey a leading supplier of glass tableware in North America. PRODUCTS Libbey's tableware products consist of glass tableware, ceramic dinnerware, metal flatware and metal holloware. Libbey's glass tableware includes tumblers, stemware, mugs, plates, bowls, ashtrays, bud vases, salt and pepper shakers, canisters, candle holders and various other items. Vitrocrisa's product assortment includes, in addition to the product types produced by Libbey, glass bakeware and handmade glass tableware, which are additional product 1 5 categories that Libbey now offers. In addition, Vitrocrisa products include glass coffee pots, blender jars, meter covers and other industrial glassware sold principally to original equipment manufacturers. Through its distribution agreement with Luigi Bormioli, Libbey is a supplier of high-end glassware, which is used in the finest eating and drinking establishments. Through its Syracuse China and World Tableware subsidiaries, Libbey sells a wide range of ceramic dinnerware products. These include plates, bowls, platters, cups, saucers and other tableware accessories. Through its World Tableware subsidiary, Libbey sells an extensive selection of metal flatware. These include knives, forks, spoons and serving utensils. In addition, World Tableware sells metal holloware, which includes serving trays, chafing dishes, pitchers and other metal tableware accessories. DOMESTIC SALES Approximately 88% of Libbey's sales are to domestic customers and are sold domestically for a broad range of uses. Libbey sells both directly to end users of the product and through networks of distributors and utilizes both a direct sales force and manufacturers' representatives. Libbey has the largest manufacturing, distribution and service network among North American glass tableware manufacturers. Libbey defines the U.S. glass tableware market to include glass beverageware, ovenware, cookware, dinnerware, serveware, floral items, items used for specialized packaging, specialized bottles, handmade glassware and lead crystal valued at less than $5 per piece. Libbey has, according to management estimates, the leading market share in glass tableware sales in U.S. foodservice applications. The majority of Libbey's tableware sales to foodservice end users are made through a network of approximately 500 independent foodservice distributors. The distributors, in turn, sell to a wide variety of foodservice establishments, including national and regional hotel chains, national restaurant chains, individually owned bars, restaurants and casinos. Syracuse China and World Tableware are recognized as long-established suppliers of high quality ceramic dinnerware and flatware, respectively. They are both among the leading suppliers of their respective product categories to foodservice end users. Libbey's retail customers are principally mass merchants and discount stores. In recent years, Libbey has been able to increase its total sales by increasing its sales to traditional department stores and specialty housewares stores. With this expanded retail representation, Libbey is better positioned to successfully introduce profitable new products. Libbey also sells imported dinnerware and metal flatware to retailers in the United States and Canada under the LIBBEY(R) brand name. Libbey sources this ceramic dinnerware and 2 6 metal flatware by leveraging the relationships it has with its existing suppliers for World Tableware products for foodservice applications. Libbey operates four factory outlet stores located at or near each of its United States manufacturing locations. Libbey is a major supplier of glassware for industrial applications in the U.S., according to management estimates. Industrial uses include candle and gift packaging, floral purposes and lighting. The craft industries and gourmet food packing companies are also industrial consumers of glassware. Libbey has expanded its sales to industrial users by offering ceramic items. Libbey believes that its success with industrial applications is based on its extensive manufacturing and distribution network, which enables it to provide superior service, and its broad product offering, which allows Libbey to meet its customers' desire for differentiated glassware products. The production capabilities and broad product portfolio of Vitrocrisa enabled Libbey to expand its product offering for its industrial customers. Another application of Libbey's products is for use as a premium. Fast-food restaurant chains use glassware as incentives or premiums, as an example. Libbey believes that its success with premium customers is dependent upon custom design, varied production capabilities and the ability to produce large quantities of product in a short period of time. Libbey also sells its tableware products to supermarket chains for continuity programs. In 2000, Libbey sold tableware products through continuity programs to over 5,600 supermarkets in the U.S. and Canada. INTERNATIONAL EXPANSION AND EXPORT SALES Libbey exports its products through independent agents and distributors to over 80 countries throughout the world, competing in the tableware markets of Latin America, Asia and Europe. Through its export operation, Libbey sells its tableware product to foodservice, retail and premium customers internationally. Libbey's export sales, which include sales to customers in Canada, represent approximately 12% of total sales in 2001. Libbey believes that expanding its sales to export markets represents an important growth opportunity for the future. Libbey currently has technical assistance agreements with companies covering operations in various countries. In 2001, Libbey performed services for licensees in seven countries. These agreements, which cover areas ranging from manufacturing and engineering assistance to support in functions such as marketing, sales and administration, allow Libbey to participate in the worldwide growth of the glass tableware industry and to keep abreast of potential sales and marketing opportunities in those countries. During 2001, Libbey's technical assistance agreements and licenses produced royalties of $4.7 million. Libbey also sells machinery, primarily glass-forming machinery, to certain parties with which it has technical assistance agreements. 3 7 MANUFACTURING Libbey owns and operates three glass tableware manufacturing plants in the United States located in Toledo, Ohio; Shreveport, Louisiana and City of Industry, California. Libbey owns and operates a ceramic dinnerware plant in Syracuse, New York. Libbey operates distribution centers located at or near each of its manufacturing facilities (See "Properties"). In addition, Libbey operates distribution centers for its Vitrocrisa-supplied products in Laredo, Texas and World Tableware products near Chicago, Illinois. The glass tableware manufacturing and distribution centers are strategically located (geographically) to enable Libbey to supply significant quantities of its product to virtually all of its customers in a short period of time. Libbey is the only glass tableware producer operating more than two manufacturing facilities in the United States. The manufacture of Libbey's glass tableware products involves the use of automated processes and technologies. Much of Libbey's glass tableware production machinery was designed by Libbey and has evolved and been continuously refined to incorporate technology advancements. In addition, Libbey has installed robotics technology in certain of its labor-intensive manufacturing processes. Libbey believes that its production machinery and equipment continue to be adequate for its needs in the foreseeable future. Libbey's glass tableware products are generally produced using one of two manufacturing methods or, in the case of certain stemware, a combination of such methods. Most of Libbey's tumblers and stemware and certain other glass tableware products are produced by forming molten glass in molds with the use of compressed air and are known as "blown" glass products. Libbey's other glass tableware products and the stems of certain of its stemware are "pressware" products which are produced by pressing molten glass into the desired product shape. Ceramic dinnerware is also produced through the forming of raw materials into the desired product shape and is either manufactured at Libbey's Syracuse, New York production facility or imported by World Tableware from primarily China, Malaysia and Bangladesh. All metal flatware and metal holloware are sourced by Libbey's World Tableware subsidiary primarily from China, Indonesia, Japan, Korea and Thailand. Libbey employs a team of engineers whose responsibilities include continuing efforts to improve and upgrade Libbey's manufacturing facilities, equipment and processes. In addition, they provide engineering required to manufacture new products and implement the large number of innovative changes continuously being made to Libbey's product designs, sizes and shapes. 4 8 All of the raw materials used by Libbey, principally sand, lime, soda ash and clay, have historically been available in adequate supply from multiple sources. However, for certain raw materials, there may be temporary shortages due to weather or other factors, including disruptions in supply caused by raw material transportation or production delays. Such shortages have not previously had and are not expected to have a material adverse effect on Libbey's operations in the future. Natural gas is a primary source of energy in Libbey's production processes, and variability in the price for natural gas can have an impact on its profitability. Historically the Company has used natural gas hedging contracts to partially mitigate this impact. SALES AND MARKETING Libbey has its own sales staff located strategically throughout the U.S. and Canada who call on customers and distributors. In addition, Libbey retains the services of approximately 25 manufacturing representative's organizations. These manufacturing representative's organizations are in addition to over 80 Libbey sales professionals located in various metropolitan areas throughout the U.S. and Canada. The majority of Libbey's tableware sales to foodservice end users are made through approximately 500 independent distributors, who serve a vital function in the distribution of Libbey's products and with whom Libbey works closely in connection with marketing and selling efforts. Most of Libbey's retail, industrial and premium market sales are made directly by Libbey's sales force. Libbey also has a marketing staff located at its corporate headquarters in Toledo, Ohio engaged in developing strategies relating to product development, pricing, distribution, advertising and sales promotion. CUSTOMERS The customers for Libbey's tableware products include approximately 500 foodservice distributors. In addition, Libbey sells to mass merchants, department stores, retail distributors, national retail chains and specialty housewares stores, supermarkets and industrial companies and others who use Libbey's products for promotional and other private uses. No single customer or group of customers accounts for 10% or more of Libbey's sales, although the loss of any of Libbey's major customers could have a material effect on Libbey. Sales for premium applications tend to be more unpredictable from year to year; and Libbey is less dependent on such business than it is on sales to foodservice, retail and industrial customers. 5 9 COMPETITORS Libbey's business is highly competitive, with the principal competitive factors being customer service, brand name, product quality, delivery time and price. Competitors in glass tableware are Arc International, a private French company; Indiana Glass Company (a unit of Lancaster Colony Corporation); Anchor Hocking (a unit of Newell Rubbermaid Inc.), a supplier of glass beverageware and a supplier of glass bakeware to retail markets in the U.S. and Oneida Ltd. which imports glassware for sale in the U.S. among other places. In recent years, Libbey has experienced increasing competition from foreign glass tableware manufacturers, including Arc International (France), Kedaung (Indonesia), and Pasabache (Turkey). In addition, other materials such as plastics also compete with glassware. Competitors in U.S. ceramic dinnerware are Homer Laughlin (a private U.S. company) and Rego China and Buffalo China (units of Oneida Ltd.). Competitors in metal flatware are Oneida Ltd. and various importing companies. Some of Libbey's competitors have substantially greater financial and other resources than Libbey. PATENTS, TRADEMARKS AND LICENSES Based upon market research and market surveys, Libbey believes its Libbey trade name as well as product shapes and styles enjoy a high degree of consumer recognition and are valuable assets. Libbey believes that the Libbey, Syracuse China and World Tableware trade names are material to its business. Libbey has rights under a number of patents which relate to a variety of products and processes. Libbey does not consider that any patent or group of patents relating to a particular product or process is of material importance to its business as a whole. SEASONALITY Due primarily to the impact of consumer buying patterns and production activity, Libbey's profits tend to be strongest in the third quarter and weakest in the first quarter of each year. As a consequence, with the exception of 1998, profits typically range between 41% and 44% in the first half of each year and 56% to 59% in the second half of the year. 6 10 ENVIRONMENTAL MATTERS Libbey's operations, in common with those of industry generally, are subject to numerous existing and proposed laws and governmental regulations designed to protect the environment, particularly regarding plant wastes and emissions and solid waste disposal. Libbey has shipped, and continues to ship, waste materials for off-site disposal. Although Libbey is not named as a potentially responsible party in any waste disposal site matters pending prior to June 24, 1993, the date of Libbey's initial public offering and separation from Owens-Illinois, Owens-Illinois has been named as a potentially responsible party or other participant in connection with certain waste disposal sites to which Libbey may also have shipped wastes and bears some responsibility. Owens-Illinois has agreed to defend and hold harmless Libbey in connection with any such matters identified and pending as of June 24, 1993 and to indemnify it against any resulting costs and liabilities from such matters in excess of $3 million. Libbey believes that if it is necessary to draw upon this indemnification, collection is probable. Pursuant to the indemnification agreement, Owens-Illinois is defending Libbey in a suit instituted by the Board of Lucas County Ohio Commissioners on January 4, 2000 against Owens-Illinois, Libbey and numerous other defendants (59 companies have been named in the complaint as potentially responsible parties) in the United States District Court for the Northern District of Ohio seeking to recover past and future costs incurred in response to the release or threatened release of hazardous substances at the King Road landfill. The suit was dismissed without prejudice in October, 2000 but it is likely to be reinstituted at a future date when more information as to the appropriate environmental remedy becomes available. Subsequent to June 24, 1993, Libbey has been named a potentially responsible party at four other sites, all of which have been settled for immaterial amounts. No further sums are expected to be paid with respect to these sites unless unusual and unanticipated contingencies occur. Through its Syracuse China subsidiary, Libbey acquired on October 10, 1995 from The Pfaltzgraff Co. and certain of its subsidiaries the assets operated as Syracuse China. The Pfaltzgraff Co. entered into an order of consent effective November 1, 1994 with the New York State Department of Environmental Conservation (NYSDEC) which requires Pfaltzgraff to prepare a Remedial Investigation and Feasibility Study (RI/FS) to develop a remedial action plan for a site in Syracuse, New York (which includes among other items a landfill and wastewater and sludge ponds and adjacent wetlands located on the property purchased by Syracuse China Company) and to remediate the site. As part of the Asset Purchase Agreement, the Syracuse China Company agreed to share a part of the remediation and related expense up to a maximum of fifty percent of such costs with a maximum limit for Syracuse China Company of $1,350,000. Notwithstanding the foregoing, Syracuse China Company is not a party to the decree. Construction of the approved remedy began in 2000 and is expected to be completed in 2001. 7 11 In addition, Syracuse China Company has been named as a potentially responsible party by reason of its potential ownership of certain property adjoining its plant, which has been, designated a sub-site of a superfund site. Libbey believes that any contamination of such sub-site was caused by and will be remediated by other parties at no cost to Syracuse China. Such other parties have acquired ownership of the sub-site which should end any responsibility of Syracuse China with respect to the sub-site. In any event, any expense with respect to such sub-site for which Syracuse China may be deemed responsible would likely be shared with Pfaltzgraff pursuant to the Asset Purchase Agreement. Libbey regularly reviews the facts and circumstances of the various environmental matters affecting Libbey, including those which are covered by indemnification. Although not free of uncertainties, Libbey believes that its share of the remediation costs at the various sites, based upon the number of parties involved at the sites and the estimated cost of undisputed work necessary for remediation based upon known technology and the experience of others, will not be material to Libbey. There can be no assurance, however, that Libbey's future expenditures in such regard will not have a material adverse effect on Libbey's financial position or results of operations. In addition, occasionally the federal government and various state authorities have investigated possible health issues that may arise from the use of lead or other ingredients in enamels such as those used by Libbey on the exterior surface of its decorated products. Capital expenditures for property, plant and equipment for environmental control activities were not material during 2000. Libbey believes that it is in material compliance with all federal, state and local environmental laws, and Libbey is not aware of any regulatory initiatives that would be expected to have a material effect on Libbey's products or operations. NUMBER OF EMPLOYEES Libbey employed approximately 3,250 persons at December 31, 2001. A majority of the glass tableware employees are U.S.-based hourly workers covered by six collective bargaining agreements, which were entered into in the fourth quarter of 1998 and expire at various times during the fourth quarter of 2001. The ceramic dinnerware hourly employees are covered by a collective bargaining agreement, which expired in March 1999 and has subsequently been renegotiated to expire in March 2002. Libbey considers its employee relations to be good. 8 12 ITEM 2. PROPERTIES The following information sets forth the location of the Company's principal manufacturing and distribution facilities at December 31, 2001. The Company also operates distribution facilities at or near each of its manufacturing facilities as well as at the distribution centers set forth below: Manufacturing Facilities ---------------------------------------- Syracuse, New York Toledo, Ohio Shreveport, Louisiana City of Industry, California Distribution Centers ---------------------------------------- Vitrocrisa - Laredo, Texas World Tableware - West Chicago, Illinois The Company's headquarters, the World Tableware offices, some warehouses, sales offices and outlet stores are located in leased space. All of the Company's operating properties are currently being utilized for their intended purpose and are owned in fee. The Company believes that its facilities are well maintained and adequate for its planned production requirements at those facilities over the next three to five years. ITEM 3. LEGAL PROCEEDINGS The Company is involved in various routine legal proceedings arising in the ordinary course of its business. The Company is not engaged in any legal proceeding which would be deemed to be material to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 9 13 EXECUTIVE OFFICERS OF THE REGISTRANT Set forth below are the names and the ages, positions and offices held (as of the date hereof), and a brief account of the business experience of each executive officer of the Company.

NAME AGE POSITION ---- --- -------- John F. Meier 53 Chairman of the Board and Chief Executive Officer since June Chairman and Chief 1993; Executive Vice President and General Manager from December Executive Officer 1990 to June 1993. Richard I. Reynolds 54 Executive Vice President and Chief Operating Officer since Executive Vice President and Chief November 1995; Vice President and Chief Financial Officer from Operating Officer June 1993 to November 1995; Vice President and Director of Finance and Administration from January 1989 to June 1993. L. Frederick Ashton 60 Vice President, General Sales Manager since November 1990. Vice President, General Sales Manager Arthur H. Smith 65 Vice President, General Counsel and Secretary since June 1993; Vice President, General Secretary of the Company since 1987 and Senior Counsel and Counsel and Secretary Assistant Secretary of Owens-Illinois, Inc. from 1987 to June 1993. Kenneth G. Wilkes 43 Vice President and Chief Financial Officer since July 1999 after Vice President and Chief serving as Vice President, Chief Financial Officer and Treasurer Financial Officer of the Company since November 1995. From August 1993 to November 1995 he was Vice President and Treasurer. Previously employed as Senior Corporate Banker, Vice President with The First National Bank of Chicago from 1981.

10 14

NAME AGE POSITION ---- --- -------- Kenneth A. Boerger 43 Vice President and Treasurer since July 1999. From 1994 to July Vice President and Treasurer 1999 was Corporate Controller and Assistant Treasurer. From 1980 to 1994 held various financial and accounting positions. John A. Zarb 49 Vice President and Chief Information Officer since April 1996. Vice President and Chief From 1991 to April 1996 employed by AlliedSignal Inc. in Information Officer information technology senior management positions in Europe and the U.S. Daniel P. Ibele 40 Vice President, Marketing and Specialty Operations since Vice President, Marketing and September 1997; Vice President and Director of Marketing at Specialty Libbey since 1995. From 1983 to 1995 held various marketing and sales positions. Timothy T. Paige 43 Vice President and Director of Human Resources since January Vice President and Director of Human 1997; Director of Human Resources from May 1995 to January Resources 1997. From 1991 to May 1995 employed by Frito-Lay, Inc. in human resources management positions.

11 15 PART II ITEM 5. MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS Libbey Inc. common stock is listed for trading on the New York Stock Exchange under the symbol LBY. The price range for the Company's common stock on the New York Stock Exchange as reported by the New York Stock Exchange was as follows:

2000 1999 High Low High Low ---------------------------------------------------------------------------------------------------- First Quarter $28 5/8 $25 5/16 $33 $24 1/8 Second Quarter $32 1/2 $26 11/16 $33 3/4 $27 1/8 Third Quarter $33 1/2 $29 1/8 $31 15/16 $28 3/8 Fourth Quarter $31 $26 5/16 $29 3/4 $24 5/8

On March 1, 2001, there were 1,116 registered common shareholders of record. The Company has paid a regular quarterly cash dividend of $.075 per share beginning with the fourth quarter of 1993. The declaration of future dividends is within the discretion of the Board of Directors of the Company and will depend upon, among other things, business conditions, earnings and the financial condition of the Company. 12 16 ITEM 6. SELECTED FINANCIAL DATA

Dollars in thousands, except per-share data 2000 1999 1998 1997 1996 --------------------------------------------------------------------------------------------------------------- OPERATING RESULTS Net sales $ 441,828 $ 460,592 $ 436,522 $ 411,966 $ 397,656 Freight billed to customers (a) 2,274 2,609 1,191 -- -- Total revenues 448,786 467,598 440,739 415,053 400,354 Cost of sales 306,003 324,242 323,140 295,009 288,538 Selling, general and administrative expenses 61,185 64,131 54,191 49,585 44,620 Capacity realignment charges -- 991 20,046 -- -- Income from operations 81,598 78,234 43,362 70,459 67,196 Equity earnings 4,769 2,915 8,880 3,570 -- Other income (expenses) -- net (919) 13 1,493 (732) 1,302 Earnings before interest and income taxes 85,448 81,162 53,735 73,297 68,498 Interest expense -- net 12,216 12,501 12,674 14,840 14,962 Income before income taxes 73,232 68,661 41,061 58,457 53,536 Provision for income taxes 26,366 25,233 15,618 22,331 20,986 Net income 46,866 43,428 25,443 36,126 32,550 PER-SHARE DATA: Basic net income 3.07 2.69 1.45 2.33 2.16 Diluted net income 3.01 2.64 1.42 2.27 2.12 Dividends paid 0.30 0.30 0.30 0.30 0.30 OTHER INFORMATION EBIT 85,448 81,162 53,735 73,297 68,498 EBITDA 103,800 99,915 73,241 93,193 89,983 Depreciation 14,055 14,717 15,852 16,826 19,275 Amortization 4,297 4,036 3,654 3,070 2,210 Capital expenditures 18,096 9,428 17,486 18,408 15,386 Dividends paid 4,569 4,821 5,253 4,550 4,511 Employees (average) 3,270 3,552 3,969 4,136 4,110 BALANCE SHEET DATA Total assets 446,707 434,395 439,671 449,600 315,733 Working capital (b) 95,177 77,794 75,930 89,942 65,823 Long-term debt 151,404 170,000 176,300 200,350 202,851 Shareholders' equity 133,271 91,843 94,860 99,989 (18,447)

(a) Reclassification for 1997 and prior is impractical. (b) Current assets less current liabilities excluding short-term debt. 13 17 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS HISTORICAL FINANCIAL DATA The following table presents certain operations data for Libbey for the periods indicated:

YEAR ENDED DECEMBER 31, (Dollars in thousands) 2000 1999 1998 -------------------------------------------------------------------------------------------- Net sales $441,828 $460,592 $436,522 Gross profit $138,099 $138,959 $114,573 As a percent of sales 31.3% 30.2% 26.2% Income from operations - excluding capacity realignment charge $ 81,598 $ 79,225 $ 63,408 As a percent of sales 18.5% 17.2% 14.5% Income from operations - after capacity realignment charge $ 81,598 $ 78,234 $ 43,362 As a percent of sales 18.5% 17.0% 9.9% Earnings before interest and income taxes $ 85,448 $ 81,162 $ 53,735 As a percent of sales 19.3% 17.6% 12.3% Net income $ 46,866 $ 43,428 $ 25,443 As a percent of sales 10.6% 9.4% 5.8%

Management is not aware of any events or uncertainties that are likely to have a material impact on the Company's prospective results of operations or financial condition. The modest rate of inflation experienced over the last three years has not had a significant effect on the Company's financial results. Significant increases in inflation in the future could have a material impact on the Company's financial results if it is not able to raise prices to its customers. RESULTS OF OPERATIONS COMPARISON OF 2000 WITH 1999 Net sales for 2000 were $441.8 million compared to net sales of $460.6 million in 1999. In 1999, both glassware and dinnerware sales were positively impacted by approximately $14 million in non-repeat sales of product associated with the millennium. In addition, sales in 2000 were impacted by a slowdown in retail sales late in the fourth quarter and by the Company's decision to exit certain low-margin retail business which totaled $12.5 million in 1999. Libbey's export sales, which include sales to Libbey's customers in Canada, decreased to $51.8 million from $56.2 million in 1999. The decrease was the result of lower sales to customers in Canada, partially offset by the increase in sales to other export customers. A decrease in bottleware sales due to the decision to exit this low-margin business also contributed. 14 18 GROSS PROFIT (defined as net sales plus freight billed to customers less cost of sales) was $138.1 million in 2000 compared to $139.0 million in 1999 and increased as a percent of net sales to 31.3% from 30.2% over this period. Sale of higher margin product and expense reduction in other areas, including energy savings initiatives, helped to offset lower sales and the substantial increase in the price for natural gas and increases in corrugated packaging prices. INCOME FROM OPERATIONS increased 4.3% to $81.6 million in 2000 from $78.2 million in 1999 and increased as a percent of net sales to 18.5% from 17.0% in the year-ago period. Excluding the effect of the capacity realignment charge in 1999, income from operations would have totaled $79.2 million in the year-ago period, or an improvement of 3.0% in 2000. The increase was the result of lower administrative expenses, which more than offset the reduction in gross profit. EARNINGS BEFORE INTEREST AND INCOME TAXES (EBIT) increased 5.3% to $85.4 million in 2000 from $81.2 million in 1999 and increased as a percent of net sales to 19.3% from 17.6% in the year-ago period. Excluding the capacity realignment charge, EBIT would have been $82.2 million in 1999. The increase was attributable to higher income from operations and higher equity earnings from the Company's joint venture in Mexico. NET INCOME increased 7.9% to an all-time record $46.9 million from $43.4 million in 1999 and increased as a percent of net sales to the highest level since the Company went public in 1993 of 10.6% from 9.4% in the year-ago period. Excluding the impact of the capacity realignment charge, net income would have been $44.1 million in 1999. The increase is attributable to higher income from operations as a result of the continued benefits of capacity realignment efforts, lower administrative expense, higher equity earnings and a lower effective tax rate of 36.0% compared with 36.75% in the year-ago period. The reduction in the Company's effective tax rate is primarily attributable to reduction in tax on undistributed earnings. COMPARISON OF 1999 WITH 1998 Net sales for 1999 of $460.6 million were 5.5% higher than the net sales of $436.5 million in 1998. Sales increases were recorded in all of the Company's operations, with Syracuse China experiencing double-digit sales growth as well as a record performance in foodservice glassware. Both glassware and dinnerware sales were positively impacted by sales associated with the millennium. The positive impact of our expanded sales coverage also contributed. Libbey's export sales, which include sales to Libbey's customers in Canada, decreased to $56.2 million from $58.1 million in 1998. The decrease was partly the result of lower sales to customers in the Far East and South America primarily due to increases in prices resulting from the strength of the U.S. dollar as well as depressed foodservice and retail industries in those regions. A decrease in bottleware sales due to the decision to exit the production also contributed. 15 19 GROSS PROFIT (defined as net sales plus freight billed to customers less cost of sales) increased 21.3% to $139.0 million in 1999 from $114.6 million in 1998 and increased as a percent of net sales to 30.2% from 26.2% over this period. Gross margin increased due to higher sales of more profitable products and lower costs due to improved utilization of the Company's glassware plants. INCOME FROM OPERATIONS was $78.2 million in 1999 compared with $43.4 million in 1998 and increased as a percent of net sales to 17.0% from 9.9% in the year-ago period. Excluding the effect of the capacity realignment charge, income from operations would have totaled $79.2 million in 1999 compared with $63.4 million in the year-ago period, or an improvement of 24.9% in 1999. The higher operating income was the result of improved utilization of the Company's glassware plants and record sales. CAPACITY REALIGNMENT CHARGE On December 31, 1998, the Board of Directors of the Company approved a capacity realignment plan, which included reallocating a portion of the current production of the Company's Wallaceburg, Ontario, facility to its glassware facilities in the United States to improve its cost structure and more fully utilize available capacity. A portion of Wallaceburg's production is being absorbed by the Company's joint venture in Mexico, Vitrocrisa. The Company is servicing its Canadian glass tableware customers from its remaining manufacturing and distribution network, which includes locations in Toledo, Ohio; Shreveport, Louisiana and City of Industry, California. The Company also announced that it would exit the production of bottleware, a niche, low-margin business for the Company. In connection with this plan, the Company recorded a capacity realignment charge in the fourth quarter of 1998 of $20.0 million which includes $10.0 million for severance and related employee costs, $7.6 million for write-off of fixed assets (primarily equipment) and $2.4 million for supply inventories, repair parts and other costs. An additional charge was recorded in 1999 of $1.0 million which includes a $0.8 million reduction for severance and related employee costs, $1.4 million for write-off of fixed assets and $0.4 million for supply inventories, repair parts and other costs. The Wallaceburg facility ceased production in May 1999, and the limited warehouse operations that remained ceased operations in 2000. The fixed assets, supply inventories and repair parts not being transferred have been written down to a nominal amount. The Wallaceburg facility is presently held for sale, and the disposition of the property occurred in late March, 2001. The Company terminated the employment of virtually all of its 560 salary and hourly employees and included severance and related employee costs in its capacity realignment charge at the time when such severance amounts were disclosed to the employees. These severance and related employee costs were paid primarily when production ceased. The capacity realignment was instrumental in reducing the Company's cost structure and improving its profitability. Productivity improvements and improved utilization of its glassware facilities and the availability of capacity at the Company's joint venture enabled these changes. 16 20 EARNINGS BEFORE INTEREST AND INCOME TAXES (EBIT) were $81.2 million in 1999 compared with $53.7 million in 1998 and increased as a percent of net sales to 17.6% from 12.3% in the year-ago period. Excluding the capacity realignment charge, EBIT would have been $82.2 million in 1999 compared with $73.8 million in 1998. The increase was attributable to higher operating income, which more than offset lower equity earnings at the Company's joint venture in Mexico. NET INCOME was $43.4 million compared with $25.4 million in 1998, and increased as a percent of net sales to 9.4% from 5.8% in the year-ago period. Excluding the impact of the capacity realignment charge, net income would have been $44.1 million in 1999 compared with $37.9 million in 1998. The increase is attributable to higher income from operations combined with a lower effective tax rate of 36.75% compared with 38.0% in the year-ago period. The reduction in the Company's effective tax rate is primarily attributable to lower state income taxes. CAPITAL RESOURCES AND LIQUIDITY Libbey's financial condition at year end 2000 reflects the effects of the Company's increased net income, increased working capital and higher capital expenditures. Net cash provided by operating activities was $36.9 million compared to $69.0 million in 1999. Compared to the year-ago period, inventories increased $14.6 million. However, with scheduled repair activity and the expectation of increased sales, the Company anticipates inventory reductions for 2001. Reductions in accounts receivable of $10.6 million and higher accounts payable helped offset the majority of the inventory increase. Capital expenditures were $18.1 million in 2000 compared with $9.4 million in 1999, with the increase attributed to investments in higher productivity machinery and equipment. Capital expenditures for 2001 are expected to be in the range of $25.0 to $30.0 million. Cash of $4.1 million was used to repurchase 149,400 shares of common stock. Since mid-1998, the Company has repurchased 2,647,400 shares for $74.1 million. As of December 31, 2000, the Company has authorization to purchase up to an additional 977,600 shares. Libbey had total debt of $161.4 million at December 31, 2000, compared with $178.7 million at December 31, 1999. The decrease was primarily attributable to the net cash provided by operations. Libbey had additional debt capacity of $223.2 million at December 31, 2000, under the Bank Credit Agreement. Libbey has entered into interest rate protection agreements with respect to $75.0 million of its debt. The average interest rate for the Company's borrowings related to the interest rate protection agreements is 6.67% with an average maturity of 3.1 years at December 31, 2000. Of Libbey's outstanding indebtedness, $86.4 million is subject to fluctuating interest rates at December 31, 2000. A change of one percent in such rates would result in a change in interest expense of approximately $0.9 million on an annual basis. 17 21 The Company is not aware of any trends, demands, commitments or uncertainties that will result or that are reasonably likely to result in a material change in Libbey's liquidity. The Company believes that its cash from operations and available borrowings under the Bank Credit Agreement will be sufficient to fund its operating requirements, capital expenditures and all other obligations (including debt service and dividends) throughout the remaining term of the Bank Credit Agreement. In addition, the Company anticipates refinancing the Bank Credit Agreement at or prior to the maturity date of May 1, 2002, to meet the Company's longer term funding requirements. ITEM 7a. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risks due to changes in currency values, although the majority of the Company's revenues and expenses are denominated in the U.S. dollar. The currency market risks include devaluations and other major currency fluctuations relative to the U.S. dollar that could reduce the cost competitiveness of the Company's products compared to foreign competition and the effect of exchange rate changes on the value of the Mexican peso relative to the U.S. dollar and the impact of those changes on the earnings expressed under U.S. GAAP and cash flow of the Company's joint venture in Mexico. The Company is exposed to market risk associated with changes in interest rates in the U.S. However, the Company has entered into Interest Rate Protection Agreements ("Rate Agreements") with respect to $75.0 million of debt as a means to manage its exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of the Company's borrowings from variable rate debt to a fixed-rate basis, thus reducing the impact of interest rate changes on future income. The average interest rate for the Company's borrowings related to the Rate Agreements at December 31, 2000, was 6.67% for an average remaining period of 3.1 years. Total remaining debt not covered by the Rate Agreements has fluctuating interest rates with a weighted average rate of 6.99% at December 31, 2000. The Company had $86.4 million of debt subject to fluctuating interest rates at December 31, 2000. A change of one percent in such rates would result in a change in interest expense of approximately $0.9 million on an annual basis. The interest rate differential to be received or paid under the Rate Agreements is being recognized over the life of the Rate Agreements as an adjustment to interest expense. If the counterparts to these Rate Agreements fail to perform, the Company would no longer be protected from interest rate fluctuations by these Rate Agreements. However, the Company does not anticipate nonperformance by the counterparts. At December 31, 2000, the carrying value of the long-term debt approximates its fair value based on the Company's current incremental borrowing rates. The fair market value for the Company's Interest Rate Protection Agreements at December 31, 2000, was $(1.2) million. The fair value of long-term debt is estimated based on borrowing rates currently available to the Company for loans with similar terms and maturities. The fair value of the Company's Rate Agreements is 18 22 based on quotes from brokers for comparable contracts. The Company does not expect to cancel these agreements and expects them to expire as originally contracted. In June 1998, the Financial Accounting Standards Board issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" (Statement 133) as amended in June 2000 by Statement No. 138 "Accounting for Certain Derivative Instruments and Certain Hedging Activities" (Statement 138), which requires companies to recognize all derivatives as either assets or liabilities on the balance sheet and measure such instruments at fair value. The Company will adopt the statements effective January 1, 2001. Adoption of the statements is not expected to materially impact the Company's financial statements. OTHER INFORMATION This document and supporting schedules contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements only reflect the Company's best assessment at this time and are indicated by words or phrases such as "goal," "expects," "believes," "will," "estimates," "anticipates" or similar phrases. Investors are cautioned that forward-looking statements involve risks and uncertainty, that actual results may differ materially from such statements and that investors should not place undue reliance on such statements. Important factors potentially affecting performance include major slowdowns in the retail, travel or entertainment industries in the United States, Canada or Mexico; significant increases in interest rates that increase the Company's borrowing costs and per unit increases in the costs for natural gas, corrugated packaging and other purchased materials; devaluations and other major currency fluctuations relative to the U.S. dollar that could reduce the cost competitiveness of the Company's products compared to foreign competition; the effect of high inflation in Mexico and exchange rate changes to the value of the Mexican peso and the earnings expressed under U.S. GAAP and cash flow of the Company's joint venture in Mexico, Vitrocrisa; the inability to achieve savings and profit improvements at targeted levels in the Company's glassware sales from its capacity realignment efforts and re-engineering programs, or within the intended time periods; inability to achieve targeted manufacturing efficiencies at Syracuse China and cost synergies between World Tableware and the Company's other operations; protracted work stoppages related to collective bargaining agreements; increased competition from foreign suppliers endeavoring to sell glass tableware in the United States; whether the Company completes any significant acquisition and whether such acquisitions can operate profitably. 19 23 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Page ---- Report of Independent Auditors 21 Consolidated Balance Sheets at December 31, 2000 and 1999 22 For the years ended December 31, 2000, 1999 and 1998: Consolidated Statements of Income 24 Consolidated Statements of Shareholders' Equity 25 Consolidated Statements of Cash Flows 26 Notes to Consolidated Financial Statements 27 Selected Quarterly Financial Data 43

20 24 REPORT OF INDEPENDENT AUDITORS THE BOARD OF DIRECTORS AND SHAREHOLDERS LIBBEY INC. We have audited the accompanying consolidated balance sheets of Libbey Inc. as of December 31, 2000 and 1999, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2000. Our audits also included the financial statement schedule listed in the index at Item 14(a). These financial statements and schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We did not audit the 2000 and 1999 financial statements of Vitrocrisa, S. de R.L. de C.V. (formerly Vitrocrisa, S.A. de C.V.), a corporation in which the Company has a 49% equity interest, which statements reflect total assets of $230.0 million and $220.9 million as of December 31, 2000 and 1999, respectively. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to data included for Vitrocrisa, S. de R.L. de C.V., is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Libbey Inc. at December 31, 2000 and 1999, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. ERNST & YOUNG LLP Toledo, Ohio January 26, 2001 21 25

Libbey Inc. Consolidated Balance Sheets ============================================================================================================================ December 31, 2000 1999 ---------------------------------------------------------------------------------------------------------------------------- Dollars in thousands ASSETS Current assets: Cash $ 1,282 $ 3,918 Accounts receivable: Trade, less allowances of $6,788 and $3,869 47,747 59,492 Other 3,992 2,837 ---------------------------------------------------------------------------------------------------------------------------- 51,739 62,329 Inventories: Finished goods 94,822 80,547 Work in process 6,060 5,829 Raw materials 3,021 2,844 Operating supplies 603 669 ---------------------------------------------------------------------------------------------------------------------------- 104,506 89,889 Prepaid expenses and deferred taxes 7,923 8,028 ---------------------------------------------------------------------------------------------------------------------------- Total current assets 165,450 164,164 Other assets: Repair parts inventories 8,027 5,684 Intangibles, net of accumulated amortization of $2,951 and $2,647 9,254 9,558 Pension assets 21,638 14,625 Deferred software, net of accumulated amortization of $8,651 and $6,181 4,286 5,728 Other assets 415 379 Investments 84,727 82,835 Goodwill, net of accumulated amortization of $16,174 and $14,651 44,805 46,328 ---------------------------------------------------------------------------------------------------------------------------- 173,152 165,137 Property, plant and equipment at cost 224,532 217,584 Less accumulated depreciation 116,427 112,490 ---------------------------------------------------------------------------------------------------------------------------- Net property, plant and equipment 108,105 105,094 ---------------------------------------------------------------------------------------------------------------------------- Total assets $446,707 $434,395 ============================================================================================================================ See accompanying notes.

22 26 Libbey Inc. Consolidated Balance Sheets (Continued)

---------------------------------------------------------------------------------------------------------------------- December 31, 2000 1999 ---------------------------------------------------------------------------------------------------------------------- Dollars in thousands LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $10,000 $8,655 Accounts payable 29,861 29,126 Salaries and wages 15,574 22,804 Accrued liabilities 23,884 28,469 Income taxes 954 5,971 ---------------------------------------------------------------------------------------------------------------------- Total current liabilities 80,273 95,025 Long-term debt 151,404 170,000 Deferred taxes 19,413 18,392 Other long-term liabilities 12,670 6,594 Nonpension retirement benefits 49,676 52,541 Shareholders' equity: Common stock, par value $.01 per share, 50,000,000 shares authorized, 17,858,102 shares issued less 2,647,400 Treasury shares (17,747,753 shares issued less 2,498,000 Treasury shares in 1999) 152 152 Capital in excess of par value 284,930 282,734 Treasury stock (74,113) (70,061) Deficit (77,698) (119,995) Cumulative foreign currency translation adjustment -- (987) ---------------------------------------------------------------------------------------------------------------------- Total shareholders' equity 133,271 91,843 ---------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $446,707 $434,395 ======================================================================================================================

See accompanying notes. 23 27 Libbey Inc. Consolidated Statements of Income

------------------------------------------------------------------------------------------------------- Year ended December 31, Dollars in thousands, except per-share amounts 2000 1999 1998 ------------------------------------------------------------------------------------------------------- REVENUES Net sales $441,828 $460,592 $436,522 Freight billed to customers 2,274 2,609 1,191 Royalties and net technical assistance income 4,684 4,397 3,026 ------------------------------------------------------------------------------------------------------- Total revenues 448,786 467,598 440,739 Costs and expenses: Cost of sales 306,003 324,242 323,140 Selling, general and administrative expenses 61,185 64,131 54,191 Capacity realignment charges --- 991 20,046 ------------------------------------------------------------------------------------------------------- 367,188 389,364 397,377 ------------------------------------------------------------------------------------------------------- INCOME FROM OPERATIONS 81,598 78,234 43,362 Other income (expense): Equity earnings 4,769 2,915 8,880 Other - net (919) 13 1,493 ------------------------------------------------------------------------------------------------------- 3,850 2,928 10,373 ------------------------------------------------------------------------------------------------------- Earnings before interest and income taxes 85,448 81,162 53,735 Interest expense - net (12,216) (12,501) (12,674) ------------------------------------------------------------------------------------------------------- Income before income taxes 73,232 68,661 41,061 Provision for income taxes 26,366 25,233 15,618 ------------------------------------------------------------------------------------------------------- NET INCOME $ 46,866 $ 43,428 $ 25,443 ======================================================================================================= NET INCOME PER SHARE Basic $ 3.07 $ 2.69 $ 1.45 Diluted $ 3.01 $ 2.64 $ 1.42 =======================================================================================================

See accompanying notes 24 28 LIBBEY INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

-------------------------------------------------------------------------------------------------------------------------------- Accumulated Common Capital in Other Dollars in thousands, Stock Excess of Treasury Comprehensive except per-share data Shares Amount Par Value Stock Deficit Income (Loss) Total -------------------------------------------------------------------------------------------------------------------------------- Balance January 1, 1998 17,580,931 $175 $279,208 $(178,792) $ (602) $ 99,989 Comprehensive income: Net income 25,443 25,443 Effect of exchange rate fluctuation (810) (810) --------- Comprehensive income 24,633 Stock options exercised 126,639 1 1,793 1,794 Income tax benefit on stock options 955 955 Purchase of shares for treasury (875,000) (8) $(27,250) (27,258) Dividend -- $0.30 per share (5,253) (5,253) -------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1998 16,832,570 168 281,956 (27,250) (158,602) (1,412) 94,860 Comprehensive income: Net income 43,428 43,428 Effect of exchange rate fluctuation 425 425 --------- Comprehensive income 43,853 Stock options exercised 40,183 1 533 534 Income tax benefit on stock options 245 245 Purchase of shares for treasury (1,623,000) (17) (42,811) (42,828) Dividend -- $0.30 per share (4,821) (4,821) -------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 1999 15,249,753 152 282,734 (70,061) (119,995) (987) 91,843 Comprehensive income: Net income 46,866 46,866 Effect of exchange rate fluctuation (154) (154) Closure of exchange rate fluctuation 1,141 1,141 --------- Comprehensive income 47,853 Stock options exercised 110,349 1 1,602 1,603 Income tax benefit on stock options 594 594 Purchase of shares for treasury (149,400) (1) (4,052) (4,053) Dividend -- $0.30 per share (4,569) (4,569) -------------------------------------------------------------------------------------------------------------------------------- Balance December 31, 2000 15,210,702 $152 $284,930 $(74,113) $ (77,698) $ -- $133,271 --------------------------------------------------------------------------------------------------------------------------------

See accompanying notes 25 29 Libbey Inc. Consolidated Statements of Cash Flows

-------------------------------------------------------------------------------------------------------------------------------- Year ended December 31, Dollars in thousands 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net income $46,866 $43,428 $25,443 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 14,055 14,717 15,852 Amortization 4,297 4,036 3,654 Equity earnings (4,769) (2,915) (8,880) Capacity realignment charge -- 991 20,046 Nonpension retirement benefit cost in excess of payments (2,735) 1,419 (1,417) Deferred income taxes 6,349 4,274 (498) Other 3,189 1,579 1,468 Changes in operating assets and liabilities: Accounts receivable 10,440 (10,202) 1,566 Inventories (15,185) 1,404 8,693 Prepaid expenses (329) 640 9 Other assets (10,420) (3,141) (5,126) Accounts payable 762 6,313 (2,859) Accrued liabilities (2,474) 2,160 (5,499) Other liabilities (13,148) 4,253 (220) -------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 36,898 68,956 52,232 INVESTING ACTIVITIES Additions to property, plant and equipment (18,096) (9,428) (17,486) Dividends received from equity investments 2,940 517 14,232 Other (63) 94 1,639 -------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (15,219) (8,817) (1,615) FINANCING ACTIVITIES Net bank credit facility activity (18,596) (6,300) (23,751) Other net borrowings 1,345 (6,217) 4,547 Stock options exercised 1,603 534 1,794 Treasury shares purchased (4,053) (42,828) (27,258) Dividends (4,569) (4,821) (5,253) -------------------------------------------------------------------------------------------------------------------------------- Net cash used in financing activities (24,270) (59,632) (49,921) Effect of exchange rate fluctuations on cash (45) 99 (18) -------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash (2,636) 606 678 Cash at beginning of year 3,918 3,312 2,634 -------------------------------------------------------------------------------------------------------------------------------- CASH AT END OF YEAR $ 1,282 $ 3,918 $ 3,312 --------------------------------------------------------------------------------------------------------------------------------

See accompanying notes 26 30 LIBBEY INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA) 1. BASIS OF PRESENTATION The consolidated financial statements include the accounts of Libbey Inc. and all wholly owned subsidiaries ("the Company"). The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 2. SIGNIFICANT ACCOUNTING POLICIES BUSINESS The Company operates in one business segment, tableware products. The Company designs, manufactures and markets an extensive line of high-quality, machine-made glass beverageware, other glass tableware and ceramic dinnerware to a broad group of customers in the foodservice, retail, industrial and premium areas. Most of the Company's sales are to customers in North America. The Company also imports and distributes ceramic dinnerware and flatware and has a 49% interest in a glass tableware manufacturer in Mexico. INVENTORY VALUATION The Company uses the last-in, first-out (LIFO) cost method of inventory valuation for over 70% of its inventories. If inventories valued on the LIFO method had been valued at standard or average costs, which approximate current costs, inventories would be higher than reported by $7,851, $9,726 and $11,203 at December 31, 2000, 1999 and 1998, respectively. The remaining inventories are valued at either standard or average cost which approximate current costs. GOODWILL Goodwill, which results from the excess of purchase cost over net assets acquired, is being amortized over 40 years. The carrying value of goodwill is reviewed to determine if facts and circumstances suggest that goodwill may be impaired or that the amortization period may need to be changed. The Company considers external factors relating to businesses to which the goodwill relates. If these external factors and the projected undiscounted cash flows over the remaining amortization period indicate that goodwill will not be recoverable, the carrying value will be adjusted to the estimated fair value. INTANGIBLES Intangibles result from valuations assigned by independent appraisers for future revenues from technical assistance agreements and trademarks acquired. 27 31 DEFERRED SOFTWARE Deferred software is the cost of software packages purchased and the cost associated with the installation of software. This cost is amortized over 5 years. The Company periodically reviews software to assess plans to replace the existing programs before the 5 years. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are recorded at cost. Major improvements are capitalized. Maintenance and repairs are expensed as incurred. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, generally 3 to 10 years for equipment and furnishings and 20 to 40 years for buildings and improvements. STOCK OPTIONS The Company accounts for employee stock options in accordance with Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees." INCOME TAXES Deferred income taxes are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and are measured using the tax rates and laws that are expected to be in effect when the differences are expected to reverse. REVENUE RECOGNITION Revenue is recognized when the product is shipped. The Company generally does not accept a return unless it is preauthorized. ROYALTIES AND NET TECHNICAL ASSISTANCE Royalties and net technical assistance income are accrued based on the terms of the respective agreements, which typically specify that a percentage of the licensee's sales be paid to the Company monthly, quarterly or semi-annually in exchange for the Company's assistance with manufacturing and engineering and support in functions such as marketing, sales and administration. FOREIGN CURRENCY TRANSLATION The assets and liabilities of the Company's wholly owned foreign subsidiary were translated at current exchange rates, and any related translation adjustments were recorded directly in shareholders' equity. With the wind down of activity in the Company's Canadian subsidiary, the cumulative exchange loss was recognized as expense during 2000. The functional currency for remaining activity in Canada will be the U.S. dollar effective January 1, 2001. The 49% investment in Vitrocrisa is accounted for using the equity method with the U.S. dollar being the functional currency. OTHER COMPREHENSIVE INCOME (LOSS) Other comprehensive income (loss) for the Company consisted of foreign currency translation adjustment. Disclosure of comprehensive income (loss) is incorporated into the Statements of Shareholders' Equity for all years presented. NEW ACCOUNTING STANDARDS In June 1998, the Financial Accounting Standards Board issued Statement No. 133 "Accounting for Derivative Instruments and Hedging Activities" (Statement 133) as amended in June 2000 by Statement No. 138 "Accounting for Certain 28 32 Derivative Instruments and Certain Hedging Activities" (Statement 138), which requires companies to recognize all derivatives as either assets or liabilities on the balance sheet and measure such instruments at fair value. The Company will adopt the statements effective January 1, 2001. Adoption of the statements is not expected to materially impact the Company's financial statements. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 101 "Revenue Recognition in Financial Statements" (SAB 101), which summarizes certain of the staff's views in applying accounting principles generally accepted in the United States to revenue recognition in financial statements. The Company adopted SAB 101 in the fourth quarter, which did not have a material impact on the financial statements. In May 2000, the Emerging Issues Task Force Issue 00-10 "Accounting for Shipping and Handling Fees and Costs" (EITF 00-10) concluded that all amounts billed to a customer in a sale transaction represent the fees earned for the goods provided. Accordingly, amounts billed related to shipping and handling are now classified as revenue, while costs are classified as a cost of goods sold. The Company has adopted EITF 00-10 for the year ended December 31, 2000, and has reclassified 1999 and 1998, which had no impact on net income. TREASURY STOCK Treasury stock purchases are recorded at cost. During 2000, 1999 and 1998 the Company purchased 149,400, 1,623,000 and 875,000 shares of stock at an average cost of $27.13, $26.39 and $31.15, respectively. INCOME PER SHARE OF COMMON STOCK The following table sets forth the computation of basic and diluted earnings per share: --------------------------------------------------------------------------------

Year ended December 31, 2000 1999 1998 --------------------------------------------------------------------------------------------------------------------------- Numerator for diluted earnings per share -- net income that is available to common shareholders $46,866 $43,428 $25,443 --------------------------------------------------------------------------------------------------------------------------- Denominator for basic earnings per share -- weighted-average shares outstanding 15,253,726 16,151,169 17,523,564 Effect of dilutive securities -- employee stock options 293,327 325,834 392,132 --------------------------------------------------------------------------------------------------------------------------- Denominator for diluted earnings per share -- adjusted weighted-average shares and assumed conversions 15,547,053 16,477,003 17,915,696 --------------------------------------------------------------------------------------------------------------------------- Basic earnings per share $3.07 $ 2.69 $ 1.45 --------------------------------------------------------------------------------------------------------------------------- Diluted earnings per share $3.01 $ 2.64 $ 1.42 ---------------------------------------------------------------------------------------------------------------------------

29 33 3. INVESTMENTS IN UNCONSOLIDATED AFFILIATES The Company is a 49% equity owner in Vitrocrisa, S. de R.L. de C.V. (and related Mexican companies), which manufactures, markets and sells glass tableware (beverageware, plates, bowls, serveware and accessories) and industrial glassware (coffee pots, blender jars, meter covers, glass covers for cooking ware and lighting fixtures sold to original equipment manufacturers) and a 49% equity owner in Crisa Industrial, L.L.C., a domestic distributor of industrial glassware for Vitrocrisa in the U.S. and Canada. Summarized combined financial information for the Company's investments, accounted for by the equity method, is as follows:

December 31, 2000 1999 ------------------------------------------------------------------------------------------------------ Current assets $ 84,266 $ 77,462 Non-current assets 140,644 129,915 ------------------------------------------------------------------------------------------------------ Total assets 224,910 207,377 Current liabilities 65,496 93,431 Other liabilities and deferred items 134,884 96,389 ------------------------------------------------------------------------------------------------------ Total liabilities and deferred items 200,380 189,820 ------------------------------------------------------------------------------------------------------ Net assets $24,530 $ 17,557 ======================================================================================================

Year ended December 31, 2000 1999 1998 ------------------------------------------------------------------------------------------------------------------------ Net sales $217,477 $189,699 $172,562 Cost of sales 154,248 129,667 114,250 ------------------------------------------------------------------------------------------------------------------------ Gross profit 63,229 60,032 58,312 Operating expenses 22,817 21,260 19,765 ------------------------------------------------------------------------------------------------------------------------ Income from operations 40,412 38,772 38,547 Other income (loss) 1,326 (1,058) 1,003 ------------------------------------------------------------------------------------------------------------------------ Earnings before finance costs and taxes 41,738 37,714 39,550 Interest expense 10,296 10,871 14,061 Translation gain (loss) 289 (1,392) 4,433 ------------------------------------------ Earnings before income taxes and profit sharing 31,731 25,451 29,922 Income taxes and profit sharing 18,534 16,040 8,336 ------------------------------------------------------------------------------------------------------------------------ Net income $ 13,197 $9,411 $21,586 ========================================================================================================================

30 34 4. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following:

December 31, 2000 1999 ------------------------------------------------------------------------------------------------------------------------ Land $ 15,153 $ 15,184 Buildings 33,433 33,047 Machinery and equipment 152,964 154,406 Furniture and fixtures 13,122 11,577 Construction in progress 9,860 3,370 ------------------------------------------------------------------------------------------------------------------------ 224,532 217,584 Less accumulated depreciation 116,427 112,490 ------------------------------------------------------------------------------------------------------------------------ Net property, plant and equipment $108,105 $105,094 ========================================================================================================================

5. OTHER ACCRUED LIABILITIES Other accrued liabilities include accruals for insurance of $5,335 and $5,510 and various customer incentive programs of $13,427 and $14,510 at December 31, 2000 and 1999, respectively. 31 35 6. INCOME TAXES The provision (credit) for income taxes consists of the following: --------------------------------------------------------------------------------

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Current: Federal $ 19,111 $ 21,062 $ 11,383 Foreign (1,530) (2,498) 3,330 State and local 2,436 2,395 1,403 ----------------------------------------------------------------------------------------------------------------------------- Total current tax provision 20,017 20,959 16,116 ----------------------------------------------------------------------------------------------------------------------------- Deferred: Federal 3,963 1,154 5,874 Foreign 1,911 3,530 (7,049) State and local 475 (410) 677 ----------------------------------------------------------------------------------------------------------------------------- Total deferred tax provision 6,349 4,274 (498) ----------------------------------------------------------------------------------------------------------------------------- Total: Federal 23,074 22,216 17,257 Foreign 381 1,032 (3,719) State and local 2,911 1,985 2,080 ----------------------------------------------------------------------------------------------------------------------------- Total tax provision $ 26,366 $ 25,233 $ 15,618 =============================================================================================================================

The provision for income taxes was calculated based on the following components of earnings (loss) before income taxes:

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Domestic $ 71,482 $ 65,996 $52,091 Foreign 1,750 2,665 (11,030) ----------------------------------------------------------------------------------------------------------------------------- Total earnings before tax $ 73,232 $ 68,661 $41,061 =============================================================================================================================

32 36 A reconciliation from the statutory U.S. federal tax rate of 35% to the consolidated effective tax rate is as follows:

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Statutory U.S. federal tax rate 35.00% 35.00% 35.00% Increase (decrease) in rate due to: State and local income taxes, net of related federal taxes 2.60 1.90 3.30 Amortization of goodwill 1.10 1.20 2.00 Other (2.70) (1.35) (2.30) ----------------------------------------------------------------------------------------------------------------------------- Consolidated effective tax rate 36.00% 36.75% 38.00% =============================================================================================================================

Income taxes paid in cash (net of refunds received) amounted to $29,288, $13,849 and $17,078 for the years ended December 31, 2000, 1999 and 1998, respectively. Significant components of the Company's deferred tax liabilities and assets are as follows:

December 31, 2000 1999 ----------------------------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Property, plant and equipment $ 16,623 $ 20,055 Inventories 5,050 5,677 Pension 7,265 4,835 Intangibles and other assets 19,723 14,508 ----------------------------------------------------------------------------------------------------------------------------- Total deferred tax liabilities 48,661 45,075 Deferred tax assets: Accrued nonpension retirement benefits 18,657 19,683 Other accrued liabilities 8,343 9,814 Receivables 2,158 803 Capacity realignment reserve -- 1,346 Tax credits 5,920 1,301 ----------------------------------------------------------------------------------------------------------------------------- Total deferred tax assets 35,078 32,947 ----------------------------------------------------------------------------------------------------------------------------- Net deferred tax liabilities $ 13,583 $ 12,128 =============================================================================================================================

The net deferred tax liability is included in the consolidated balance sheets as follows:

December 31, 2000 1999 ----------------------------------------------------------------------------------------------------------------------------- Noncurrent deferred taxes $ 19,413 $ 18,392 Prepaid expenses (5,830) (6,264) ----------------------------------------------------------------------------------------------------------------------------- Net deferred tax liabilities $ 13,583 $ 12,128 =============================================================================================================================

33 37 7. PENSION PLANS AND NONPENSION RETIREMENT BENEFITS The Company has pension plans covering substantially all employees. Benefits generally are based on compensation for salaried employees and length of service for hourly employees. The Company's policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. The components of the benefit obligation, plan assets and funded status of the plans are as follows:

December 31, 2000 1999 ----------------------------------------------------------------------------------------------------------------------------- Change in benefit obligation: Benefit obligation, beginning of year $ 158,241 $ 168,566 Service cost 3,817 3,825 Interest cost 12,261 11,836 Plan amendments -- 544 Actuarial (gain) loss 196 (14,735) Benefits paid (14,312) (11,795) ----------------------------------------------------------------------------------------------------------------------------- Benefit obligation, end of year $ 160,203 $ 158,241 ============================================================================================================================= Change in plan assets: Fair value of plan assets, beginning of year $ 246,404 $ 219,435 Actual return on plan assets (9,444) 38,764 Benefits paid (14,312) (11,795) ----------------------------------------------------------------------------------------------------------------------------- Fair value of plan asset, end of year $ 222,648 $ 246,404 ============================================================================================================================= Funded status of plan $ 62,445 $ 88,163 Unrecognized net gain (46,207) (79,294) Unrecognized prior year service cost 5,400 5,756 ----------------------------------------------------------------------------------------------------------------------------- Prepaid pension benefit cost $ 21,638 $ 14,625 =============================================================================================================================

The actuarial present value of benefit obligations is based on a discount rate of 7.75% in 2000 and 1999 and 7.0% in 1998. The expected long-term rate of return on assets is 10.0% in 2000, 1999 and 1998. A salary growth rate of 5.0% was used in 2000 and 1999 and 4.5% in 1998. Future benefits are assumed to increase in a manner consistent with past experience. Plan assets primarily include marketable equity securities and government and corporate debt securities. 34 38 The components of the net pension expense are as follows: --------------------------------------------------------------------------------

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Service cost (benefits earned during the period) $ 3,817 $ 3,825 $ 3,799 Interest cost on projected benefit obligation 12,261 11,836 11,395 Expected return on plan assets (21,245) (19,248) (17,256) Prior service cost amortization 356 348 166 Actuarial gain recognized (2,202) (685) -- ----------------------------------------------------------------------------------------------------------------------------- Net pension credit $ (7,013) $ (3,924) $ (1,896) =============================================================================================================================

The Company also sponsors certain other employee retirement benefit plans which in the aggregate resulted in an expense of $2,373, $2,082 and $1,977 in 2000, 1999 and 1998, respectively. The Company also provides certain retiree health care and life insurance benefits covering substantially all salaried and hourly employees. Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. Under a cross-indemnity agreement, Owens-Illinois, Inc. assumed liability for the nonpension retirement benefits of Company retirees who had retired as of June 18, 1993. The components of the nonpension retirement benefit obligation and amounts accrued are as follows: --------------------------------------------------------------------------------

December 31, 2000 1999 ----------------------------------------------------------------------------------------------------------------------------- Change in accumulated postretirement benefit obligation: Benefit obligation, beginning of year $20,321 $17,471 Currency gain (116) -- Service cost 439 532 Interest cost 1,549 1,475 Plan amendments -- 3,863 Actuarial gain 207 (1,869) Settlement of insurance contract (289) -- Benefits paid (1,256) (1,151) ----------------------------------------------------------------------------------------------------------------------------- Benefit obligation, end of year $20,855 $20,321 ============================================================================================================================= Funded status of plan $(20,855) $(20,321) Unrecognized actuarial gain (15,531) (16,758) Unrecognized prior year service cost (13,290) (15,462) ----------------------------------------------------------------------------------------------------------------------------- Accrued benefit cost $(49,676) $(52,541) =============================================================================================================================

35 39 The provision for nonpension retirement benefit costs consists of the following: --------------------------------------------------------------------------------

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Service cost (benefits earned during the period) $ 439 $ 533 $ 698 Amortization (2,883) 933 (2,517) Interest cost on nonpension retirement benefit obligation 1,549 1,475 1,485 ----------------------------------------------------------------------------------------------------------------------------- Net nonpension retirement benefit cost (credit) $ (895) $ 2,941 $ (334) =============================================================================================================================

Assumed health care cost inflation is based on a gradual decrease to an ultimate rate of 5.0%. A one percent increase in these rates would have increased the nonpension retirement expense by $78 and the benefit obligation by $1,062. A one percent decrease in these rates would have decreased the net nonpension retirement expense by $88 and the benefit obligation by $1,205. The assumed discount rate used in determining the accumulated nonpension retirement benefit obligation was 7.75% for 2000 and 1999. The increase in 1999 in the accumulated postretirement benefit obligation related to coverage of additional employees for medical expense. The Company continues to fund these nonpension retirement benefit obligations as claims are incurred. The Company also provides retiree health care benefits to certain union hourly employees through participation in a multi-employer retiree health care benefit plan. Approximately $377, $400 and $443 was charged to expense for the years ended December 31, 2000, 1999 and 1998, respectively. 8. LONG-TERM DEBT The Company and its Canadian subsidiary have an unsecured agreement ("Bank Credit Agreement" or "Agreement") with a group of banks that provides for a Revolving Credit and Swing Line Facility ("Facility") permitting borrowings up to an aggregate total of $380.0 million, maturing May 1, 2002. Swing Line borrowings are limited to $25.0 million with interest calculated at the prime rate minus the Commitment Fee Percentage. Revolving Credit borrowings bear interest at the Company's option at either the prime rate minus the Commitment Fee Percentage or a Eurodollar rate plus the Applicable Eurodollar Margin. The Commitment Fee Percentage and Applicable Eurodollar Margin vary depending on the Company's performance against certain financial ratios. The Commitment Fee Percentage and the Applicable Eurodollar Margin were .125% and .225%, respectively, at December 31, 2000. The Company may also elect to borrow up to a maximum of $190.0 million under a Bid Rate loan alternative of the Facility at floating rates of interest. The Company had $151.4 and $170.0 million outstanding under the Facility at December 31, 2000 and 1999, respectively. The Facility also provides for the issuance of $38.0 million of letters of credit, 36 40 with such usage applied against the $380.0 million limit. At December 31, 2000, the Company had $5.4 million in letters of credit outstanding under the Facility. The Company has entered into Interest Rate Protection Agreements ("Rate Agreements") with respect to $75.0 million of debt as a means to manage its exposure to fluctuating interest rates. The Rate Agreements effectively convert this portion of the Company's borrowings from variable rate debt to a fixed-rate basis, thus reducing the impact of interest rate changes on future income. The average interest rate for the Company's borrowings related to the Rate Agreements at December 31, 2000, was 6.67% for an average remaining period of 3.1 years. Total remaining debt not covered by the Rate Agreements has fluctuating interest rates with a weighted average rate of 6.97% at December 31, 2000. The interest rate differential to be received or paid under the Rate Agreements is being recognized over the life of the Rate Agreements as an adjustment to interest expense. If the counterparts to these Rate Agreements fail to perform, the Company would no longer be protected from interest rate fluctuations by these Rate Agreements. However, the Company does not anticipate nonperformance by the counterparts. The Company must pay a commitment fee ("Commitment Fee Percentage") on the total credit provided under the Bank Credit Agreement. No compensating balances are required by the Agreement. The Agreement requires the maintenance of certain financial ratios, restricts the incurrence of indebtedness and other contingent financial obligations and restricts certain types of business activities and investments. Annual maturities for all the Company's long-term debt through 2002 are as follows: 2001 - none; 2002 - $151.4 million. At December 31, 2000, the carrying value of the long-term debt approximates its fair value based on the Company's current incremental borrowing rates. The fair market value for the Company's Rate Agreements at December 31, 2000 was $(1.2) million. The fair value of long-term debt is estimated based on borrowing rates currently available to the Company for loans with similar terms and maturities. The fair value of the Company's Rate Agreements is based on quotes from brokers for comparable contracts. The Company does not expect to cancel these agreements and expects them to expire as originally contracted. The Company has guaranteed $20.0 million of Vitrocrisa Holdings' debt as of December 31, 2000. Interest paid in cash amounted to $12,001, $12,297 and $12,392 for the years ended December 31, 2000, 1999 and 1998. 37 41 9. STOCK OPTIONS The Company has two stock option plans for key employees: (1) the Libbey Inc. Amended and Restated Stock Option Plan for Key Employees and (2) the 1999 Equity Participation Plan of Libbey Inc. The plans provide for the granting of Incentive Stock Options and Nonqualified Options to purchase 2,800,000 shares of the Company's common stock at a price not less than the fair market value on the date the option is granted. Options become exercisable as determined at the date of the grant by the Compensation Committee of the Board of Directors. Unless an earlier expiration date is set at the time of the grant or results from termination of an optionee's employment or a merger, consolidation, acquisition, liquidation or dissolution of the Company, Incentive Stock Options expire ten years after the date of the grant and Nonqualified Options expire ten years and a day after the grant. The Company has elected to follow APB No. 25 "Accounting for Stock Issued to Employees" (APB No. 25) in accounting for employee stock options. The alternative fair value accounting provided for under FASB No. 123 "Accounting for Stock-Based Compensation" (Statement 123) requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB No. 25, no compensation expense is recognized because the exercise price of the Company's employee stock options equals the market price of the underlying stock at the date of grant. In the opinion of management, the existing fair value models do not provide a reliable measure of the value of employee stock options. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The Company's employee stock options have characteristics significantly different from those of traded options. In addition, option valuation models require highly subjective assumptions including the expected stock price volatility. Changes in these assumptions can materially affect the fair value estimate. Pro forma information regarding net income and earnings per share is required by Statement 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994, under the fair-value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions by year:

Assumption 2000 1999 1998 ---------- ---- ---- ---- Risk-free interest rates 6.0% 6.0% 5.5% Dividend yield 0.9% 1.0% 0.8% Volatility .29 .29 .29

The weighted average fair value of options granted in 2000, 1999 and 1998 was $14.12, $12.22 and $15.22, respectively. 38 42 For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:

Year ended December 31, 2000 1999 1998 ----------------------------------------------------------------------------------------------------------------------------- Net income: Reported $ 46,866 $ 43,428 $ 25,443 Pro forma $ 45,625 $ 42,365 $ 24,435 Earnings per share: Basic Reported $3.07 $ 2.69 $ 1.45 Pro forma $2.99 $ 2.62 $ 1.39 Diluted Reported $3.01 $ 2.64 $ 1.42 Pro forma $2.93 $ 2.57 $ 1.36 -----------------------------------------------------------------------------------------------------------------------------

Pro forma effect on net income for 1999, 1998 and 1997 is not representative of the pro forma effect on net income in future years because it does not take into consideration pro forma compensation expense related to grants made prior to 1995. Stock option activity is as follows: --------------------------------------------------------------------------------

Weighted-Average Price Range Per Number of Shares Exercise Price Share ----------------------------------------------------------------------------------------------------------------------------- January 1, 1999 Outstanding 1,383,346 19.17 $13.00-$38.44 Exercisable 1,112,447 15.46 Granted 164,450 31.25 Canceled 500 38.44 Exercised 40,183 13.27 ----------------------------------------------------------------------------------------------------------------------------- December 31, 1999 Outstanding 1,507,113 20.64 $13.00-$38.44 Exercisable 1,196,708 17.32 Granted 175,750 32.31 Canceled 4,190 30.02 Exercised 110,349 14.53 ----------------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 2000 OUTSTANDING 1,568,324 22.35 $13.00-$38.44 EXERCISABLE 1,219,882 19.25 -----------------------------------------------------------------------------------------------------------------------------

39 43 The following information is as of December 31, 2000:

Options with an Options with an exercise price exercise price of greater than $13.00 per share $13.00 per share ----------------------------------------------------------------------------------------------------------------------------- Options outstanding 676,703 891,621 Weighted-average exercise price $13.00 $29.45 Remaining contractual life 2.48 7.00 Options exercisable 676,703 543,179 Weighted-average exercise price $13.00 $27.03 -----------------------------------------------------------------------------------------------------------------------------

10. SHAREHOLDERS' RIGHTS PLAN The Company has a Shareholders' Rights Plan designed to ensure that all of the Company's shareholders receive fair and equal treatment in the event of any proposal to acquire control of the Company. The Plan defines Existing Holder to mean Baron Capital Group, Inc. together with all of its Affiliates and Associates (including, without limitation, Ronald Baron, BAMCO, Inc., Baron Capital Management, Inc. and Baron Asset Fund). Under the Plan, the Company's Board of Directors would declare a distribution of one right for each outstanding common share of the Company. Each right will entitle shareholders to buy 1/100th of a share of newly created Series A Junior Participating Preferred Stock at an exercise price of $55 per right. The rights will not be exercisable until a person acquires beneficial ownership of 20% (or in the case of an Existing Holder, 25%) of the Company's common shares or makes a tender offer for at least 20% (or in the case of an Existing Holder, 25%) of its common shares. Percentage increases resulting from share repurchases by the Company or inadvertence do not cause the rights to become exercisable. After the time that a person acquires beneficial ownership of 20% (or in the case of an Existing Holder, 25%) of the Company's common shares, the holders of the rights may be permitted to exercise such rights to receive the Company's common shares having market value of twice the exercise price. The rights are redeemable at $0.001 per right at any time before the tenth day after a person has acquired 20% (or in the case of an Existing Holder, 25%) or more of the outstanding common shares. The redemption period may be extended under certain circumstances. If at any time after the rights become exercisable and not redeemed, the Company is acquired in a merger or other business combination transaction in which the Company is not the surviving party, the rights will entitle a holder to buy a number of shares of common stock of the acquiring company having a market value of twice the exercise price of each right. 40 44 11. OPERATING LEASES Rental expense for all operating leases, primarily for warehouses, was $4,705, $5,299 and $5,684 for the years ended December 31, 2000, 1999 and 1998, respectively. Future minimum rentals under operating leases are as follows: 2001--$2,827; 2002--$2,255; 2003--$2,061; 2004--$1,680; 2005--$1,076; and 2006 and thereafter--$3,944. 12. CAPACITY REALIGNMENT CHARGE The Company recorded a capacity realignment charge of approximately $20.0 million in the fourth quarter of 1998, which included $10.0 million for severance and related employee costs, $7.6 million for write-off of fixed assets (primarily equipment) and $2.4 million for supply inventories, repair parts and other costs. The primary thrust of the plan was the closing of the Wallaceburg, Ontario, manufacturing and distribution facility, the realignment of its production and distribution activities to other facilities and the Company's Mexican joint venture partner and the exiting of the glass bottle business serviced out of Wallaceburg. The Wallaceburg facility ceased operations in May 1999. An additional charge was recorded in the first quarter of 1999 of $2.2 million, which included $1.5 million for enhanced severance and related employee costs, $0.3 million for write-off of fixed assets (primarily equipment) and $0.4 million for write-off of supply inventories and other costs. During the fourth quarter of 1999, the Company assessed the capacity realignment reserve by activity and reduced it by approximately $1.2 million, primarily for a reduction of severance and related costs. This resulted in a net provision for 1999 of $1.0 million. The reserve balance at January 1, 1999, of $19.9 million decreased to $3.7 million at December 31, 1999. Activity in the reserve in 1999 consisted of asset write-offs of $6.9 million, cash payments of $11.1 million, an increase for the $1.0 million provision discussed above and an increase of $0.8 million to the reserve as a result of foreign currency translation. The $3.7 million balance at December 31, 1999, related to $3.4 million for asset write-offs and $0.3 million for severance costs. During 2000, the Company ceased operations at the remaining Wallaceburg warehouse. Activity in the reserve for 2000 consisted of asset write-offs of $1.1 million, cash payments of $0.9 million and a decrease of $0.1 million due to foreign currency translation. The $1.6 million remaining at December 31, 2000, is designated $1.4 million for the disposition of the Wallaceburg property and $0.2 million for related employee costs. The disposition of the property occurred in late March, 2001, with related employee payments made soon thereafter. The capacity realignment reserve is included in other accrued liabilities on the balance sheets at December 31, 2000 and 1999. 41 45 13. INDUSTRY SEGMENT INFORMATION Effective the fourth quarter of 1998, the Company adopted Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" (Statement 131), which superseded Statement No. 14 "Financial Reporting for Segments of a Business Enterprise." Statement 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim and annual financial reports. Statement 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company's revenues from external customers are derived from tableware products. The Company does not have any customer who represents 10% or more of total sales. The Company's operations by geographic areas for 2000, 1999 and 1998 are presented below. Intercompany sales to affiliates represent products that are transferred between geographic areas on a basis intended to reflect as nearly as possible the market value of the products. The long-lived assets include net fixed assets, goodwill and equity investments.

United States Foreign Eliminations Consolidated ----------------------------------------------------------------------------------------------------------------------------- 2000 Net sales: Customers $389,990 $ 51,838 $441,828 Intercompany 740 $(740) -- ----------------------------------------------------------------------------------------------------------------------------- Total $390,730 $51,838 $(740) $441,828 ----------------------------------------------------------------------------------------------------------------------------- Long-lived assets $155,328 $82,309 $237,637 1999 Net sales: Customers $404,355 $56,237 $460,592 Intercompany 17,962 4,040 $(22,002) -- ----------------------------------------------------------------------------------------------------------------------------- Total $422,317 $60,277 $(22,002) $460,592 ----------------------------------------------------------------------------------------------------------------------------- Long-lived assets $154,909 $79,348 $234,257 1998 Net sales: Customers $378,420 $58,102 $436,522 Intercompany 25,429 12,853 $(38,282) -- ----------------------------------------------------------------------------------------------------------------------------- Total $403,849 $70,955 $(38,282) $436,522 ----------------------------------------------------------------------------------------------------------------------------- Long-lived assets $161,105 $86,738 $247,843 -----------------------------------------------------------------------------------------------------------------------------

42 46 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) The following tables present selected quarterly financial data for the years ended December 31, 2000 and 1999: 2000

Dollars in thousands, except First Quarter Second Quarter Third Quarter Fourth Quarter per-share data ----------------------------------------------------------------------------------------------------------------------------- Net sales $96,761 $113,293 $108,089 $123,685 Freight billed to customers 458 529 583 704 Cost of sales 69,605 75,851 71,824 88,723 Gross profit 27,614 37,971 36,848 35,666 Earnings before interest and income taxes(1) 13,156 25,826 25,215 21,251 Net income(1) 6,402 14,339 14,297 11,828 ----------------------------------------------------------------------------------------------------------------------------- Net income per share Basic $0.42 $0.94 $0.94 $0.78 Diluted $0.41 $0.92 $0.92 $0.76 -----------------------------------------------------------------------------------------------------------------------------

1999

Dollars in thousands, except First Quarter Second Quarter Third Quarter Fourth Quarter per-share data ----------------------------------------------------------------------------------------------------------------------------- Net sales $95,280 $112,923 $112,017 $140,372 Freight billed to customers 432 528 600 1,049 Cost of sales 71,776 73,222 75,408 103,836 Gross profit 23,936 40,229 37,209 37,585 Earnings before interest and income taxes(1) 9,474 24,947 24,983 21,758 Net income(1) 3,983 13,639 13,888 11,918 ----------------------------------------------------------------------------------------------------------------------------- Net income per share Basic $0.24 $0.84 $0.85 $0.76 Diluted $0.24 $0.82 $0.84 $0.74 -----------------------------------------------------------------------------------------------------------------------------

-------------- (1) In the first quarter of 1999, the Company recorded a capacity realignment charge of $2.2 million pre-tax and $1.4 million after-tax. In the fourth quarter of 1999, the Company recorded a capacity realignment credit of $1.2 million pre-tax and $0.8 million after-tax. 43 47 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to executive officers is set forth herein immediately following Item 4 of Part I. Information with respect to non-officer directors is included in the Proxy Statement in the section entitled "Election of Directors" and such information is incorporated herein by this reference. The section in the Proxy Statement entitled "General Information - Compliance with Section 16(a) of the Exchange Act" is also incorporated herein by this reference. ITEMS 11. AND 13. EXECUTIVE COMPENSATION AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The sections entitled "Election of Directors," exclusive of the subsection entitled "Board Meetings and Committees of the Board," and "Executive Compensation," exclusive of the subsections entitled "Compensation Committee Report" and "Performance Graph," which are included in the Proxy Statement, are incorporated herein by this reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section entitled "Security Ownership of Certain Beneficial Owners and Management," which is included in the Proxy Statement, is incorporated herein by this reference. 44 48 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K a) Index of Financial Statements and Financial Statement Schedule Covered by Report of Independent Auditors.

Page Report of Independent Auditors 21 Consolidated Balance Sheets at December 31, 2000 and 1999 22 For the years ended December 31, 2000, 1999 and 1998: Consolidated Statements of Income 24 Consolidated Statements of Shareholders' Equity 25 Consolidated Statements of Cash Flows 26 Notes to Consolidated Financial Statements 27 Selected Quarterly Financial Data 43

Financial statement schedule for the years ended December 31, 2000, 1999 and 1998: II - Valuation and Qualifying Accounts (Consolidated) S-1 All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule or because the information required is included in the consolidated financial statements or the accompanying notes. The accompanying Exhibit Index is hereby incorporated herein by this reference. The exhibits listed in the accompanying Exhibit Index are filed or incorporated by reference as part of this report. b) no forms 8-K were filed during the fourth quarter. 45 49 Vitrocrisa, S. de R. L. de C.V. Financial Statements as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998 and Independent Auditors' Report are filed as a part of this Annual Report pursuant to Rule 3.09 of Regulation S-X S-2 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LIBBEY INC. by: /s/ Kenneth G. Wilkes -------------------------------- Kenneth G. Wilkes Vice President and Chief Financial Officer Date: March 30, 2001 46 50 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Libbey Inc. and in the capacities and on the dates indicated.

SIGNATURE TITLE --------- ----- Peter C. McC. Howell Director Gary L. Moreau Director Terence P. Stewart Director Carol B. Moerdyk Director Richard I. Reynolds Director, Executive Vice President, Chief Operating Officer John F. Meier Chairman of the Board of Directors, Chief Executive Officer

By: /s/ Kenneth G. Wilkes ---------------------- Kenneth G. Wilkes Attorney-In-Fact /s/ Kenneth G. Wilkes ---------------------- Kenneth G. Wilkes Vice President and Chief Financial Officer (Principal Accounting Officer) Date: March 30, 2001 47 51 INDEX TO FINANCIAL STATEMENT SCHEDULE AND SEPARATE FINANCIAL STATEMENTS OF AFFILIATE Page ---- Financial Statement Schedule of Libbey Inc. for the years ended December 31, 2000, 1999, and 1998 for Schedule II Valuation and Qualifying Accounts (Consolidated) S-1 Vitrocrisa, S. de R. L. de C.V. Financial Statements as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998 and Independent Auditors' Report S-2 48 52 LIBBEY INC. SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (Consolidated) Years ended December 31, 2000, 1999 and 1998 (Dollars in thousands)

Additions Charged Balance at (Credited) to Beginning Costs and Other Deductions Balance at Of Year Expenses (Note 1) (Note 2) End of Year ---------- ------------- -------- ---------- ----------- Allowances for Losses and Discounts on Receivables: 2000 $3,869 $3,631 $ 293 $1,005 $6,788 ====== ====== ===== ====== ====== 1999 $3,636 $1,648 $ 79 $1,494 $3,869 ====== ====== ===== ====== ====== 1998 $3,103 $1,212 $ 132 $ 811 $3,636 ====== ====== ===== ====== ======

(1) The amounts in "Other" represent recoveries of accounts previously charged off as uncollectible. (2) Deductions from allowances for losses and discounts on receivables represent uncollectible notes and accounts written off. S-1 53 VITROCRISA, S. de R.L. de C.V. Financial Statements (US GAAP) for the Years Ended December 31, 2000, 1999 and 1998 and Independent Auditors' Report S-2 54 [DELOITTE & TOUCHE LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners of Vitrocrisa, S. de R.L. de C.V. Monterrey, N.L. (Amounts in thousands of Mexican pesos) We have audited the accompanying balance sheets of Vitrocrisa, S. de R.L. de C.V. (the "Company") as of December 31, 2000 and 1999, and the related statements of income, changes in partners' equity and changes in financial position for each of the three years in the period ended December 31, 2000, all expressed in thousands of constant Mexican pesos as of December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and that they are prepared in accordance with accounting principles generally accepted in Mexico. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Effective January 1, 2000 the Company applied the provisions of the new Bulletin D-4, "Accounting Treatment of Income Tax, Tax on Assets and Workers' Profit Sharing". The cumulative effect at that date was an increase in long-term liabilities of Ps. 235,193, a decrease in total assets of Ps. 134,416 and a decrease directly to partners' equity of Ps. 369,609. The effect on the year ended December 31, 2000 was a decrease in net income of Ps.58,239, an increase directly to partners' equity of Ps. 8,651 and an increase in long-term liabilities of Ps. 49,588 (see note 2 e). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vitrocrisa, S. de R.L. de C.V. as of December 31, 2000 and 1999, and the results of its operations, changes in its partners' equity and changes in its financial position for each of the three years in the period ended December 31, 2000, in conformity with accounting principles generally accepted in Mexico. Accounting principles generally accepted in Mexico differ in certain significant respects from accounting principles generally accepted in the United States of America. The application of the latter would have affected the determination of net income for each of the three years in the period ended December 31, 2000, and the determination of partners' equity at December 31, 2000 and 1999 to the extent summarized in note 13. The accompanying financial statements and the independent auditors' report have been translated into English language for the convenience of readers. /s/ Deloitte & Touche San Pedro Garza Garcia, N.L. Mexico February 15, 2001 S-3 55 VITROCRISA, S. DE R.L. DE C.V. BALANCE SHEETS (Thousands of constant Mexican pesos as of December 31, 2000) --------------------------------------------------------------------------------

DECEMBER 31, ASSETS 2000 1999 Cash and cash equivalents Ps. 31,336 Ps. 1,523 Trade receivables, net of allowance for doubtful accounts of Ps. 25,630 and Ps. 22,148 at December 31, 2000 and 1999, respectively (note 11) 261,860 294,366 Notes receivable from affiliates (note 11) 81,349 33,245 Refundable income taxes and value added tax 52,593 Other receivables (note 11) 52,168 47,429 Inventories (note 3) 303,453 232,989 ------------- ------------ Current assets 730,166 662,145 Prepaid rent (note 12) 98,096 Investment in shares 9,310 10,145 Deferred income tax and profit sharing to workers (note 9 b) 172,820 Land and buildings (note 4) 415,913 421,875 Machinery and equipment (note 4) 847,295 876,843 Construction in progress 11,585 37,994 Intangible seniority premium and pension asset 90,286 99,704 Other assets 6,971 4,195 ------------- ------------ Total assets Ps. 2,209,622 Ps.2,285,721 ============= ============ LIABILITIES Short-term debt Ps. 82,797 Current portion of long-term debt Ps 78,350 13,688 Trade payables 233,963 198,829 Notes payable to affiliates (note 11) 47,809 231,935 Accounts payable to affiliates (note 11) 31,721 26,838 Accrued expenses 59,508 70,518 Other current liabilities 23,764 25,156 ------------- ------------ 475,115 649,761 ------------- ------------ Current liabilities Long-term debt (note 5) 812,714 821,080 Seniority premium and pension plans (note 6) 182,734 175,229 Deferred income tax and profit sharing to workers (note 9 b) 247,718 ------------- ------------ Long-term liabilities 1,243,166 996,309 ------------- ------------ Total liabilities 1,718,281 1,646,070 ------------- ------------ Commitments (note 12) PARTNERS' EQUITY Contributed capital 2,974,629 2,916,338 Paid-in capital 98,556 98,556 Shortfall in restatement of capital (2,817,572) (2,810,301) Cumulative effect of deferred taxes (369,609) Minimum pension liability adjustment (33,114) (27,646) Retained earnings 462,704 65,755 Net income for the year 175,747 396,949 ------------- ------------ Partners' equity (note 8) 491,341 639,651 ------------- ------------ Total liabilities and partners' equity Ps.2,209,622 Ps.2,285,721 ============= ============

The accompanying notes are an integral part of these financial statements. ING. SALVADOR MINARRO Administrative Director S-4 56 VITROCRISA, S. DE R.L. DE C.V. STATEMENTS OF INCOME (Thousands of constant Mexican pesos as of December 31, 2000) --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31, 2000 1999 1998 Net sales (note 11) Ps. 2,114,997 Ps. 2,035,076 Ps. 2,056,647 Cost of sales (note 11) 1,553,276 1,415,901 1,384,563 General, administrative and selling expenses (note 11) 211,656 214,665 220,133 ------------- ------------- ------------- Operating income 350,065 404,510 451,951 ------------- ------------- ------------- Interest expense (note 11) 135,876 129,293 159,760 Interest income (27,409) (7,455) (5,566) Exchange loss (gain), net 8,475 (48,422) 256,937 Gain from monetary position (81,773) (136,921) (215,262) ------------- ------------- ------------- Total financing cost (benefit), net 35,169 (63,505) 195,869 ------------- ------------- ------------- Income after financing 314,896 468,015 256,082 Other (expense) income, net (3,053) (27,041) 603 ------------- ------------- ------------- Income before income tax, profit sharing to workers and extraordinary item 311,843 440,974 256,685 Income and asset tax (note 9) 118,018 119,079 76,103 Profit sharing to workers (note 9) 18,078 10,179 11,592 ------------- ------------- ------------- Income before extraordinary item 175,747 311,716 168,990 Extraordinary item (note 10) 85,233 80,889 ------------- ------------- ------------- Net income Ps. 175,747 Ps. 396,949 Ps. 249,879 ============= ============= =============

The accompanying notes are an integral part of these financial statements. S-5 57 VITROCRISA, S. DE R.L. DE C.V. STATEMENTS OF CHANGES IN PARTNERS' EQUITY (NOTE 8) (Thousands of constant Mexican pesos as of December 31, 2000, except per share amounts) --------------------------------------------------------------------------------

CUMULATIVE MINIMUM SHORTFALL IN EFFECT OF PENSION CONTRIBUTED PAID-IN RESTATEMENT OF DEFERRED LIABILITY CAPITAL CAPITAL CAPITAL TAXES ADJUSTMENT Balance at December 31, 1997 Ps. 2,916,338 Ps. 98,556 Ps. (2,686,387) Appropriation of net loss from prior year Dividends (Ps. 344.07 per share) Loss from holding non-monetary assets (38,915) Minimum pension liability adjustment Ps. (26,823) Net income ------------- ---------- -------------- ------------ ----------- Balance at December 31, 1998 2,916,338 98,556 (2,725,302) (26,823) Appropriation of net income from prior year Dividends (Ps. 205.86 per share) Loss from holding non-monetary assets (84,999) Minimum pension liability adjustment (823) Net income ------------- ---------- -------------- ------------ ----------- Balance at December 31, 1999 2,916,338 98,556 (2,810,301) (27,646) Appropriation of net income from prior year Increase in contributed capital 58,291 Loss from holding non-monetary assets (14,003) Deferred taxes 6,732 1,919 Cumulative effect of deferred taxes Ps. (369,609) Minimum pension liability adjustment (7,387) Net income ------------- ---------- -------------- ------------ ----------- Balance at December 31, 2000 Ps. 2,974,629 Ps. 98,556 Ps. (2,817,572) Ps. (369,609) Ps. (33,114) ============= ========== ============== ============ ===========

RETAINED NET PARTNERS' EARNINGS INCOME EQUITY Balance at December 31, 1997 Ps. 415,084 Ps. 743,591 Appropriation of net loss from prior year Ps. 415,084 (415,084) Dividends (Ps. 344.07 per share) (374,902) (374,902) Loss from holding non-monetary assets (38,915) Minimum pension liability adjustment (26,823) Net income 249,879 249,879 ----------- ----------- ----------- Balance at December 31, 1998 40,182 249,879 552,830 Appropriation of net income from prior year 249,879 (249,879) Dividends (Ps. 205.86 per share) (224,306) (224,306) Loss from holding non-monetary assets (84,999) Minimum pension liability adjustment (823) Net income 396,949 396,949 ----------- ----------- ----------- Balance at December 31, 1999 65,755 396,949 639,651 Appropriation of net income from prior year 396,949 (396,949) Increase in contributed capital 58,291 Loss from holding non-monetary assets (14,003) Deferred taxes 8,651 Cumulative effect of deferred taxes (369,609) Minimum pension liability adjustment (7,387) Net income 175,747 175,747 ----------- ----------- ----------- Balance at December 31, 2000 Ps. 462,704 Ps. 175,747 Ps. 491,341 =========== =========== ===========

The accompanying notes are an integral part of these financial statements. S-6 58 VITROCRISA, S. DE R.L. DE C.V. STATEMENTS OF CHANGES IN FINANCIAL POSITION (Thousands of constant Mexican pesos as of December 31, 2000) --------------------------------------------------------------------------------

YEAR ENDED DECEMBER 31, OPERATING ACTIVITIES: 2000 1999 1998 Net income Ps.175,747 Ps. 396,949 Ps. 249,879 Add (deduct) non-cash items: Depreciation and amortization 155,080 133,633 127,615 Provision for seniority premium and pension plans 9,536 13,003 11,613 (Gain) loss from sale of fixed assets (1,055) 552 (14,533) Deferred income tax and profit sharing to workers 59,581 (8,397) (7,512) ---------- ------------ ------------ 398,889 535,740 367,062 Increase in trade payables 35,134 24,024 18,839 (Increase) decrease in trade receivables 32,506 (6,260) 44,589 Increase in inventories (62,564) (11,962) (61,864) Other operating assets and liabilities (57,761) (91,465) 41,792 ---------- ------------ ------------ Resources generated from operations 346,204 450,077 410,418 ---------- ------------ ------------ FINANCING ACTIVITIES: Short-term debt 601,080 13,318 100,767 Notes receivable from affiliates (58,216) (33,245) Notes payable to affiliates (166,937) 136,277 (65,501) Long-term debt 347,319 440,205 858,231 Monetary effect on liabilities with financing cost (85,189) (158,825) (231,011) Payment of short-term debt (599,121) Payment of long-term debt (297,668) (573,552) (414,759) Dividends paid (224,305) (498,102) Contributed capital 58,291 ---------- ------------ ------------ Resources used in financing activities (200,441) (400,127) (250,375) ---------- ------------ ------------ INVESTMENT ACTIVITIES: Investment in shares (17) Sales of fixed assets 1,403 790 22,226 Investment in land, buildings, machinery and equipment (112,989) (65,924) (179,165) Other (4,364) (1,141) (2,714) ---------- ------------ ------------ Resources used in investment activities (115,950) (66,275) (159,670) ---------- ------------ ------------ Net (decrease) increase in cash and cash equivalents 29,813 (16,325) 373 Cash and cash equivalents at beginning of year 1,523 17,848 17,474 ---------- ------------ ------------ Cash and cash equivalents at end of year Ps. 31,336 Ps. 1,523 Ps. 17,847 ========== ============ ============

The accompanying notes are an integral part of these financial statements. S-7 59 VITROCRISA, S. DE R.L. DE C.V. NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (Thousands of constant Mexican pesos as of December 31, 2000) -------------------------------------------------------------------------------- 1. ACTIVITIES OF THE COMPANY: Vitrocrisa, S. de R.L. de C.V. (the "Company"), a wholly-owned subsidiary of Vitrocrisa Holding, S. de R.L. de C.V. which is 51% owned by Vitro, S.A. de C.V. ("Vitro") and 49% by Libbey Inc. ("Libbey"), is a company whose activity is the manufacture and distribution of glass articles. Prior to August 29, 1997, the Company was a wholly-owned subsidiary of Vitro. 2. PRINCIPAL ACCOUNTING POLICIES: a) Accounting method for the treatment of the effects of inflation The financial statements of the Company have been prepared in accordance with Bulletin B-10, "Recognition of the Effects of Inflation in the Financial Information", as amended, issued by the Mexican Institute of Public Accountants ("IMCP"), which recognizes the effects of inflation. The Third Amendment to Bulletin B-10, requires the restatement of all comparative financial statements to constant pesos as of the date of the most recent balance sheet presented. For that purpose, the Company uses the "Indice Nacional de Precios al Consumidor" (Mexican National Consumer Price Index: "INPC"), published by Banco de Mexico. Bulletin B-12 sets the rules related to the statement of changes in financial position. This statement presents the sources and uses of funds during the period measured as the differences, in constant pesos, between the beginning and ending balances of balance sheet items adjusted by the excess (shortfall) in restatement of capital. As required by Bulletin B-12, the monetary effect and the effect of changes in exchange rates are not considered non-cash items in the determination of funds generated from operations due to the fact they affect the purchasing power of the entity. The following is a description of the items that have been restated and of the methods used: - Inventories and cost of sales Inventories are valued at the price of the last purchase made during the period, or at standard cost, without exceeding the net realizable value. Cost of sales is determined by using the standard cost at the time of sale. - Land, buildings, machinery and equipment Investments in land, buildings, machinery and equipment (collectively "fixed assets"), including expenditures for renewals and improvements which extend useful lives, are capitalized. The Company has followed the principles of the Fifth Amendment to Bulletin B-10, issued by the IMCP and which became effective on January 1, 1997 under which, fixed assets are restated under the method of consumer price index adjustment, using the INPC. The starting balance to apply the INPC is the net replacement value as of December 31, 1996. For machinery and equipment purchased in a foreign country, the restatement is based on a general price index from the country of origin and the exchange rate at the end of each period. Depreciation is calculated using the straight-line method, taking into consideration the useful life of the asset, in order to depreciate the original cost and the revaluation. The depreciation begins in the month in which the asset comes into service. The useful lives of the assets are as follows:

YEARS Buildings 25 Machinery and equipment 3 to 11

S-8 60 - Investment in shares The investment in shares in which the Company holds less than 10% of the capital stock, are accounted for at their acquisition cost. - Shortfall in restatement of capital This item, which is an element of partners' equity, reflects the accumulated effect of holding non-monetary assets and the effect of the initial monetary position gain or loss. The accumulated effect of holding non-monetary assets represents the increase in the specific values of non-monetary assets in excess of or below the increase attributable to general inflation as measured by the INPC. - Restatement of contributed capital and retained earnings Contributed capital and retained earnings are restated using the INPC from the respective dates such capital was contributed or income generated to the date of the most recent balance sheet presented. - Exchange fluctuations Exchange gains or losses included in the (benefit) cost of financing are calculated by translating monetary assets and liabilities denominated in foreign currencies at the exchange rate in effect at the end of each month. - Gain (loss) from monetary position The monetary position reflects the result of holding monetary assets and liabilities during periods of inflation. Values stated in current monetary units experience a decrease in purchasing power as time goes by. This means that losses are incurred by holding monetary assets over time, whereas gains are realized by maintaining monetary liabilities. The net effect is presented in the statement of income for the year as part of the total financing cost (benefit). b) Cash and cash equivalents Highly liquid short-term investments with original maturities of ninety days or less, consisting primarily of Mexican Government Treasury Bonds and money market instruments, are classified as cash equivalents. c) Maintenance expenses Maintenance and repair expenses are recorded as costs and expenses in the period when they are incurred. d) Seniority premiums, pension plans and severance payments Statutory seniority premiums and pension plans for all personnel are considered as costs in the periods in which services are rendered. Periodic costs are calculated in accordance with the accounting pronouncement Bulletin D-3, issued by the IMCP, and the actuarial computations were made by independent actuaries using estimates of the salaries that will be in effect at the time of payment. Personnel not yet eligible for seniority premiums are also taken into account, with any necessary adjustments made in accordance with the probability of their acquiring the required seniority. The cost of past service is amortized over the average period required for workers to reach their retirement age. The actuarial method used is the projected unit credit. Severance payments are expensed in the period in which such payments are made. S-9 61 e) Income tax Effective January 1, 2000, the Company applied the provisions of the new Bulletin D-4 "Accounting Treatment of Income Tax, Tax on Assets and Workers' Profit Sharing", issued by the IMCP. As required by this new bulletin, deferred income taxes are provided for differences between the book and tax value of assets and liabilities and deferred workers' profit sharing for temporary differences between the financial and adjusted tax income, that are expected to reverse in the future. Additionally, the tax on assets paid is recognized as an asset. Until 1999, deferred taxes were provided only for identifiable, non-recurring timing differences that were expected to reverse over a definite period of time, and the tax on assets paid was recognized in the income statement. The cumulative effect at January 1, 2000 was an increase in long-term liabilities of Ps. 235,193, a decrease in total assets of Ps. 134,416 and a decrease directly to partners' equity of Ps. 369,609. The effect on the year ended December 31, 2000 was a decrease in net income of Ps.58,239, an increase directly to partners' equity of Ps. 8,651 and an increase in long-term liabilities of Ps. 49,588. f) Reclassification of selling, general and administrative expenses to cost of goods sold In order to improve comparative analysis with other companies, to reflect ongoing changes in Company's management of production facilities, and to facilitate the control of such expenses, a change in classification of certain costs and expenses is reflected in the 1999 results. Expenses related to the production of goods have been reclassified, from selling, general and administrative expenses to cost of goods sold. Those expenses include, among others, supervisors' salaries, packing materials, certain freight expenses, and warehousing costs. For comparison purposes, historical figures for the year 1998 have been reclassified in the amount of Ps. 135,505. Additionally, as a result of the reclassification, Ps. 15,123 were capitalized in ending inventory at December 31, 1999 and operating income for the year then ended was increased by the same amount. g) Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of these financial statements and its disclosures. Actual results could differ from those estimated. 3. INVENTORIES: The breakdown is summarized as follows:

DECEMBER 31, 2000 1999 Finished products Ps. 269,660 Ps. 188,284 Raw materials 8,072 8,093 Packaging materials 15,478 11,750 ------------ ------------ 293,210 208,127 Spare parts 3,059 3,722 Refractory 7,184 21,140 ------------ ------------ Ps. 303,453 Ps. 232,989 ============ ============

S-10 62 4. LAND, BUILDINGS, MACHINERY AND EQUIPMENT: Land, buildings, machinery and equipment are summarized as follows:

DECEMBER 31, 2000 1999 Land Ps. 149,032 Ps. 148,828 Buildings 569,779 566,744 Accumulated depreciation (302,898) (293,697) ----------- ------------ Ps. 415,913 Ps. 421,875 =========== ============ Machinery and equipment 2,754,665 2,765,032 Accumulated depreciation (1,907,370) (1,888,189) ----------- ------------ Ps. 847,295 Ps. 876,843 =========== ============

As discussed in note 2a), machinery and equipment purchased in a foreign country, in the amount of Ps. 501,419, was restated using the index of inflation of the country of origin and translated into Mexican pesos using the corresponding exchange rate at December 31, 2000. 5. LONG TERM DEBT: Long-term debt consists of the following, net of its respective current maturities:

DECEMBER 31, 2000 1999 Unsecured loan in U.S. dollars, semiannual interest based on LIBOR plus 1.55 points, principal payable in 2004. Ps. 288,294 Ps. 310,490 Unsecured loan in U.S. dollars, semiannual interest based on LIBOR plus 2.5 points, principal payable in several installments through 2005. 221,990 434,685 Unsecured loan in U.S. dollars, semiannual interest based on LIBOR plus 1.65 points, principal payable in 2004. 192,196 Unsecured loan guaranteed by Vitro in Mexican pesos, interest based on Investments Units (UDIS) plus 8.75 points, payable monthly, principal payable in several installments through 2006. 62,185 75,905 Unsecured notes payable to affiliates in U.S. dollars, semiannual interest based on LIBOR plus 1.65 points, principal payable in 2004. 48,049 ------------ ------------ Ps. 812,714 Ps. 821,080 ============ ============

S-11 63 Maturity of long-term debt is as follows:

DECEMBER 31, YEAR 2000 2002 Ps. 78,350 2003 193,667 2004 491,570 2005 46,637 2006 2,490 ----------- Ps. 812,714 ===========

Certain of the Company's long-term debt agreements contain restrictions and covenants that require the maintenance of various financial ratios. The Company has complied with the restrictions and covenants during 2000. 6. SENIORITY PREMIUM AND PENSION PLANS: The disclosures relating to the Company's seniority premium and pension plans required by Bulletin D-3, issued by IMCP, together with certain actuarial assumptions utilized are presented below as of December 31, 2000 and 1999.

DECEMBER 31, 2000 1999 Accumulated benefit obligation Ps. 182,734 Ps. 175,229 ----------- ----------- Projected benefit obligation 193,446 180,165 Unrecognized transition obligation 69,710 80,599 Changes in assumptions and adjustments from experience 43,781 30,598 Unrecognized net loss 20,620 21,089 ----------- ----------- Projected net liability 59,335 47,879 ----------- ----------- Additional minimum liability 123,399 127,350 Net periodic cost (Ps. 26,011 in 1998) 29,800 28,452 Assumptions: Discount rate 5% 5% Compensation increase 1% 1%

7. FOREIGN CURRENCY BALANCES AND OPERATIONS: a) Assets and liabilities denominated in foreign currency consist of the following at December 31, 2000:

THOUSANDS OF U.S. DOLLARS MEXICAN PESOS Monetary assets $ 4,009 Ps. 38,529 Fixed assets 52,178 501,419 Monetary liabilities-short term 20,577 197,737 Inventories 2,122 20,394 Monetary liabilities-long term 78,100 750,529

S-12 64 b) Foreign operations during 2000 were as follows:

THOUSANDS OF MEXICAN PESOS U.S. DOLLARS Exports $ 71,946 Ps. 680,670 Imports 29,095 275,447 Interest expense, net 8,971 85,025

c) The exchange rates used for purposes of these financial statements were Ps 9.6098 per one U.S. dollar at December 31, 2000 and Ps 9.4986 per one U.S. dollar at December 31, 1999. On February 15, 2001, date of issuance of these financial statements, the exchange rate was Ps. 9.6763 per one U.S. dollar. 8. PARTNERS' EQUITY: a) At the partners' meeting held on March 20, 2000, the variable portion of the contributed capital was increased by Ps. 55,000 (Thousands of nominal pesos). b) At the stockholders' meeting held on September 27, 1999 it was agreed to change the corporate name from Vitrocrisa, S.A. de C.V. to Vitrocrisa, S. de R.L. de C.V. c) Contributed capital is analyzed as follows:

CLASS I CLASS II FIXED CAPITAL VARIABLE CAPITAL NUMBER OF PERCENTAGE NUMBER OF PERCENTAGE SERIES SHARES OF SHARES SHARES OF SHARES TOTAL A 1 0.0038% 0.0038% B 1 0.0036% 0.0036% C (limited vote) 1 2.70% 1 97.2926% 99.9926% ------- ----- ----- ------- -------- 1 2.70% 3 97.3000% 100.0000% ======= ===== ===== ======= ========

d) At the stockholders' meeting held on April 30, 1999 it was agreed to declare dividends in the amount of Ps. 193,970 (thousands of nominal pesos). e) At the stockholders' meeting held on August 31, 1998 it was agreed to declare dividends in the amount of Ps. 271,658 (thousands of nominal pesos). f) Partners' equity includes accrued profits and results from the restating of assets which, in case of distribution, will be subject, under certain circumstances, to the payment of income tax by the Company. Effective January 1, 1999, after a change made to the Income Tax Law in Mexico, the taxable rate for those distributions is 35%, and when dividends are paid to individuals or foreign residents, an additional 5% withholding tax will be paid. S-13 65 9. INCOME TAX AND WORKERS' PROFIT SHARING a) The income tax and workers' profit sharing included in the Company's result are (the 2000 amounts are not comparable with the amounts of 1999 and 1998, see note 2 e):

YEAR ENDED DECEMBER 31, Income tax: 2000 1999 1998 Tax benefit that results from the utilization of tax loss carry forwards and asset tax Ps. 85,233 Ps. 80,889 Current Ps. 63,483 41,640 Deferred 54,535 (7,794) (10,261) ----------- ------------ ----------- 118,018 119,079 70,628 Asset tax 5,475 ----------- ------------ ----------- Ps. 118,018 Ps.119,079 Ps. 76,103 =========== ============ ===========

YEAR ENDED DECEMBER 31, 2000 1999 1998 Workers' profit sharing: Current Ps. 16,848 Ps. 15,885 Ps. 14,832 Deferred 1,230 (5,706) (3,240) ----------- ------------ ----------- Ps 18,078 Ps 10,179 Ps. 11,592 =========== ============ ===========

b) The principal amounts of deferred taxes and workers' profit sharing on the balance sheets are (the 2000 amounts are not comparable with the amounts of 1999 see note 2 e):

DECEMBER 31, 2000 1999 Deferred income tax: Reserves Ps. 51,212 Ps. 39,938 Inventories (14,699) 94,477 Seniority premium and pension plans 29,910 Fixed assets (302,407) Prepaid expenses (47,253) Other (722) ----------- ---------- (283,959) 134,415 ----------- ---------- Workers' profit sharing: Reserves 10,472 11,411 Inventories 25,769 26,994 ----------- ---------- 36,241 38,405 ----------- ---------- Ps.(247,718) Ps.172,820 =========== ==========

S-14 66 c) The reconciliation between the Company's effective income tax rate and the statutory income tax rate is as follows (the 2000 amounts are not comparable with the amounts of 1999 and 1998, see note 2e):

YEAR ENDED DECEMBER 31, 2000 1999 1998 Effective income tax rate 37.84% 27.00% 29.65% Add (deduct): Purchase deductions 1.72 7.72 Difference between tax and financial accounting for depreciation .11 .31 Difference between tax and financial accounting for monetary gain (0.64) 3.42 3.89 Provisions .37 (8.20) Other (2.20) 2.38 .63 ----- ----- ----- Statutory income tax rate 35.00% 35.00% 34.00% ===== ===== =====

d) Effective January 1, 1999, the Mexican income tax law was changed in several respects. In addition to the changes described in note 8 f), the overall tax rate increased from 34% to 35%; however, in 1999 income taxes are currently payable based on a 32% rate and the remaining 3% will be paid when such amounts are paid out as dividends. The 32% rate decreased to 30% effective January 1, 2000 and the remaining 5% will be paid when such amounts are paid out as dividends. Taxpayers have the option to pay 35% currently rather than deferring a remainder until dividends are paid. 10. EXTRAORDINARY ITEM: The extraordinary items in 1999 and 1998 are the tax benefits that resulted from the utilization of tax loss carry forwards and recovery of asset tax paid in previous years. 11. BALANCES AND TRANSACTIONS WITH AFFILIATED COMPANIES: The principal balances and transactions with affiliated companies not shown separately in the financial statements are as follows:

AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2000 1999 1998 Cash equivalents Ps. 421 Trade receivables Ps. 4,753 Ps. 4,529 7,310 Other receivables 4,632 35,221 Unsecured long-term loan payable 88,982 Net sales 379,731 344,775 295,856 Other income 3,520 4,540 3,163 Purchases of inventory 37,099 33,910 15,928 Operating expenses 35,545 38,185 47,914 Interest expense (2,915) 12,267 113,139

S-15 67 The balances of cash equivalents and unsecured long-term loan payable in 1998, disclosed above result from deposits and loan transactions with subsidiaries of Grupo Financiero Serfin, S.A. (GFS), a Mexican financial group, in which Vitro held an equity interest. Interest expense relates to loan transactions with Vitro's subsidiaries and GFS in 1998. Net sales disclosed above were primarily to Crisa Corporation, a U.S. corporation owned 100% by Vitro, and to Crisa Industrial L.L.C., a U.S. Corporation owned 51% by Vitro and 49% by Libbey, for purposes of facilitating export sales. Notes receivables (payable) from (to) affiliates are interest-bearing loans with market interest rates. Trade receivables, other receivables, other income, purchases of inventory, operating expenses, and accounts payable to affiliates, all consist of transactions with subsidiaries of Vitro and are of a normal and recurring nature. 12. COMMITMENTS The Company leases warehouses under no cancelable operating lease agreements. Under those agreements the Company might sub-lease such premises. As of December 31, 2000, future minimum lease payments are as follows:

YEAR AMOUNT 2001 Ps. 24,849 2002 24,849 2003 24,270 2004 14,414 ----------- Ps. 88,382 ===========

Additionally to these payments, the Company prepaid Ps. 163,091 during 2000 to freeze future increases by inflation or other factors. The amortizations are as follows:

YEAR AMOUNT 2001 Ps. 36,914 2002 36,914 2003 35,123 2004 26,059 ----------- Ps. 135,010 ===========

Rental expense for the years 2000, 1999 and 1998 were Ps. 39,939, Ps. 44,179 and Ps. 29,217, respectively. 13. DIFFERENCES BETWEEN MEXICAN AND UNITED STATES ACCOUNTING PRINCIPLES: The Company's financial statements are prepared in accordance with Mexican GAAP, which vary in certain significant respects from accounting principles generally accepted in the United States (U.S. GAAP). The principal differences between Mexican GAAP and U.S. GAAP and their effects on net income and partners' equity are presented below with an explanation of the adjustments: S-16 68 Reconciliation of net income:

YEAR ENDED DECEMBER 31, 2000 1999 1998 Net income under Mexican GAAP Ps.175,747 Ps. 396,949 Ps.249,879 U.S. GAAP adjustments for: Effects of inflationary accounting 15,134 (86,917) (149,792) Deferred income taxes (1,885) (86,121) (51,258) Deferred workers' profit sharing (15,461) (26,740) 4,732 ---------- ------------ ---------- Net income under U.S. GAAP Ps.173,535 Ps. 197,171 Ps. 53,561 ========== ============ ==========

Reconciliation of partners' equity:

YEAR ENDED DECEMBER 31, 2000 1999 1998 Total partners' equity reported under Mexican GAAP Ps. 491,341 Ps. 639,651 Ps. 552,830 U.S. GAAP adjustments for: Effects of inflationary accounting (979,019) (1,026,498) (1,052,966) Cumulative effect of deferred income tax 339,216 Deferred tax on minimum pension liability adjustment 10,062 Deferred workers' profit sharing on minimum pension liability adjustment 2,875 Deferred income taxes 8,389 10,274 96,395 Deferred workers' profit sharing (7,732) 7,729 34,469 ----------- ----------- ----------- Partners' equity (deficiency in assets) under U.S. GAAP Ps.(134,868) Ps.(368,844) Ps.(369,272) =========== =========== ===========

a) Effects of inflationary accounting A significant difference between Mexican and U.S. GAAP relates to the formal adoption in Mexico of inflationary accounting, which mitigates the effects of inflation on financial information. Under Mexican GAAP, all basic financial statements (including those of prior years) and related notes are presented in pesos of purchasing power at the end of the latest period presented. Inventories are valued at replacement cost and fixed assets are restated under the method of consumer price index adjustment, using the INPC. Partners' equity components are restated by applying INPC growth factors from the date on which the component was contributed or generated. b) Deferred income tax: The Company applies the provisions of the new Bulletin D-4 "Accounting Treatment of Income Tax, Tax on Assets and Workers' Profit Sharing", issued by the IMCP. As required by this new bulletin, deferred income taxes are provided for differences between the book and tax value of assets and liabilities and deferred workers' profit sharing for temporary differences between the financial and adjusted tax income that are expected to reverse in the future. Additionally, the tax on assets paid is recognized as an asset. Until 1999, deferred taxes were provided only for identifiable, non-recurring timing differences that were expected to reverse over a definite period of time, and the tax on assets paid was recognized in the income statement. For U.S. GAAP purposes, the Company has applied Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". S-17 69 Under SFAS No. 109, deferred tax assets and liabilities are recognized for future tax consequences of temporary differences between the financial statement carrying amounts of assets and liabilities and their tax bases. Deferred tax assets are also recognized for the estimated future effects of tax loss carry forwards. Deferred tax assets are reduced by any tax benefits that are not expected to be realized. The significant components of the deferred tax assets for purposes of U.S. GAAP reconciliation are as follows:

DECEMBER 31, 2000 1999 1998 Reserves Ps.35,776 Ps. 33,733 Ps. 39,278 Tax loss carry forwards 3,140 Inventories (14,699) 11,868 10,585 Seniority premium and pension plans 30,081 15,380 9,975 Tax on assets 58,476 Fixed assets 33,044 33,528 33,491 Prepaid rent (47,253) Other 2,157 (11,969) --------- ----------- ---------- Total deferred tax assets Ps.39,106 Ps. 82,540 Ps.154,945 ========= =========== ==========

c) Deferred workers' profit sharing The Company calculates a deferred workers' profit sharing asset for U.S. GAAP purposes based on temporary differences between the financial reporting bases and workers' profit sharing bases of assets and liabilities. Under U.S. GAAP, workers' profit sharing expense would be classified as a component of operating expenses. The significant components of the deferred workers' profit sharing for purposes of U.S. GAAP reconciliation are as follows:

DECEMBER 31, 2000 1999 1998 Inventories Ps. (4,200) Ps. 3,391 Ps. 3,025 Exchange fluctuation 8,304 9,623 32,973 Reserves 10,221 9,638 11,222 Fixed assets (8,896) (8,716) (8,260) Seniority premium and pension plans 8,595 4,394 2,850 Prepaid rent (13,501) Other 616 (3,420) --------- ---------- ---------- Net deferred profit sharing assets Ps. 1,139 Ps. 14,910 Ps. 41,810 ========== ========== ==========

d) Other Differences and Supplemental U.S. GAAP Disclosures 1. Extraordinary Items.- Until 1999, Mexican GAAP required that utilization of tax loss carry forwards and the recovery of the asset tax paid in previous years be classified as extraordinary items in the statement of income, whereas U.S. GAAP requires the benefit from utilization of tax loss carry forwards to be classified as a component of income tax expense attributable to continuing operations. The benefits from utilization of tax loss carry forwards in constant peso terms were Ps.13,046 for the year ended December 31, 1999 and Ps. 89,886 for the year ended December 31, 1998. For U.S. GAAP purposes, such amounts, in thousands of nominal pesos, were, Ps.11,190 and Ps. 66,096, respectively. The benefit from the recovery of the asset tax in 1999 was Ps. 72,187 in constant peso terms and Ps. 62,633 in thousands of nominal pesos. S-18 70 2. Post-retirement Benefits.- Under U.S. GAAP, SFAS No. 106, "Employer's Accounting for Post-retirement Benefits Other Than Pensions" requires accrual of post-retirement benefits other than pensions (such as health care benefits) during the years an employee provides services. The Company is not required to provide for post-retirement benefits. 3. Pension Disclosures.- The Company maintains pension plans and seniority premium plans and has adopted Bulletin D-3 issued by the IMCP. The accounting treatment for pensions set forth in this Bulletin is substantially the same as those set forth in SFAS No. 87 "Employer's Accounting For Pensions". The Company records the pension cost determined by actuarial computations, as described in notes 2d) and 6. The differences between principles applied by the Company under Mexican GAAP and requirements of SFAS No. 87 are not material. For purposes of determining pension and seniority premium cost under U.S. GAAP the Company applies SFAS No. 87. The disclosures under SFAS No. 132, "Employers' Disclosures about Pensions and Other Post-retirement Benefits", are presented below.

2000 1999 1998 Change in benefit obligation: Benefit obligation at beginning of year Ps. 160,821 Ps. 134,560 Ps. 80,128 Service cost 5,109 3,865 4,277 Interest cost 8,605 7,153 6,281 Net amortization and deferral 14,856 13,736 10,696 Intangible asset (1,220) 7,362 20,045 Minimum pension liability adjustment 7,500 3,454 21,918 Benefits paid (12,937) (9,309) (8,785) ----------- ------------ ----------- Benefit obligation at end of year Ps. 182,734 Ps. 160,821 Ps. 134,560 =========== ============ =========== Amounts recognized in the balance sheet consists of: Projected net liability Ps. 63,698 Ps. 48,065 Ps. 32,620 Intangible asset 90,286 91,506 84,144 Minimum pension liability adjustment 28,750 21,250 17,796 ----------- ------------ ----------- Ps. 182,734 Ps. 160,821 Ps. 134,560 =========== ============ ===========

Pension and seniority premium costs are summarized below:

YEAR ENDED DECEMBER 31, 2000 1999 1998 Service costs Ps. 5,109 Ps. 3,865 Ps. 4,277 Interest cost 8,605 7,153 6,281 Net amortization and deferral 14,856 13,736 10,696 ----------- ----------- ---------- Net periodic pension cost Ps. 28,570 Ps. 24,754 Ps. 21,254 =========== =========== ==========

4. Weighted Average Interest Rates - The weighted average interest rates on short-term debt and short-term accounts payable to affiliates for 2000 were approximately 8.5% for the transactions denominated in dollars and 17.4% for those transactions denominated in pesos and 8% and 18.8%, respectively, for 1999. S-19 71 5. Supplement Cash flow Information Required by U.S. GAAP

YEAR ENDED DECEMBER 31, ------------------------------ 2000 1999 1998 Cash payments for interest and income tax follows: Interest Ps.117,533 Ps.80,169 Ps.80,832 Income tax 59,935 71,429 4,078

Under Mexican GAAP the financial statements of the Company are prepared in accordance with Bulletin B-10, which requires the recognition of the effects of inflation in a comprehensive manner. The statement of changes in financial position is prepared in accordance with Bulletin B-12 and is in constant pesos, which means pesos of the same purchasing power as of the date of the last balance sheet presented. Therefore all the resources generated or used are measured in constant pesos. Additionally, the monetary effect and the effect of changes in exchange rates are considered as cash items for purposes of this statement because these items do affect the purchasing power of the entity. U.S. GAAP requires a statement of cash flows prepared in accordance with SFAS No. 95, "Statement of Cash Flows". In order to reconcile to U.S. GAAP, the exchange loss and the monetary gain of all monetary assets and liabilities must be excluded from resources generated from operations and resources generated from financing activities. The Company has presented a cash flow statement in a manner that comprehensively segregates the effects of inflation and currency devaluation from the cash flows from operating, investing and financing activities as follows: CONDENSED STATEMENTS OF CASH FLOWS U.S. GAAP BASIS

YEAR ENDED DECEMBER 31, --------------------------------------- OPERATING ACTIVITIES: 2000 1999 1998 Net income Ps.173,535 Ps. 197,171 Ps. 53,561 Add (deduct) non-cash items: Depreciation and amortization 28,759 47,338 32,042 Provision for seniority premium and pension plans 15,633 13,170 12,495 (Gain) loss from sale of fixed assets (1,140) (505) (16,479) Deferred income tax and profit sharing to workers 70,142 99,289 33,827 Exchange loss 8,962 (41,685) 189,889 ---------- ------------ ----------- 295,891 314,778 305,335 Increase in trade payables 52,495 39,787 19,286 Increase in trade and receivables from affiliates 9,013 (34,250) 10,968 Increase in inventories (88,914) (18,526) (46,188) Other current assets and liabilities, net (54,698) (71,592) 45,079 ---------- ------------ ----------- Cash provided by operating activities 213,787 230,197 334,480 ---------- ------------ ----------- FINANCING ACTIVITIES: Borrowing of short-term debt (75,989) 11,662 64,326 Borrowing (payments) of notes payable to affiliates (160,062) 119,451 (94,796) Notes receivable from affiliates (52,156) (31,183) Long-term debt 343,918 379,951 639,171 Payment of long-term debt (230,513) (469,930) (462,631) Dividends (193,970) (361,305) Contributed capital 55,000 ---------- ------------ ----------- Cash used in financing activities (119,802) (184,019) (215,235) ---------- ------------ -----------

S-20 72

YEAR ENDED DECEMBER 31, ---------------------------------------------- 2000 1999 1998 INVESTING ACTIVITIES: Sale of fixed assets 1,339 679 16,816 Investment in land, buildings, machinery and equipment (61,200) (57,848) (133,685) Other (3,102) (1,099) (2,187) ----------- ------------- ----------- Cash used in investing activities (62,963) (58,268) (119,056) ----------- ------------- ----------- Net (decrease) increase in cash and cash equivalents 31,022 (12,090) 189 Cash and cash equivalents at beginning of year 1,398 14,584 12,038 Effect of exchange rates on cash and cash equivalents (1,084) (1,096) 2,357 ----------- ------------- ----------- Cash and cash equivalents at end of year Ps. 31,336 Ps. 1,398 Ps. 14,584 =========== ============= ===========

6. Fair value of financial instruments.- SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", requires disclosure of the estimated fair values of certain financial instruments. The estimated fair value amounts have been determined using available market information or other appropriate valuation methodologies that require considerable judgment in interpreting market data and developing estimates. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The carrying amounts of the Company's financial instruments approximate their estimated fair values. The fair value information presented herein is based on information available to management as of December 31, 2000 and 1999. Although management is not aware of any factors that would significantly affect the estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date and, therefore, the current estimates of fair value may differ significantly from the amounts presented herein. 7. Comprehensive income - Under U.S. GAAP, SFAS No. 130, "Reporting Comprehensive Income", establishes standards for reporting and display of comprehensive income and its components. The Company's only item of other comprehensive income is the minimum pension liability adjustment. Additional required disclosures under SFAS No. 130 are as follows: Disclosure of accumulated other comprehensive income balances:

MINIMUM PENSION LIABILITY ADJUSTMENT Balance at December 31, 1997 Change for the year Ps.17,796 ---------- Balance at December 31, 1998 17,796 Change for the year 3,454 ---------- Balance at December 31, 1999 21,250 Change for the year (Net of tax) (5,437) ---------- Balance at December 31, 2000 Ps.15,813 ==========

S-21 73 8. Balance sheets and statements of income - The staff of the SEC also requires the disclosure of summarized comparative balance sheet and statements of income, as follows: BALANCE SHEETS (Thousands of Mexican pesos) --------------------------------------------------------------------------------

ASSETS DECEMBER 31, 2000 DECEMBER 31, 1999 Cash and cash equivalents Ps. 31,336 Ps. 1,398 Trade receivables, net of allowance for doubtful accounts of Ps. 25,630 and Ps. 22,148 at December 31, 2000 and 1999, respectively 261,860 270,161 Other receivables 52,168 43,528 Refundable income taxes and value added tax 48,269 Notes receivable from affiliates 81,349 30,511 Inventories 302,663 213,749 Deferred income tax and profit sharing to workers 10,657 ------------- ------------- Current assets 729,376 618,273 Prepaid rent 98,096 Investment in shares 9,310 9,310 Deferred income tax and profit sharing to workers 51,349 86,793 Land and buildings 31,558 27,463 Machinery and equipment 318,755 267,323 Construction in progress 11,585 34,870 Intangible seniority premiums and pension asset 90,286 91,506 Other 6,484 3,382 ------------- ------------- Total assets Ps. 1,346,799 Ps. 1,138,920 ============= ============= LIABILITIES Short-term debt Current portion of long-term debt Ps. 75,989 Ps. 78,350 12,563 Trade payables 225,664 172,792 Accounts payable to affiliates 40,021 34,320 Notes payable to affiliates 47,809 212,864 Accrued expenses 36,064 60,012 Other current liabilities 58,311 24,838 ------------- ------------- Current liabilities 486,219 593,378 ------------- ------------- Long-term debt 812,714 753,565 Seniority premium and pension plans 182,734 160,821 ------------- ------------- Long-term liabilities 995,448 914,386 ------------- ------------- Total liabilities 1,481,667 1,507,764 ------------- ------------- PARTNERS' EQUITY Partners' capital (474,785) (529,785) Minimum pension liability adjustment (15,813) (21,250) Retained earnings 182,195 (14,980) Net income for the year 173,535 197,171 ------------- ------------- Partners' equity (deficiency in assets) (134,868) (368,844) ------------- ------------- Total liabilities and Partners' equity Ps. 1,346,799 Ps. 1,138,920 ============= =============

S-22 74 STATEMENTS OF INCOME (Thousands of Mexican pesos) --------------------------------------------------------------------------------

Year ended Year ended Year ended December 31, December 31, December 31, 2000 1999 1998 ------------- ------------- -------------- Net sales Ps. 2,038,297 Ps. 1,793,019 Ps. 1,553,081 Cost of sales 1,396,360 1,168,204 980,738 General, administrative and selling expenses 237,033 224,679 170,133 ------------- ------------- -------------- Operating income 404,904 400,136 402,210 ------------- ------------- -------------- Interest expense 130,860 113,461 119,028 Interest income (26,640) (6,549) (2,597) Exchange loss (gain), net 8,962 (41,685) 189,889 ------------- ------------- -------------- Total financing cost, net 113,182 65,227 306,320 ------------- ------------- -------------- Income after financing 291,722 334,909 95,890 Other (expense) income, net (2,784) (22,389) 5,237 ------------- ------------- -------------- Income before income tax 288,938 312,520 101,127 Income and asset tax 115,403 115,349 47,566 ------------- ------------- -------------- Net income Ps. 173,535 Ps. 197,171 Ps. 53,561 ============= ============= ==============

***** S-23 75 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 2.0 -- Asset Purchase Agreement dated as of September 22, 1995 by and among The Pfaltzgraff Co., The Pfaltzgraff Outlet Co., Syracuse China Company of Canada Ltd., LG Acquisition Corp. and Libbey Canada Inc., Acquisition of Syracuse China Company (filed as Exhibit 2.0 to the Registrant's Current Report on Form 8-K dated September 22, 1995 and incorporated herein by reference). 2.1 -- Master Investment Agreement, dated to be effective as of August 15, 1997, entered into by and between Libbey Inc., Libbey Glass Inc., LGA2 Corp., LGA3 Corp., LGA4 Corp., Vitro S.A., Vitrocrisa Holding, S.A. de C.V., Vitro Corporativo, S.A., Vitrocrisa S.A. de C.V. Crisa Corporation, and WorldCrisa Corporation (filed as Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated August 29, 1997 and incorporated herein by reference). 3.1 -- Restated Certificate of Incorporation of Libbey Inc. (filed as Exhibit 3.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). 3.2 -- Amended and Restated By-Laws of Libbey Inc. (filed as Exhibit 3.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). 4.1 -- Restated Certificate of Incorporation of Libbey Inc. (incorporated by reference herein as Exhibit 3.1). 4.2 -- Amended and Restated By-Laws of Libbey Inc. (incorporated by reference herein as Exhibit 3.2). 4.3 -- Rights Agreement, dated January 5, 1995, between Libbey Inc. and The Bank of New York, which includes the form of Certificate of Designations of the Series A Junior Participating Preferred Stock of Libbey Inc. as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C, (filed as Exhibit 1 to Registrant's Registration Statement on Form 8-A dated January 20, 1995 and incorporated herein by reference). E-1 76 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 4.4 -- First Amendment to Rights Agreement, dated February 3, 1999, between Libbey Inc. and The Bank of New York (filed as Exhibit 4.4 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1998 and incorporated herein by reference). 10.1 -- Management Services Agreement dated as of June 24, 1993 between Owens-Illinois General Inc. and Libbey Glass Inc. (filed as Exhibit 10.2 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). 10.2 -- Tax Allocation and Indemnification Agreement dated as of May 18, 1993 by and among Owens-Illinois, Inc., Owens-Illinois Group, Inc. and Libbey Inc. (filed as Exhibit 10.3 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). *10.3 -- Pension and Savings Plan Agreement dated as of June 17, 1993 between Owens-Illinois, Inc. and Libbey Inc. (filed as Exhibit 10.4 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). 10.4 -- Cross-Indemnity Agreement dated as of June 24, 1993 between Owens-Illinois, Inc. and Libbey Inc. (filed as Exhibit 10.5 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). *10.5 -- Employment Agreements dated as of June 24, 1993 between Libbey Inc. and its then Executive Officers (filed as Exhibit 10.6 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993 and incorporated herein by reference). *10.6 -- Employment Agreement dated as of August 1, 1993 between Libbey Inc. and Kenneth G. Wilkes (filed as an Exhibit 10.6(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). E-2 77 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.7 -- Form of Non-Qualified Stock Option Agreement between Libbey Inc. and certain key employees participating in the Libbey Inc. Stock Option Plan for Key Employees (filed as Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). *10.8 -- Description of Libbey Inc. Senior Executive Life Insurance Plan (filed as Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). *10.9 -- Libbey Inc. Deferred Compensation Plan for Outside Directors (filed as Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 and incorporated herein by reference). *10.10 -- The Amended and Restated Libbey Inc. Stock Option Plan for Key Employees (filed as Exhibit 10.14 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995 and incorporated herein by reference). *10.11 -- Form of Non-Qualified Stock Option Agreement between Libbey Inc. and Charles S. Goodman under Amended and Restated Libbey Inc. Stock Option Plan for Key Employees (filed as Exhibit 10.16 to the Registrant's current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). 10.12 -- Libbey Inc. Guarantee dated as of October 10, 1995 in favor of The Pfaltzgraff Co., The Pfaltzgraff Outlet Co. and Syracuse China Company of Canada Ltd. guaranteeing certain obligations of LG Acquisition Corp. and Libbey Canada Inc. under the Asset Purchase Agreement for the Acquisition of Syracuse China (Exhibit 2.0) in the event certain contingencies occur (filed as Exhibit 10.17 to the Registrant's Current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). E-3 78 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 10.13 -- Susquehanna Pfaltzgraff Co. Guarantee dated as of October 10, 1995 in favor of LG Acquisition Corp. and Libbey Canada Inc. guaranteeing certain obligations of The Pfaltzgraff Co., The Pfaltzgraff Outlet Co. and Syracuse China Company of Canada, Ltd. under the Asset Purchase Agreement for the Acquisition of Syracuse China (Exhibit 2.0) in the event certain contingencies occur (filed as Exhibit 10.18 to the Registrant's Current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). 10.14 -- Letter Agreement dated as of October 10, 1995 by and between The Pfaltzgraff Co., The Pfaltzgraff Outlet Co., Syracuse China Company of Canada Ltd., LG Acquisition Corp. and Libbey Canada Inc. amending the Letter Agreement dated September 22, 1995 filed as part of the Asset Purchase Agreement for the Acquisition of Syracuse China (Exhibit 2.0) (filed as Exhibit 10.19 to the Registrant's Current Report on Form 8-K dated October 10, 1995 and incorporated herein by reference). *10.15 -- Employment Agreement dated as of April 1, 1996 between Libbey Inc. and John A. Zarb (filed as Exhibit 10.21 to Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996 and incorporated herein by reference). *10.16 -- The Amended and Restated Libbey Inc. Senior Management Incentive Plan (filed as Exhibit 10.22 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and incorporated herein by reference). *10.17 -- First Amended and Restated Libbey Inc. Executive Savings Plan (filed as Exhibit 10.23 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). *10.18 -- Employment Agreement dated as of January 1, 1997 between Libbey Inc. and Timothy T. Paige (filed as Exhibit 10.24 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). E-4 79 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 10.19 -- The Second Amended and Restated Credit Agreement dated as of April 23, 1997 to the First Amended and Restated Credit Agreement dated as of July 17, 1995 among Libbey Glass Inc. and Libbey Canada Inc. as Borrowers, the lenders listed therein, The Bank of Nova Scotia, as Canadian Agent, The First National Bank of Chicago, as Syndication Agents, NationsBank, N.A., as Documentation Agent, The Bank of New York, The Bank of Nova Scotia, Caisse National De Credit Agricole, Fleet Bank, N.A. and Keybank National Association, as Co-Agents and Bankers Trust Company, as Administrative Agent (filed as Exhibit 10.25 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 and incorporated herein by reference). 10.20 -- Amended and Restated Distribution Agreement dated to be effective as of August 29, 1997, by and among Vitro S.A., Vitrocrisa, S.A. de C.V., Libbey Inc. and Libbey Glass Inc. whereby Libbey Glass Inc. will distribute certain products (filed as Exhibit 10.26 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). 10.21 -- Vitrocrisa S.A. de C.V. Shareholders Agreement dated to be effective as of August 29,1997 by and among Libbey Inc., LGA3 Corp., Vitro S.A., Vitrocrisa Holding S.A. de C.V. and Vitrocrisa S.A. de C.V. (filed as Exhibit 10.28 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). 10.22 -- Vitrocrisa Holding S.A. de C.V. Shareholders Agreement dated to be effective as of August 29,1997 by and among Libbey Inc., LGA3 Corp., Vitro S.A. and Vitrocrisa Holding S.A. de C.V. (filed as Exhibit 10.29 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). 10.23 -- Amended and Restated Covenant Not to Compete dated to be effective as of August 29, 1997 by and between Libbey Inc. and Vitro S.A. (filed as Exhibit 10.30 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). E-5 80 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 10.24 -- Crisa Libbey S.A. de C.V. Shareholders Agreement dated to be effective as of August 29,1997 by and among Libbey Inc., LGA3 Corp., Vitro S.A. and Crisa Libbey S.A. de C.V. (filed as Exhibit 10.31 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). 10.25 -- Limited Liability Company Agreement of Crisa Industrial, L.L.C. dated to be effective as of August 29, 1997 by and among Crisa Corporation, LGA4 Corp., Vitro S.A. and Libbey Inc. (filed as Exhibit 10.32 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). 10.26 -- Management Services Agreement dated to be effective August 29, 1997 by and between Libbey Inc. and Vitrocrisa S. A. de C.V. for services to be provided by one or more subsidiary corporations of Libbey Inc. (filed as Exhibit 10.33 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). *10.27 -- Employment Agreement dated as of September 1, 1997 between Libbey Inc. and Daniel P. Ibele (filed as Exhibit 10.34 to Registrant's Current Report on Form 8-K/A dated August 29, 1997 Amendment No. 1 and incorporated herein by reference). *10.28 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and L. Frederick Ashton (filed as Exhibit 10.35 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.29 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Rob A. Bules (filed as Exhibit 10.38 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.30 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Robert A. Dunton (filed as Exhibit 10.39 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). E-6 81 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.31 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Terry E. Hartman (filed as Exhibit 10.40 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.32 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and William M. Herb (filed as Exhibit 10.41 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.33 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Daniel P. Ibele (filed as Exhibit 10.42 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.34 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Pete D. Kasper (filed as Exhibit 10.43 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.35 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and John F. Meier (filed as Exhibit 10.44 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.36 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Timothy T. Paige (filed as Exhibit 10.45 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.37 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and John P. Pranckun (filed as Exhibit 10.46 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.38 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Willie B. Purvis (filed as Exhibit 10.47 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). E-7 82 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.39 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Richard I. Reynolds (filed as Exhibit 10.48 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.40 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Scott M. Sellick (filed as Exhibit 10.49 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.41 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Arthur H. Smith (filed as Exhibit 10.50 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.42 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Kenneth G. Wilkes (filed as Exhibit 10.51 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.43 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and John A. Zarb (filed as Exhibit 10.52 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.44 -- Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Wayne J. Zitkus (filed as Exhibit 10.53 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998 and incorporated herein by reference). *10.45 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and L. F. Ashton (filed as Exhibit 10.48 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.46 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and J. F. Meier (filed as Exhibit 10.49 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). E-8 83 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.47 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Arthur H. Smith (filed as Exhibit 10.50 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.48 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Richard I. Reynolds (filed as Exhibit 10.51 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.49 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Kenneth G. Wilkes (filed as Exhibit 10.52 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.50 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Timothy T. Paige (filed as Exhibit 10.53 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.51 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and John A. Zarb (filed as Exhibit 10.54 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.52 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Daniel P. Ibele (filed as Exhibit 10.55 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.53 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Willie Purvis (filed as Exhibit 10.57 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). E-9 84 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.54 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Robert Dunton (filed as Exhibit 10.58 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.55 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and William Herb (filed as Exhibit 10.59 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.56 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Wayne Zitkus (filed as Exhibit 10.60 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.57 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and John P. Pranckun (filed as Exhibit 10.61 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.58 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Pete Kasper (filed as Exhibit 10.63 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.59 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Scott Sellick (filed as Exhibit 10.64 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.60 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Rob Bules (filed as Exhibit 10.65 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). E-10 85 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- *10.61 -- Amendment dated May 21, 1999 to the Change of Control Agreement dated as of May 27, 1998 between Libbey Inc. and Terry Hartman (filed as Exhibit 10.66 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999 and incorporated herein by reference). *10.62 -- Employment Agreement dated as of August 1, 1999 between Libbey Inc. and Kenneth A. Boerger (filed as Exhibit 10.67 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). *10.63 -- Change of Control Agreement dated as of August 1, 1999 between Libbey Inc. and Kenneth A. Boerger (filed as Exhibit 10.68 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). *10.64 -- Form of Non-Qualified Stock Option Agreement between Libbey Inc. and certain key employees participating in The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.69 to Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999 and incorporated herein by reference). *10.65 -- The 1999 Equity Participation Plan of Libbey Inc. (filed as Exhibit 10.67 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1999 and incorporated herein by reference). 13 -- 2000 Annual Report to Shareholders for the year ended December 31, 2000. Except for the information that is expressly incorporated herein by reference, this exhibit is furnished for the information of the Securities and Exchange Commission and is not deemed to be filed as part of this report. 22 -- Subsidiaries of the Registrant (filed herewith). 23 -- Consent of Independent Auditors (filed herewith). 25 -- Power of Attorney (filed herewith). E-11 86 EXHIBIT INDEX S-K Item 601No. Document -------------------------------------------------------------------------------- 99 -- Safe harbor provisions of the Private Securities Litigation Reform Act of 1995 (filed herewith). * Management Contract or Compensation Plan or Arrangement. E-12