Pension and Non-pension Postretirement Benefits

6 Months Ended

Jun. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and Non-pension Postretirement Benefits

Pension and Non-pension Postretirement Benefits

We have pension plans covering the majority of our employees. Benefits generally are based on compensation for salaried employees and job grade and length of service for hourly employees. Our policy is to fund pension plans such that sufficient assets will be available to meet future benefit requirements. In addition, we have an unfunded supplemental employee retirement plan (SERP) that covers salaried U.S.-based employees of Libbey hired before January 1, 2006. The U.S. pension plans cover the salaried U.S.-based employees of Libbey hired before January 1, 2006 and most hourly U.S.-based employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). The non-U.S. pension plans cover the employees of our wholly owned subsidiaries in the Netherlands and Mexico. The plan in Mexico is not funded.

The components of our net pension expense, including the SERP, are as follows:

Three months ended June 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2012			2011			2012			2011			2012			2011
Service cost	$	1,370		$	1,314		$	548		$	457		$	1,918		$	1,771
Interest cost	3,827			3,940			1,178			1,361			5,005			5,301
Expected return on plan assets	(4,461		)	(4,259		)	(583		)	(625		)	(5,044		)	(4,884		)
Amortization of unrecognized:
Prior service cost	522			541			62			90			584			631
Loss	1,719			1,112			124			134			1,843			1,246
Settlement charge	37			—			—			—			37			—
Pension expense	$	3,014		$	2,648		$	1,329		$	1,417		$	4,343		$	4,065
Six months ended June 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2012			2011			2012			2011			2012			2011
Service cost	$	2,925		$	2,746		$	990		$	885		$	3,915		$	3,631
Interest cost	7,846			8,028			2,434			2,621			10,280			10,649
Expected return on plan assets	(8,946		)	(8,572		)	(1,190		)	(1,190		)	(10,136		)	(9,762		)
Amortization of unrecognized:
Prior service cost	1,043			1,082			128			172			1,171			1,254
Loss	3,520			2,330			259			260			3,779			2,590
Settlement charge	457			—			—			—			457			—
Pension expense	$	6,845		$	5,614		$	2,621		$	2,748		$	9,466		$	8,362

During the first half of 2012, we incurred pension settlement charges totaling $0.5 million. The pension settlement charges were triggered by an excess lump sum distribution, which required us to record unrecognized gains and losses in our pension plan accounts.

We provide certain retiree health care and life insurance benefits covering our U.S and Canadian salaried and non-union hourly employees hired before January 1, 2004 and a majority of our union hourly employees (excluding employees hired at Shreveport after 2008 and at Toledo after September 30, 2010). Employees are generally eligible for benefits upon retirement and completion of a specified number of years of creditable service. Benefits for most hourly retirees are determined by collective bargaining. The U.S. non-pension postretirement plans cover the hourly and salaried U.S.-based employees of Libbey (excluding those mentioned above). The non-U.S. non-pension postretirement plans cover the retirees and active employees of Libbey who are located in Canada. The postretirement benefit plans are not funded.

The provision for our non-pension postretirement benefit expense consists of the following:

Three months ended June 30,	U.S. Plans				Non-U.S. Plans						Total
(dollars in thousands)	2012		2011		2012			2011			2012		2011
Service cost	$	367	$	306	$	1		$	1		$	368	$	307
Interest cost	856		891		26			33			882		924
Amortization of unrecognized:
Prior service cost	106		106		—			—			106		106
Loss / (gain)	229		264		(1		)	(4		)	228		260
Non-pension postretirement benefit expense	$	1,558	$	1,567	$	26		$	30		$	1,584	$	1,597
Six months ended June 30,	U.S. Plans				Non-U.S. Plans						Total
(dollars in thousands)	2012		2011		2012			2011			2012		2011
Service cost	$	735	$	679	$	1		$	1		$	736	$	680
Interest cost	1,713		1,816		52			62			1,765		1,878
Amortization of unrecognized:
Prior service cost	211		211		—			—			211		211
Loss / (gain)	458		554		(1		)	(8		)	457		546
Non-pension postretirement benefit expense	$	3,117	$	3,260	$	52		$	55		$	3,169	$	3,315

In May 2012, we used a portion of the proceeds of our debt refinancing to contribute $79.7 million to our U.S. pension plans to fully fund our target obligations under ERISA. The 2012 pension expense calculation was not adjusted as a result of this discretionary contribution as it was not contemplated in the assumption set used for the expense determination for the year. We have contributed $85.8 million and $94.8 million of cash into our pension plans (including the $79.7 million contribution made to the U.S. pension plans in May 2012) for the three months and six months ended June 30, 2012, respectively. Pension contributions for the remainder of 2012 are estimated to be $1.7 million. Our 2012 estimate of non-pension payments was $4.7 million, and we have paid $1.0 million and $1.4 million for the three and six months ended June 30, 2012, respectively.

In March 2010, the Patient Protection and Affordable Care Act and the Health Care Education and Affordability Reconciliation Act (the Acts) were signed into law. The Acts contain provisions that could impact our accounting for retiree medical benefits in future periods. Based on the analysis to date, the impact of provisions in the Acts that are reasonably determinable is not expected to have a material impact on our postretirement benefit plans. We will continue to assess the provisions of the Acts and may consider plan amendments and design changes in future periods to better align these plans with the provisions of the Acts.