Pension and Non-pension Postretirement Benefits

9 Months Ended

Sep. 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 certain 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). U.S. salaried employees will not be eligible for additional company contribution credits beginning January 1, 2013. 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 September 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2012			2011			2012			2011			2012			2011
Service cost	$	1,543		$	1,372		$	118		$	390		$	1,661		$	1,762
Interest cost	3,702			4,014			1,327			1,190			5,029			5,204
Expected return on plan assets	(4,939		)	(4,307		)	(596		)	(566		)	(5,535		)	(4,873		)
Amortization of unrecognized:
Prior service cost	494			540			70			77			564			617
Loss	1,302			1,166			149			113			1,451			1,279
Settlement charge	—			—			93			—			93			—
Curtailment charge (credit)	(125		)	—			—			—			(125		)	—
Pension expense	$	1,977		$	2,785		$	1,161		$	1,204		$	3,138		$	3,989
Nine months ended September 30,	U.S. Plans						Non-U.S. Plans						Total
(dollars in thousands)	2012			2011			2012			2011			2012			2011
Service cost	$	4,468		$	4,118		$	1,108		$	1,275		$	5,576		$	5,393
Interest cost	11,548			12,042			3,761			3,811			15,309			15,853
Expected return on plan assets	(13,885		)	(12,879		)	(1,786		)	(1,756		)	(15,671		)	(14,635		)
Amortization of unrecognized:
Prior service cost	1,537			1,622			198			249			1,735			1,871
Loss	4,822			3,496			408			373			5,230			3,869
Settlement charge	457			—			93			—			550			—
Curtailment charge (credit)	(125		)	—			—			—			(125		)	—
Pension expense	$	8,822		$	8,399		$	3,782		$	3,952		$	12,604		$	12,351

During the first nine months of 2012, we incurred pension settlement and curtailment charges totaling $0.4 million. The pension settlement charges were triggered by excess lump sum distributions, which required us to record unrecognized gains and losses. The curtailment charges resulted from the third quarter announcement that as of January 1, 2013, we are ceasing annual company contribution credits to the cash balance accounts in our Libbey U.S. Salaried Pension Plan and SERP. As a result, these plans were remeasured as of July 31, 2012. At that time the discount rate was reduced from 5.00 percent to 3.87 percent. The re-measurement resulted in a reduction in pension expense of $1.1 million in the third quarter of 2012 compared to what our expense would have been for the nine months ended September 30, 2012 had these events not occurred. This amount is included in the above table. 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. During the second quarter of 2012, the 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. As a result of the U.S. salaried pension plan re-measurement on July 31, 2012, the portion of this contribution related to this plan did affect the pension expense calculation. We have contributed $3.9 million and $98.7 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 nine months ended September 30, 2012, respectively. Pension contributions for the remainder of 2012 are estimated to be $4.2 million.

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). Effective January 1, 2013, we are ending our existing healthcare benefit for salaried retirees age 65 and older and will instead provide a Retiree Health Reimbursement Arrangement (RHRA) that supports retirees in purchasing a Medicare plan that meets their needs. Also effective January 1, 2013, the life insurance benefit will be 20.0 percent of the retiree's final salary, with a maximum benefit of $10,000. 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 September 30,	U.S. Plans				Non-U.S. Plans						Total
(dollars in thousands)	2012		2011		2012			2011			2012		2011
Service cost	$	368	$	340	$	—		$	—		$	368	$	340
Interest cost	857		908		28			30			885		938
Amortization of unrecognized:
Prior service cost	105		105		—			—			105		105
Loss / (gain)	229		277		—			(5		)	229		272
Non-pension postretirement benefit expense	$	1,559	$	1,630	$	28		$	25		$	1,587	$	1,655
Nine months ended September 30,	U.S. Plans				Non-U.S. Plans						Total
(dollars in thousands)	2012		2011		2012			2011			2012		2011
Service cost	$	1,103	$	1,019	$	1		$	1		$	1,104	$	1,020
Interest cost	2,570		2,724		80			92			2,650		2,816
Amortization of unrecognized:
Prior service cost	316		316		—			—			316		316
Loss / (gain)	687		831		(1		)	(13		)	686		818
Non-pension postretirement benefit expense	$	4,676	$	4,890	$	80		$	80		$	4,756	$	4,970

Our 2012 estimate of non-pension payments was $4.7 million, and we have paid $1.0 million and $3.0 million for the three and nine months ended September 30, 2012, respectively.