Libbey Inc. Annual Report Transformation2007: Actions Taken/Results Achieved Contents Libbey Profi le Profi le 1 ibbey (NYSE:LBY) is the leading Western Hemispheres. Our Royal Financial Highlights 2 Lproducer of glass tableware products in the Leerdam subsidiary, located in Leerdam, The Libbey Vision, Mission and Values Statement 2 Western Hemisphere, in addition to Netherlands, is among the world leaders in Letter to Shareholders 3 supplying to key markets throughout the producing and selling glass stemware to Directors 15 world. Libbey has the largest retail, foodservice and industrial clients. Offi cers 16 manufacturing, distribution and service Our Crisal subsidiary, located in Marinha Ten-Year Summary of Selected Financial Data 17 network among North American glass Grande, Portugal, manufactures and Form 10-K 18 tableware manufacturers. We design and markets glass tableware, mainly tumblers, market an extensive line of high-quality stemware and glassware accessories General Information Inside Back Cover glass tableware, ceramic dinnerware, metal complementing Royal Leerdam’s products Main Operating Locations Back Cover fl atware, hollowware and serveware, and and providing an expanded presence in plastic items to a broad group of customers Europe. Crisal and Royal Leerdam are in the foodservice, retail, business-to- important parts to our growth strategy to business and industrial markets. We own be a supplier of high-quality, machine- and operate two glass tableware made glass tableware products to key manufacturing plants in the United States markets worldwide. as well as glass tableware manufacturing plants in the Netherlands, Portugal, China A Leader in the Foodservice and Mexico. We also own and operate a Industry ceramic dinnerware plant in New York and Libbey is a leading provider of tableware a plastics plant in Wisconsin. In addition, products to the foodservice industry we import products from overseas in order through our broad glassware, dinnerware, to complement our line of manufactured fl atware and plastic product offerings. Our items. The combination of manufacturing extensive sales and distribution network, and procurement allows us to compete in among the largest in the foodservice the global tableware market by offering an supply industry, is a source of competitive extensive product line at competitive prices. advantage by providing a comprehensive product offering and service to our The Leader in North America foodservice customers. Through its Libbey designs, manufactures and markets Syracuse China and World Tableware under the well-recognized Libbey® brand an subsidiaries, Libbey is a leading provider of extensive line of high-quality, machine- ceramic dinnerware and metal fl atware to made glass tableware. Libbey maintains the foodservice industry in the United over 2,000 stock-keeping units in one of States. Our Syracuse China subsidiary the most extensive product portfolios in the designs, manufactures and distributes an North American glass tableware industry. extensive line of high-quality ceramic Our glassware manufacturing facilities and dinnerware, principally for foodservice distribution network in North America, the establishments in the United States and largest in the glass tableware industry, Canada. Our World Tableware subsidiary enable us to provide a high level of service imports and sells a full-line of metal to all our end users for glass tableware. fl atware and hollowware and an Prior to 2006, we owned 49 percent of assortment of ceramic dinnerware and Vitrocrisa Holding, S. de R.L. De C.V. and other tabletop items principally for related companies (Crisa) based in foodservice establishments in the United Monterrey, Mexico. On June 16, 2006, we States and Canada. Our Traex subsidiary, purchased the remaining 51 percent of located in Wisconsin, designs, Crisa, bringing our ownership in Crisa to manufactures and distributes an extensive 100 percent. Our acquisition of Crisa, which line of plastic items for the foodservice is the largest glass tableware manufacturer industry. in Latin America and has approximately 60 percent of the glass tableware market in The Leading Brand Names in Retail Mexico, is consistent with our strategy to We design and market our glass tableware expand our global sales base. products globally under the Libbey®, Royal Leerdam® and Crisa® brands. The Libbey® A Leader in the International Market brand is one of the most recognized Libbey exports glassware to more than 100 brands in consumer housewares in the countries around the world. We continue to United States and is the leading glass expand our international presence with a tableware brand in the retail channel of newly constructed state-of-the-art glass distribution. Libbey® products are sold in tableware facility in Langfang, China, not far major retail channels of distribution in the from Beijing. Commercial shipments to our United States and Canada, including mass customer base in China began from this merchants, department stores and wholly owned factory in March 2007, and specialty housewares stores. Our Crisa® we continue our efforts to grow the Chinese products are the leading brand of glass and Asia-Pacifi c markets. It joins our tableware in the Mexican retail channel, factories in Europe and North America, and our Royal Leerdam® stemware is a giving Libbey critical presence in the most leading stemware brand in retail channels signifi cant regions of both the Eastern and in Europe. 1 Libbey Inc. Financial Highlights Dollars in thousands, except per-share amounts 2007 2006 (c) % Change Sales $ 814,160 $ 689,480 18.1% Income from operations $ 66,101 $ 19,264 243.1% Diluted net loss per share $ (0.16) $ (1.47) 89.1% Earnings before interest, taxes, depreciation and amortization (EBITDA) (a) $ 116,451 $ 53,504 117.6% Cash provided by operating activities $ 51,457 $ 54,858 (6.2%) Capital expenditures $ 43,121 $ 73,598 (41.4%) Free cash fl ow (d) $ 16,549 $ (97,174) NM Dividends paid $ 1,446 $ 1,417 2.0% Total assets $ 899,112 $ 878,131 2.4% Working capital (b) $ 200,888 $ 188,413 6.6% Total debt $ 496,634 $ 491,232 1.1% Number of employees (year-end) 7,442 7,156 4.0% Number of shares outstanding (year-end) 14,564,556 14,331,535 1.6% Number of registered shareholders (year-end) 830 846 (1.9%) (a) We believe that EBITDA (earnings before interest, taxes, depreciation and amortization), a non-GAAP fi nancial measure, is a useful metric for evaluating our fi nancial performance as it is a measure that we use internally to assess performance. (b) Working capital is defi ned as inventory plus accounts receivable less accounts payable. (c) See note 4 of the Consolidated Financial Statements for summary pro forma fi nancial information refl ecting Crisa acquisition. (d) We believe that Free Cash Flow (net cash provided by operating activities, less capital expenditures and acquisition & related costs, plus proceeds from asset sales and other, and dividends received from equity investments), is a useful metric for evaluating our fi nancial performance, as it is the measure that we use internally to assess performance. The Libbey Vision, Mission and Values Statement Our Vision is to be the premier provider of tabletop glassware and related products worldwide. Our Mission is to create value by delivering quality products, great service and strong fi nancial results through the power of our people worldwide. Our Values: Customer Focus Respect Understand the Customer Act with Integrity Generate Customer Enthusiasm Value the Contribution of Others Act with Urgency Embrace Our Global Diversity Performance Teamwork Reach for Excellence Contribute Measure Progress Communicate Celebrate Success Collaborate Continuous Improvement Development Embrace Change Learn Apply Best Practices Coach Challenge Conventional Thinking Grow 2 Letter to Shareholders L ibbey made solid strides in 2007. We took signifi cant actions, and key results were achieved. This Shareholders’ Letter will highlight the year and share our vision for the future. I am particularly pleased with our execution in the face of mounting economic challenges at home and the ongoing competitive challenges in our various worldwide markets. In many respects, I would characterize this year as one of great accomplishment for the Company, and I salute all the men and women of Libbey, worldwide, who made it happen! Our growth was broad based and came both in key areas of our core USA business and from signifi cant growth in the International business that we have created. It manifested itself in the marketplace and on the factory fl oor. In the face of multiple undertakings in assimilating further our Crisa business in Mexico, our new factory in China and the distractions of the U.S. economy, our Company executed its agenda, and the results of this large effort of the last few years are paying off. From an operations perspective, we were pleased on balance with our overall manufacturing performance. Particularly gratifying was the start-up and steady progress of our new factory in China and the fi ne execution of our Crisa business in Mexico, including the completion of “Project Tiger,” which involved rationalizing our capacity in Mexico. On the fi nancial front, we had improved performance, with some positive “records” being established in key areas. On behalf of our Shareholders, we continued our progression. Libbey stock fi nished at $15.84, up 28.4%, and registered a Total Shareholder Return of 29.1%, outpacing our relative indices signifi cantly as well as our peer group of 19 companies. This is our second year in a row of such a performance. In all the work the Company has completed recently, one of our key goals has been to position Libbey as a broadened and global player. To that end we now have: 3 ■ Over 45% of our sales outside the USA ■ Over 50% of our production with Libbey subsidiaries in low-cost countries ■ Over 60% of our workforce outside the USA Now, as the No.