In its latest move to keep the company afloat while weathering the pandemic storm created by the coronavirus, Toledo table glass and stemware maker Libbey Inc. said Tuesday that it has awarded key executives a combined $3.1 million in bonuses to dissuade them from leaving the company as it navigates through disruptions to its business model.
Earlier the company shut down plants in Toledo and Shreveport, La. through May, ordered pay cuts through Sept. 30 for all salaried employees in the United States and Canada, cut the $675,000 base salary of CEO Mike Bauer by 25 percent and cut the salary of its other executive officers and vice presidents by 20 percent, and furloughed about 50 percent of its U.S. and Canadian salaried work force through June.
It also suspended its 401(k) match for U.S. employees, reduced manufacturing and distribution operations in Mexico, and cut a portion of its planned 2020 capital expenditures and expenses.
Libbey also has managed to push back a $12 million loan prepayment, originally due to be paid April 9, to a new due date of May 31 through a series of five amendments to its loan terms negotiated with its lender. The move has allowed it to essentially skip payments for two months during the pandemic.
The mechanics of Tuesday’s bonus announcement actually took place last week.
The company said that four top executives received a total of $2,025,000 in Retention Bonuses paid out on or before last Friday.
Mr. Bauer received $900,000; Chief Operating Officer Jim Burmeister, $400,000; Chief Human Resources Officer Sarah Zibbel, $325,000, and Chief Financial Officer and Treasurer Juan Amezquita, $400,000.
The retention bonus plan states that recipients must repay the entire bonus if they are dismissed for “cause” or they voluntarily leave without “Good Reason” before May 19, 2021.
Libbey defined “Good Reason” as reducing a recipient’s annual base salary but not in the same manner as similar employees, relocating a recipient’s principal work location by more than 50 miles, or Libbey breaching any written contract between the recipient and company.
Retention bonuses are a standard industry procedure used to keep management talent in place when a company is facing duress.
And Libbey, like many other companies has been heavily impacted by the pandemic with one of its key sales segments, the retail and restaurant industry, largely shutdown for nearly two months.
Libbey’s share price, which had hovered at just under $1 a share since March 12, dropped as low as 49 cents in late March and early April. But in late April it bounced back somewhat, occasionally rising over $1 again and closing Tuesday at 86 cents, down less than a cent.
Libbey officials could not be reached for comment Tuesday. But in a statement released in April, Mr. Bauer said all the significant moves the company has taken were necessary to survive.
“As we adapt to the impact of COVID-19, Libbey’s management team and board of directors are focused on business continuity and ensuring we can continue to meet the needs of our customers, employees and business partners,” he said in a company update on the virus’ impact on Libbey.
On May 1, the company stated that the pandemic had been so disruptive to its business that it would not be able to report its first quarter earnings in May as it normally does. It stated it would need another month and a half.
“As previously reported, we have experienced significant disruptions to our business and operations due to circumstances related to COVID-19. In particular, COVID-19 has caused displacement of our staff in order to comply with “stay at home” orders, which has limited our access to facilities and certain technology systems that we rely upon to timely prepare our quarterly reports,” the company said in Securities and Exchange Commission filing.
“In addition, the disruptions to our business caused by COVID-19 have resulted in a significant diversion of resources to attend to the operational needs of the business. As a result, we will require additional time to prepare and finalize our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 due to circumstances related to COVID-19. Notwithstanding the foregoing, we expect to file the (first quarter) 10-Q no later than June 29, 2020 (which is 45 days from the first quarter 10-Q’s original filing deadline of May 15, 2020),” Libbey said.
In a note to investors issued March 31, analyst Lee Jagoda, of CJS Securities, said the brokerage firm was moving Libbey to its list of companies it monitors from its previous position of providing coverage of Libbey.
“On (March 19), the company announced it temporarily suspended production at its two US facilities, Toledo and Shreveport in response to virus concerns and uncertainty around the demand outlook. We believe this represents (less than) 30 percent of its global capacity. The furnaces are expected to remain warm to allow for the ability to ramp up when the macro improves,” Mr. Jagoda wrote.
“In the interim, we expect significant layoffs which should somewhat mitigate the costs associated with downtime activities. The end markets (Foodservice, Retail, B2B) are expected to experience significant drops in demand over the coming weeks/months and it remains uncertain how much product Libbey will ultimately sell in the near term,” he added.
Libbey was founded 202 years ago as the New England Glass Co., later becoming Libbey Glass Co. in 1892 as a part of Libbey-Owens-Ford Co., where it remained until 1935. Owens-Illinois obtained the company in 1935, where it remained as the Libbey Glass division until 1993 when it was spun off into Libbey Inc.
Throughout its 202 years the company has never been in bankruptcy and has survived depressions, recessions, and economic downturns.
However, Mr. Bauer acknowledged in March that the company was facing “a period of unprecedented uncertainty.”
Mr. Jagoda, of CJS securities, declined on Tuesday to speculate what future moves, if any, Libbey might make.
But in his March 31 notes Mr. Jagoda noted that the company had drawn down an additional $40 million on its line of credit. The drawdown plus $49 million it already had in cash on hand “creates some flexibility to weather this unprecedented situation.’
First Published May 26, 2020, 3:12 p.m.
