Libbey Inc. Announces Second Quarter 2014 Financial Results

TOLEDO, Ohio, July 31, 2014 /PRNewswire/ -- Libbey Inc. (NYSE MKT: LBY) today reported results for the second quarter-ended June 30, 2014.

Second Quarter Financial Highlights

• Sales for the second quarter were $223.5 million, compared to $209.9 million for the second quarter of 2013, an increase of 6.5 percent (6.3 percent excluding currency fluctuation).
• Income from operations for the second quarter was $29.5 million, compared to $27.9 million for the second quarter of 2013.
• Adjusted gross profit (see Table 1) for the second quarter was an all-time record $60.8 million, compared to $58.6 million in the second quarter of 2013.
• Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) (see Table 3) for the quarter was $41.0 million, compared to $42.0 million in the prior-year quarter.
• Refinancing expected to generate over $10 million in annual interest expense savings, based on current interest rates.

"Sales growth was strong throughout the Company, as revenue increased in every region except Asia Pacific.  Revenues were particularly strong in the Americas where we achieved 8.9 percent revenue growth, as we were able to defend and grow our market share in a hyper-competitive market.  While our adjusted EBITDA margins were impacted by higher input costs, currency and market actions, we are pleased with our overall Company growth of 6.5 percent during the quarter.  We look forward to continuing our strong sales performance in the remainder of the year, as we leverage the investments we have made in new products, sales and marketing capabilities.  We continue to make progress in realizing the benefits of our North American capacity realignment, but have determined that over the balance of the year we will not be able to recover from the impact of weather, currency and higher input costs that we experienced in the first quarter of 2014.  For each of the remaining two quarters, we expect to deliver sales growth similar to the second quarter and adjusted EBITDA margins similar to the full-year margins we delivered in 2013," said Stephanie A. Streeter, chief executive officer of Libbey Inc.

Second Quarter Segment Sales and Operational Review

• Sales in the Americas segment were $154.5 million, compared to $141.8 million in the second quarter of 2013, an increase of 8.9 percent (9.9 percent excluding currency impact).  This was comprised of 0.4 percent higher sales in our foodservice channel, an increase of 6.7 percent in retail and a 24.4 percent increase in the business-to-business channel.
• Sales in the EMEA segment increased 3.6 percent (a decrease of 1.1 percent excluding currency impact) to $39.3 million, compared to $38.0 million in the second quarter of 2013.
• Sales in U.S. Sourcing were $21.4 million in the second quarter of 2014, compared to $21.2 million in the prior-year quarter, as sales of World Tableware and Syracuse China flatware and dinnerware increased 0.9 percent.
• Sales in Other were $8.4 million, compared to $8.9 million in the prior-year quarter, resulting from a 6.2 percent decrease in sales (6.8 percent excluding currency impact) in the Asia Pacific region.
• Income from operations was $29.5 million in the second quarter of 2014, compared to $27.9 million for the second quarter of 2013.
• Adjusted EBITDA of $41.0 million (see Table 3) was $1.0 million less than the $42.0 million reported in the prior-year quarter.  The primary factors contributing to the change in adjusted EBITDA from the prior-year quarter include higher input costs for natural gas, packaging and electricity of $1.8 million, nearly $1.5 million in currency impacts, primarily in Mexico, as well as increased selling and marketing expenses and higher freight costs partially offset by higher capacity utilization and the realization of savings of approximately $1.2 million from the recently completed North American capacity realignment.
• Interest expense was $5.5 million, a decrease of $2.6 million compared to $8.1 million in the year-ago period, primarily driven by lower interest rates, as a result of the refinancing completed during the quarter.
• Our effective tax rate was (10.3) percent for the quarter-ended June 30, 2014, compared to 28.2 percent for the quarter-ended June 30, 2013.  The (10.3) percent effective rate was generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, intra-period tax allocation and other activity in jurisdictions with recorded valuation allowances.

Six-Month Financial Highlights

• Sales for the first six months of 2014 were $405.1 million, compared to $393.4 million for the first half of 2013, an increase of 3.0 percent (or 2.8 percent excluding currency fluctuation).
• Income from operations for the first six months of 2014 was $33.0 million, compared to $39.4 million during the first half of 2013.
• Adjusted EBITDA (see Table 3) was $61.1 million for the first six months of 2014, compared to $68.2 million for the first half of 2013.

Sixth-Month Segment Sales and Operational Review

• Sales in the Americas segment were $276.4 million, compared to $265.4 million in the first six months of 2013, an increase of 4.2 percent (5.1 percent excluding currency fluctuation) driven by significantly higher unit volume.  Sales performance was led by a 10.6 percent increase in sales within our Latin American region (13.7 percent excluding currency impact) and included a 1.2 percent increase within our U.S. and Canada region.
• Sales in the EMEA segment increased 2.1 percent (a decrease of 2.1 percent excluding currency impact) to $73.7 million, compared to $72.2 million in the first half of 2013.
• Sales in the U.S. Sourcing segment increased 1.2 percent to $39.1 million, compared to $38.7 million in the first half of 2013.
• Sales in Other were $15.9 million, compared to $17.1 million in the prior-year period.  This decrease was the result of a 7.3 percent decrease in sales (8.5 percent excluding currency impact) in the Asia Pacific end market.
• Interest expense was $13.2 million, a decrease of $3.4 million compared to $16.6 million in the year-ago period, primarily driven by lower interest rates.
• Our effective tax rate was (4.3) percent for the six months ended June 30, 2014, compared to 27.8 percent for the six months ended June 30, 2013.  The effective tax rate was generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, intra-period tax allocation and other activity in jurisdictions with recorded valuation allowances.

Balance Sheet and Liquidity

• Libbey reported that it had available capacity of $79.7 million under its ABL credit facility as of June 30, 2014, with $7.0 million in loans currently outstanding.  The Company also had cash on hand of $23.2 million at June 30, 2014.
• As of June 30, 2014, working capital, defined as inventories and accounts receivable less accounts payable, was $207.9 million, compared to $208.1 million at June 30, 2013. Despite sales increases of 6.5 percent during the quarter, working capital decreased $0.2 million, compared to the prior year, as the result of higher accounts payable mostly offset by higher accounts receivable and higher inventories.

Sherry Buck, chief financial officer, added: "In addition to the strong sales performance that we achieved during the second quarter, we believe the actions we have taken to strengthen our balance sheet positions us well to compete in this dynamic market environment.  We will continue to realize lower interest expense going forward as a result of the $440 million senior secured credit facility, which, based on current interest rates, is expected to generate over $10 million in annual interest expense savings."

Libbey Expands Premium Dinnerware Offering

The Company also confirmed its announcement that Libbey will become the exclusive foodservice distributor of Schönwald dinnerware products to the U.S. and Canada, effective January 1, 2015.

Through this exclusive agreement, Libbey will be offering new premium dinnerware choices for U.S. and Canadian foodservice customers.  "Schönwald is one of the world's leading providers of high-end porcelain for foodservice.  This agreement directly supports our strategic goal to further grow our business in the foodservice industry.  We are extremely pleased that Schönwald will be joining the Libbey family," said Streeter.  "These new choices for dinnerware, in combination with our Spiegelau and Nachtmann partnership, dramatically extend our high quality premium offerings.  When added to the hundreds of new products we have introduced this year, it provides our foodservice customers with the broadest tabletop choices available in the U.S. and Canada."

Webcast Information

Libbey will hold a conference call for investors on Thursday, July 31, 2014, at 11 a.m. Eastern Daylight Time.  The conference call will be simulcast live on the Internet and is accessible from the Investor Relations' section of www.libbey.com. To listen to the call, please go to the website at least 10 minutes early to register, download and install any necessary software.  A replay will be available for 14 days after the conclusion of the call.

About Libbey Inc.

Based in Toledo, Ohio, since 1888, we believe Libbey Inc. is the largest manufacturer of glass tableware in the western hemisphere and one of the largest glass tableware manufacturers in the world. It supplies products to foodservice, retail, industrial and business-to-business customers in over 100 countries, and it is the leading manufacturer of tabletop products for the U.S. foodservice industry.

Libbey operates glass tableware manufacturing plants in the United States in Louisiana and Ohio as well as in Mexico, China, Portugal and the Netherlands.  Its Crisa subsidiary, located in Monterrey, Mexico, is a leading producer of glass tableware in Mexico and Latin America.  Its subsidiary located in Leerdam, Netherlands, is among the world leaders in producing and selling glass stemware to retail, foodservice and industrial clients.  Its Crisal subsidiary, located in Portugal, provides an expanded presence in Europe.  Its Syracuse China subsidiary designs and distributes an extensive line of high-quality ceramic dinnerware, principally for foodservice establishments in the United States.  Its World Tableware subsidiary imports and sells a full line of metal flatware and hollowware and an assortment of ceramic dinnerware and other tabletop items principally for foodservice establishments in the United States.  In 2013, Libbey Inc.'s net sales totaled $818.8 million.

This press release includes forward-looking statements as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended.  Such statements reflect only 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 and that actual results may differ materially from these statements, and that investors should not place undue reliance on such statements.  These forward-looking statements may be affected by the risks and uncertainties in the Company's business. This information is qualified in its entirety by cautionary statements and risk factor disclosures contained in the Company's Securities and Exchange Commission filings, including the Company's report on Form 10-K filed with the Commission on March 12, 2014.  Important factors potentially affecting performance include but are not limited to risks related to our ability to borrow under our ABL credit agreement; increased competition from foreign suppliers endeavoring to sell glass tableware in the United States and Mexico; the impact of lower duties for imported products; global economic conditions and the related impact on consumer spending levels; major slowdowns in the retail, travel or entertainment industries in the United States, Canada, Mexico, Western Europe and Asia, caused by terrorist attacks or otherwise; significant increases in per-unit costs for natural gas, electricity, freight, corrugated packaging, and other purchased materials; high levels of indebtedness; high interest rates that increase the Company's borrowing costs or volatility in the financial markets that could constrain liquidity and credit availability; protracted work stoppages related to collective bargaining agreements; increases in expense associated with higher medical costs, increased pension expense associated with lower returns on pension investments and increased pension obligations; devaluations and other major currency fluctuations relative to the U.S. dollar and the Euro 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 and cash flow of Libbey Mexico, expressed under U.S. GAAP; the inability to achieve savings and profit improvements at targeted levels in the Company's operations or within the intended time periods; and whether the Company completes any significant acquisition and whether such acquisitions can operate profitably.  Any forward-looking statements speak only as of the date of this press release, and the Company assumes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date of this press release.

In accordance with the SEC's Regulation G, tables 1, 2, 3, 4, 5 and 6 provide non-GAAP measures used in this earnings release and a reconciliation to the most closely related Generally Accepted Accounting Principle (GAAP) measure.  Libbey believes that providing supplemental non-GAAP financial information is useful to investors in understanding Libbey's core business and trends.  In addition, it is the basis on which Libbey's management assesses performance.  Although Libbey believes that the non-GAAP financial measures presented enhance investors' understanding of Libbey's business and performance, these non-GAAP measures should not be considered an alternative to GAAP.