Exhibit 99.1
| | | |
| | Libbey Inc.
300 Madison Ave
P.O. Box 10060
Toledo, OH 43699 |
N E W S R E L E A S E
| | | |
AT THE COMPANY: | | |
Kenneth Boerger | | Scott Sellick |
VP/Treasurer | | VP/Chief Financial Officer |
(419) 325-2279 | | (419) 325-2135 |
FOR IMMEDIATE RELEASE
WEDNESDAY, OCTOBER 25, 2006
LIBBEY INC. ANNOUNCES THIRD QUARTER RESULTS
| • | | Sales Increase 35.2 Percent |
| • | | Reported Net Loss of $3.3 Million, or $0.23 Per Share |
| • | | Year-to-Date Cash Flow From Operations Increase 147.3 Percent |
| • | | Adjusted EBITDA of $20.2 Million, $.7 Million Better Than Upper End of Guidance |
TOLEDO, OHIO, OCTOBER 25, 2006—Libbey Inc. (NYSE: LBY)announced today that sales increased 35.2 percent to $183.3 million from $135.6 million in the prior year third quarter. Libbey reported a net loss of $3.3 million, or $0.23 per share, for the third quarter ended September 30, 2006, as compared with net income of $4.2 million, or $0.30 per share in the prior year quarter.
Third Quarter Results
For the quarter-ended September 30, 2006, sales increased 35.2 percent to $183.3 million from $135.6 million in the year-ago quarter. The increase in sales was primarily attributable to the consolidation of the sales of Crisa, the Company’s former joint venture in Mexico, a more than 10 percent increase in shipments to retail, Royal Leerdam and Crisal glassware customers and World Tableware products, and increases of more than 3.5 percent in shipments of Traex and Syracuse China products. Shipments to foodservice glassware customers were down slightly as the installation of a new warehouse management software system in Toledo resulted in missed shipments of approximately $3 million of foodservice glassware. On a pro-forma basis giving effect to the consolidation of Crisa, as detailed in the attached Table 4, sales were up 4.4 percent in total.
The Company reported income from operations of $10.8 million during the quarter, as compared to income from operations of $10.0 million in the year-ago quarter. Income
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from operations, excluding special charges (see Table 1), was $10.5 million during the year-ago quarter (see Table 2). Factors contributing to the increase in income from operations were the consolidation of Crisa, higher sales, and higher production activity. Partially offsetting these improvements were an unfavorable mix of sales amounting to $2.5 million, driven by a reduction in foodservice sales and the impact of Crisal close-out sales, higher distribution costs of $1.6 million, primarily related to the increased sales, and $0.5 million in increased pension and postretirement welfare expenses.
Libbey reported that adjusted EBITDA, as detailed on Table 3, increased to $20.2 million in the third quarter of 2006 as compared to $19.1 million in the year-ago quarter. The additional EBITDA provided by Crisa was partially offset by an increase of almost $2.2 million in charges related to hedge accounting for natural gas contracts.
Interest expense increased $12.2 million compared with the year-ago period as a result of the refinancing consummated on June 16, 2006, which resulted in higher debt and higher average interest rates.
The effective tax rate increased to 48.3 percent for the quarter. This increase was driven by the new annual effective tax rate of 38 percent as the result of the Crisa acquisition and related refinancing. Libbey reported its net loss was $3.3 million, or $0.23 per diluted share, compared with diluted earnings per share of $0.30 in the third quarter of 2005. The Company reported diluted earnings per share for the third quarter of 2005 of $0.32, as detailed in the attached Table 2, and excluding pretax special charges of $0.5 million relating to the impact of capacity realignment charges associated with the shutdown of Libbey’s City of Industry, California, facility in February 2005, as detailed in the attached Table 1.
Nine-Month Results
For the nine months ended September 30, 2006, sales increased 16.2 percent to $476.1 million from $409.9 million in the year-ago period. The increase in sales was primarily attributable to the consolidation of the sales of Crisa and increases of more than 6 percent in shipments to foodservice glassware customers, retail customers, Traex customers, Royal Leerdam customers and Crisal customers. Sales of World Tableware products increased 5 percent as compared to the first nine months of 2005. Shipments to industrial customers were down almost 7 percent during the first nine months of 2006, while shipments of Syracuse China products were down slightly. On a pro-forma basis, giving effect to the consolidation of Crisa, as detailed in the attached Table 4, sales were up 4.2 percent in total.
Libbey reported income from operations of $9.8 million during the first nine months of 2006 as compared to income from operations of $12.6 million during the year-ago period. Adjusted income from operations, excluding special charges (see Table 2), was $24.9 million for the first nine months of 2006, as compared to $22.5 million for the year-ago period. Primary contributors to the increase in adjusted income from operations were the consolidation of Crisa, higher sales and higher production activity.
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Equity earnings from Crisa, which were included from January 1, 2006 through June 15, 2006, were $2.0 million on a pretax basis, as compared to a pretax loss of $1.4 million in the first nine months of 2005. The increased equity earnings were the result of increased and more profitable sales, higher translation gain, and lower natural gas and electricity costs.
For the first nine months of 2006, adjusted EBITDA, as detailed on Table 3, was $51.6 million, a 7.5 percent increase over adjusted EBITDA of $48.0 million during the first nine months of 2005. The additional EBITDA provided by Crisa was partially offset by $3.1 million increase in charges related to hedge accounting for natural gas contracts.
Interest expense increased $19.1 million compared with the year-ago period as a result of the refinancing completed on June 16, 2006. Contributing to the increase in interest expense were higher debt and higher average interest rates.
The Company recorded a net loss of $12.4 million, or $0.87 per diluted share, compared with net income of $1.6 million, or $0.12 per diluted share, in the year-ago period. The Company reported that its diluted earnings per share for the first nine months of 2006, as detailed in the attached Table 2, and excluding special charges of $15.1 million pretax relating to the announced consolidation of two of its recently acquired Mexican facilities and the write-off of $4.9 million pretax of finance fees outlined in the attached Table 1, were $0.00 per diluted share. This compares to diluted earnings per share of $0.60 during the first nine months of 2005, excluding the impact of special charges relating to the 2005 salary reduction program and the capacity realignment charges associated with the shutdown of Libbey’s City of Industry, California, facility in February 2005, as detailed in the attached Table 1.
Cash Flow
Year-to-date cash flow from operations increased $18.8 million, or 147.3 percent, to $31.5 million as compared to the year-ago period. Contributing to the increase in operating cash flow were higher non-cash special charges and a reduction in working capital.
Working capital, defined as inventories and accounts receivable less accounts payable, increased by $29.6 million from $169.4 million to $199.0 million compared to September 30, 2005, due to the acquisition of Crisa. Excluding working capital of $46.0 million at Crisa at September 30, 2006, the Company’s working capital was $16.4 million lower than the year-ago period, reflecting the Company’s continued efforts to reduce its investment in working capital.
Pro Forma Results
Libbey reported that pro forma adjusted EBITDA as detailed on Table 4 was $20.2 million in the third quarter of 2006 as compared to $26.2 million in the year-ago quarter as the result of an unfavorable mix of sales, driven by a reduction in foodservice sales and the impact of Crisal close-out sales and the expenses and reduced activity associated with the capacity realignment at Crisa in Mexico. For the first nine months of 2006, pro
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forma adjusted EBITDA, as detailed on Table 4, was $69.7 million as compared to pro forma adjusted EBITDA of $71.0 million during the first nine months of 2005, largely impacted by a $3.1 million increase in charges related to hedge accounting for natural gas contracts, Crisal close-out sales and the capacity realignment in Mexico.
Recent Developments
Libbey announced that an agreement has been reached with Vista Allegre Atlantis SGPS, SA (VAA) to acquire the remaining 5 percent of Crisal that it does not currently own for 1 euro. The agreement eliminates the previously anticipated payment of 2 million euros for the remaining 5 percent of shares of Crisal and also waives an earn-out contingency of 5.5 million euros, which was expected to be paid in 2008.
Libbey also announced that it entered into interest rate protection agreements during the third quarter with respect to $200 million of debt as a means to manage its exposure to fluctuating interest rates. These rate agreements effectively convert $200 million of our $306 million of senior notes from variable rate debt to fixed rate debt at 12.24 percent through December 2009.
Libbey has determined that the recently enacted Pension Protection Act of 2006 is expected to favorably impact projected 2007 cash flow by approximately $17 million. Libbey had originally projected cash contributions of approximately $35 million to cover 2007 pension and retiree welfare funding requirements. These contributions are now expected to be approximately $18 million.
Outlook for 2006
John F. Meier, chairman and chief executive officer, commenting on the quarter said, “We are pleased with the strength of our core business performance. While we experienced a small decline in foodservice glassware shipments as a result of the installation of our new warehouse management software in Toledo, our sales of other products to foodservice customers increased nicely. Sales to European glassware customers were strong and shipments to retail customers were especially robust. Crisa, our recently acquired Mexican glass tableware operation, contributed as planned during the consolidation of the facilities in Mexico, and we look forward to harvesting those future savings in 2007.” He added, “We expect fourth quarter sales to increase by 3 to 4 percent as compared with the pro-forma fourth quarter sales in 2005. We are encouraged by our expectations for increased sales in all channels of distribution in the United States during the fourth quarter of 2006. Earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be between $18.5 million and $19.5 million in the fourth quarter of 2006.”
Libbey also confirmed that it is on schedule to begin production in early 2007 at its new glass tableware production facility in China.
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Webcast Information
Libbey will hold a conference call for investors on Thursday, October 26, 2006, at 11 a.m. Eastern Daylight Time. The conference call will be simulcast live on the Internet on bothwww.libbey.com andhttp://phx.corporate-ir.net/phoenix.zhtml?p=iroleventDetails&c=64169&eventID=1401164. 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 30 days after the conclusion of the call.
This press release includes forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements only reflect 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, that actual results may differ materially from such 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 16, 2006, and Form 10-Q filed with the Commission on August 9, 2006. Important factors potentially affecting performance include but are not limited to increased competition from foreign suppliers endeavoring to sell glass tableware in the United States and Mexico, including the impact of lower duties for imported products; major slowdowns in the retail, travel or entertainment industries in the United States, Canada, Mexico and Western Europe, caused by terrorist attacks or otherwise; significant increases in per unit costs for natural gas, electricity, corrugated packaging, and other purchased materials; higher indebtedness related to the Crisa acquisition; higher interest rates that increase the Company’s borrowing costs; 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 Crisa, 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; whether the Company completes any significant acquisition, and whether such acquisitions can operate profitably. With respect to its expectations regarding the recent Crisa acquisition, these factors also include, the ability to successfully integrate the operations of Crisa and recognize the expected synergies and the ability of Vitro to supply necessary services to Crisa, and our ability to capitalize on the expanded platform that the acquisition of Crisa will provide.
Libbey Inc.:
| • | | is the largest manufacturer of glass tableware in the western hemisphere and one of the largest glass tableware manufacturers in the world; |
| • | | is expanding its international presence with facilities in Mexico, the Netherlands, Portugal, and a facility in China that is expected to begin production in 2007; |
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| • | | is the leading manufacturer of tabletop products for the U.S. foodservice industry; and |
| • | | supplies products to foodservice, retail, industrial and business-to-business customers in over 90 countries. |
Based in Toledo, Ohio, the Company operates glass tableware manufacturing plants in the United States in Louisiana and Ohio, as well as in Mexico, Portugal and the Netherlands. Its Crisa subsidiary, located in Monterrey, Mexico, is the leading producer of glass tableware in Mexico and Latin America. Its Royal Leerdam 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, manufactures 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 holloware and an assortment of ceramic dinnerware and other tabletop items principally for foodservice establishments in the United States. Its Traex subsidiary, located in Wisconsin, designs, manufactures and distributes an extensive line of plastic items for the foodservice industry. In 2005, Libbey Inc.’s net sales totaled $568.1 million.
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per-share amounts)
(unaudited)
| | | | | | | | | |
| | | THREE MONTHS ENDED | |
| | | September 30, 2006 | | | September 30, 2005 | |
| Net sales | | $ | 183,256 | | | $ | 135,573 | |
| Freight billed to customers | | | 1,004 | | | | 444 | |
| | | | | | | |
| Total revenues | | | 184,260 | | | | 136,017 | |
| Cost of sales | | | 152,692 | | | | 108,750 | |
| | | | | | | |
| Gross profit | | | 31,568 | | | | 27,267 | |
| Selling, general and administrative expenses | | | 20,729 | | | | 16,788 | |
Special charges(1) | | | — | | | | 487 | |
| | | | | | | |
| Income from operations | | | 10,839 | | | | 9,992 | |
| Equity loss — pretax | | | — | | | | (1,183 | ) |
| Other (loss) income | | | (1,733 | ) | | | 923 | |
| | | | | | | |
| Earnings before interest, income taxes and minority interest | | | 9,106 | | | | 9,732 | |
| Interest expense | | | 15,551 | | | | 3,398 | |
| | | | | | | |
| (Loss) income before income taxes and minority interest | | | (6,445 | ) | | | 6,334 | |
| (Credit) provision for income taxes | | | (3,116 | ) | | | 2,090 | |
| | | | | | | |
| (Loss) income before minority interest | | | (3,329 | ) | | | 4,244 | |
| Minority interest | | | 22 | | | | (77 | ) |
| | | | | | | |
| Net (loss) income | | $ | (3,307 | ) | | $ | 4,167 | |
| | | | | | | |
| Net (loss) income per share: | | | | | | | | |
| Basic | | $ | (0.23 | ) | | $ | 0.30 | |
| | | | | | | |
| Diluted | | $ | (0.23 | ) | | $ | 0.30 | |
| | | | | | | |
| | | | | | | | | |
| Weighted average shares: | | | | | | | | |
| Outstanding | | | 14,254 | | | | 13,948 | |
| | | | | | | |
| Diluted | | | 14,254 | | | | 13,951 | |
| | | | | | | |
| | |
| (1) | | Refer to Table 1 for special charges detail. |
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per-share amounts)
(unaudited)
| | | | | | | | | |
| | | NINE MONTHS ENDED | |
| | | September 30, 2006 (2) | | | September 30, 2005 | |
| Net sales | | $ | 476,120 | | | $ | 409,895 | |
| Freight billed to customers | | | 2,387 | | | | 1,422 | |
| | | | | | | |
| Total revenues | | | 478,507 | | | | 411,317 | |
Cost of sales(1) | | | 396,621 | | | | 335,955 | |
| | | | | | | |
| Gross profit | | | 81,886 | | | | 75,362 | |
Selling, general and administrative expenses(1) | | | 59,511 | | | | 55,109 | |
Special charges(1) | | | 12,587 | | | | 7,681 | |
| | | | | | | |
| Income from operations | | | 9,788 | | | | 12,572 | |
| Equity earnings (loss) — pretax | | | 1,986 | | | | (1,381 | ) |
| Other (loss) income | | | (2,244 | ) | | | 1,655 | |
| | | | | | | |
| Earnings before interest, income taxes and minority interest | | | 9,530 | | | | 12,846 | |
Interest expense(1) | | | 29,360 | | | | 10,240 | |
| | | | | | | |
| (Loss) income before income taxes and minority interest | | | (19,830 | ) | | | 2,606 | |
| (Credit) provision for income taxes | | | (7,535 | ) | | | 860 | |
| | | | | | | |
| (Loss) income before minority interest | | | (12,295 | ) | | | 1,746 | |
| Minority interest | | | (66 | ) | | | (98 | ) |
| Net (loss) income | | $ | (12,361 | ) | | $ | 1,648 | |
| | | | | | | |
| Net (loss) income per share: | | | | | | | | |
| Basic | | $ | (0.87 | ) | | $ | 0.12 | |
| | | | | | | |
| Diluted | | $ | (0.87 | ) | | $ | 0.12 | |
| | | | | | | |
| | | | | | | | | |
| Weighted average shares: | | | | | | | | |
| Outstanding | | | 14,139 | | | | 13,879 | |
| | | | | | | |
| Diluted | | | 14,139 | | | | 13,880 | |
| | | | | | | |
| | |
| (1) | | Refer to Table 1 for special charges detail. |
|
| (2) | | Crisa results for January 1, 2006 through June 15, 2006 are reflected in equity earnings. Crisa results forJune 16, 2006 through September 30, 2006 are included in the consolidated statement of operations above. |
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LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| | | September 30, 2006 | | | June 30, 2006 | | | December 31, 2005 | | | September 30, 2005 | |
| | | (unaudited)(1) | | | (unaudited)(1,2) | | | | | | | (unaudited) | |
ASSETS | | | | | | | | | | | | | | | | |
| Cash | | $ | 37,804 | | | $ | 26,661 | | | $ | 3,242 | | | $ | 1,242 | |
| Accounts receivable — net | | | 104,708 | | | | 103,849 | | | | 79,042 | | | | 75,122 | |
| Inventories — net | | | 167,859 | | | | 161,827 | | | | 122,572 | | | | 147,848 | |
| Deferred taxes | | | 3,529 | | | | 3,339 | | | | 8,270 | | | | 8,847 | |
| Other current assets | | | 14,075 | | | | 6,199 | | | | 10,787 | | | | 18,660 | |
| | | | | | | | | | | | | |
| Total current assets | | | 327,975 | | | | 301,875 | | | | 223,913 | | | | 251,719 | |
| Other assets | | | 55,058 | | | | 54,213 | | | | 33,483 | | | | 40,015 | |
| Investments | | | — | | | | | | | | 76,657 | | | | 81,271 | |
| Goodwill and purchased intangibles — net | | | 196,755 | | | | 200,624 | | | | 61,603 | | | | 70,857 | |
| Property, plant and equipment — net | | | 309,777 | | | | 295,153 | | | | 200,128 | | | | 204,608 | |
| | | | | | | | | | | | | |
| Total assets | | $ | 889,565 | | | $ | 851,865 | | | $ | 595,784 | | | $ | 648,470 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
LIABILITIES AND SHAREHOLDERS’ EQUITY | | | | | | | | | | | | | | | | |
| Notes payable | | $ | 422 | | | $ | 1,546 | | | $ | 11,475 | | | $ | 15,748 | |
| Accounts payable | | | 73,559 | | | | 59,447 | | | | 47,020 | | | | 53,551 | |
| Accrued liabilities | | | 72,934 | | | | 62,666 | | | | 53,011 | | | | 40,413 | |
| Deposit liability | | | — | | | | — | | | | — | | | | 16,623 | |
| Special charges reserve | | | 3,509 | | | | 3,508 | | | | 2,002 | | | | 3,029 | |
| Other current liabilities | | | 4,374 | | | | 7,746 | | | | 7,131 | | | | 7,650 | |
| Long-term debt due within one year | | | 825 | | | | 825 | | | | 825 | | | | 243,857 | |
| | | | | | | | | | | | | |
| Total current liabilities | | | 155,623 | | | | 135,738 | | | | 121,464 | | | | 380,871 | |
| Long-term debt | | | 484,035 | | | | 462,774 | | | | 249,379 | | | | 5,829 | |
| Deferred taxes | | | — | | | | — | | | | — | | | | 13,252 | |
| Pension liability | | | 78,061 | | | | 73,994 | | | | 54,760 | | | | 43,741 | |
| Nonpension postretirement benefits | | | 43,673 | | | | 44,533 | | | | 45,081 | | | | 45,882 | |
| Other liabilities | | | 23,769 | | | | 26,352 | | | | 5,461 | | | | 6,628 | |
| | | | | | | | | | | | | |
| Total liabilities | | | 785,161 | | | | 743,391 | | | | 476,145 | | | | 496,203 | |
| Minority interest | | | 100 | | | | 129 | | | | 34 | | | | 98 | |
| | | | | | | | | | | | | |
| Total liabilities and minority interest | | | 785,261 | | | | 743,520 | | | | 476,179 | | | | 496,301 | |
| Total shareholders’ equity | | | 104,304 | | | | 108,345 | | | | 119,605 | | | | 152,169 | |
| | | | | | | | | | | | | |
| Total liabilities and shareholders’ equity | | $ | 889,565 | | | $ | 851,865 | | | $ | 595,784 | | | $ | 648,470 | |
| | | | | | | | | | | | | |
| | |
| (1) | | Crisa balances are consolidated in September 30, 2006 and June 30, 2006 balances. |
| |
| (2) | | Certain amounts have been reclassified to conform to the presentation used in the September 30, 2006 balance sheet above. |
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| | | | | | | | | |
| | | THREE MONTHS ENDED | |
| | | September 31, 2006 | | | September 30, 2005 | |
Operating activities | | | | | | | | |
| Net (loss) income | | $ | (3,307 | ) | | $ | 4,167 | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 10,671 | | | | 9,160 | |
| Equity loss — net of tax | | | — | | | | 791 | |
| Change in accounts receivable | | | (2,624 | ) | | | (2,685 | ) |
| Change in inventories | | | (5,600 | ) | | | (11,773 | ) |
| Change in accounts payable | | | 17,373 | | | | 11,516 | |
| Special charges | | | (65 | ) | | | (2,356 | ) |
| Pension & nonpension postretirement | | | 3,225 | | | | 1,517 | |
| Other operating activities | | | (8,524 | ) | | | (9,082 | ) |
| | | | | | | |
| Net cash provided by operating activities | | | 11,149 | | | | 1,255 | |
| | | | | | | | | |
Investing activities | | | | | | | | |
| Additions to property, plant and equipment | | | (20,301 | ) | | | (7,389 | ) |
| Business acquisition and related costs — net of cash acquired | | | (424 | ) | | | — | |
| Other | | | — | | | | 223 | |
| | | | | | | |
| Net cash used in investing activities | | | (20,725 | ) | | | (7,166 | ) |
| | | | | | | | | |
Financing activities | | | | | | | | |
| Net borrowings | | | 21,036 | | | | 6,544 | |
| Debt financing fees | | | (1,112 | ) | | | — | |
| Dividends | | | (356 | ) | | | (1,394 | ) |
| Other | | | 1,078 | | | | (537 | ) |
| | | | | | | |
| Net cash provided by financing activities | | | 20,646 | | | | 4,613 | |
| Effect of exchange rate fluctuations on cash | | | 73 | | | | — | |
| | | | | | | |
| Increase (decrease) in cash | | | 11,143 | | | | (1,298 | ) |
| Cash at beginning of period | | | 26,661 | | | | 2,540 | |
| | | | | | | |
| Cash at end of period | | $ | 37,804 | | | $ | 1,242 | |
| | | | | | | |
E-10
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(unaudited)
| | | | | | | | | |
| | | NINE MONTHS ENDED | |
| | | September 30, 2006 | | | September 30, 2005 | |
Operating activities | | | | | | | | |
| Net (loss) income | | $ | (12,361 | ) | | $ | 1,648 | |
| Adjustments to reconcile net loss to net cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 27,212 | | | | 25,611 | |
| Equity (earnings) loss — net of tax | | | (1,378 | ) | | | 967 | |
| Change in accounts receivable | | | 1,892 | | | | (4,382 | ) |
| Change in inventories | | | (2,678 | ) | | | (16,284 | ) |
| Change in accounts payable | | | 2,061 | | | | 3,630 | |
| Special charges | | | 18,859 | | | | 1,156 | |
| Pension & nonpension postretirement | | | 9,428 | | | | 4,538 | |
| Other operating activities | | | (11,511 | ) | | | (4,138 | ) |
| | | | | | | |
| Net cash provided by operating activities | | | 31,524 | | | | 12,746 | |
| | | | | | | | | |
Investing activities | | | | | | | | |
| Additions to property, plant and equipment | | | (54,557 | ) | | | (26,503 | ) |
| Business acquisition and related costs — net of cash acquired | | | (77,995 | ) | | | (28,990 | ) |
| Other | | | — | | | | 223 | |
| | | | | | | |
| Net cash used in investing activities | | | (132,552 | ) | | | (55,270 | ) |
| | | | | | | | | |
Financing activities | | | | | | | | |
| Net borrowings | | | 150,666 | | | | 42,137 | |
| Debt financing fees | | | (15,468 | ) | | | — | |
| Dividends | | | (1,059 | ) | | | (4,162 | ) |
| Other | | | 1,273 | | | | (453 | ) |
| | | | | | | |
| Net cash provided by financing activities | | | 135,412 | | | | 37,522 | |
| Effect of exchange rate fluctuations on cash | | | 178 | | | | — | |
| | | | | | | |
| Increase (decrease) in cash | | | 34,562 | | | | (5,002 | ) |
| Cash at beginning of period | | | 3,242 | | | | 6,244 | |
| | | | | | | |
| Cash at end of period | | $ | 37,804 | | | $ | 1,242 | |
| | | | | | | |
E-11
Table 1
Summary of Special Charges
(Dollars in thousands)
| | | | | | | | | | | | | | | | | |
| | | Three Months ended September 30, | | | Nine Months ended September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Capacity realignment: | | | | | | | | | | | | | | | | |
| Fixed asset related | | $ | — | | | $ | 130 | | | $ | — | | | $ | 650 | |
| Employee termination costs & other | | | — | | | | 357 | | | | — | | | | 3,681 | |
| | | | | | | | | | | | | |
Included in Special charges | | $ | — | | | $ | 487 | | | $ | — | | | $ | 4,331 | |
| | | | | | | | | | | | | |
In August 2004, Libbey announced that it was realigning its production capacity in order to improve its cost structure.Pursuant to the plan, Libbey closed its manufacturing facility in City of Industry, California, in February 2005 and realigned production among its other glass manufacturing facilities. Libbey has recorded a pretax charge of $487 in the third quarter 2005 and $4,331 year-to-date 2005, as detailed above.
| | | | | | | | | | | | | | | | | |
Salary reduction program: | | | | | | | | | | | | | | | | |
| Pension & retiree welfare | | $ | — | | | $ | — | | | $ | — | | | $ | 867 | |
| | | | | | | | | | | | | |
Included in Cost of sales | | | — | | | | — | | | | — | | | | 867 | |
| | | | | | | | | | | | | | | | | |
| Pension & retiree welfare | | | — | | | | — | | | | — | | | | 1,347 | |
| | | | | | | | | | | | | |
Included in Selling, general and administrative expenses | | | — | | | | — | | | | — | | | | 1,347 | |
| | | | | | | | | | | | | | | | | |
| Employee termination costs & other | | | — | | | | — | | | | — | | | | 3,350 | |
| | | | | | | | | | | | | |
Included in Special charges | | | — | | | | — | | | | — | | | | 3,350 | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Pretax salary reduction program | | $ | — | | | $ | — | | | $ | — | | | $ | 5,564 | |
| | | | | | | | | | | | | |
In June 2005, Libbey reduced its North American salaried workforce by ten percent in order to improve its overall cost profile. The pretax charge for the salary reduction was $5,564 year-to-date 2005 as detailed above.
| | | | | | | | | | | | | | | | | |
Crisa Restructuring: | | | | | | | | | | | | | | | | |
| Inventory write-down | | $ | — | | | $ | — | | | $ | 2,543 | | | $ | — | |
| | | | | | | | | | | | | |
Included in Cost of sales | | | — | | | | — | | | | 2,543 | | | | — | |
| | | | | | | | | | | | | | | | | |
| Fixed asset related | | | — | | | | — | | | | 12,587 | | | | — | |
| | | | | | | | | | | | | |
Included in Special charges | | | — | | | | — | | | | 12,587 | | | | — | |
| | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Crisa Restructuring | | $ | — | | | $ | — | | | $ | 15,130 | | | $ | — | |
| | | | | | | | | | | | | |
In June 2006, Libbey announced plans to consolidate Crisa’s two principal manufacturing facilities. Libbey has recorded a pretax charge of $15,130 year-to-date 2006 as detailed above.
| | | | | | | | | | | | | | | | | |
Write-off of finance fees: | | | | | | | | | | | | | | | | |
| Write-off of finance fees | | $ | — | | | $ | — | | | $ | 4,906 | | | $ | — | |
| | | | | | | | | | | | | |
Included in Interest expense | | $ | — | | | $ | — | | | $ | 4,906 | | | $ | — | |
| | | | | | | | | | | | | |
In June 2006, Libbey wrote off unamortized finance fees related to debt refinancing at Libbey and Crisa.
| | | | | | | | | | | | | | | | | |
Total Special charges | | $ | — | | | $ | 487 | | | $ | 20,036 | | | $ | 9,895 | |
| | | | | | | | | | | | | |
Special charges classifications as shown in the Condensed Consolidated Statement of Operations:
| | | | | | | | | | | | | | | | | |
| Cost of sales | | $ | — | | | $ | — | | | $ | 2,543 | | | $ | 867 | |
| Selling, general and administrative expenses | | | | | | | — | | | | — | | | | 1,347 | |
| Special charges | | | — | | | | 487 | | | | 12,587 | | | | 7,681 | |
| Interest expense | | | — | | | | — | | | | 4,906 | | | | — | |
| | | | | | | | | | | | | |
Total special charges | | $ | — | | | $ | 487 | | | $ | 20,036 | | | $ | 9,895 | |
| | | | | | | | | | | | | |
E-12
In accordance with the SEC’s Regulation G, the following tables 2, 3 and 4 provide non-GAAP measures used in the earnings release and a reconciliation to the most closely related Generally Accepted Accounting Principles (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 internally 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.
Table 2
Reconciliation of Non-GAAP Financial Measures for Special Charges
(Dollars in thousands, except per-share amounts)
| | | | | | | | | | | | | | | | | |
| | | Three months ended September 30, | | | Nine months ended September 30, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
| Reported income from operations | | $ | 10,839 | | | $ | 9,992 | | | $ | 9,788 | | | $ | 12,572 | |
| Special charges (excluding write-off of finance fees) — pre-tax | | | — | | | | 487 | | | | 15,130 | | | | 9,895 | |
| | | | | | | | | | | | | |
Adjusted income from operations | | $ | 10,839 | | | $ | 10,479 | | | $ | 24,918 | | | $ | 22,467 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Reported net (loss) income | | $ | (3,307 | ) | | $ | 4,167 | | | $ | (12,361 | ) | | $ | 1,648 | |
| Special charges — net of tax | | | — | | | | 326 | | | | 12,422 | | | | 6,630 | |
| | | | | | | | | | | | | |
Adjusted net (loss) income | | $ | (3,307 | ) | | $ | 4,493 | | | $ | 61 | | | $ | 8,278 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Diluted (loss) income per share: | | | | | | | | | | | | | | | | |
| Reported net (loss) income | | $ | (0.23 | ) | | $ | 0.30 | | | $ | (0.87 | ) | | $ | 0.12 | |
| Special charges — net of tax | | | — | | | | 0.02 | | | | 0.87 | | | | 0.48 | |
| | | | | | | | | | | | | |
Adjusted net (loss) income per diluted share | | $ | (0.23 | ) | | $ | 0.32 | | | $ | 0.00 | | | $ | 0.60 | |
| | | | | | | | | | | | | |
E-13
Table 3
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
(Dollars in thousands)
| | | | | | | | | |
| | | Three months ended September 30, | |
| | | 2006 | | | 2005 | |
| Reported net (loss) income | | $ | (3,307 | ) | | $ | 4,167 | |
| |
| Add: | | | | | | | | |
| Interest expense | | | 15,551 | | | | 3,398 | |
| (Credit) provision for income taxes | | | (3,116 | ) | | | 2,090 | |
| Depreciation and amortization (adjusted for minority interest) | | | 11,060 | | | | 8,943 | |
| | | | | | | |
EBITDA | | $ | 20,188 | | | $ | 18,598 | |
| | | | | | | |
| | | | | | | | | |
| Add: | | | | | | | | |
| Special charges | | | — | | | | 487 | |
| | | | | | | |
Adjusted EBITDA | | $ | 20,188 | | | $ | 19,085 | |
| | | | | | | |
| |
| | | Nine months ended September 30, | |
| | | 2006 | | | 2005 | |
| Reported net (loss) income | | $ | (12,361 | ) | | $ | 1,648 | |
| | | | | | | | | |
| Add: | | | | | | | | |
| Interest expense | | | 29,360 | | | | 10,240 | |
| (Credit) provision for income taxes | | | (7,535 | ) | | | 860 | |
| Depreciation and amortization (adjusted for minority interest) | | | 27,048 | | | | 25,394 | |
| | | | | | | |
EBITDA | | $ | 36,512 | | | $ | 38,142 | |
| | | | | | | |
| | | | | | | | | |
| Add: | | | | | | | | |
| Special charges | | | 15,130 | | | | 9,895 | |
| | | | | | | |
Adjusted EBITDA | | $ | 51,642 | | | $ | 48,037 | |
| | | | | | | |
E-14
Table 4
Summary Consolidated Pro-forma Results
(Dollars in thousands)
The following table presents the impact of the Crisa acquistion (closed on June 16, 2006) as if it occurred on January 1 of 2006 and 2005.
| | | | | | | | | | | | | | | | | |
| | | Three months ended Sept 30, | | | Nine months ended Sept 30, | |
| | | 2006(1) | | | 2005 | | | 2006 | | | 2005 | |
Libbey | | | | | | | | | | | | | | | | |
Net sales | | $ | 143,970 | | | $ | 135,573 | | | $ | 428,254 | | | $ | 409,895 | |
| |
| Earnings before interest and tax (EBIT) | | | 6,995 | | | | 9,732 | | | | 21,641 | | | | 12,846 | |
| Add: special charges | | | — | | | | 487 | | | | — | | | | 9,895 | |
| Less: minority interest (5% for Crisal) | | | 22 | | | | (77 | ) | | | (66 | ) | | | (96 | ) |
| | | | | | | | | | | | | |
| Adjusted EBIT | | | 7,017 | | | | 10,142 | | | | 21,575 | | | | 22,645 | |
| |
Pro forma adjustments: | | | | | | | | | | | | | | | | |
| Equity (earnings) loss | | | — | | | | 1,183 | | | | (1,986 | ) | | | 1,381 | |
| | | | | | | | | | | | | |
| |
Libbey adjusted pro forma EBIT | | | 7,017 | | | | 11,325 | | | | 19,589 | | | | 24,026 | |
| |
| Depreciation & amortization (adjusted for minority interest) | | | 7,902 | | | | 8,943 | | | | 23,890 | | | | 25,394 | |
| | | | | | | | | | | | | |
| |
Libbey adjusted pro forma earnings before interest tax depreciation and amortization (EBITDA) | | $ | 14,919 | | | $ | 20,268 | | | $ | 43,479 | | | $ | 49,420 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Crisa | | | | | | | | | | | | | | | | |
Net sales | | $ | 49,399 | | | $ | 47,735 | | | $ | 145,625 | | | $ | 141,471 | |
| |
| Earnings / (loss) before interest and tax (EBIT) | | | 2,111 | | | | 292 | | | | (4,200 | ) | | | 3,399 | |
| Add: special charges | | | — | | | | — | | | | 15,130 | | | | — | |
| | | | | | | | | | | | | |
| Adjusted EBIT | | | 2,111 | | | | 292 | | | | 10,930 | | | | 3,399 | |
| |
Pro forma adjustments: | | | | | | | | | | | | | | | | |
| Pension expense | | | — | | | | 945 | | | | 2,638 | | | | 2,835 | |
| Profit sharing expense | | | — | | | | 844 | | | | 1,560 | | | | 2,712 | |
| Vitro corporate tax | | | — | | | | 681 | | | | 1,286 | | | | 1,911 | |
| Rent expense | | | — | | | | 235 | | | | 470 | | | | 705 | |
| Other | | | — | | | | 292 | | | | (36 | ) | | | 188 | |
| | | | | | | | | | | | | |
| Total Crisa pro forma adjustments | | | — | | | | 2,997 | | | | 5,918 | | | | 8,351 | |
| |
| | | | | | | | | | | | | |
Crisa adjusted pro forma EBIT | | | 2,111 | | | | 3,289 | | | | 16,848 | | | | 11,750 | |
| | | | | | | | | | | | | | | | | |
| Depreciation & amortization | | | 3,158 | | | | 2,594 | | | | 9,408 | | | | 9,830 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Crisa adjusted pro forma earnings before interest tax depreciation and amortization (EBITDA) | | $ | 5,269 | | | $ | 5,883 | | | $ | 26,256 | | | $ | 21,580 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
| Net sales adjustments and eliminations | | | (10,113 | ) | | | (7,713 | ) | | | (23,687 | ) | | | (23,323 | ) |
| | | | | | | | | | | | | | | | | |
Libbey consolidated | | | | | | | | | | | | | | | | |
Pro forma net sales | | $ | 183,256 | | | $ | 175,595 | | | $ | 550,192 | | | $ | 528,043 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Pro forma adjusted EBIT | | $ | 9,128 | | | $ | 14,614 | | | $ | 36,437 | | | $ | 35,776 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | |
Pro forma adjusted EBITDA | | $ | 20,188 | | | $ | 26,151 | | | $ | 69,735 | | | $ | 71,000 | |
| | | | | | | | | | | | | |
| | |
| (1) | | Reflects actual results. |
E-15
