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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
(X)Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For Quarter Ended June 30, 1996
or
( )Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Libbey Inc.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12084 34-1559357
- - - -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation or
organization)
420 Madison Avenue, Toledo, Ohio 43604
- - - --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
419-727-2100
- - - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
----- -------
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Common Stock, $.01 par value - 15,032,200 shares at July 31, 1996.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to present
fairly such information for the periods and at the dates indicated. Since the
following condensed unaudited financial statements have been prepared in
accordance with Article 10 of Regulation S-X, they do not contain all
information and footnotes normally contained in annual consolidated financial
statements; accordingly they should be read in conjunction with the Consolidated
Financial Statements and notes thereto appearing in the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1995. The interim results of
operations are not necessarily indicative of results for the entire year.
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share amounts)
(unaudited)
Three months ended June 30,
Revenues: 1996 1995
--------- --------
Net sales $ 103,804 $ 84,006
Royalties and net technical
assistance income 756 614
--------- --------
Total revenues 104,560 84,620
Costs and expenses:
Cost of sales 73,838 58,235
Selling, general and administrative
expenses 12,561 9,793
--------- --------
86,399 68,028
--------- --------
Income from operations 18,161 16,592
Other income (expense):
Interest expense - net (3,812) (3,725)
Other - net 35 (21)
--------- --------
(3,777) (3,746)
--------- --------
Income before income taxes 14,384 12,846
Provision for income taxes 5,682 5,173
--------- --------
Net income $ 8,702 $ 7,673
========= ========
Net income per share $ 0.56 $ 0.50
========= ========
Dividends per share $ 0.075 $ 0.075
========= ========
See accompanying notes.
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share amounts)
(unaudited)
Six months ended June 30,
Revenues: 1996 1995
--------- ---------
Net sales $ 187,805 $ 155,022
Royalties and net technical
assistance income 1,232 1,128
--------- ---------
Total revenues 189,037 156,150
Costs and expenses:
Cost of sales 137,864 111,321
Selling, general and administrative
expenses 23,102 19,482
--------- ---------
160,966 130,803
--------- ---------
Income from operations 28,071 25,347
Other income (expense):
Interest expense - net (7,932) (6,676)
Other - net 759 86
--------- ---------
(7,173) (6,590)
--------- ---------
Income before income taxes 20,898 18,757
Provision for income taxes 8,255 7,597
--------- ---------
Net income $ 12,643 $ 11,160
========= =========
Net income per share $ 0.81 $ 0.72
========= =========
Dividends per share $ 0.15 $ 0.15
========= =========
See accompanying notes.
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LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
1996 1995
-------- --------
(unaudited) (Note)
ASSETS
Current assets:
Cash $ 1,770 $ 2,095
Trade receivables, less allowances
of $3,494 and $3,289 42,561 38,775
Other receivables 1,409 1,582
-------- --------
Total receivables 43,970 40,357
Finished goods 76,313 69,987
Work in process 6,083 5,245
Raw materials 3,122 3,246
Operating supplies 711 714
-------- --------
Total inventories 86,229 79,192
Prepaid expenses 6,260 9,199
-------- --------
Total current assets 138,229 130,843
Other assets:
Repair parts inventories 5,783 5,528
Goodwill, net of accumulated
amortization of $9,728 and $9,118 38,881 39,755
Other assets and investments 23,367 21,711
-------- --------
Total other assets 68,031 66,994
Property, plant and equipment,
at cost 225,392 220,675
Less accumulated depreciation 105,282 96,697
-------- --------
Net property, plant and
equipment 120,110 123,978
-------- --------
Total assets $326,370 $321,815
======== ========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1995 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
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LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
June 30, December 31,
1996 1995
---- ----
(unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes payable $ 3,059 --
Accounts payable 16,057 $ 20,088
Accrued liabilities 27,196 22,792
Other current liabilities 15,626 13,168
--------- ---------
Total current liabilities 61,938 56,048
Long-term debt 236,561 248,721
Nonpension retirement benefits 51,120 48,945
Deferred taxes and other liabilities 13,332 15,217
Commitments
Shareholders' equity:
Common stock, par value $.01
per share, 50,000,000 shares
authorized, 15,032,200 shares
issued and outstanding
(15,023,500 in 1995) 150 150
Capital in excess of par value 191,376 191,226
Deficit (228,018) (238,407)
Cumulative foreign currency
translation adjustment (89) (85)
--------- ---------
Total shareholders' equity (36,581) (47,116)
--------- ---------
Total liabilities and
shareholders' equity $ 326,370 $ 321,815
========= =========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1995 has been
derived from the audited consolidated financial statements at that date but does
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements.
See accompanying notes.
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LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
Six months ended June 30,
1996 1995
---- ----
Operating activities
Net income $ 12,643 $ 11,160
Adjustments to reconcile net income to
cash provided by (used in) operating
activities:
Depreciation and amortization 11,223 8,828
Other non-cash charges 468 1,242
Net change in components of working
capital and other assets (7,105) (29,023)
-------- --------
Net cash provided by (used in)
operating activities 17,229 (7,793)
Investing activities--additions
to property, plant and equipment (6,355) (13,981)
Financing activities
Net borrowings (repayments) under Bank
Credit Agreement (12,155) 22,805
Other net borrowings 3,059
Stock options exercised 150 --
Dividends (2,254) (2,250)
-------- --------
Net cash provided by (used in)
financing activities (11,200) 20,555
Effect of exchange rate fluctuations
on cash 1 --
-------- --------
Decrease in cash (325) (1,219)
Cash at beginning of year 2,095 3,700
-------- --------
Cash at end of period $ 1,770 $ 2,481
======== ========
See accompanying notes.
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LIBBEY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands, except per share data
(unaudited)
1. LONG-TERM DEBT
The Company and its Canadian subsidiary have an unsecured agreement ("Bank
Credit Agreement" or "Agreement") with a group of banks which provides for a
Revolving Credit and Swing Line Facility ("Facility") permitting borrowings up
to an aggregate total of $300 million, maturing October 1999. Swing Line
borrowings are limited to $15 million with interest calculated at the prime rate
minus the Commitment Fee Percentage. Revolving Credit borrowings bear interest
at the Company's option at either the prime rate minus the Commitment Fee
Percentage, or a Eurodollar rate plus the Applicable Eurodollar Margin. The
Commitment Fee Percentage and Applicable Eurodollar Margin will vary depending
on the Company's performance against certain financial ratios. The Commitment
Fee Percentage and the Applicable Eurodollar Margin were 1/4% and 3/8%,
respectively, at June 30, 1996. The Company may also elect to borrow under a
Negotiated Rate loan alternative of the Revolving Credit and Swing Line Facility
at floating rates of interest, up to a maximum of $150 million. The Revolving
Credit and Swing Line Facility also provides for the issuance of $22 million of
letters of credit, with such usage applied against the $300 million limit. At
June 30, 1996, the Company had $5.1 million in letters of credit outstanding.
The Company has entered into interest rate protection agreements ("Rate
Agreements") with respect to $175 million of debt under its Bank Credit
Agreement as a means to manage its exposure to fluctuating interest rates. The
Rate Agreements effectively convert this portion of the Company's Bank Credit
Agreement borrowings from variable rate debt to a fixed rate basis, thus
reducing the impact of interest rate changes on future income. The average
interest rate for the Company's borrowings related to the Rate Agreements at
June 30, 1996 was 5.75% for an average remaining period of 2.2 years. The
remaining debt not covered by the Rate Agreements has fluctuating interest rates
with a weighted average rate of 5.9% at June 30, 1996.
The interest rate differential to be received or paid under the Rate Agreements
is being recognized over the life of the Rate Agreements as an adjustment to
interest expense. Should the counterparts to these Rate Agreements fail to
perform, the Company would no longer be protected from interest rate
fluctuations by these Rate Agreements. However, the Company does not anticipate
nonperformance by the counterparts.
The Company must pay a commitment fee ("Commitment Fee Percentage") on the total
credit provided under the Bank Credit Agreement. No compensating balances are
required by the Agreement. The Agreement requires the maintenance of certain
financial ratios, restricts the incurrence of indebtedness and other contingent
financial obligations, and restricts certain types of business activities and
investments.
2. CASH FLOW INFORMATION
Interest paid in cash aggregated $7,535 and $6,504 for the first six months of
1996 and 1995, respectively. Income taxes paid in cash aggregated $5,169 and
$10,652 for the first six months of 1996 and 1995, respectively.
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3. NET INCOME PER SHARE OF COMMON STOCK
Net income per share of common stock is computed using the weighted average
number of shares of common stock outstanding, including common stock
equivalents. Weighted average shares were 15,615,263 and 15,565,853 for the
three and six month periods ending June 30, 1996, respectively; and 15,430,822
and 15,369,564 for the three and six month periods ending June 30, 1995.
The following table shows the 1995 and 1996 earnings per share results using the
average shares outstanding including and excluding common stock equivalents.
Including Equivalents Excluding Equivalents
--------------------- ---------------------
Quarter Ending Quarter Year-to-date Quarter Year-to-date
-------------- ------- ------------ ------- ------------
March 31, 1995 $0.23 $0.23 $0.23 $0.23
June 30, 1995 $0.50 $0.72 $0.51 $0.74
September 30, 1995 $0.64 $1.36 $0.66 $1.40
December 31, 1995 $0.58 $1.95 $0.60 $2.00
March 31, 1996 $0.25 $0.25 $0.26 $0.26
June 30, 1996 $0.56 $0.81 $0.58 $0.84
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4. ACQUISITION
On October 10, 1995, the Company completed the acquisition of certain assets and
liabilities of the business operated as Syracuse China from the Pfaltzgraff Co.,
The Pfaltzgraff Outlet Co., and Syracuse China Company of Canada Ltd. The
purchase price approximated $40.0 million and the acquisition has been recorded
using the purchase method of accounting. The excess of the aggregate purchase
price over the fair market value of net assets acquired of approximately $7.2
million was recognized as goodwill. The operating results of Syracuse China have
been included in the consolidated financial statements since the date of
acquisition.
The following unaudited pro forma results of operations assume the acquisition
occurred as of January 1, 1994 (in thousands except per-share amounts):
Quarter ended June 30, 1996 1995
---- ----
Net sales $103,804 $92,325
Net income 8,702 8,054
Net income per share (including
common stock equivalents) $ 0.56 $ 0.52
Six Months ended June 30, 1996 1995
---- ----
Net sales $187,805 $170,811
Net income 12,643 11,809
Net income per share (including
common stock equivalents) $ 0.81 $ 0.77
The pro forma financial information is not necessarily indicative of the
operating results that would have occurred had the Syracuse China acquisition
been consummated as of January 1, 1994, nor are they necessarily indicative of
future operating results.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER 1996 COMPARED WITH SECOND QUARTER 1995
Three months ended
June 30,
----------------------
(dollars in thousands)
1996 1995
-------- -------
Net sales $103,804 $84,006
Gross profit 29,966 25,771
As a percentage of sales 28.9% 30.7%
Income from operations $ 18,161 $16,592
As a percentage of sales 17.5% 19.8%
Net income $ 8,702 $ 7,673
Net sales for the second quarter of 1996 of $103.8 million increased 23.6% from
the net sales of $84.0 million reported in the comparable period in 1995. The
increase in sales is due primarily to higher sales to the Company's foodservice
and industrial markets in the U.S. and the acquisition of Syracuse China in the
fourth quarter of 1995. Sales benefited from increased unit volume, particularly
with industrial customers. Export sales were up 41.8%, increasing to $7.8
million from $5.5 million in the year-ago period.
Gross profit increased 16.3% to $30.0 million in the second quarter of 1996 from
$25.8 million in the second quarter of 1995, but decreased as a percentage of
sales to 28.9% from 30.7%. Gross margins were affected by product mix, with
greater sales of lower margin items in the industrial and export markets,
increased natural gas expense and increased compensation costs.
Income from operations increased 9.5% to $18.2 million from $16.6 million in the
year-ago period. Operating income as a percentage of sales fell to 17.5% from
19.8% in the comparable year-ago period, as a result of the lower gross profit
percentage and the inclusion of Syracuse China in 1996 and
re-engineering-related expenses.
Net income increased by $1.0 million due to higher revenues and a reduction in
the Company's effective tax rate from 40.3% to 39.5%, principally due to lower
state income taxes, offset by lower operating profits and increased interest
expense due to additional debt associated with the Syracuse China acquisition.
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RESULTS OF OPERATIONS - SIX MONTHS 1996 COMPARED WITH SIX MONTHS 1995
Six months ended
June 30,
----------------------
(dollars in thousands)
1996 1995
-------- --------
Net sales $187,805 $155,022
Gross profit 49,941 43,701
As a percentage of sales 26.6% 28.2%
Income from operations $ 28,071 $ 25,347
As a percentage of sales 14.9% 16.4%
Net income $ 12,643 $ 11,160
Net sales for the first six months of 1996 of $187.8 million increased 21.1%
from the sales of $155.0 million reported in the comparable period in 1995. The
increase in sales is due primarily to higher sales to the Company's foodservice
and industrial markets in the U.S. and the acquisition of Syracuse China in the
fourth quarter of 1995. Sales benefited from increased unit volume, particularly
with industrial customers. Export sales were up 24.9%, increasing to $14.3
million from $11.4 million in the year-ago period.
Gross profit increased 14.3% to $49.9 million in the first six months of 1996
from $43.7 million in the comparable period in 1995, but decreased as a
percentage of sales to 26.6% from 28.2%. Gross margins primarily were affected
by product mix, with greater sales of lower margin items in the industrial and
export markets and the inclusion of Syracuse China, contributed to a
lower-margin sales mix. In addition, higher energy and compensation costs were
factors.
Income from operations increased 10.7% to $28.1 million from $25.3 million in
the year-ago period. Operating income as a percentage of sales fell to 14.9%
from 16.4% in the comparable year-ago period, as a result of the lower gross
profit percentage. In the selling, general and administrative expense category,
reduced health care expenses were almost completely offset by the effects of
Syracuse China.
Net income increased by $1.5 million due to higher revenues, increased machinery
sales, and a reduction in the Company's effective tax rate from 40.5% to 39.5%,
principally due to lower state income taxes, offset by lower operating profits
and increased interest expense due to additional debt associated with the
Syracuse China acquisition.
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CAPITAL RESOURCES AND LIQUIDITY
The Company had total debt of $239.6 million at June 30, 1996, compared to
$248.7 million at December 31, 1995. The decrease in debt from December 31, 1995
is due to operating cash flows supplemented by aggressive working capital
management and timing of capital expenditures. Inventories at June 30, 1996,
were $7.0 million higher than at December 31, 1995, principally due to the
seasonal nature of the Company's business, however, because of improved
inventory management, this increase is not as large as in previous years. The
Company had additional capacity at June 30, 1996 under the Bank Credit Agreement
of $58.3 million. Of Libbey's outstanding indebtedness, $64.6 million is subject
to fluctuating interest rates at June 30, 1996. A change of one percentage point
in such rates would result in a change in interest expense of approximately $.6
million on an annual basis.
The Company is not aware of any trends, demands, commitments, or uncertainties
which will result or which are reasonably likely to result in a material change
in Libbey's liquidity. The Company believes that its cash from operations and
available borrowings under the Bank Credit Agreement will be sufficient to fund
its operating requirements, capital expenditures and all other obligations
(including debt service and dividends) throughout the five-year term of the Bank
Credit Agreement. The Company continues to be engaged in various efforts to
expand through acquisitions as well as through internal growth and may seek
further amendments to its Bank Credit Agreement if such indebtedness is
required. In addition, the Company anticipates refinancing the Bank Credit
Agreement at or prior to the maturity date of October 1999 to meet the Company's
longer term funding requirements.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 7, 1996 at the annual meeting of stockholders, Messrs.
William A. Foley and Terry L. Wilkison were elected as members of
Class III of the board of directors for three year terms expiring
on the date of the 1999 annual meeting. The results of the voting
were:
Directors
Name For Against
---- --- -------
Mr. Foley 12,468,787 213,320
Mr. Wilkison 12,454,887 227,220
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
Exhibit
Number Description
- - - ------ -----------
10.22* The Amended and Restated Libbey Inc. Senior Management Incentive
Plan
27 Financial Data Schedule
* Management Contract or Compensation Plan or Arrangement
(b.) No reports on Form 8-K were filed during the quarter.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBBEY INC.
Date August 8, 1996 By /s/ Kenneth G. Wilkes
----------------------------------
Kenneth G. Wilkes,
Vice President, Chief Financial
Officer and Treasurer
(Principal Accounting Officer)
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