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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, 1997
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)
300 Madison Avenue, Toledo, Ohio 43604
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(Address of principal executive offices) (Zip Code)
419-325-2100
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(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 - 15,202,398 shares at August 4, 1997.
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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, 1996.
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: 1997 1996
---- ----
Net sales $ 103,954 $ 103,804
Royalties and net technical
assistance income 696 756
--------- ---------
Total revenues 104,650 104,560
Costs and expenses:
Cost of sales 71,894 73,838
Selling, general and administrative
expenses 12,707 12,561
--------- ---------
84,601 86,399
--------- ---------
Income from operations 20,049 18,161
Other income (expense):
Interest expense - net (3,443) (3,812)
Other - net (20) 35
--------- ---------
(3,463) (3,777)
Income before income taxes 16,586 14,384
Provision for income taxes 6,454 5,682
--------- ---------
Net income $ 10,132 $ 8,702
========= =========
Net income per share $ 0.65 $ 0.56
========= =========
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: 1997 1996
---- ----
Net sales $ 182,433 $ 187,805
Royalties and net technical
assistance income 1,620 1,232
--------- ---------
Total revenues 184,053 189,037
Costs and expenses:
Cost of sales 128,669 137,864
Selling, general and administrative
expenses 24,457 23,102
--------- ---------
153,126 160,966
--------- ---------
Income from operations 30,927 28,071
Other income (expense):
Interest expense - net (6,744) (7,932)
Other - net 44 759
--------- ---------
(6,700) (7,173)
--------- ---------
Income before income taxes 24,227 20,898
Provision for income taxes 9,449 8,255
--------- ---------
Net income $ 14,778 $ 12,643
========= =========
Net income per share $ 0.95 $ 0.82
========= =========
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,
1997 1996
---- ----
(unaudited) (Note)
ASSETS
Current assets:
Cash $ 3,750 $ 1,990
Accounts receivable:
Trade, less allowances of $2,442
and $2,279 48,723 40,503
Other 1,269 1,551
-------- --------
49,992 42,054
Inventories:
Finished goods 84,698 67,503
Work in process 5,408 5,017
Raw materials 3,621 3,054
Operating supplies 708 807
-------- --------
94,435 76,381
Prepaid expenses 5,328 6,719
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Total current assets 153,505 127,144
Other assets:
Repair parts inventories 5,855 6,090
Goodwill, net of accumulated
amortization of $10,939 and $10,339 37,131 37,731
Other assets 26,596 25,398
-------- --------
69,582 69,219
Property, plant and equipment, at cost 230,958 225,518
Less accumulated depreciation 114,764 106,148
-------- --------
Net property, plant and equipment 116,194 119,370
-------- --------
Total assets $339,281 $315,733
======== ========
Note: The condensed consolidated balance sheet at December 31, 1996 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,
1997 1996
---- ----
(unaudited) (Note)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 20,000 $ 4,525
Accounts payable 14,878 22,506
Accrued liabilities 26,529 23,102
Other current liabilities 14,584 15,713
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Total current liabilities 75,991 65,846
Long-term debt 201,315 202,851
Nonpension retirement benefits 52,452 51,165
Deferred taxes and other liabilities 13,134 14,318
Commitments
Shareholders' equity:
Common stock, par value $.01
per share, 50,000,000 shares
authorized, 15,176,621 shares
issued and outstanding
(15,061,231 in 1996) 152 151
Capital in excess of par value 194,289 191,909
Deficit (197,855) (210,368)
Cumulative foreign currency
translation adjustment (197) (139)
--------- ---------
Total shareholders' equity (3,611) (18,447)
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Total liabilities and shareholders' equity $ 339,281 $ 315,733
========= =========
Note: The condensed consolidated balance sheet at December 31, 1996 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,
1997 1996
---- ----
Operating activities
Net income $ 14,778 $ 12,643
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation and amortization 11,163 11,223
Other non-cash charges 359 468
Net change in components of working
capital and other assets (31,829) (7,105)
-------- --------
Net cash provided by (used in)
operating activities (5,529) 17,229
Investing activities--additions
to property, plant and equipment (6,861) (6,355)
Financing activities
Net repayments under Bank Credit Agreement (1,438) (12,155)
Other net borrowings 15,475 3,059
Stock options exercised 2,381 150
Dividends (2,265) (2,254)
-------- --------
Net cash provided by (used in) financing
activities 14,153 (11,200)
Effect of exchange rate fluctuations
on cash (3) 1
-------- --------
Increase (decrease) in cash 1,760 (325)
Cash at beginning of year 1,990 2,095
-------- --------
Cash at end of period $ 3,750 $ 1,770
======== ========
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 $380 million, maturing May 1, 2002. Swing Line
borrowings are limited to $25 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 0.15% and 0.275%,
respectively, at June 30, 1997. 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 $190 million. The Revolving
Credit and Swing Line Facility also provides for the issuance of $35 million of
letters of credit, with such usage applied against the $380 million limit. At
June 30, 1997 the Company had $5.1 million in letters of credit outstanding
under the Facility.
The Company has entered into interest rate protection agreements ("Rate
Agreements") with respect to $150 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, 1997 was 5.69% for an average remaining period of 1.5 years. The
remaining debt not covered by the Rate Agreements has fluctuating interest rates
with a weighted average rate of 5.8% at June 30, 1997.
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.
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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. ACQUISITION OPPORTUNITY
On March 10, 1997 the Company announced that it had signed a letter of intent to
enter into a joint venture with Vitro S.A., with respect to its glass tableware
operations in Mexico, and also purchase the business known as WorldCrisa,
presently owned by Vitro S.A. The announced cash purchase price is approximately
$100 million. The completion of the transaction is subject to the performance of
final due diligence, negotiation of definitive agreements and approval of the
boards of directors of the respective companies. The Company anticipates
completing the transaction in the third quarter of 1997.
3. CASH FLOW INFORMATION
Interest paid in cash aggregated $6,392 and $7,535 for the first six months of
1997 and 1996, respectively. Income taxes paid in cash aggregated $5,484 and
$5,169 for the first six months of 1997 and 1996, respectively.
4. 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 15,586,603 and 15,537,399 for the
three and six month periods ending June 30, 1997, respectively; and 15,382,778
and 15,344,544 for the three and six month periods ending June 30, 1996
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" (FAS 128) which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute EPS and restate all
prior periods. The impact of adopting FAS 128 is not expected to be material.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - SECOND QUARTER 1997 COMPARED WITH SECOND QUARTER 1996
Three months ended
June 30,
-----------------------
(dollars in thousands)
1997 1996
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Net sales $103,954 $103,804
Gross profit 32,060 29,966
As a percentage of sales 30.8% 28.9%
Income from operations $ 20,049 $ 18,161
As a percentage of sales 19.3% 17.5%
Net income $ 10,132 $ 8,702
Net sales for the second quarter of 1997 of $104.0 million increased 0.1% from
net sales of $103.8 million reported in the comparable period in 1996. A primary
factor for the increase was an increase in net sales to the Company's domestic
retail customers which helped offset lower sales to the Company's industrial and
foodservice customers in the U.S., reflecting the Company's decision to
eliminate certain sales which typically had experienced low or negative
operating profit margins. Export sales were up 9.3%, increasing to $8.5 million
from $7.8 million in the year-ago period.
Gross profit increased 7.0% to $32.1 million in the second quarter of 1997 from
$30.0 million in the second quarter of 1996, and increased as a percentage of
sales to 30.8% from 28.9%. Profit margins improved as a result of improved sales
mix and lower expenses at the Company's domestic glass manufacturing facilities.
Income from operations increased 10.4% to $20.0 million from $18.2 million in
the year-ago period. Operating income as a percentage of sales increased to
19.3% from 17.5% in the comparable year-ago period, as a result of the higher
gross profit percentage.
Net income increased by $1.4 million due to items discussed above, plus a
reduction in the Company's effective tax rate from 39.5% to 38.9%, principally
due to lower state income taxes, and decreased interest expense resulting from
lower debt levels.
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RESULTS OF OPERATIONS - FIRST SIX MONTHS 1997 COMPARED WITH FIRST SIX MONTHS
1996
Six months ended
June 30,
------------------------
(dollars in thousands)
1997 1996
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Net sales $182,433 $187,805
Gross profit 53,764 49,941
As a percentage of sales 29.5% 26.6%
Income from operations $ 30,927 $ 28,071
As a percentage of sales 17.0% 14.9%
Net income $ 14,778 $ 12,643
Net sales for the first six months of 1997 of $182.4 million decreased 2.9% from
net sales of $187.8 million reported in the comparable period in 1996. The
decrease is due primarily to lower net sales to the Company's industrial and
retail markets in the U.S. as the Company chose to eliminate certain sales which
typically had experienced low or negative operating profit margins. Export sales
were down 4.8%, decreasing to $13.6 million from $14.3 million in the year-ago
period primarily due to a large premium order in the first quarter of 1996 which
did not repeat in 1997.
Gross profit increased 7.7% to $53.8 million in the first six months of 1997
from $49.9 million in the first six months of 1996, and increased as a
percentage of sales to 29.5% from 26.6%. Profit margins improved as a result of
an improved mix of sales to more profitable products related to the termination
of certain sales with low profit margins. In addition, lower expenses and higher
efficiency performance in the Company's glassware facilities contributed to
higher gross profit.
Income from operations increased 10.2% to $30.9 million from $28.1 million in
the year-ago period. Operating income as a percentage of sales increased to
17.0% from 14.9% in the comparable year-ago period. A higher gross profit
percentage more than offset higher selling, general and administrative expense,
principally associated with higher marketing and sales management activities.
Net income increased by $2.1 million due to items discussed above, plus a
reduction in the Company's effective tax rate from 39.5% to 39.0%, principally
due to lower state income taxes, and decreased interest expense resulting from
lower debt levels.
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CAPITAL RESOURCES AND LIQUIDITY
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The Company had total debt of $221.3 million at June 30, 1997, compared to
$207.4 million at December 31, 1997. The increase in debt from December 31, 1996
is due to increased working capital requirements historically experienced during
this period. Inventories at June 30, 1997 were $18.1 million higher than at
December 31, 1996 principally due to the seasonal nature of the Company's
business. The Company had additional capacity at June 30, 1997 under the Bank
Credit Agreement of $173.7 million. Of Libbey's outstanding indebtedness, $71.2
million is subject to fluctuating interest rates at June 30, 1997. A change of
one percentage point in such rates would result in a change in interest expense
of approximately $.7 million on an annual basis.
On March 10, 1997 the Company announced that it had signed a letter of intent to
enter into a joint venture with Vitro S.A., with respect to its glass tableware
operations in Mexico and also purchase the business known as WorldCrisa,
presently owned by Vitro S.A., subject to the performance of final due
diligence, negotiation of definitive agreements and approval of the boards of
directors of the respective companies.
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 remaining term of the Bank
Credit Agreement. In addition, the Company anticipates refinancing the Bank
Credit Agreement at or prior to the maturity date of May 2002 to meet the
Company's longer term funding requirements.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 1, 1997 at the annual meeting of stockholders, Messrs. John F.
Meier and Gary L. Moreau were elected as members of Class I of the
board of directors for three year terms expiring on the date of the
2000 annual meeting. The results of the voting were:
Directors
Name For Withheld
---- --- --------
Mr. Meier 13,111,627 108,716
Mr. Moreau 13,108,626 111,717
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
Exhibit
Number Description
- ------- -----------
10.25 The Second Amended and Restated Credit Agreement dated as
of April 23, 1997 to the First Amended and Restated Credit
Agreement dated as of July 17, 1995 among Libbey Glass
Inc. and Libbey Canada Inc. as Borrowers, the lenders
listed therein, The Bank of Nova Scotia, as Canadian
Agent, The First National Bank of Chicago, as Syndication
Agents, NationsBank, N.A., as Documentation Agent, The
Bank of New York, The Bank of Nova Scotia, Caisse National
De Credit Agricole, Fleet Bank, N.A. and Keybank National
Association, as Co-Agents and Bankers Trust Company, as
Administrative Agent.
27 Other Financial Information
(b.) No reports on Form 8-K were filed during the second 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 12, 1997 By /s/ Kenneth G. Wilkes
------------------------- ----------------------------------
Kenneth G. Wilkes,
Vice President, Chief Financial
Officer and Treasurer
(Principal Accounting Officer)
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