Libbey Inc. Announces Increase of 23.1 Percent in Income Before Income Taxes on 7.0 Percent Increase in Sales for the Third Quarter of 2010

Oct 20, 2010, 07:30 ET from Libbey Inc.

TOLEDO, Ohio, Oct. 20 /PRNewswire-FirstCall/ --

  • Third Quarter Net Sales of $200.0 Million, an Increase of 7.0 Percent Compared to $186.9 Million in the Prior-Year Quarter
  • Libbey China Sales Increase 27.3 Percent
  • Libbey Mexico Sales Increase 14.6 Percent
  • Sales to U.S. and Canadian Retail Customers Increase 4.9 Percent
  • International Sales Increase 12.3 Percent (22.2 percent excluding the impact of currency)
  • Income Before Income Taxes Increased 23.1 Percent to $3.8 Million in the Third Quarter of 2010 Compared to Income Before Income Taxes of $3.1 Million in the Prior-Year Quarter
  • Adjusted EBITDA of $28.1 Million in the Third Quarter of 2010 Compared to $31.9 Million in the Third Quarter of 2009
  • Adjusted EBITDA of $86.2 Million in the First Nine Months of 2010 Compared to $61.0 Million in the First Nine Months of 2009

Libbey Inc. (NYSE Amex: LBY) announced today that sales for the third quarter of 2010 were $200.0 million, compared to $186.9 million in the third quarter of 2009, an increase of 7.0 percent.  Libbey reported net income of $2.3 million, or $0.12 per diluted share, for the third quarter ended September 30, 2010, compared to net income of $3.5 million, or $0.23 per diluted share, in the prior-year quarter.  Excluding special items of $2.4 million, Libbey had net income of $4.7 million (see Table 1) and diluted earnings per share of $0.23 for the third quarter of 2010.  The special items in the third quarter of 2010 included a write-down of decorating assets at the Company's Shreveport, Louisiana, facility and fees related to the secondary stock offering completed in August 2010, for which no proceeds were received.

Third Quarter Results

For the quarter-ended September 30, 2010, sales were $200.0 million, compared to $186.9 million in the year-ago quarter.  Sales in the North American Glass segment were $137.1 million, an increase of 6.8 percent, compared to $128.3 million in the third quarter of 2009 (see Table 5).  Primary contributors to the increased sales included a 14.6 percent increase in sales to Crisa customers and a 4.9 percent increase in sales to U.S. and Canadian retail customers, compared to the prior-year quarter.  Sales to U.S. and Canadian foodservice glassware customers increased 1.3 percent, compared to the prior- year quarter.  North American Other sales increased 1.5 percent to $20.8 million, compared to $20.5 million in the prior-year quarter.  Traex sales increased by 7.6 percent versus the prior year quarter, while sales to World Tableware customers increased 3.4 percent during the quarter.  A decrease in Syracuse China sales of 5.6 percent partially offset these increases.  International segment sales increased 12.3 percent (International sales growth, excluding the impact of currency, was 22.2 percent during the third quarter) to $45.2 million, compared to $40.3 million in the year-ago quarter.  The increase in International sales was led by a 27.3 percent increase in sales to Libbey China customers, an increase of 16.3 percent in sales at Crisal and an 11.4 percent sales growth at Royal Leerdam.

The Company reported income from operations of $15.7 million during the quarter, compared to income from operations of $17.8 million in the year-ago quarter.  Income from operations, excluding special items (see Table 1), was $18.0 million in the third quarter of 2010, compared to $18.6 million during the third quarter of 2009.  Factors contributing to the change in income from operations (both including and excluding special items) were higher sales offset by higher labor, increased workers compensation expense (primarily related to a facility in California which was closed in 2005) and increased health care costs.

Libbey reported earnings before interest and taxes (EBIT) of $15.7 million, compared to EBIT of $20.6 million in the year-ago quarter.  The lower EBIT was primarily a result of the change in income from operations discussed above and $2.9 million of translation gains included in other income during the third quarter of 2009, which did not repeat in 2010.  EBIT, excluding special items (see Table 1, hereafter defined as adjusted EBIT), was $18.0 million in the third quarter of 2010, compared to $21.3 million during the third quarter of 2009.  Adjusted EBIT (see Table 5) was $11.6 million for North American Glass, compared to adjusted EBIT of $17.0 million in the year-ago quarter.  North American Other reported adjusted EBIT for the third quarter of 2010 of $2.8 million, compared to $3.3 million in the year-ago quarter.  The International segment reported adjusted EBIT of $3.7 million primarily as a result of the 12.3 percent increase in sales, compared to adjusted EBIT of $1.0 million in the third quarter of 2009.  

Libbey reported that adjusted EBITDA (see Table 3) was $28.1 million for the third quarter of 2010, compared to $31.9 million in the third quarter of 2009.  

Interest expense decreased by $5.6 million to $11.9 million, compared to $17.5 million in the year-ago period, as a result of lower debt levels and the impact of the debt refinancing completed in February 2010.

The effective tax rate was 38.6 percent for the third quarter of 2010, compared to a negative 13.9 percent in the third quarter of 2009.  The effective tax rate was influenced by valuation allowances, changes in the mix of earnings with differing statutory rates and changes in accruals related to uncertain tax positions.

Libbey reported net income of $2.3 million, or $0.12 per diluted share, for the third quarter ended September 30, 2010, compared to net income of $3.5 million, or $0.23 per diluted share, in the prior year quarter.  Diluted shares outstanding increased to 20.3 million for the quarter ended September 30, 2010, compared to 15.6 million diluted shares in the prior year quarter.  Excluding special items of $2.4 million, Libbey had net income of $4.7 million (see Table 1) and diluted earnings per share of $0.23 for the third quarter of 2010.  This compares to net income excluding special items of $4.3 million and diluted earnings per share of $0.27 during the third quarter of 2009.  The special items in the third quarter of 2010 included a write-down of decorating assets at the Company's Shreveport, Louisiana, facility and fees related to the secondary stock offering completed in August 2010.

Nine-Month Results  

For the nine months ended September 30, 2010, sales increased 6.7 percent to $576.9 million from $540.6 million in the year-ago period.  North American Glass sales increased 7.8 percent to $404.1 million (see Table 5) from $374.8 million in the year-ago period.  The increased sales were attributable to an approximate 24.4 percent increase in Crisa's sales and a solid 10.0 percent increase in sales to U.S. and Canadian retail customers. The Company reported an all-time record U.S. and Canadian retail sales performance during the first nine months of 2010.  Partially offsetting these increases in sales were lower sales to U.S. and Canadian foodservice customers, which decreased by 2.4 percent during the first nine months of the year.  North American Other sales decreased 4.1 percent, as sales of Syracuse China decreased 21.5 percent and Traex sales were 0.5 percent lower than the first nine months of 2009.  Partially offsetting these decreases was an increase in World Tableware sales of 5.5 percent.  International sales increased 14.2 percent, as a result of 29.0 percent higher sales at Libbey China for the first nine months of 2010, compared to the first nine months of 2009.  In addition, sales of Royal Leerdam increased 15.5 percent and Crisal sales increased 11.6 percent.   Excluding the currency impact, International sales increased approximately 18.6 percent.  

The special items in the first nine months of 2010 included a gain of $70.2 million, which represented the difference between the carrying value and the face value of the Payment in Kind (PIK) notes, which were redeemed in February 2010.  This gain was partially offset by the write-off of $13.4 million of unamortized fees and discounts on the refinanced floating rate senior notes and ABL credit facility and call premium payments.

The Company reported income from operations of $49.6 million during the first nine months of 2010, compared to income from operations of $17.3 million in the year-ago period.  Adjusted income from operations was $54.1 million for the first nine months of 2010 (see Table 2) compared to adjusted income from operations of $23.2 million in the first nine months of 2009.  Factors contributing to the increase in adjusted income from operations were higher sales and increased capacity utilization.  Increased selling, general and administrative expenses partially offset these increases.    

EBIT was $107.3 million in the first nine months of 2010, compared to $22.7 million in the first nine months of 2009.  Adjusted EBIT for the first nine months of 2010, as detailed in Table 2, was $55.2 million compared to adjusted EBIT of $28.8 million in the first nine months of 2009.  Adjusted EBIT for North American Glass was $43.1 million during the first nine months of 2010, compared to adjusted EBIT of $22.8 million in the first nine months of 2009.  The increase is the result of increased sales and increased operating activity in U.S. and Mexican operations.  North American Other reported adjusted EBIT for the first nine months of 2010 of $11.1 million, compared to $8.4 million in the year-ago period, the increase being primarily a result of ongoing cost reductions.  The International segment reported an adjusted EBIT of $1.0 million, compared to an adjusted EBIT loss of $2.3 million in the first nine months of 2009.  This improvement was primarily related to the increased sales.

Libbey reported that adjusted EBITDA, as detailed in Table 3, was $86.2 million in the first nine months of 2010, compared to adjusted EBITDA of $61.0 million in the year-ago nine-month period.  

As a result of lower debt levels and the impact of the debt refinancing completed in February 2010, interest expense decreased $18.9 million, compared to the first nine months of 2009.

The effective tax rate was 9.1 percent for the first nine months of 2010, compared to 26.3 percent in the first nine months of 2009.  The effective tax rate was influenced by valuation allowances, changes in the mix of earnings with differing statutory rates and changes in accruals related to uncertain tax positions.

Libbey reported net income of $67.3 million for the first nine months of 2010, or earnings of $3.26 per diluted share, compared to a net loss of $21.7 million, or $1.45 per diluted share, in the first nine months of 2009.  Diluted shares outstanding for the first nine months of 2010 were 20.7 million shares, compared to 14.9 million diluted shares outstanding for the first nine months of 2009.   Excluding special items of $52.2 million, Libbey had net income of $15.2 million (see Table 2) and diluted earnings per share of $0.73 for the first nine months of 2010, compared to a net loss of $15.6 million, or diluted loss per share of $1.04 in the first nine months of 2009.  The special items in the first nine months of 2010 included a gain of $70.2 million, which represented the difference between the carrying value and the face value of the Payment in Kind (PIK) notes which were redeemed in February 2010.  This gain was partially offset by the write-off of $13.4 million of unamortized fees and discounts on the refinanced floating rate senior notes and ABL credit facility and call premium payments.  Also included was a write-down of certain after-processing equipment within the Company's International segment and write down of decorating equipment at the Company's Shreveport, Louisiana, facility as well as fees related to the secondary stock offering completed in August 2010.

Working Capital and Liquidity

As of September 30, 2010, working capital, defined as inventories and accounts receivable less accounts payable, was $211.0 million, compared to $192.6 million at September 30, 2009.  Working capital as a percentage of the last twelve months net sales was 26.9 percent at September 30, 2010, compared to 26.5 percent at September 30, 2009.

Libbey reported that it had available capacity of $69.6 million under its Asset Backed Loan (ABL) credit facility as of September 30, 2010, with no loans currently outstanding.  The Company also had cash on hand of $35.6 million at September 30, 2010.

Sales Improvement in All Segments During the Third Quarter

John F. Meier, chairman and chief executive officer said, "We were pleased with the solid sales improvements we saw in both the North American Glass and International segments in the third quarter as well as quarterly year-over-year improvement in sales in North American Other for the first time in 2010.  The higher sales, increased capacity utilization and the ongoing benefits of the cost reductions we have put in place have resulted in adjusted EBITDA of $86.2 million for the first nine months of 2010, which was a $25.2 million improvement in adjusted EBITDA, when compared to the first nine months of the prior year."

Meier added, "A substantial order for the B to B channel of distribution in the U.S., which was planned to be produced in the third quarter, will now be completed and shipped during the fourth quarter of 2010.  We expect that this activity will contribute to a solid finish to 2010."

Webcast Information

Libbey will hold a conference call for investors on Wednesday, October 20, 2010, 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 or at http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=64169&eventID=3405986. 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 Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended.  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 and that actual results may differ materially from these 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 15, 2010.  Important factors potentially affecting performance include but are not limited to increased competition from foreign suppliers from such statements, and that investors should not place undue reliance on such 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, corrugated packaging, and other purchased materials; higher indebtedness related to the Crisa acquisition; higher 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 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; 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.

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 China, Mexico, the Netherlands and Portugal;
  • 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 100 countries.

Based in Toledo, Ohio, since 1888, 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 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 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 2009, Libbey Inc.'s net sales totaled $748.6 million.

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per-share amounts)

(unaudited)

Three Months Ended September 30,

2010

2009

Net sales

$               200,007

$               186,878

Freight billed to customers

457

419

Total revenues

200,464

187,297

Cost of sales (1)

158,779

144,337

Gross profit

41,685

42,960

Selling, general and administrative expenses (1)

25,335

24,811

Special charges (1)

700

300

Income from operations

15,650

17,849

Other income (1)

23

2,703

Earnings before interest and income taxes

15,673

20,552

Interest expense

11,855

17,451

Income before income taxes

3,818

3,101

Provision for (benefit from) income taxes

1,472

(432)

Net income

$                   2,346

$                   3,533

Net income per share:

Basic

$                     0.13

$                     0.23

Diluted

$                     0.12

$                     0.23

Weighted average shares:

Outstanding

18,148

15,152

Diluted

20,287

15,588

(1) Refer to Table 1 for Special Charges detail.

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except per-share amounts)

(unaudited)

Nine Months Ended September 30,

2010

2009

Net sales

$ 576,947

$ 540,557

Freight billed to customers

1,311

1,163

Total revenues

578,258

541,720

Cost of sales (1)

454,665

453,761

Gross profit

123,593

87,959

Selling, general and administrative expenses (1)

72,878

69,699

Special charges (1)

1,088

974

Income from operations

49,627

17,286

Gain on redemption of debt (1)

56,792

-

Other income (1)

916

5,424

Earnings before interest and income taxes

107,335

22,710

Interest expense

33,243

52,162

Income (loss) before income taxes

74,092

(29,452)

Provision for (benefit from) income taxes

6,769

(7,756)

Net income (loss)

$   67,323

$ (21,696)

Net income (loss) per share:

Basic

$       3.98

$      (1.45)

Diluted

$       3.26

$      (1.45)

Weighted average shares:

Outstanding

16,928

14,926

Diluted

20,658

14,926

(1) Refer to Table 2 for Special Items detail.

LIBBEY INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

September 30, 2010

December 31, 2009

(unaudited)

ASSETS

Cash & cash equivalents

$   35,568

$   55,089

Accounts receivable - net

110,574

82,424

Inventories - net

159,374

144,015

Other current assets

12,374

11,783

Total current assets

317,890

293,311

Pension asset

10,700

9,454

Goodwill and purchased intangibles - net

191,914

193,181

Property, plant and equipment - net

272,723

290,013

Other assets

21,556

8,854

Total assets

$ 814,783

$ 794,813

LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Notes payable

$           -

$        672

Accounts payable

58,937

58,838

Accrued liabilities

77,860

69,763

Pension liability (current portion)

2,031

1,984

Nonpension postretirement benefits (current portion)

4,363

4,363

Other current liabilities

10,162

7,921

Long-term debt due within one year

9,878

9,843

Total current liabilities

163,231

153,384

Long-term debt

446,224

504,724

Pension liability

113,314

119,727

Nonpension postretirement benefits

65,447

64,780

Other liabilities

18,214

19,105

Total liabilities

806,430

861,720

Common stock, treasury stock, capital in excess of par value and warrants

299,916

254,161

Accumulated deficit

(181,439)

(205,344)

Accumulated other comprehensive loss

(110,124)

(115,724)

Total shareholders' equity (deficit)

8,353

(66,907)

Total liabilities and shareholders' equity (deficit)

$ 814,783

$ 794,813

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Dollars in thousands)

(unaudited)

Three Months Ended September 30,

2010

2009

Operating activities:

Net income

$   2,346

$   3,533

Adjustments to reconcile net income to net

cash (used in) provided by operating activities:

Depreciation and amortization

10,040

10,629

Loss on asset disposals

78

77

Change in accounts receivable

(15,355)

864

Change in inventories

(2,418)

(6,196)

Change in accounts payable

77

(3,191)

Accrued interest and amortization of discounts, warrants and finance fees

(8,996)

13,447

Pension & nonpension postretirement benefits

917

(453)

Restructuring charges

627

(1,086)

Accrued liabilities & prepaid expenses

7,007

8,344

Accrued income taxes

1,129

(862)

Other operating activities

1,768

1,533

Net cash (used in) provided by operating activities

(2,780)

26,639

Investing activities:

Additions to property, plant and equipment

(7,743)

(2,737)

Proceeds from asset sales and other

-

172

Net cash used in investing activities

(7,743)

(2,565)

Financing activities:

Net repayments on ABL credit facility

-

(16,799)

Other repayments

(878)

(662)

Net cash used in financing activities

(878)

(17,461)

Effect of exchange rate fluctuations on cash

796

(47)

(Decrease) increase in cash

(10,605)

6,566

Cash at beginning of period

46,173

24,082

Cash at end of period

$ 35,568

$ 30,648

LIBBEY INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

(Dollars in thousands)

(unaudited)

Nine Months Ended September 30,

2010

2009

Operating activities:

Net income (loss)

$  67,323

$ (21,696)

Adjustments to reconcile net income (loss) to net

cash (used in) provided by operating activities:

Depreciation and amortization

30,994

32,875

Loss on asset disposals

343

109

Change in accounts receivable

(28,967)

(14,733)

Change in inventories

(17,218)

32,050

Change in accounts payable

914

(3,078)

Accrued interest and amortization of discounts, warrants and finance fees

6,795

14,998

Accrual of interest on PIK notes

-

11,916

Gain on redemption of PIK Notes

(70,193)

-

Payment of interest on PIK Notes

(29,400)

-

Call premium on floating rate notes

8,415

-

Write-off of bank fees & discounts on old ABL and floating rate notes

4,986

-

Pension & nonpension postretirement benefits

3,788

2,712

Restructuring charges

3,023

(1,837)

Accrued liabilities & prepaid expenses

4,494

21,128

Accrued income taxes

890

(9,499)

Other operating activities

2,980

784

Net cash (used in) provided by operating activities

(10,833)

65,729

Investing activities:

Additions to property, plant and equipment

(19,122)

(12,287)

Call premium on floating rate notes

(8,415)

-

Proceeds from asset sales and other

-

260

Net cash used in investing activities

(27,537)

(12,027)

Financing activities:

Net repayments on ABL credit facility

-

(33,488)

Other repayments

(969)

(2,785)

Other borrowings

215

-

Floating rate note payments

(306,000)

-

PIK Note payment

(51,031)

-

Proceeds from senior secured notes

392,328

-

Debt issuance costs and other

(15,488)

-

Net cash provided by (used in) financing activities

19,055

(36,273)

Effect of exchange rate fluctuations on cash

(206)

(85)

(Decrease) increase in cash

(19,521)

17,344

Cash at beginning of period

55,089

13,304

Cash at end of period

$  35,568

$  30,648

In accordance with the SEC’s Regulation G, tables 1, 2, 3, 4 and 5 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.

Table 1

Reconciliation of "As Reported" results to "As Adjusted" results - Quarter

(Dollars in thousands, except per-share amounts)

(unaudited)

Three Months Ended September 30,

2010

2009

As Reported

Special Items

As Adjusted

As Reported

Special Items

As Adjusted

Net sales

$       200,007

$        -

$ 200,007

$  186,878

$                 -

$ 186,878

Freight billed to customers

457

-

457

419

-

419

Total revenues

200,464

-

200,464

187,297

-

187,297

Cost of sales

158,779

578

158,201

144,337

162

144,175

Gross profit

41,685

(578)

42,263

42,960

(162)

43,122

Selling, general and administrative expenses

25,335

1,096

24,239

24,811

255

24,556

Special charges

700

700

-

300

300

             -  

Income from operations

15,650

(2,374)

18,024

17,849

(717)

18,566

Other income

23

-

23

2,703

(27)

2,730

Earnings before interest and income taxes

15,673

(2,374)

18,047

20,552

(744)

21,296

Interest expense

11,855

-

11,855

17,451

-

17,451

Income before income taxes

3,818

(2,374)

6,192

3,101

(744)

3,845

Provision for (benefit from) income taxes

1,472

-

1,472

(432)

-

(432)

Net income

$           2,346

$ (2,374)

$     4,720

$      3,533

$            (744)

$     4,277

Net income per share:

Basic

$             0.13

$   (0.13)

$       0.26

$        0.23

$           (0.05)

$       0.28

Diluted

$             0.12

$   (0.12)

$       0.23

$        0.23

$           (0.05)

$       0.27

Weighted average shares:

Outstanding

18,148

15,152

Diluted

20,287

15,588

Three Months Ended September 30, 2010

Three Months Ended September 30, 2009

Equity

Total

Pension

Total

Restructuring

Offering

Special

Settlement

Restructuring

Special

Special Items Detail-(income) expense:

Charges (1)

Fees (2)

Items

Charge (3)

Charges (1)

Items

Cost of sales

$              578

$        -

$        578

$            -

$              162

$        162

SG&A

-

1,096

1,096

255

-

          255

Special charges

700

-

700

-

300

          300

Other expense

-

-

-

-

27

            27

Total Special Items

$           1,278

$  1,096

$     2,374

$         255

$              489

$        744

(1) Restructuring charges are related to the closure of our Syracuse, New York, manufacturing facility, our Mira Loma, California, distribution center and the decorating operations at our Shreveport manufacturing facility.

(2) Equity offering fees under selling, general and administrative expense are related to the secondary stock offering completed in August, 2010, for which the company received no proceeds.

(3) The pension settlement charges were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts.

Table 2

Reconciliation of "As Reported" results to "As Adjusted" results - Nine Months

(Dollars in thousands, except per-share amounts)

(unaudited)

Nine Months Ended September 30,

2010

2009

As Reported

Special Items

As Adjusted

As Reported

Special Items

As Adjusted

Net sales

$ 576,947

$                 -

$         576,947

$ 540,557

$        -

$  540,557

Freight billed to customers

1,311

-

1,311

1,163

-

1,163

Total revenues

578,258

-

578,258

541,720

-

541,720

Cost of sales

454,665

2,320

452,345

453,761

1,983

451,778

Gross profit

123,593

(2,320)

125,913

87,959

(1,983)

89,942

Selling, general and administrative expenses

72,878

1,096

71,782

69,699

2,955

66,744

Special charges

1,088

1,088

-

974

974

              -  

Income from operations

49,627

(4,504)

54,131

17,286

(5,912)

23,198

Gain on redemption of debt

56,792

56,792

-

-

-

              -  

Other income

916

(130)

1,046

5,424

(213)

5,637

Earnings before interest and income taxes

107,335

52,158

55,177

22,710

(6,125)

28,835

Interest expense

33,243

-

33,243

52,162

-

52,162

Income (loss) before income taxes

74,092

52,158

21,934

(29,452)

(6,125)

(23,327)

Provision for (benefit from) income taxes

6,769

-

6,769

(7,756)

-

(7,756)

Net income (loss)

$   67,323

$         52,158

$           15,165

$ (21,696)

$ (6,125)

$  (15,571)

Net income (loss) per share:

Basic

$       3.98

$             3.08

$               0.90

$     (1.45)

$   (0.41)

$      (1.04)

Diluted

$       3.26

$             2.52

$               0.73

$     (1.45)

$   (0.41)

$      (1.04)

Weighted average shares:

Outstanding

16,928

14,926

Diluted

20,658

14,926

Nine Months Ended September 30, 2010

Nine Months Ended September 30, 2009

Gain on

Equity Offering

Total

Pension

Total

PIK

Restructuring

and Finance

Special

Settlement

Restructuring

Special

Special Items Detail-(income) expense:

Notes (1)

Charges (2)

Fees (3)

Other (4)

Items

Charge (5)

Charges (2)

Items

Cost of sales

$           -

$              578

$                   -

$     1,742

$  2,320

$            -

$           1,983

$ 1,983

SG&A

-

-

1,096

-

1,096

2,955

-

2,955

Special charges

-

1,088

-

-

1,088

-

974

974

Gain on redemption of debt

(70,193)

-

13,401

-

(56,792)

-

-

-

Other expense

-

130

-

-

130

-

213

213

Total Special Items

$ (70,193)

$           1,796

$           14,497

$     1,742

$ (52,158)

$      2,955

$           3,170

$ 6,125

(1) Gain on PIK Notes is the difference between the carrying value and the face value of the PIK Notes when we redeemed them in February 2010.

(2) Restructuring charges are related to the closure of our Syracuse, New York, manufacturing facility, our Mira Loma, California, distribution center and the decorating operations at our Shreveport manufacturing facility.

(3) Equity offering and finance fees include the write-off of unamortized finance fees and discounts on the floating rate senior notes, unamortized finance fees on the refinanced credit facility, call premium payments and fees related to the secondary stock offering completed in August 2010 for which the company received no proceeds.

(4) Other cost of sales includes a write down of certain after-processing equipment within our International segment and other items.

(5) The pension settlement charges were triggered by excess lump sum distributions taken by employees, which required us to record unrecognized gains and losses in our pension plan accounts.

Table 3

Reconciliation of Net Income (Loss) to Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and Adjusted EBITDA

(Dollars in thousands)

Three Months Ended September 30,

Nine Months ended September 30,

2010

2009

2010

2009

Reported net income (loss)

$                      2,346

$                      3,533

$                        67,323

$                      (21,696)

Add:

Interest expense

11,855

17,451

33,243

52,162

Provision for (benefit from) income taxes

1,472

(432)

6,769

(7,756)

Depreciation and amortization

10,040

10,629

30,994

32,875

EBITDA

25,713

31,181

138,329

55,585

Add:

Special Items before interest and taxes

2,374

744

(52,158)

6,125

Less: Depreciation expense included in Special Items and also in Depreciation and Amortization above

-

-

-

(705)

Adjusted EBITDA

$                    28,087

$                    31,925

$                        86,171

$                        61,005

Table 4

Reconciliation of Net Cash (used in) provided by Operating Activities to Free Cash Flow and Adjusted Free Cash Flow

(Dollars in thousands)

Three Months Ended September 30,

Nine Months ended September 30,

2010

2009

2010

2009

Net cash (used in) provided by operating activities

$                     (2,780)

$                    26,639

$                      (10,833)

$                        65,729

Capital expenditures

(7,743)

(2,737)

(19,122)

(12,287)

Proceeds from asset sales and other

-

172

-

260

Free Cash Flow

(10,523)

24,074

(29,955)

53,702

Payment of cash interest on PIK Notes

-

-

29,400

-

Adjusted Free Cash Flow

$                   (10,523)

$                    24,074

$                           (555)

$                        53,702

Table 5

Summary Business Segment information

(Dollars in thousands)

Three months ended September 30,

Nine months ended September 30,

2010

2009

2010

2009

Net Sales:

North American Glass

$ 137,101

$ 128,316

$ 404,083

$ 374,803

North American Other

20,768

20,462

63,488

66,180

International

45,245

40,279

118,381

103,663

Eliminations

(3,107)

(2,179)

(9,005)

(4,089)

Consolidated Net Sales

$ 200,007

$ 186,878

$ 576,947

$ 540,557

Adjusted Earnings before Interest & Taxes (EBIT):

North American Glass

$   11,556

$   16,956

$   43,089

$   22,763

North American Other

2,831

3,335

11,087

8,352

International

3,660

1,005

1,001

(2,280)

Consolidated Adjusted EBIT

$   18,047

$   21,296

$   55,177

$   28,835

Adjusted Depreciation & Amortization: (1)

North American Glass

$     5,968

$     6,074

$   18,250

$   18,857

North American Other

184

244

570

1,125

International

3,888

4,311

12,174

12,188

Consolidated Adjusted Depreciation & Amortization

$   10,040

$   10,629

$   30,994

$   32,170

(1) Adjusted Depreciation & Amortization for YTD 2009 excludes $705 of depreciation expense that is included in Special Items below.

Special Items:

North American Glass

$     2,374

$        362

$ (55,334)

$     3,036

North American Other

-

382

489

3,089

International

-

-

2,687

-

Consolidated Special Items

$     2,374

$        744

$ (52,158)

$     6,125

Reconciliation of Adjusted EBIT to Net Income (Loss):

Segment Adjusted EBIT

$   18,047

$   21,296

$   55,177

$   28,835

Special Items before interest and taxes

(2,374)

(744)

52,158

(6,125)

Interest Expense

(11,855)

(17,451)

(33,243)

(52,162)

Income Taxes

(1,472)

432

(6,769)

7,756

Net Income (Loss)

$     2,346

$     3,533

$   67,323

$ (21,696)

Note:

North American Glass—includes sales of glass tableware from subsidiaries throughout the United States, Canada and Mexico.

North American Other—includes sales of ceramic dinnerware, metal tableware, holloware and serveware and plastic items.

International—includes worldwide sales of glass tableware from subsidiaries outside the United States, Canada and Mexico.

SOURCE Libbey Inc.



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