Libbey Inc. Announces Fourth Quarter and Full-Year 2017 Financial Results

TOLEDO, Ohio, Feb. 27, 2018 /PRNewswire/ -- Libbey Inc. (NYSE American: LBY), one of the largest glass tableware manufacturers in the world, today reported results for the fourth quarter ended December 31, 2017.

Fourth Quarter Financial & Operating Highlights

• Net sales in the fourth quarter of 2017 were $224.0 million, compared to $205.8 million in the prior-year fourth quarter, an 8.8 percent increase (or an increase of 6.7 percent, excluding a $4.4 million currency impact.)

• Net loss in the fourth quarter 2017 was $7.2 million, compared to a net loss of $2.2 million in fourth quarter 2016. The fourth quarter 2017 included a $6.7 million unfavorable revaluation of net deferred tax assets as a result of the latest U.S. tax reform.

• Adjusted EBITDA (see Table 1) in fourth quarter 2017 was $24.2 million, including a $2.8 million unfavorable currency impact related to the Company's tax provision, compared to $23.5 million in fourth quarter 2016.

"We were pleased to see the business return to sales growth during the fourth quarter. This and several other performance indicators give us confidence that our strategies to drive long-term, profitable growth are gaining traction," said Chief Executive Officer William Foley. "We saw improved sales contributions from both our new e-commerce platform and new products during the fourth quarter. Profitability in our EMEA and Latin America segments also improved for a second consecutive quarter, and we're continuing to implement additional opportunities to improve our margin profile."

• Net sales in the U.S. and Canada segment increased 8.2 percent, driven by segment volume and favorable price and mix of product sold in the foodservice channel.

• In Latin America, net sales increased 14.7 percent (an increase of 11.3 percent excluding currency fluctuation) as a result of higher net sales in the business-to-business and retail channels, primarily due to favorable price and mix of product sold and a favorable currency impact, partially offset by expected lower volume as a result of margin improvement initiatives.

• Net sales in the EMEA segment were favorably impacted by price and mix of product sold in the foodservice and retail channels, as well as a $1.9 million favorable currency impact for the fourth quarter of 2017 versus the prior-year quarter.

• Net sales in Other were down primarily as a result of lower sales in China.

• The Company's effective tax rate was 202.4 percent for the fourth quarter of 2017, compared to 165.0 percent in the prior-year quarter. The high effective tax rates relative to the U.S. statutory rate of 35 percent were driven by several items, including a 2017 charge of $6.7 million related to the revaluation of net deferred tax assets caused by the U.S. tax reform, low pretax income relative to unfavorable tax adjustments for non-deductible expenses, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange gains and losses.

Full Year 2017 Financial & Operating Highlights

• Net sales for full-year 2017 were $781.8 million, compared to $793.4 million for full-year 2016, a decrease of 1.5 percent (or a decrease of 1.6 percent excluding the $1.1 million currency impact).

• Net loss for full-year 2017 was $93.4 million, compared to net income of $10.1 million during full-year 2016; 2017 included a $79.7 million non-cash goodwill impairment charge associated with the Latin America segment, and a $6.7 million charge related to the revaluation of net deferred tax assets as a result of the latest U.S. tax reform.

• Adjusted EBITDA (see Table 1) was $70.6 million for full-year 2017, compared to $111.6 million for full-year 2016.

• Net sales in the U.S. and Canada segment were lower due to lower price and mix of product sold, partially offset by increased volumes and a favorable currency impact.

• In Latin America, net sales declined as a result of lower net sales across the retail and business-to-business channels, specifically due to lower volume and unfavorable currency. The decline was partially offset by favorable price and mix.

• Net sales in the EMEA segment increased primarily as a result of favorable price and mix of product sold, partially offset by lower volumes and an unfavorable currency impact.

• Net sales in Other were down primarily as a result of lower sales in China.

• The Company's effective tax rate was (20.4) percent for 2017, compared to 63.7 percent in the year-ago period. The change in the effective tax rate was driven by several items, including the non-deductible goodwill impairment charge, a 2017 charge of $6.7 million related to the revaluation of net deferred tax assets caused by the U.S. tax reform, low pretax income relative to unfavorable tax adjustments for non-deductible expenses, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange losses compared to gains in the prior period.

Balance Sheet and Liquidity

• The Company had available capacity of $91.9 million under its ABL credit facility at December 31, 2017, with no loans outstanding and cash on hand of $24.7 million.

• At December 31, 2017, Trade Working Capital (see Table 3), defined as inventories and accounts receivable less accounts payable, was $199.5 million, an increase of $16.0 million from $183.5 million at December 31, 2016. The increase was a result of higher inventories and higher accounts receivable, partially offset by higher accounts payable. $7.8 million of the increase in Trade Working Capital was attributable to the effect of currency.

Outlook

The Company is anticipating improved global macroeconomic conditions in 2018. In addition, the Company expects that our industry and competitive trends will improve, but remain challenged. As such, outlook for full-year 2018 includes the following:

• Net sales increase in the low single digits, compared to the full-year 2017, on a reported basis

• Adjusted EBITDA margins of 10 percent to 11 percent (see Table 6)

• Capital expenditures in the range of $50 million to $55 million

• Selling, general and administrative expense as a percent of net sales around 17 percent

For the first half of 2018, the Company projects the following:

• Net sales increase in the low single digits, when compared to the first half of 2017, on a reported basis

• Adjusted EBITDA margins of 8.5 percent to 9.5 percent (see Table 6)

Jim Burmeister, vice president, chief financial officer, commented, "We successfully amended and extended our ABL credit facility during the fourth quarter and our liquidity remains strong. Over the course of fiscal year 2017, we paid $24.4 million on our Term Loan B debt, and plan to continue to prioritize debt reduction with excess cash flow over the near-term horizon."

Webcast Information

Libbey will hold a conference call for investors on Tuesday, February 27, 2018, at 11 a.m. Eastern Standard Time. The conference call will be webcast live on the Internet and is accessible from the Investor Relations section of www.libbey.com. To listen to the call, please go to the website at least 10 minutes early to register, download and install any necessary software.

About Libbey Inc.

Based in Toledo, Ohio, Libbey Inc. is one of the largest glass tableware manufacturers in the world. Libbey Inc. operates manufacturing plants in the U.S., Mexico, China, Portugal and the Netherlands. In existence since 1818, the Company supplies tabletop products to retail, foodservice and business-to-business customers in over 100 countries. Libbey's global brand portfolio, in addition to its namesake brand, includes Libbey Signature^®, Master's Reserve^®, Crisa^®, Royal Leerdam^®, World^® Tableware, Syracuse^®China, and Crisal Glass^®. In 2017, Libbey Inc.'s net sales totaled $781.8 million. Additional information is available at www.libbey.com.

Use of Non-GAAP Financial Measures

To supplement the condensed financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP), we use non-GAAP measures of certain components of financial performance. These non-GAAP measures include Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Trade Working Capital, Adjusted Selling, General & Administrative Expense (Adjusted SG&A), Adjusted SG&A Margin and our Debt Net of Cash to Adjusted EBITDA Ratio. Reconciliations to the nearest U.S. GAAP measures of all non-GAAP measures included in this press release can be found in the tables below.

Our non-GAAP measures, as defined below, are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. Libbey believes these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for additional transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management's internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool. We define our non-GAAP measures as follows:

• We define Adjusted EBITDA and Adjusted EBITDA Margin as U.S. GAAP net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and special items that Libbey believes are not reflective of our core operating performance.

• We define Trade Working Capital as net accounts receivable plus net inventories less accounts payable.

• We define Adjusted SG&A and Adjusted SG&A Margin as U.S. GAAP selling, general and administrative expenses less special items that Libbey believes are not reflective of our core operating performance.

• We define our Debt Net of Cash to Adjusted EBITDA Ratio as gross debt before unamortized discount and finance fees, less cash and cash equivalents, divided by Adjusted EBITDA (defined above).

Constant Currency

We translate revenue and expense accounts in our non-U.S. operations at current average exchange rates during the year. References to "constant currency," "excluding currency impact" and "adjusted for currency" are considered non-GAAP measures. Constant currency references regarding net sales reflect a simple mathematical translation of local currency results using the comparable prior period's currency conversion rate. Constant currency references regarding Adjusted EBITDA and Adjusted EBITDA Margin comprise a simple mathematical translation of local currency results using the comparable prior period's currency conversion rate plus the transactional impact of changes in exchange rates from revenues, expenses and assets and liabilities that are denominated in a currency other than the functional currency. We believe this non-GAAP constant currency information provides valuable supplemental information regarding our core operating results, better identifies operating trends that may otherwise be masked or distorted by exchange rate changes and provides a higher degree of transparency of information used by management in its evaluation of our ongoing operations. These non-GAAP measures should be viewed in addition to, and not as an alternative to, the reported results prepared in accordance with U.S. GAAP. Our currency market risks include currency fluctuations relative to the U.S. dollar, Canadian dollar, Mexican peso, euro and RMB.

Caution on Forward-Looking Statements

This press release includes forward-looking statements as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect only the Company's best assessment at this time and are indicated by words or phrases such as "goal," "expects," " believes," "will," "estimates," "anticipates," or similar phrases. Investors are cautioned that forward-looking statements involve risks and uncertainty and that actual results may differ materially from these statements. 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 3, 2017. Important factors potentially affecting performance include but are not limited to risks related to increased competition from foreign suppliers endeavoring to sell glass tableware, ceramic dinnerware and metalware in our core markets; global economic conditions and the related impact on consumer spending levels; changes in trends in the restaurant and bar industry and the retail channel of distribution that impact demand for our products; major slowdowns in the retail, travel or entertainment industries in the United States, Canada, Mexico, Western Europe and Asia, caused by terrorist attacks or otherwise; significant increases in per-unit costs for natural gas, electricity, freight, corrugated packaging, and other purchased materials; our ability to borrow under our ABL credit agreement; high levels of indebtedness; high interest rates that increase the Company's borrowing costs or volatility in the financial markets that could constrain liquidity and credit availability; protracted work stoppages related to collective bargaining agreements; increases in expense associated with higher medical costs, increased pension expense associated with lower returns on pension investments and increased pension obligations; devaluations and other major currency fluctuations relative to the U.S. dollar and the euro that could reduce the cost competitiveness of the Company's products compared to foreign competition; the effect of exchange rate changes to the value of the euro, the Mexican peso, the RMB and the Canadian dollar and the earnings and cash flows of our international operations, expressed under U.S. GAAP; the effect of high levels of inflation in countries in which we operate or sell our products; and the inability to achieve savings and profit improvements at targeted levels in the Company's operations or within the intended time periods. Any forward-looking statements speak only as of the date of this press release, and the Company assumes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date of this press release.

In accordance with the SEC's Regulation G, the following tables provide non-GAAP measures used in this earnings release and a reconciliation to the most closely related U.S. GAAP measure. See the above text for additional information on our non-GAAP measures. 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 U.S. GAAP.

View original content:http://www.prnewswire.com/news-releases/libbey-inc-announces-fourth-quarter-and-full-year-2017-financial-results-300604845.html

SOURCE Libbey Inc.