Libbey Inc. Announces Fourth-Quarter And Full-Year 2018 Financial Results

TOLEDO, Ohio, Feb. 20, 2019 /PRNewswire/ -- Libbey Inc. (NYSE American: LBY), one of the world's largest glass tableware manufacturers, today reported results for the fourth quarter ended December 31, 2018.

Fourth-quarter 2018 Financial & Operating Highlights

• Net sales were $211.6 million, compared to $224.0 million in the prior-year period, a 5.5 percent decrease (or a decrease of 4.4 percent, excluding a $2.6 million currency impact).
• Net loss was $4.0 million, compared to a net loss of $7.2 million in the fourth quarter of 2017.
• New products, defined as products introduced within the previous 36 months, contributed $15.9 million in net sales, or 7.5 percent of total net sales, during the fourth quarter.
• E-commerce sales were approximately 13.0 percent of total U.S. & Canada retail sales, an increase of 29.8 percent compared to the fourth quarter of 2017.
• Adjusted EBITDA (see Table 1) was $16.2 million, compared to $24.2 million in the fourth quarter of 2017. Currency fluctuations had a negative impact of $1.8 million for the quarter.
• Net inventories were reduced by $18.5 million during the quarter.
• The Company announced that its board of directors has approved a plan to pursue strategic alternatives for its business in China, including a potential sale or closure, within the next 12 to 18 months, of Libbey's manufacturing and distribution facility in Langfang, China.

"The top-line momentum we delivered through the first three quarters of 2018 was interrupted in the fourth quarter, particularly in the month of December, as a slowdown in economic activity was felt across most of the geographies and markets we serve," said Chief Executive Officer William Foley. "This was exacerbated by cautious buying patterns from some of our distributors as well as a specific competitive action directed at one of our larger customers late in the quarter. As a result, unfavorable price and product mix in our foodservice markets in the U.S. and Canada caused us to under-perform our expectations during the fourth quarter."

Foley continued, "While these short-term challenges are unfortunate, we remain confident in our ability to continue executing against our Creating Momentum Strategy, which helped us deliver top-line growth of 2.1 percent in fiscal-year 2018. We will continue to execute on this strategy with a relentless focus on new product introductions. The ongoing expansion of our industry-leading, e-commerce platform, combined with our focus on new product introductions, underpins our position as the most financially stable, innovative and forward-looking glass tableware manufacturer in the world today."

• Net sales in the U.S. & Canada segment decreased 4.6 percent, driven by unfavorable price and product mix sold in the foodservice channel, partially offset by higher volume in the foodservice and business-to-business channels.
• In Latin America, net sales decreased 8.9 percent (a decrease of 6.0 percent excluding currency fluctuation) as a result of lower volume in the business-to-business channel and an unfavorable currency impact.
• Net sales in the EMEA segment decreased 5.7 percent, driven primarily by lower volume and an unfavorable currency impact.
• Net sales in Other decreased 3.1 percent as a result of unfavorable price and mix in China and an unfavorable currency impact.

Full-year 2018 Financial & Operating Highlights

• Net sales were $797.9 million, compared to $781.8 million for full-year 2017, a 2.1 percent increase (or an increase of 1.5 percent, excluding a $4.3 million currency impact).
• Net loss was $8.0 million, compared to a net loss of $93.4 million during the full-year 2017, which included a $79.7 million non-cash goodwill impairment charge associated with the Latin America segment.
• New products, defined as products introduced within the previous 36 months, contributed $54.1 million in net sales, or 6.8 percent of total net sales.
• E-commerce sales were approximately 12.1 percent of total U.S. & Canada retail sales, an increase of 34.1 percent compared to the full-year 2017.
• Adjusted EBITDA (see Table 1) was $71.0 million, compared to $70.6 million for full-year 2017.

• Net sales in the U.S. & Canada segment increased 0.4 percent, driven by higher volume, partially offset by unfavorable channel mix.
• In Latin America, net sales increased 2.6 percent (an increase of 3.6 percent excluding currency fluctuation) as a result of higher volume and favorable pricing. The increase was achieved despite unfavorable product mix in the retail and business-to-business channels and an unfavorable currency impact.
• Net sales in the EMEA segment increased 9.0 percent and were favorably impacted by $5.1 million of currency. Favorable pricing on product mix sold in all three channels, as well as higher sales volume in the retail and business-to-business channels, also contributed to year-over-year improvement.
• Net sales in Other were down primarily as a result of lower sales volume in China, partially offset by favorable price and product mix and a favorable currency impact.

Balance Sheet and Liquidity

• The Company had remaining available capacity of $71.6 million under its ABL credit facility at December 31, 2018, with $19.9 million in loans outstanding and cash on hand of $25.1 million.
• At December 31, 2018, Trade Working Capital (see Table 3), defined as inventories and accounts receivable less accounts payable, was $201.2 million, an increase of $1.7 million from $199.5 million at December 31, 2017. The increase was a result of higher inventories and lower accounts payable, partially offset by lower accounts receivable.

2019 Outlook and Strategic Alternatives Review of China Business

The Company anticipates that uncertain, global macroeconomic conditions, as well as a challenging competitive environment, will continue through the first half of 2019, but expects to offset some of those pressures through continued execution against its strategic plan. As a result, the outlook for full-year 2019 includes:

• Net sales increase in the low-single digits, compared to full-year 2018 sales, on a U.S. GAAP basis;
• Adjusted EBITDA margins between 8.5 percent and 10 percent (see table 6);
• Capital expenditures in the range of $35 million to $40 million; and
• Adjusted selling, general and administrative expense of approximately 16 percent of net sales (see table 7).

Jim Burmeister, senior vice president, chief financial officer, commented, "In the fourth quarter, we continued to focus our capital investments in important strategic areas while curtailing other spending. As a result, our annual capital expenditures totaled $45.1 million which was below our previously guided range of $50 million to $55 million. We will remain disciplined with our capital investment decisions in 2019, with an emphasis toward maximizing cash-flow generation and maintaining the competitive strength of our balance sheet. This includes a reduction in the capital expenditure expectations set last summer during our Investor Day, and an ongoing rationalization of our footprint, the next step of which we are announcing today with the strategic review of our business in China. That said, planned investments in our critical growth areas such as e-commerce and new product innovation, as well as our ERP initiatives, will remain a priority. We have made strong initial progress on our ERP implementation, and we believe that it will drive significant efficiencies allowing us to focus on improving our long-term operating performance. We anticipate that once fully implemented, our ERP investments will help us achieve run-rate benefits between $15 million and $20 million annually."

Webcast Information

Libbey will hold a conference call for investors on Thursday, February 21, 2019, at 8 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 2018, Libbey Inc.'s net sales totaled $797.9 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, when applicable, 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 last twelve months 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 1, 2018. 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; major slowdowns or changes in trends in the retail, travel, restaurant and bar or entertainment industries that impact demand for our products; inability to meet the demand for new products; material restructuring charges related to involuntary employee terminations, facility abandonments, or other various restructuring activities; 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; the inability to achieve savings and profit improvements at targeted levels in the Company's operations or within the intended time periods; the failure of our investments in e-commerce, new technology and other capital expenditures to yield expected returns; failure to prevent unauthorized access, security breaches and cyber attacks to our information technology systems; compliance with, or the failure to comply with, legal requirements relating to health, safety and environmental protection; our failure to protect our intellectual property; and the inability to effectively integrate future business we acquire or joint ventures into which we enter. 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.

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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.

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SOURCE Libbey Inc.