Libbey: expectations for earning growth 2003

Chairman and CEO of glass tableware giant Libby Inc., John F. Meier, led a review meeting between management and investors in Chicago, Illinois (north central USA) which looked at the company“s recen…

Chairman and CEO of glass tableware giant Libby Inc., John F. Meier, led a review meeting between management and investors in Chicago, Illinois (north central USA) which looked at the company“s recent acquisitions and operational strategies, as well as plans to achieve sales, net income and cash flow growth in 2003. The company confirmed that the recent acquisitions of Traex and Royal Leerdam are expected to add USD 69 to USD 73 million to income in 2003. Expectations are for the acquisitions to be accretive in 2003 by USD 0.15 to USD 0.20 per diluted share. Capital expenditure programs with the aim of reducing costs in Libbey“s domestic facilities also came under review. Libbey plans to invest USD 30 to USD 35 million from 2003 through 2005 in new equipment to automate processes and improve efficiency. Combined with regular maintenance and repair capital expenditures and other investments, total capital expenditures are expected to average USD 30 million in each of the next three years. Investments in automating inspection processes, ware handling and packaging of Libbey“s glassware and other investments to improve efficiency are forecast to generate USD 2 million in savings in 2003, increasing to USD 4 to USD 5 million of annual savings by 2005. Results for the fourth quarter and full year 2002 are expected to be announced on or about 6 February 2003. Management commented that the fourth quarter should result in a significant increase in profits. The result for the fourth quarter was characterized by solid sales performance in both the foodservice and retail channels of distribution, while to industrial sales remained weaker. In addition,higher maintenance and employee benefit costs reduced the gross profit margin, although this was partially offset by lower selling, general and administrative expenses. These factors should result in diluted earnings per share in the fourth quarter in the range of USD 0.53 to USD 0.55, or an approximate 20% increase over the fourth quarter of 2001. While discussing expectations for 2003, Kenneth G. Wilkes, chief financial officer and head-international operations, said, “We expect a solid 2003, with a recovering economy and the continued success of new products contributing to 4 to 6% revenue growth from existing businesses, and total revenue growth of over 20% when considering recent acquisitions.” He added, “Like many companies, we are facing a reversal from recording non-cash pension income in 2002 to incurring pension expense in 2003 associated with lower pension fund investment returns and lower discount rates.” The change, and higher retiree medical expenses, will have a negative non-cash earnings impact of approximately USD 0.30 in 2003. This additional accounting cost is expected to be more than offset by the benefits of solid sales growth from existing businesses, a more profitable sales mix, efforts at cost reduction increasing profits in excess of USD 0.30 per diluted share, and added profits from the Traex and Royal Leerdam acquisitions Wilkes commented that, “We are particularly encouraged by our expected strong cash flow performance, with the significant increase in expected “cash“ earnings, more than offsetting the earnings reduction due to changes in retiree medical and non-cash pension costs. In addition, we expect cash flow from operations to total USD 55 to USD 60 million in 2003.” Total diluted earnings per share including Traex and Royal Leerdam for 2003 are anticipated to be in the range of USD 2.55 to USD 2.60, compared to USD 1.79 to USD 1.81 in 2002. Excluding the expenses associated with abandoned acquisitions in 2002, full year diluted earnings per share in 2002 are forecast to be in the range of USD 2.34 to USD 2.36. The company also reviewed its recent announcements on an authorization to repurchase up to 2.5 million shares and the 33% increase in dividend rate to USD 0.10 per quarter. While the decision to increase the dividend was not linked to recently announced proposals to eliminate taxation on dividend income, such an elimination would among the factors the company would consider in the size and timing of future increases in dividend rates. The meeting ended with a review of the company“s long term goals, which include: expanding its business through product lines in foodservice supply and greater international presence in glassware; increasing earnings by 10% per annum ; continuing to achieve a double-figure return on capital invested.