Libbey Inc., one of the world’s largest glass tableware manufacturers, reported results for the first quarter ended March 31, 2020.
First-quarter 2020 Financial & Operating Highlights
Net sales were 150.5 million USD, a decrease of 14.0 percent, versus the prior-year period as volumes were significantly impacted by the COVID-19 global pandemic.
Selling, general and administrative expense was reduced by 6.1 million USD versus the prior year.
Net loss was 78.7 million USD, compared to net loss of 4.5 million USD in the first quarter of 2019. Net loss in the first quarter of 2020 was affected by a 38.4 million USD non-cash goodwill impairment in our U.S. and Canada segment and a $2.9 million USD non-cash charge related to the loss of hedge accounting treatment on our derivative contracts. Additionally, the Company recorded valuation allowances against the net deferred tax assets in all of the operating jurisdictions which accounted for nearly all of the 20.4 million USD of tax expense, or a 34.9 percent effective tax rate.
Adjusted EBITDA (see Table 1) increased 3.7 percent versus the prior year to 10.1 million USD. The weaker sales demand experienced during the latter half of the first quarter of 2020 was offset by SG&A savings and a favourable currency impact during the quarter.
Free Cash Flow (see Table 2) was favourable by 2.0 million USD compared to the first quarter of 2019 driven by Trade Working Capital and reductions in capital expenditures.
“During the early months of 2020, Libbey’s core USC and LATAM business segments were performing well, delivering strong Adjusted EBITDA and margin results on a run rate basis,” said Mike Bauer, Libbey’s chief executive officer. “Our team came into 2020 prepared to build on the strong momentum we captured across our business in the second half of 2019, while continuing to execute our plans to reduce costs and improve cash flow generation. For the majority of the quarter, our operating performance exceeded our initial forecast; however, beginning in mid-March, our business results were materially impacted by COVID-19. Mandated shutdowns across a large part of the U.S. and global economy were felt across our key end markets, with the food-service industry being one of the most directly impacted. This global pandemic negatively impacted our first quarter performance, but it also introduced significant uncertainty into the future demand landscape, particularly in our core U.S. food-service channel.”
Bauer continued, “As the restaurant and food-service industries quickly reacted to the non-essential business restrictions and social distancing guidelines from federal, state and local governments, Libbey moved swiftly to lower costs and preserve liquidity by temporarily suspending production and distribution across our U.S. facilities, temporary layoffs and furloughs across the hourly and salary workforces, pay reductions for all U.S. salary associates, and significant cutbacks to planned 2020 capital expenditures. Because of the dynamic nature of the COVID-19 pandemic and related market volatility, we are unable to reasonably estimate the full extent of the impact it will have on our business.”
“To navigate the effects of the COVID-19 pandemic and to address the upcoming debt maturities, Libbey elected to file a voluntary petition for a court-supervised reorganization under Chapter 11 of the U.S. Bankruptcy Code.” Bauer added, “We are convinced that the outcome of the Chapter 11 process will better position the Company for the future and is an appropriate and necessary step to minimize further disruption to the business and continue to serve our customers, while working to protect the interests of all stakeholders. We are in truly unprecedented times in Libbey’s 200-year history and we remain focused on providing our end users and customers with superior quality products that are environmentally sustainable, beautiful and durable. We are already seeing improvements as states lift stay-at-home orders and we continue to execute against our previously announced planned turnaround and cost reduction efforts. I would like to take a moment to express my sincere thanks and appreciation to our employees around the globe for their continued dedication, especially during times of unprecedented uncertainty. They are what make Libbey products exceptional, and we could not be here without their unwavering commitment to our Company.”
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