Quarter Included Sales of USD 209.2 Million; Income from Operations of USD 29.0 Million; Adjusted EBITDA of USD 39.7 Million
Libbey Inc. (NYSE MKT: LBY) reported results for the second quarter ended June 30, 2012.
Second Quarter Highlights: Sales for the second quarter were USD 209.2 million, compared to USD 214.0 million for the second quarter of 2011, a decrease of 2.2% (an increase of 1.4% excluding currency fluctuation). Sales in the Glass Operations segment were USD 190.5 million, compared to USD 194.5 million in the second quarter of 2011, a decrease of 2.0% (an increase of 2.0% excluding currency fluctuation). Sales performance was led by a 24.2% increase in sales within our China sales region. Income from operations (IFO) grew 17.2%, compared to the second quarter of 2011, increasing to USD 29.0 million from USD 24.7 million in the year-ago quarter. Adjusted EBITDA increased 14.0% to a record for any quarter of USD 39.7 million, compared to USD 34.8 million for the second quarter of 2011. Working capital as a percentage of the last twelve months’ sales was 24.5% at June 30, 2012, compared to 25.2% during the same time period in 2011.
“We are encouraged by these results, driven by our efforts to increase productivity and control costs as well as the solid sales growth we achieved in select markets,” said Stephanie A. Streeter, chief executive officer of Libbey Inc. “Our sales were particularly strong in glass operations in the U.S. and Canada, and in China. On the other hand, sales were disappointing in Mexico and Europe. Despite this reasonably strong quarter, we have a lot of work to do to sustain performance and secure our future,” said Streeter.
Second Quarter Regional Sales and Operational Review: Glass Operations sales were led by a 24.2% increase in sales within the China sales region and a 5.9% increase in sales within U.S. and Canada sales region. Sales within Mexico were down 12.9% The company saw a 16.0% decrease in sales in European sales. Sales to U.S. and Canadian foodservice glassware customers increased by 5.1%. Glassware sales to U.S. and Canadian retail customers increased 7.2% during the second quarter of 2012, while sales to business-to-business customers in the U.S. and Canada increased 5.5%. Sales in the Other Operations segment were USD 18.9 million, compared to USD 19.7 million in the prior-year quarter. As a result of the sale of substantially all of the assets of Traex in late April 2011, the second quarter of 2011 included net sales of USD 1.2 million of Traex products which were no longer offered for sale by the company in the second quarter of 2012. This accounted for more than the total USD 0.8 million decrease in sales for Other Operations. Increased sales to World Tableware customers of 5.1% during the quarter were partially offset by a 4.9% decrease in sales to Syracuse China customers. Interest expense decreased by USD 0.8 million to USD 10.0 million, compared to USD 10.8 million in the year-ago period, primarily driven by lower interest rates. Our effective tax rate was a benefit of 12.8% for the quarter-ended June 30, 2012, compared to an expense of 9.3% for the quarter-ended June 30, 2011. The effective tax rate was influenced by jurisdictions with recorded valuation allowances, intra-period tax allocations and changes in the mix of earnings with differing statutory rates.
The USD 31.1 million of special items during the second quarter of 2012 were the result of a loss on redemption of debt in conjunction with the new senior note offering completed during the quarter. The significant special items in the second quarter of 2011 included a gain on the sale of substantially all of the assets of Traex and an equipment credit net of CEO transition expenses.
Six-Month Highlights: Sales for the first six months of 2012 were USD 397.1 million, compared to USD 395.0 million for the first half of 2011, an increase of 0.5%. Sales in the Glass Operations segment were USD 361.8 million, compared to USD 356.5 million in the first half of 2011, an increase of 1.5%. A primary contributor was a 47.9% increase in sales in China. Income from operations grew 24.0%, compared to the first half of 2011, increasing to USD 43.9 million from USD 35.4 million in the year-ago six-month period. Adjusted EBITDA increased 15.3 percent to USD 64.6 million, compared to USD 56.0 million for the first half of 2011.
Working Capital and Liquidity: As of June 30, 2012, working capital, defined as inventories and accounts receivable less accounts payable, was USD 200.6 million, compared to USD 204.3 million at June 30, 2011. This reduced investment in working capital resulted in working capital as a percentage of the last twelve months’ net sales of 24.5% at June 30, 2012, compared to 25.2% at June 30, 2011: Libbey reported that it had available capacity of USD 75.6 million under its ABL credit facility as of June 30, 2012, with no loans currently outstanding. The Company also had cash on hand of USD 19.6 million at June 30, 2012.