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Libbey ‘owns the moment’ with 2015 results

Libbey Inc. (NYSE MKT: LBY) reported results for the fourth quarter and full-year 2015 on Wednesday 24th February.

The Company also announced that it has revised its reportable operating segments as: U.S. and Canada (reflects combination of U.S. and Canada Glass business and previous U.S. Sourcing segment); Latin America; Europe, Middle East and Africa (EMEA); and Other.  The Company will disclose 2015 quarterly results and three years of full-year financial results (2013 – 2015) for these new segments within its Form 10-K for the year ended December 31, 2015.
“Libbey made progress during 2015 on the Own the Moment strategy, despite the challenging market conditions,” said William A. Foley, chairman and chief executive officer of Libbey Inc. “We have the right long-term vision, and the core foundation of our Own the Moment strategy is absolutely correct.  We must continue our evolution to become a faster-paced, customer and consumer-focused business. We have an excellent leadership team in place that is focused on a number of operational improvements that will simplify our business, allow us to respond faster to customer needs, become a true innovator of new products and become more competitive in the markets in which we compete.”
Fourth Quarter Segment Sales and Operational Review
Net sales in the U.S. and Canada segment were $139.8 million, compared to $138.2 million in the fourth quarter 2014, an increase of 1.1 percent (or an increase of 1.3 percent excluding currency impact). Foodservice sales remained strong during the quarter, growing 9.0 percent versus last year, partially offset with a reduction in net sales primarily as a result of softness in the retail and business-to-business channels.
Net sales in the Latin America segment were $40.2 million, compared to $48.5 million in fourth quarter 2014, a decrease of 17.1 percent (or a decrease of 5.8 percent excluding currency impact), due to a heightened competitive environment and weakness in the retail channel.
Net sales in the EMEA segment were $31.5 million, compared to $36.2 million in fourth quarter 2014, a decrease of 13.0 percent (or a decrease of 1.3 percent excluding currency impact), due to softness in the retail channel.
  • Net sales in Other were $7.7 million in fourth quarter 2015, compared to $8.5 million in the comparable prior-year quarter, reflecting a decrease of 9.8 percent (or a decrease of 5.7 percent excluding currency impact) in the Asia Pacific region.
  • The Company recorded a tax benefit of $39.7 million for fourth quarter 2015, compared to a provision of $3.9 million in same period in 2014. The benefit recorded for fourth quarter 2015 includes a tax benefit of $43.8 million related to the reversal of substantially all of the remaining valuation allowance recorded against U.S. deferred tax assets. In addition, the effective rate in both years was generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, non-taxable foreign translation gains and other activity in jurisdictions with recorded valuation allowances.

Full-Year Financial Highlights

  • Net sales for the full year were $822.3 million, compared to $852.5 million for the full year of 2014, a decrease of 3.5 percent (or an increase of 1.7 percent excluding currency fluctuation). During 2015, foodservice net sales for the Company were up 5.8 percent versus prior year (or 8.0 percent in constant currency).
  • Net income for 2015 was $66.3 million, compared to net income of $5.0 million in 2014. Net income was favorably impacted by the reversal of substantially all of the remaining valuation allowance recorded against U.S. deferred tax assets of $43.8 million. Last year’s net income included a $47.2 million charge for the retirement of debt during the period. Adjusted net income (see Table 2) for 2015 was $47.8 million, compared to $50.7 million recorded in 2014.
  • Adjusted EBITDA (see Table 3) for 2015 was $116.1 million, compared to $123.4 million in 2014.
  • In 2015, Libbey repurchased 412,473 shares at an average price of $37.03. The Company has approximately 1.05 million shares available for repurchase at December 31, 2015, under the current board authorization.
Full-Year Segment Sales and Operational Review
  • Net sales in the U.S and Canada segment were $497.7 million in 2015, compared to $482.1 million in 2014, an increase of 3.2 percent (or an increase of 3.4 percent excluding currency fluctuation). Sales performance was led by a 7.5 percent increase in sales within the segment’s foodservice channel. Partially offsetting this increased performance was a decrease in the segment’s retail channel of 2.5 percent (or 2.2 percent decrease excluding currency impact).
  • Net sales in the Latin America segment decreased 12.1 percent (or down 1.3 percent excluding currency impact) to $167.1 million, compared to $190.1 million in 2014.
  • Net sales in the EMEA segment decreased 16.9 percent (or down 1.4 percent excluding currency impact) to $122.7 million, compared to $147.6 million in 2014.
  • Sales in Other were $34.9 million, compared to $32.7 million in the prior-year. This increase was the result of a 6.6 percent increase in sales (8.7 percent excluding currency impact) in the Asia Pacific region.
  • Interest expense for 2015 was $18.5 million, a decrease of $4.4 million compared to $22.9 million in the year-ago period, primarily driven by lower interest rates as a result of the refinancing completed during the second quarter of 2014.
  • The Company recorded a tax benefit of $38.2 million for 2015, compared to a provision of $8.6 million for 2014. The benefit recorded for full-year 2015 includes a tax benefit of $43.8 million related to the reversal of substantially all of the remaining valuation allowance against its U.S. deferred tax assets. In addition, the effective tax rate was generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, non-taxable foreign translation gains and other activity in jurisdictions with recorded valuation allowances.
Balance Sheet and Liquidity
Libbey reported that it had available capacity of $91.0 million under its ABL credit facility at December 31, 2015, with no loans currently outstanding. The Company also had cash on hand of $49.0 million at December 31, 2015.
At December 31, 2015, working capital, defined as inventories and accounts receivable less accounts payable, was $200.8 million, an increase of $22.4 million compared to $178.4 million at December 31, 2014 (see Table 5). The increase was a result of higher inventories, higher accounts receivable and lower accounts payable.
Sherry Buck, chief financial officer, commented: “In 2016, we plan to maintain our balanced approach to capital allocation. In addition to improving free cash flow generation during 2016, we plan to further our progress on achieving our stated leverage ratio targets and to return capital to shareholders through our share repurchase program and our dividend policy, which was recently increased 5 percent to $0.46 per share annually.”
2016 Outlook
Taking into consideration the slowing global economy and the challenging competitive environment, the Company expects for full-year 2016:
  • Sales growth of approximately 1 percent, as reported, from $822.3 million to approximately $830 million Adjusted EBITDA
  • margins of approximately 14 percent
  • Capital expenditures in the range of $50 million to $55 million
More information, including a recording of the conference call for investors is available at www.libbey.com.

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