4Q included sales of USD 219.1 million, income from operations of USD 13.1 million and adjusted EBITDA of USD 29.9 million; free cash flow generation of USD 36.7 million in the 4Q 2012; working capital as a percentage of last 12 months’ sales was an all-time record low 20.9%; debt net of cash reduced to USD 398.9 million, resulting in net debt to adjusted EBITDA of 3.0 times; tentative plans to realign production and reduce capacity in Shreveport facility to further improve cost structure.
Libbey Inc. has reported results for the fourth quarter of 2012 and the full year as follows:
•   Sales for the fourth quarter were USD 219.1 million, compared to USD 214.8 million for the fourth quarter of 2011, an increase of 2.0% (1.9% excluding currency fluctuation).
•   Sales in the Glass Operations segment were USD 201.3 million, compared to USD 199.2 million in the fourth quarter of 2011, an increase of 1.1% (0.9% excluding currency fluctuation). Sales performance was led by a 5.0% increase in sales within our US and Canada sales region.
•   Income from operations grew 34.8%, compared to the fourth quarter of 2011, increasing to USD 13.1 million from USD 9.7 million in the year-ago quarter.
•   Adjusted EBITDA increased 40.2% to USD 29.9 million, the highest fourth-quarter adjusted EBITDA since 2007. In the fourth quarter of 2011, adjusted EBITDA was USD 21.3 million.
“We are pleased with this quarter’s results, driven in large part by the increased focus on improving margins and defending and growing our business in our key markets, the core of our recently announced strategic plan. Our cost improvements, coupled with solid sales growth in the US and Canada sales region, led to exceptionally strong adjusted EBITDA. Four strong quarters propelled us to 2012 full year results that included all-time records in sales, income from operations and adjusted EBITDA,” said Stephanie A. Streeter, chief executive officer of Libbey Inc. “Our commitment to improving our cost structure, leveraging our advantaged businesses and strengthening our balance sheet was reflected in our results. We will continue efforts to improve our cost structure. We believe these efforts, in combination with our overall productivity improvements, will enable strengthened financial and operational performance in 2013.”
Fourth-Quarter Regional Sales and Operational Review were as follows:
•   Glass Operations segment sales were led by a 5.0% increase in sales within our US and Canada sales region and a 0.8% increase in sales within our China sales region (sales were essentially unchanged during the quarter excluding currency impact). Sales within our Mexico sales region were lower by 5.6%, compared to the prior-year quarter (lower by 9.3% excluding the impact of currency). The European sales region saw a 3.1% decrease in sales (a 0.8% increase excluding currency fluctuation).
•   Sales to US and Canadian foodservice glassware customers increased by 4.0%. Glassware sales to US and Canadian retail customers increased 6.5% during the fourth quarter of 2012, while sales to business-to-business customers in the US and Canada increased 3.7%.
•   Sales in the Other Operations segment increased 13.4% to USD 17.8 million, compared to USD 15.7 million in the prior-year quarter. This increase was driven by solid sales increases to both Syracuse China and World Tableware customers during the quarter.
•   Interest expense decreased by USD 1.9 million to USD 8.6 million, compared to USD 10.5 million in the year-ago period, primarily driven by lower interest rates.
•   Our effective tax rate was 67.7% for the quarter-ended 31 December 2012, compared to a benefit of 296.6% for the quarter-ended 31 December 2011. The effective tax rate was influenced by non-deductible foreign currency differences, an increase in foreign withholding taxes in jurisdictions with recorded valuation allowances, activity in jurisdictions with recorded valuation allowances, and changes in the mix of earnings with differing statutory rates.
Twelve-Month Highlights:
•   Full-year sales for 2012 were USD 825.3 million, compared to USD 817.1 million in 2011, an increase of 1.0% (or 3.1% excluding currency fluctuation).
•   Sales in the Glass Operations segment were USD 753.0 million, compared to USD 746.6 million in 2011, an increase of 0.9% (3.1% excluding currency fluctuation). Contributing to the increase was a 24.0% increase in sales within our China sales region (21.3% excluding currency impact) and a 4.1% increase in our US and Canada sales region.
•   Income from operations in 2012 grew 28.1%, compared to the full year 2011, increasing to USD 81.3 million from USD 63.5 million in 2011.
•   Adjusted EBITDA increased 17.1% to an all-time high for any year of USD 132.4 million, compared to USD 113.1 million for 2011.
Twelve-Month Regional Sales and Operational Review:
•   Primary contributors to increased Glass Operations sales were a 24.0% increase in sales within our China sales region (21.3% excluding currency impact) and a 4.1% increase in sales within our US and Canada sales region. We reported sales that were 1.6% lower within our Mexico sales region; however, excluding currency impact, net sales in the Mexico sales region were 3.1% higher compared to the prior year. We saw an 8.3% decrease in sales within our European sales region (only a 0.6% decrease excluding currency fluctuation).
•   Sales to US and Canadian foodservice glassware customers increased by 5.1%. Glassware sales to US and Canadian retail customers increased 3.6% during 2012, while sales to business-to-business customers in the US and Canada were 3.1% higher.
•   Sales in the Other Operations segment were USD 73.0 million, compared to USD 71.2 million in the prior year. The prior year included net sales of USD 4.8 million of Traex® products that, as a result of the sale of substantially all of the assets of Traex in April 2011, were no longer offered for sale by the company in 2012. More than offsetting the absence of Traex® product sales in 2012 were increased sales to World Tableware customers of 9.0% and an even stronger 12.6% increase in sales to Syracuse China customers.
•   Interest expense decreased by USD 5.7 million to USD 37.7 million, compared to USD 43.4 million in the prior year, the result of lower interest rates in the last seven months of the year.
•   Our effective tax rate was 45.0% for the year-ended 31 December 2012, compared to 6.5% in 2011. The effective tax rate was heavily influenced by non-deductible foreign currency losses related to our Mexican operations, an increase in foreign withholding taxes in jurisdictions with recorded valuation allowances, activity in jurisdictions with recorded valuation allowances and changes in the mix of earnings with differing statutory rates.
Working Capital and Liquidity:
•   As of December 31, 2012, working capital, defined as inventories and accounts receivable less accounts payable, was USD 172.7 million, compared to USD 175.1 million at 31 December 2011. This decrease in working capital was primarily the result of lower accounts receivable and higher accounts payable.
•   Libbey reported that it had available capacity of USD 68.6 million under its ABL credit facility as of 31 December 2012, with no loans currently outstanding. The Company also had cash on hand of USD 67.2 million at 31 December 2012.
Libbey Inc. announced that its wholly owned subsidiary Libbey Glass Inc. intends to call for redemption, during the second quarter of 2013, an aggregate principal amount of USD 45.0 million of its outstanding 6.875% Senior Secured Notes Due 2020 (the “Notes”), on a pro rata basis in accordance with the terms of the indenture agreement dated 15 May 2012 (the “Indenture”). Pursuant to the terms of the Indenture, the redemption price for the Notes will be 103.0% of the principal amount of the redeemed Notes, plus accrued and unpaid interest. Following completion of the redemption, the aggregate principal amount of the Notes that will remain outstanding will be USD 405.0 million.
A formal notice of redemption will be sent separately to the holders of the Notes, in accordance with the terms of the Indenture. The company plans to fund this redemption using cash on its balance sheet and, if needed, borrowings under its ABL credit agreement.
Stephanie A. Streeter, Libbey’s chief executive officer, said, “We are pleased that, as a result of our outstanding free cash flow generation in 2012, we are in a position to reduce our outstanding senior note debt by USD 45 million. We continue to make significant progress in our ongoing efforts to reduce our leverage.”
As part of its ongoing efforts to improve Libbey’s cost structure and overall financial position, the company also announced a tentative plan to exit sales of certain glassware items, realign production in North America and reduce its manufacturing capacity at its Shreveport, LA, facility. The tentative plan will be further discussed with the United Steelworkers (USW), which represents Libbey production and maintenance employees in Shreveport. The realignment, if implemented as currently contemplated, would result in a reduction in Shreveport affecting approximately 200 positions. Some production would be relocated to Libbey’s facilities in Toledo, Ohio, and Monterrey, Mexico. Existing staff would handle the relocated production in Toledo and Monterrey. The vast majority of Libbey customers would not be impacted.
“These changes would enable Libbey to reduce manufacturing capacity and improve asset utilization across our North American facilities, while continuing to meet the needs of our customers worldwide,” Streeter said. “We regret the impact these changes would have on our affected Shreveport associates, but they are necessary to strengthen Libbey’s financial and competitive position.”