Libbey Inc. Announces Fourth Quarter and Full-Year 2017 Financial Results

02/27/2018

Company reports fourth quarter net sales growth of 8.8%; introduces fiscal year 2018 outlook

TOLEDO, Ohio, Feb. 27, 2018 /PRNewswire/ -- Libbey Inc. (NYSE American: LBY), one of the largest glass tableware manufacturers in the world, today reported results for the fourth quarter ended December 31, 2017.

Fourth Quarter Financial & Operating Highlights

  • Net sales in the fourth quarter of 2017 were $224.0 million, compared to $205.8 million in the prior-year fourth quarter, an 8.8 percent increase (or an increase of 6.7 percent, excluding a $4.4 million currency impact.)
  • Net loss in the fourth quarter 2017 was $7.2 million, compared to a net loss of $2.2 million in fourth quarter 2016. The fourth quarter 2017 included a $6.7 million unfavorable revaluation of net deferred tax assets as a result of the latest U.S. tax reform.
  • Adjusted EBITDA (see Table 1) in fourth quarter 2017 was $24.2 million, including a $2.8 million unfavorable currency impact related to the Company's tax provision, compared to $23.5 million in fourth quarter 2016.

"We were pleased to see the business return to sales growth during the fourth quarter. This and several other performance indicators give us confidence that our strategies to drive long-term, profitable growth are gaining traction," said Chief Executive Officer William Foley. "We saw improved sales contributions from both our new e-commerce platform and new products during the fourth quarter. Profitability in our EMEA and Latin America segments also improved for a second consecutive quarter, and we're continuing to implement additional opportunities to improve our margin profile."

Three months ended December 31,

(dollars in thousands)


Net Sales


Increase/(Decrease)


Currency Effects


Constant Currency Sales Growth (Decline)



2017


2016


$ Change


% Change



U.S. & Canada


$

138,345



$

127,915



$

10,430



8.2

%


$

924



7.4

%

Latin America


41,758



36,418



5,340



14.7

%


1,228



11.3

%

EMEA


36,796



33,533



3,263



9.7

%


1,860



4.2

%

Other


7,082



7,972



(890)



(11.2)

%


402



(16.2)

%

Consolidated


$

223,981



$

205,838



$

18,143



8.8

%


$

4,414



6.7

%

 

  • Net sales in the U.S. and Canada segment increased 8.2 percent, driven by segment volume and favorable price and mix of product sold in the foodservice channel.
  • In Latin America, net sales increased 14.7 percent (an increase of 11.3 percent excluding currency fluctuation) as a result of higher net sales in the business-to-business and retail channels, primarily due to favorable price and mix of product sold and a favorable currency impact, partially offset by expected lower volume as a result of margin improvement initiatives.
  • Net sales in the EMEA segment were favorably impacted by price and mix of product sold in the foodservice and retail channels, as well as a $1.9 million favorable currency impact for the fourth quarter of 2017 versus the prior-year quarter.
  • Net sales in Other were down primarily as a result of lower sales in China.
  • The Company's effective tax rate was 202.4 percent for the fourth quarter of 2017, compared to 165.0 percent in the prior-year quarter. The high effective tax rates relative to the U.S. statutory rate of 35 percent were driven by several items, including a 2017 charge of $6.7 million related to the revaluation of net deferred tax assets caused by the U.S. tax reform, low pretax income relative to unfavorable tax adjustments for non-deductible expenses, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange gains and losses.

Full Year 2017 Financial & Operating Highlights

  • Net sales for full-year 2017 were $781.8 million, compared to $793.4 million for full-year 2016, a decrease of 1.5 percent (or a decrease of 1.6 percent excluding the $1.1 million currency impact).
  • Net loss for full-year 2017 was $93.4 million, compared to net income of $10.1 million during full-year 2016; 2017 included a $79.7 million non-cash goodwill impairment charge associated with the Latin America segment, and a $6.7 million charge related to the revaluation of net deferred tax assets as a result of the latest U.S. tax reform.
  • Adjusted EBITDA (see Table 1) was $70.6 million for full-year 2017, compared to $111.6 million for full-year 2016.

Full Year ended December 31,


Net Sales


Increase/(Decrease)


Currency Effects


Constant
Currency Sales
Growth
(Decline)

(dollars in thousands)

2017


2016

$ Change


% Change

U.S. & Canada


$

481,797



$

482,296



$

(499)



(0.1)

%


$

3,416



(0.8)

%

Latin America


144,322



151,389



(7,067)



(4.7)

%


(1,280)



(3.8)

%

EMEA


126,924



126,591



333



0.3

%


(1,433)



1.4

%

Other


28,785



33,144



(4,359)



(13.2)

%


398



(14.4)

%

Consolidated


$

781,828



$

793,420



$

(11,592)



(1.5)

%


$

1,101



(1.6)

%

 

  • Net sales in the U.S. and Canada segment were lower due to lower price and mix of product sold, partially offset by increased volumes and a favorable currency impact.
  • In Latin America, net sales declined as a result of lower net sales across the retail and business-to-business channels, specifically due to lower volume and unfavorable currency. The decline was partially offset by favorable price and mix.
  • Net sales in the EMEA segment increased primarily as a result of favorable price and mix of product sold, partially offset by lower volumes and an unfavorable currency impact.
  • Net sales in Other were down primarily as a result of lower sales in China.
  • The Company's effective tax rate was (20.4) percent for 2017, compared to 63.7 percent in the year-ago period. The change in the effective tax rate was driven by several items, including the non-deductible goodwill impairment charge, a 2017 charge of $6.7 million related to the revaluation of net deferred tax assets caused by the U.S. tax reform, low pretax income relative to unfavorable tax adjustments for non-deductible expenses, the timing and mix of pretax income earned in tax jurisdictions with varying tax rates, and the impact of foreign exchange losses compared to gains in the prior period.

Balance Sheet and Liquidity

  • The Company had available capacity of $91.9 million under its ABL credit facility at December 31, 2017, with no loans outstanding and cash on hand of $24.7 million.
  • At December 31, 2017, Trade Working Capital (see Table 3), defined as inventories and accounts receivable less accounts payable, was $199.5 million, an increase of $16.0 million from $183.5 million at December 31, 2016. The increase was a result of higher inventories and higher accounts receivable, partially offset by higher accounts payable. $7.8 million of the increase in Trade Working Capital was attributable to the effect of currency.

Outlook

The Company is anticipating improved global macroeconomic conditions in 2018. In addition, the Company expects that our industry and competitive trends will improve, but remain challenged. As such, outlook for full-year 2018 includes the following:

  • Net sales increase in the low single digits, compared to the full-year 2017, on a reported basis
  • Adjusted EBITDA margins of 10 percent to 11 percent (see Table 6)
  • Capital expenditures in the range of $50 million to $55 million
  • Selling, general and administrative expense as a percent of net sales around 17 percent

For the first half of 2018, the Company projects the following:

  • Net sales increase in the low single digits, when compared to the first half of 2017, on a reported basis
  • Adjusted EBITDA margins of 8.5 percent to 9.5 percent (see Table 6)

Jim Burmeister, vice president, chief financial officer, commented, "We successfully amended and extended our ABL credit facility during the fourth quarter and our liquidity remains strong. Over the course of fiscal year 2017, we paid $24.4 million on our Term Loan B debt, and plan to continue to prioritize debt reduction with excess cash flow over the near-term horizon."

Webcast Information

Libbey will hold a conference call for investors on Tuesday, February 27, 2018, at 11 a.m. Eastern Standard Time. The conference call will be webcast live on the Internet and is accessible from the Investor Relations section of www.libbey.com. To listen to the call, please go to the website at least 10 minutes early to register, download and install any necessary software.

About Libbey Inc.

Based in Toledo, Ohio, Libbey Inc. is one of the largest glass tableware manufacturers in the world. Libbey Inc. operates manufacturing plants in the U.S., Mexico, China, Portugal and the Netherlands. In existence since 1818, the Company supplies tabletop products to retail, foodservice and business-to-business customers in over 100 countries. Libbey's global brand portfolio, in addition to its namesake brand, includes Libbey Signature®, Master's Reserve®, Crisa®, Royal Leerdam®, World® Tableware, Syracuse® China, and Crisal Glass®. In 2017, Libbey Inc.'s net sales totaled $781.8 million. Additional information is available at www.libbey.com.

Use of Non-GAAP Financial Measures

To supplement the condensed financial statements presented in accordance with U.S. Generally Accepted Accounting Principles (U.S. GAAP), we use non-GAAP measures of certain components of financial performance. These non-GAAP measures include Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow, Trade Working Capital, Adjusted Selling, General & Administrative Expense (Adjusted SG&A), Adjusted SG&A Margin and our Debt Net of Cash to Adjusted EBITDA Ratio. Reconciliations to the nearest U.S. GAAP measures of all non-GAAP measures included in this press release can be found in the tables below.

Our non-GAAP measures, as defined below, are used by analysts, investors and other interested parties to compare our performance with the performance of other companies that report similar non-GAAP measures. Libbey believes these non-GAAP measures provide meaningful supplemental information regarding financial performance by excluding certain expenses and benefits that may not be indicative of core business operating results. We believe the non-GAAP measures, when viewed in conjunction with U.S. GAAP results and the accompanying reconciliations, enhance the comparability of results against prior periods and allow for additional transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance and facilitate management's internal comparison of our financial performance to that of prior periods, as well as trend analysis for budgeting and planning purposes. The presentation of our non-GAAP measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Furthermore, our non-GAAP measures may not be comparable to similarly titled measures reported by other companies and may have limitations as an analytical tool. We define our non-GAAP measures as follows:

  • We define Adjusted EBITDA and Adjusted EBITDA Margin as U.S. GAAP net income (loss) plus interest expense, provision for income taxes, depreciation and amortization, and special items that Libbey believes are not reflective of our core operating performance.
  • We define Trade Working Capital as net accounts receivable plus net inventories less accounts payable.
  • We define Adjusted SG&A and Adjusted SG&A Margin as U.S. GAAP selling, general and administrative expenses less special items that Libbey believes are not reflective of our core operating performance.
  • We define our Debt Net of Cash to Adjusted EBITDA Ratio as gross debt before unamortized discount and finance fees, less cash and cash equivalents, divided by Adjusted EBITDA (defined above).

Constant Currency

We translate revenue and expense accounts in our non-U.S. operations at current average exchange rates during the year. References to "constant currency," "excluding currency impact" and "adjusted for currency" are considered non-GAAP measures. Constant currency references regarding net sales reflect a simple mathematical translation of local currency results using the comparable prior period's currency conversion rate. Constant currency references regarding Adjusted EBITDA and Adjusted EBITDA Margin comprise a simple mathematical translation of local currency results using the comparable prior period's currency conversion rate plus the transactional impact of changes in exchange rates from revenues, expenses and assets and liabilities that are denominated in a currency other than the functional currency. We believe this non-GAAP constant currency information provides valuable supplemental information regarding our core operating results, better identifies operating trends that may otherwise be masked or distorted by exchange rate changes and provides a higher degree of transparency of information used by management in its evaluation of our ongoing operations. These non-GAAP measures should be viewed in addition to, and not as an alternative to, the reported results prepared in accordance with U.S. GAAP. Our currency market risks include currency fluctuations relative to the U.S. dollar, Canadian dollar, Mexican peso, euro and RMB.

Caution on Forward-Looking Statements

This press release includes forward-looking statements as defined in Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. Such statements reflect only the Company's best assessment at this time and are indicated by words or phrases such as "goal," "expects," " believes," "will," "estimates," "anticipates," or similar phrases. Investors are cautioned that forward-looking statements involve risks and uncertainty and that actual results may differ materially from these statements. Investors should not place undue reliance on such statements. These forward-looking statements may be affected by the risks and uncertainties in the Company's business. This information is qualified in its entirety by cautionary statements and risk factor disclosures contained in the Company's Securities and Exchange Commission filings, including the Company's report on Form 10-K filed with the Commission on March 3, 2017. Important factors potentially affecting performance include but are not limited to risks related to increased competition from foreign suppliers endeavoring to sell glass tableware, ceramic dinnerware and metalware in our core markets; global economic conditions and the related impact on consumer spending levels; changes in trends in the restaurant and bar industry and the retail channel of distribution that impact demand for our products; major slowdowns in the retail, travel or entertainment industries in the United States, Canada, Mexico, Western Europe and Asia, caused by terrorist attacks or otherwise; significant increases in per-unit costs for natural gas, electricity, freight, corrugated packaging, and other purchased materials; our ability to borrow under our ABL credit agreement; high levels of indebtedness; high interest rates that increase the Company's borrowing costs or volatility in the financial markets that could constrain liquidity and credit availability; protracted work stoppages related to collective bargaining agreements; increases in expense associated with higher medical costs, increased pension expense associated with lower returns on pension investments and increased pension obligations; devaluations and other major currency fluctuations relative to the U.S. dollar and the euro that could reduce the cost competitiveness of the Company's products compared to foreign competition; the effect of exchange rate changes to the value of the euro, the Mexican peso, the RMB and the Canadian dollar and the earnings and cash flows of our international operations, expressed under U.S. GAAP; the effect of high levels of inflation in countries in which we operate or sell our products; and the inability to achieve savings and profit improvements at targeted levels in the Company's operations or within the intended time periods. Any forward-looking statements speak only as of the date of this press release, and the Company assumes no obligation to update or revise any forward-looking statement to reflect events or circumstances arising after the date of this press release.

 

Libbey Inc.

Condensed Consolidated Statements of Operations

(dollars in thousands, except per share amounts)

(unaudited)




Three months ended December 31,


2017


2016





Net sales

$

223,981



$

205,838


Freight billed to customers

847



807


Total revenues

224,828



206,645


Cost of sales

182,144



172,618


Gross profit

42,684



34,027


Selling, general and administrative expenses

29,193



27,636


Income from operations

13,491



6,391


Other income (expense)

(1,232)



2,327


Earnings before interest and income taxes

12,259



8,718


Interest expense

5,277



5,259


Income before income taxes

6,982



3,459


Provision for income taxes

14,133



5,708


Net loss

$

(7,151)



$

(2,249)






Net loss per share:




    Basic

$

(0.32)



$

(0.10)


    Diluted

$

(0.32)



$

(0.10)


Dividends declared per share

$

0.1175



$

0.1150






Weighted average shares:




    Basic

22,078



21,908


    Diluted

22,078



21,908


 

Libbey Inc.

Condensed Consolidated Statements of Operations

(dollars in thousands, except per share amounts)




Year ended December 31,


2017


2016


(unaudited)



Net sales

$

781,828



$

793,420


Freight billed to customers

3,328



2,790


Total revenues

785,156



796,210


Cost of sales

634,185



629,916


Gross profit

150,971



166,294


Selling, general and administrative expenses

124,926



120,984


Goodwill impairment

79,700




Income (loss) from operations

(53,655)



45,310


Other income (expense)

(3,515)



3,362


Earnings (loss) before interest and income taxes

(57,170)



48,672


Interest expense

20,400



20,888


Income (loss) before income taxes

(77,570)



27,784


Provision for income taxes

15,798



17,711


Net income (loss)

$

(93,368)



$

10,073






Net income (loss) per share:




    Basic

$

(4.24)



$

0.46


    Diluted

$

(4.24)



$

0.46


Dividends declared per share

$

0.47



$

0.46






Weighted average shares:




    Basic

22,031



21,880


    Diluted

22,031



22,049






 

Libbey Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands)




December 31, 2017


December 31, 2016


(unaudited)



ASSETS:




Cash and cash equivalents

$

24,696



$

61,011


Accounts receivable — net

89,997



85,113


Inventories — net

187,886



170,009


Prepaid and other current assets

12,550



16,777


Total current assets

315,129



332,910






Pension asset

2,939




Purchased intangibles — net

14,565



15,225


Goodwill

84,412



164,112


Deferred income taxes

24,892



40,016


Other assets

9,627



9,514


Property, plant and equipment — net

265,675



256,392


Total assets

$

717,239



$

818,169






LIABILITIES AND SHAREHOLDERS' EQUITY:




Accounts payable

$

78,346



$

71,582


Salaries and wages

27,409



27,018


Accrued liabilities

43,223



41,807


Accrued income taxes

1,862



1,384


Pension liability (current portion)

2,185



2,461


Non-pension post-retirement benefits (current portion)

4,185



4,892


Derivative liability

697



1,928


Long-term debt due within one year

7,485



5,009


Total current liabilities

165,392



156,081


Long-term debt

376,905



402,831


Pension liability

43,555



43,934


Non-pension post-retirement benefits

49,758



55,373


Deferred income taxes

1,850



1,859


Other long-term liabilities

12,885



12,972


Total liabilities

650,345



673,050






Common stock and capital in excess of par value

333,231



329,941


Retained deficit

(161,165)



(59,625)


Accumulated other comprehensive loss

(105,172)



(125,197)


Total shareholders' equity

66,894



145,119


Total liabilities and shareholders' equity

$

717,239



$

818,169



 

Libbey Inc.

Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)




Year ended December 31,


2017


2016

Operating activities:




Net income (loss)

$

(93,368)



$

10,073


Adjustments to reconcile net income (loss) to net cash provided by operating activities:




Depreciation and amortization

45,544



48,486


Goodwill impairment

79,700




Loss on asset sales and disposals

251



287


Change in accounts receivable

(2,698)



8,660


Change in inventories

(13,443)



5,979


Change in accounts payable

5,574



(481)


Accrued interest and amortization of discounts and finance fees

1,318



(1,086)


Pension & non-pension post-retirement benefits, net

1,680



(2,513)


Accrued liabilities & prepaid expenses

2,737



4,032


Income taxes

13,121



6,296


Share-based compensation expense

3,460



4,766


Other operating activities

1,432



(595)


Net cash provided by operating activities

45,308



83,904






Investing activities:




Additions to property, plant and equipment

(47,628)



(34,604)


Net cash used in investing activities

(47,628)



(34,604)






Financing activities:




Borrowings on ABL credit facility

34,086



6,000


Repayments on ABL credit facility

(34,086)



(6,000)


Other repayments

(632)



(350)


Other borrowings



339


Repayments on Term Loan B

(24,400)



(24,400)


Stock options exercised

466



1,400


Taxes paid on distribution of equity awards

(627)



(895)


Dividends

(10,355)



(10,070)


Treasury shares purchased



(2,000)


Other financing activities

334




Net cash used in financing activities

(35,214)



(35,976)






Effect of exchange rate fluctuations on cash

1,219



(1,357)


Increase (decrease) in cash

(36,315)



11,967






Cash & cash equivalents at beginning of year

61,011



49,044


Cash & cash equivalents at end of year

$

24,696



$

61,011



 

In accordance with the SEC's Regulation G, the following tables provide non-GAAP measures used in this earnings release and a reconciliation to the most closely related U.S. GAAP measure. See the above text for additional information on our non-GAAP measures. Although Libbey believes that the non-GAAP financial measures presented enhance investors' understanding of Libbey's business and performance, these non-GAAP measures should not be considered an alternative to U.S. GAAP.

Table 1









Reconciliation of Net Income (Loss) to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization 
     (Adjusted EBITDA)

(dollars in thousands)









(unaudited)











Three months ended December 31,


Year ended December 31,



2017


2016


2017


2016

Reported net income (loss)  (U.S. GAAP)


$

(7,151)



$

(2,249)



$

(93,368)



$

10,073


Add:









   Interest expense


5,277



5,259



20,400



20,888


   Provision for income taxes


14,133



5,708



15,798



17,711


   Depreciation and amortization


11,928



11,817



45,544



48,486


Add special items before interest and taxes:









   Goodwill impairment (1)






79,700




   Product portfolio optimization (2)




(1,091)





5,693


   Reorganization charges (3)






2,488




   Executive terminations




(61)





4,460


   Pension settlement




(44)





168


Work Stoppage (4)




4,162





4,162


Adjusted EBITDA (non-GAAP)


$

24,187



$

23,501



$

70,562



$

111,641











Net sales


$

223,981



$

205,838



$

781,828



$

793,420


Net income (loss) margin (U.S. GAAP)


(3.2)

%


(1.1)

%


(11.9)

%


1.3

%

Adjusted EBITDA margin (non-GAAP)


10.8

%


11.4

%


9.0

%


14.1

%

__________

(1)

Non-cash goodwill impairment charge recorded in our Mexico reporting unit within the Latin America segment.

(2)

Product portfolio optimization relates to inventory reductions to simplify and improve our operations.

(3)

Workforce reorganization as a part of our cost savings initiatives.

(4)

Work stoppage relates to the lower production volume impact, shipping costs and other direct incremental expenses associated
with the two-week Toledo, Ohio, work stoppage in the fourth quarter of 2016.

 

Table 2





Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow








(dollars in thousands)





(unaudited)







Year ended December 31,



2017


2016

Net cash provided by operating activities  (U.S. GAAP)


$

45,308



$

83,904


Net cash used in investing activities (U.S. GAAP)


(47,628)



(34,604)


Free Cash Flow (non-GAAP)


$

(2,320)



$

49,300







 

Table 3







Reconciliation to Trade Working Capital



(dollars in thousands)







(unaudited)









December 31, 2017


September 30, 2017


December 31, 2016








Accounts receivable — net


$

89,997



89,084



$

85,113


Inventories — net


187,886



200,181



170,009


Less: Accounts payable


78,346



73,645



71,582


Trade Working Capital (non-GAAP)


$

199,537



$

215,620



$

183,540















 

Table 4









Summary Business Segment Information









(dollars in thousands)
(unaudited)


Three months ended
December 31,


Year ended December 31,

Net Sales:


2017


2016 (7)


2017


2016 (7)









U.S. & Canada (1)


$

138,345



$

127,915



$

481,797



$

482,296


Latin America (2)


41,758



36,418



144,322



151,389


EMEA (3)


36,796



33,533



126,924



126,591


Other (4)


7,082



7,972



28,785



33,144


Consolidated


$

223,981



$

205,838



$

781,828



$

793,420











Segment Earnings Before Interest & Taxes (Segment EBIT) (5) :









U.S. & Canada (1)


$

14,737



$

19,517



$

48,044



$

75,449


Latin America (2)


4,041



(2,643)



6,590



12,583


EMEA (3)


2,733



1,354



1,321



1,387


Other (4)


(240)



22



(3,838)



1,001


Segment EBIT


$

21,271



$

18,250



$

52,117



$

90,420











Reconciliation of Segment EBIT to Net Income (Loss):









Segment EBIT


$

21,271



$

18,250



$

52,117



$

90,420


Retained corporate costs (6)


(9,012)



(6,566)



(27,099)



(27,265)


Goodwill impairment






(79,700)




Pension settlement




44





(168)


Reorganization charges






(2,488)




Product portfolio optimization




1,091





(5,693)


Executive terminations




61





(4,460)


Work stoppage




(4,162)





(4,162)


Interest expense


(5,277)



(5,259)



(20,400)



(20,888)


Provision for income taxes


(14,133)



(5,708)



(15,798)



(17,711)


Net income (loss)


$

(7,151)



$

(2,249)



$

(93,368)



$

10,073











Depreciation & Amortization:









U.S. & Canada (1)


$

3,649



$

3,030



$

12,665



$

12,748


Latin America (2)


4,819



5,343



18,576



19,068


EMEA (3)


1,869



1,717



7,377



9,377


Other (4)


1,267



1,426



5,088



5,588


Corporate


324



301



1,838



1,705


Consolidated


$

11,928



$

11,817



$

45,544



$

48,486




(1)

U.S. & Canada—includes sales of manufactured and sourced tableware having an end-market destination in the U.S and Canada, excluding glass products for Original Equipment Manufacturers (OEM), which remain in the Latin America segment.

(2)

Latin America—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Latin America, as well as glass products for OEMs regardless of end-market destination.

(3) 

EMEA—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Europe, the Middle East and Africa.

(4)

Other—includes primarily sales of manufactured and sourced glass tableware having an end-market destination in Asia Pacific.

(5)

Segment EBIT represents earnings before interest and taxes and excludes amounts related to certain items we consider not representative of ongoing operations as well as certain retained corporate costs and other allocations that are not considered by management when evaluating performance. Segment EBIT also includes an allocation of manufacturing costs for inventory produced at a Libbey facility that is located in a region other than the end market in which the inventory is sold.  This allocation can fluctuate from year to year based on the relative demands for products produced in regions other than the end markets in which they are sold.

(6)

Retained corporate costs include certain headquarter, administrative and facility costs, and other costs that are not allocable to the reporting segments.

(7)

In the first quarter of 2017, net sales and related costs for certain countries were reclassified between segments to align with changes in business unit responsibilities. Accordingly, 2016 segment results have been reclassified to conform to the current year structure. The revised 2016 segment results do not affect any previously reported consolidated financial results.

 


Table 5




Reconciliation of Net Income (Loss) to Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) and Debt Net of Cash to Adjusted EBITDA Ratio

(dollars in thousands)




(unaudited)





Year ended

December 31, 2017


Year ended
December 31, 2016



Reported net income (loss)  (U.S. GAAP)

$

(93,368)



$

10,073


Add:




   Interest expense

20,400



20,888


   Provision for income taxes

15,798



17,711


   Depreciation and amortization

45,544



48,486


   Special items before interest and taxes

82,188



14,483


Adjusted EBITDA  (non-GAAP)

$

70,562



$

111,641






Reported debt on balance sheet  (U.S. GAAP)

$

384,390



$

407,840


   Plus: Unamortized discount and finance fees

3,295



4,480


Gross debt

387,685



412,320


   Less: Cash and cash equivalents

24,696



61,011


Debt net of cash

$

362,989



$

351,309






Debt Net of Cash to Adjusted EBITDA Ratio (non-GAAP)

5.1



3.1


 

Table 6




2018 Outlook




Reconciliation of Net Income (Loss) margin to Adjusted EBITDA Margin



(percent of estimated 2018 net sales)




(unaudited)





Outlook for the six months
ended June 30, 2018


Outlook for the year ended
December 31, 2018

Net income (loss) margin  (U.S. GAAP)

(0.2%) - 0.5%


1.0% - 1.6%

Add:




   Interest expense

2.8%


2.7%

   Provision for income taxes

(0.1%) - 0.2%


0.6% - 1.0%

   Depreciation and amortization

6.0%


5.7%

   Special items before interest and taxes

—%


—%

Adjusted EBITDA Margin  (non-GAAP)

8.5% - 9.5%


10.0% - 11.0%







 

Table 7



Adjusted SG&A Margin

(percent of net sales)





(unaudited)







Year ended
December 31, 2017


Year ended
December 31, 2016

SG&A margin (U.S. GAAP)


16.0%


15.2%

Deduct special items in SG&A expenses:





   Executive terminations


—%


(0.5)%

   Reorganization charges


(0.3)%


—%

Adjusted SG&A Margin (non-GAAP)


15.7%


14.7%

 

Cision View original content:http://www.prnewswire.com/news-releases/libbey-inc-announces-fourth-quarter-and-full-year-2017-financial-results-300604845.html

SOURCE Libbey Inc.

CORPORATE CONTACTS: Joe Huhn, Vice President, Investor Relations, (419) 325-2205, jhuhn@libbey.com and Jamie Burt, Media, (419) 325-2672, jburt@libbey.com or INVESTOR INQUIRIES: Chris Hodges or Sam Gibbons, Alpha IR Group, (312) 445-2870, LBY@alpha-ir.com

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