<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark one)
(X)Quarterly Report Pursuant to Section 13 or 15(d)of the
Securities Exchange Act of 1934
For Quarter Ended March 31, 1997
or
( )Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Libbey Inc.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-12084 34-1559357
- -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation or
organization)
300 Madison Avenue, Toledo, Ohio 43604
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(Address of principal executive offices) (Zip Code)
419-325-2100
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Common Stock, $.01 par value - 15,112,931 shares at April 22, 1997.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Condensed Consolidated Financial Statements presented herein are unaudited
but, in the opinion of management, reflect all adjustments necessary to
present fairly such information for the periods and at the dates indicated.
Since the following condensed unaudited financial statements have been
prepared in accordance with Article 10 of Regulation S-X, they do not contain
all information and footnotes normally contained in annual consolidated
financial statements; accordingly, they should be read in conjunction with the
Consolidated Financial Statements and notes thereto appearing in the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1996.
The interim results of operations are not necessarily indicative of results
for the entire year.
2
<PAGE> 3
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(dollars in thousands, except per-share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
Revenues: 1997 1996
---- ----
<S> <C> <C>
Net sales $ 78,479 $ 84,001
Royalties and net technical
assistance income 924 476
-------- --------
Total revenues 79,403 84,477
Costs and expenses:
Cost of sales 56,775 64,026
Selling, general and administrative
expenses 11,750 10,541
-------- --------
68,525 74,567
-------- --------
Income from operations 10,878 9,910
Other income (expense):
Interest expense - net (3,301) (4,120)
Other - net 64 724
-------- --------
(3,237) (3,396)
Income before income taxes 7,641 6,514
Provision for income taxes 2,995 2,573
-------- --------
Net income $ 4,646 $ 3,941
======== ========
Net income per share $ 0.30 $ 0.26
======== ========
Dividends per share $ 0.075 $ 0.075
======== ========
See accompanying notes.
</TABLE>
3
<PAGE> 4
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(unaudited) (Note)
ASSETS
Current assets:
<S> <C> <C>
Cash $ 5,014 $ 1,990
Accounts receivable:
Trade, less allowances of $2,354 and $2,279 39,823 40,503
Other 1,465 1,551
-------- --------
41,288 42,054
Inventories:
Finished goods 81,694 67,503
Work in process 5,457 5,017
Raw materials 3,245 3,054
Operating supplies 737 807
-------- --------
91,133 76,381
Prepaid expenses 6,482 6,719
-------- --------
Total current assets 143,917 127,144
Other assets:
Repair parts inventories 6,080 6,090
Goodwill, net of accumulated
amortization of $10,639 and $10,339 37,431 37,731
Other assets 25,392 25,398
-------- --------
68,903 69,219
Property, plant and equipment, at cost 227,763 225,518
Less accumulated depreciation 111,228 106,148
-------- --------
Net property, plant and equipment 116,535 119,370
-------- --------
Total assets $329,355 $315,733
======== ========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1996 has been
derived from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
</TABLE>
See accompanying notes.
4
<PAGE> 5
LIBBEY INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---- ----
(unaudited) (Note)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 11,504 $ 4,525
Accounts payable 15,733 22,506
Accrued liabilities 22,073 23,102
Other current liabilities 11,084 15,713
Long-term debt due within one year 14,334 --
--------- ---------
Total current liabilities 74,728 65,846
Long-term debt 202,851 202,851
Nonpension retirement benefits 51,809 51,165
Deferred taxes and other liabilities 14,046 14,318
Commitments
Shareholders' equity:
Common stock, par value $.01
per share, 50,000,000 shares
authorized, 15,107,931 shares
issued and outstanding
(15,061,231 in 1996) 151 151
Capital in excess of par value 192,851 191,909
Deficit (206,853) (210,368)
Cumulative foreign currency
translation adjustment (228) (139)
--------- ---------
Total shareholders' equity (14,079) (18,447)
--------- ---------
Total liabilities and shareholders' equity $ 329,355 $ 315,733
========= =========
<FN>
Note: The condensed consolidated balance sheet at December 31, 1996 has been
derived from the audited consolidated financial statements at that date but
does not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
</TABLE>
See accompanying notes.
5
<PAGE> 6
LIBBEY INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(dollars in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
1997 1996
---- ----
<S> <C> <C>
Operating activities
Net income $ 4,646 $ 3,941
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 5,867 5,615
Other non-cash charges 410 (37)
Net change in components of working
capital and other assets (26,721) (10,905)
-------- --------
Net cash used in operating activities (15,798) (1,386)
Investing activities--additions
to property, plant and equipment (2,432) (2,066)
Financing activities
Net borrowings under Bank Credit Agreement 14,463 6,898
Other net borrowings 6,979 --
Stock options exercised 942 130
Dividends (1,131) (1,127)
-------- --------
Net cash provided by financing activities 21,253 5,901
Effect of exchange rate fluctuations
on cash 1 --
-------- --------
Increase in cash 3,024 2,449
Cash at beginning of year 1,990 2,095
-------- --------
Cash at end of period $ 5,014 $ 4,544
======== ========
</TABLE>
See accompanying notes.
6
<PAGE> 7
LIBBEY INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Dollar amounts in thousands, except per share data
(unaudited)
1. LONG-TERM DEBT
The Company and its Canadian subsidiary have an unsecured agreement ("Bank
Credit Agreement" or "Agreement") with a group of banks which provides for a
Revolving Credit and Swing Line Facility ("Facility") permitting borrowings up
to an aggregate total of $300 million, maturing October 1999. Swing Line
borrowings are limited to $15 million with interest calculated at the prime
rate minus the Commitment Fee Percentage. Revolving Credit borrowings bear
interest at the Company's option at either the prime rate minus the Commitment
Fee Percentage, or a Eurodollar rate plus the Applicable Eurodollar Margin.
The Commitment Fee Percentage and Applicable Eurodollar Margin will vary
depending on the Company's performance against certain financial ratios. The
Commitment Fee Percentage and the Applicable Eurodollar Margin were 1/4% and
3/8%, respectively, at March 31, 1997. The Company may also elect to borrow
under a Negotiated Rate Loan alternative of the Revolving Credit and Swing
Line Facility at floating rates of interest, up to a maximum of $150 million.
The Revolving Credit and Swing Line Facility also provides for the issuance of
$22 million of letters of credit, with such usage applied against the $300
million limit. At March 31, 1997 the Company had $5.1 million in letters of
credit outstanding.
The Company has entered into interest rate protection agreements ("Rate
Agreements") with respect to $150 million of debt under its Bank Credit
Agreement as a means to manage its exposure to fluctuating interest rates. The
Rate Agreements effectively convert this portion of the Company's Bank Credit
Agreement borrowings from variable rate debt to a fixed rate basis, thus
reducing the impact of interest rate changes on future income. The average
interest rate for the Company's borrowings related to the Rate Agreements at
March 31, 1997 was 5.89% for an average remaining period of 1.8 years. The
remaining debt not covered by the Rate Agreements has fluctuating interest
rates with a weighted average rate of 5.6% at March 31, 1997.
The interest rate differential to be received or paid under the Rate
Agreements is being recognized over the life of the Rate Agreements as an
adjustment to interest expense. Should the counterparts to these Rate
Agreements fail to perform, the Company would no longer be protected from
interest rate fluctuations by these Rate Agreements. However, the Company does
not anticipate nonperformance by the counterparts.
The Company must pay a commitment fee ("Commitment Fee Percentage") on the
total credit provided under the Bank Credit Agreement. No compensating
balances are required by the Agreement. The Agreement requires the maintenance
of certain financial ratios, restricts the incurrence of indebtedness and
other contingent financial obligations, and restricts certain types of
business activities and investments.
On April 24, 1997 the Company reached agreement with its group of banks to
amend its Bank Credit Agreement, principally to increase the size of available
borrowings to $380 million in conjunction with its March 10, 1997 announcement
if its intention to pursue an acquisition of the business known as World Crisa
and an investment in Vitrocrisa. In addition, the maturity date has been
extended to May 2002, borrowing rates under certain circumstances are lower
than the prior facility and financial covenants and restrictions have been
modified.
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<PAGE> 8
2. ACQUISITION OPPORTUNITY
On March 10, 1997 the Company announced that it had signed a letter of intent
to enter into a joint venture with Vitro S.A., with respect to its glass
tableware operations in Mexico, and also purchase the business known as World
Crisa, presently owned by Vitro S.A. The announced cash purchase price is
approximately $100 million. The completion of the transaction is subject to
the performance of final due diligence, negotiation of definitive agreements
approval of the boards of directors of the respective companies and compliance
with applicable governmental requirements. The Company anticipates completing
the transaction in the second quarter of 1997.
3. CASH FLOW INFORMATION
Interest paid in cash aggregated $3,324 and $3,696 for the first three months
of 1997 and 1996, respectively. Income taxes paid in cash aggregated $1,668
and $1,895 for the first three months of 1997 and 1996, respectively.
4. NET INCOME PER SHARE OF COMMON STOCK
Net income per share (EPS) of common stock is computed using the weighted
average number of shares of common stock outstanding, including common stock
equivalents. Weighted average shares, including common stock equivalents, were
15,511,585 and 15,326,728 for the three periods ending March 31, 1997 and 1996
respectively.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 "Earnings per Share" (FAS 128) which is
required to be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute EPS and restate all
prior periods. The impact of adopting FAS 128 is not expected to be material.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FIRST QUARTER 1997 COMPARED WITH FIRST QUARTER 1996
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------
(dollars in thousands)
1997 1996
-------- ------
<S> <C> <C>
Net sales $78,479 $84,001
Gross profit 21,704 19,975
As a percentage of sales 27.7% 23.8%
Income from operations $10,878 $ 9,910
As a percentage of sales 13.9% 11.8%
Net income $ 4,646 $ 3,941
</TABLE>
Net sales for the first quarter of 1997 of $78.5 million decreased 6.6% from
the net sales of $84.0 million reported in the comparable period in 1996. The
decrease in sales is due primarily to lower sales to the Company's industrial
and retail markets in the U.S. as the Company chose to eliminate certain
pieces of business which typically had experienced low or negative operating
profit margins. Export sales were down 21.5%, decreasing to $5.1 million from
$6.5 million in the year-ago period primarily due to a large premium order in
1996 which did not repeat in first quarter 1997.
8
<PAGE> 9
Gross profit increased 8.7% to $21.7 million in the first quarter of 1997 from
$20.0 million in the first quarter of 1996, and increased as a percentage of
sales to 27.7% from 23.8%. Profit margins improved as a result of the
termination of certain sales with low profit margins. In addition, higher
efficiency performance in the company's glassware facilities contributed to
higher gross profit.
Income from operations increased 9.8% to $10.9 million from $9.9 million in
the year-ago period. Operating income as a percentage of sales increased to
13.9% from 11.8% in the comparable year-ago period, as a result of the higher
gross profit percentage offsetting higher selling, general and administrative
expense, principally associated with higher marketing and sales management
expenses.
Net income increased by $0.7 million due to items mentioned above, plus a
reduction in the Company's effective tax rate from 39.5% to 39.2%, principally
due to lower state income taxes, and decreased interest expense resulting from
lower debt levels.
CAPITAL RESOURCES AND LIQUIDITY
The Company had total debt of $228.7 million at March 31, 1997, compared to
$207.4 million at December 31, 1997. The increase in debt from December 31,
1996 is due to increased working capital requirements historically experienced
during this period. Inventories at March 31, 1997 were $14.9 million higher
than at December 31, 1996 principally due to the seasonal nature of the
Company's business. The Company had additional capacity at March 31, 1997
under the Bank Credit Agreement of $78.1 million. Of Libbey's outstanding
indebtedness, $66.9 million is subject to fluctuating interest rates at March
31, 1997. A change of one percentage point in such rates would result in a
change in interest expense of approximately $.7 million on an annual basis.
On March 10, 1997 the Company announced that it had signed a letter of intent
to enter into a joint venture with Vitro S.A., with respect to its glass
tableware operations in Mexico and also purchase the business known as
WorldCrisa, presently owned by Vitro S.A., subject to the performance of final
due diligence, negotiation of definitive agreements, approval of the boards of
directors of the respective companies and compliance with applicable
governmental requirements. As a result of this proposed transaction the
Company amended its Bank Credit Agreement on April 24, 1997 to increase the
maximum borrowings from $300 million to $380 million and extend the maturity
date to May 2002 from October 1999.
The Company is not aware of any trends, demands, commitments, or uncertainties
which will result or which are reasonably likely to result in a material
change in Libbey's liquidity. The Company believes that its cash from
operations and available borrowings under the Bank Credit Agreement will be
sufficient to fund its operating requirements, capital expenditures and all
other obligations (including debt service and dividends) throughout the
remaining term of the Bank Credit Agreement. In addition, the Company
anticipates refinancing the Bank Credit Agreement at or prior to the maturity
date of May 2002 to meet the Company's longer term funding requirements.
9
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
Exhibit
Number Description
- ------ -----------
27 Other Financial Information
(b.) No reports on Form 8-K were filed during the first quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LIBBEY INC.
Date May 14, 1997 By /s/ Kenneth G. Wilkes
----------------- -----------------------------
Kenneth G. Wilkes,
Vice President, Chief Financial
Officer and Treasurer
(Principal Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,014
<SECURITIES> 0
<RECEIVABLES> 39,823
<ALLOWANCES> 0
<INVENTORY> 91,133
<CURRENT-ASSETS> 143,917
<PP&E> 227,763
<DEPRECIATION> 111,228
<TOTAL-ASSETS> 329,355
<CURRENT-LIABILITIES> 74,728
<BONDS> 0
<COMMON> 151
0
0
<OTHER-SE> (14,230)
<TOTAL-LIABILITY-AND-EQUITY> 329,355
<SALES> 78,479
<TOTAL-REVENUES> 79,403
<CGS> 56,775
<TOTAL-COSTS> 68,525
<OTHER-EXPENSES> (64)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,301
<INCOME-PRETAX> 7,641
<INCOME-TAX> 2,995
<INCOME-CONTINUING> 4,646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,646
<EPS-PRIMARY> 0.30
<EPS-DILUTED> 0.30
</TABLE>
