- THE MAGAZINE
- NEW PRODUCTS
In the fourth quarter of 2008, Libbey recorded special charges of $45.3 million, or $3.07 per share. These charges include pretax restructuring and other charges of $29.1 million associated with the planned closure of the company's ceramic dinnerware manufacturing facility in Syracuse, N.Y., scheduled for April 2009, and for the closure of its distribution center in Mira Loma, Calif., in May 2009. Approximately $4.3 million of these charges are expected to result in cash payments in 2009.
The principal components of the charges include fixed asset write-downs, inventory write-downs, employee severance, pension and other post-employment benefit curtailment charges, and other items. The Syracuse factory and Mira Loma distribution center currently employ approximately 305 people. The closures are expected to result in a net reduction of approximately 10.0% of Libbey's workforce in the U.S. and over 4.0% of Libbey's total employment worldwide.
The company also recorded non-cash charges for intangible asset impairment of $11.9 million at its Portugal and Netherlands locations. In addition, non-cash fixed asset impairment charges of $4.5 million were recorded at Libbey's North American Glass operations.
Libbey previously announced that it has identified $24 million to $28 million of cash flow enhancement that it expects to achieve in 2009. In addition, the company has identified the following cash flow enhancements for 2009: further reductions of $10.0 million in capital spending; required 2009 cash contributions to pension plans will be $9.0 million lower than in 2008; 5.0% salary reduction for most U.S. salaried employees; 7.5% salary reduction for all officers of the company; and the suspension of the 401 (k) match for all salaried and non-union hourly employees.
The company reported that it has reduced its international workforce by approximately 500 people since October 2008. Combined with the job eliminations resulting from the planned closures of the company's Syracuse China ceramic dinnerware factory and a distribution center in California, the total of approximately 800 job eliminations represents over 10% of Libbey's worldwide workforce.
For the quarter ended December 31, 2008, sales were $186.6 million, compared to $225.1 million in the year-ago quarter. Sales of the North American Glass segment were $128.0 million vs. $155.8 million in the fourth quarter of 2007. The sales results were attributable to an approximate 25.0% decline in foodservice sales, a reduction of over 12.0% in the shipment of Crisa product, and a 6.0% decrease in shipments to U.S. and Canadian retail glassware customers. Approximately 9.0% of the reduction at Crisa was related to the devaluation of the Mexican peso.
North American Other sales were $26.0 million, compared to $33.9 million in the prior-year quarter, as shipments of Syracuse China products were off almost 40%. Shipments to World Tableware customers were down nearly 14%, while sales of Traex products were off 8.8% vs. the prior year. International segment sales were $33.4 million, compared to $38.9 million in the year-ago quarter, as the result of lower shipments to customers of Royal Leerdam and Crisal and a 6.2% unfavorable currency impact. These decreases were partially offset by a 58% sales growth in China.
The company reported a loss from operations of $48.3 million during the quarter, compared to income from operations of $20.5 million in the year-ago quarter. Loss from operations, excluding special charges, was $3.2 million during the fourth quarter of 2008. Factors contributing to the loss from operations were $45.1 million of special charges; lower sales and margins; and lower capacity utilization partially offset by lower manufacturing costs, lower distribution costs and lower selling, general and administrative expenses.
Libbey reported a loss before interest and taxes of $47.5 million, compared to earnings before interest and taxes (EBIT) of $25.3 million in the year-ago quarter. The reduced EBIT was mostly a result of the reduction in income from operations discussed above, $45.5 million of special charges and the non-recurring $4.3 million gain on the sale of land at Libbey Leerdam in 2007. Normalized EBIT was a loss of $0.9 million for North American Glass compared to EBIT of $15.7 million in the year-ago quarter. North American Other reported normalized EBIT for the fourth quarter of 2008 of $1.0 million, compared to $4.4 million in the year-ago quarter. The International segment reported a normalized EBIT loss of $2.1 million, compared to EBIT of $5.2 million in the fourth quarter of 2007.
Libbey reported a net loss of $68.9 million, or $4.68 per share, for the fourth quarter ended December 31, 2008, compared to a net loss of $5.0 million, or $0.34 per share, in the prior year quarter. Excluding the special charges of $45.3 million, the net loss was $23.7 million and diluted loss per share was $1.61 for the fourth quarter.
For the 12 months ended December 31, 2008, sales decreased 0.5% to $810.2 million from $814.2 million in 2007. North American Glass sales decreased 2.5% to $554.1 million from $568.5 million in 2007. The decrease in sales was primarily attributable to a decline of over 10.0% in sales to foodservice customers and to a currency impact of $2.1 million related to sales of Crisa product in Mexican pesos.
Partially offsetting the decrease in sales was an increase of more than 4.0% in shipments to U.S. and Canadian retail glassware customers. North American Other sales decreased 8.4% to $111.0 million, as shipments of Syracuse China products declined 17.9%, shipments of World Tableware products were off 3.9% and Traex sales were flat with the prior year. International sales increased 12.3% to $153.5 million on the strength of increased sales at Libbey China of 171.3%, a 7.5% increase of Crisal sales at Libbey Portugal, a modest increase in sales at Libbey Leerdam and a favorable currency impact of 7.9%.
Libbey reported a loss from operations of $5.5 million during 2008 compared to income from operations of $66.1 million for 2007. Normalized income from operations, excluding special charges, was $39.6 million for the full year 2008, compared to $66.1 million in 2007. Primary contributors to the change in income from operations were $45.1 million of special charges, higher natural gas and electricity costs, increased carton costs, higher depreciation, and an unfavorable mix of sales. Partially offsetting these higher costs were lower distribution costs and lower selling, general and administrative expenses.
Loss before interest and taxes was $4.4 million for 2008, compared to earnings before interest and taxes (EBIT) of $74.9 million in 2007. The reduced EBIT was mostly a result of the reduction in income from operations discussed above, $45.5 million of special charges, $5.4 million non-recurring gain on the land sales at Libbey Leerdam and Syracuse China in 2007, and higher prior-year foreign currency translation gains. Normalized EBIT for 2008 was $41.1 million. Normalized EBIT was $30.9 million for North American Glass. The North American Other segment had normalized EBIT for 2008 of $10.6 million, compared to $15.7 million in 2007. The International segment reported normalized EBIT loss of $0.3 million, compared to EBIT of $4.7 million in 2007.
The company recorded a net loss of $80.5 million, or $5.48 per diluted share for 2008, compared to a net loss of $2.3 million, or $0.16 per diluted share, in the year-ago period. The company reported that its normalized net loss per diluted share for the full year 2008 was $2.40 per diluted share. This compares to the diluted loss per share of $0.16 in 2007.
“As announced in December, we saw a dramatic slowdown in the foodservice and retail channels in the fourth quarter due to the impact of the global economic recession,” said John F. Meier, chairman and chief executive officer. “Declining consumer confidence and the weakness in the Mexican peso impacted us. However, we were pleased that our retail sales in the U.S. and Canada increased over 4.0% for the full year 2008, as we increased our market share in the U.S. from 34.0% in 2007 to 40.6% in 2008."
For additional details, including an archive of a recent conference call discussing these results, visit www.libbey.com.