- THE MAGAZINE
In the fourth quarter of 2007, Libbey recorded a non-cash tax charge of $15.3 million to establish a full valuation allowance against its net deferred tax assets in the U.S. The valuation allowance does not reflect a change in the company’s long-term financial outlook; it relates to the U.S. GAAP accounting requirements in situations where a company has a cumulative pre-tax loss in recent years. Excluding this non-cash charge of $15.3 million for the tax valuation allowance, net income would have been $10.3 million, and diluted earnings per share would have been $0.71 for the fourth quarter. The establishment of a valuation allowance has no impact on cash, and the company expects to utilize its loss carry-forwards and other deferred tax assets when its U.S. operations generate future pre-tax profits.
For the quarter ended December 31, 2007, sales of the North American Glass segment were flat at $155.8 million vs. $156.0 million in the fourth quarter of 2006. The sales results were attributable to approximately 5% growth of the sales of Crisa product, a 9.5% increase in shipments to U.S. and Canadian retail glassware customers, and an approximately 5% reduction in sales to foodservice and industrial glassware customers. North American Other sales increased 8.6% as shipments of Syracuse China products were up over 25%. Shipments to World Tableware and Traex customers were down less than 2%. International segment sales increased 31.9% as a result of increased shipments to customers of Royal Leerdam, Crisal and Libbey China, and a 10.8% favorable currency impact.
The company reported income from operations of $20.5 million during the quarter, compared to income from operations of $9.5 million in the year-ago quarter. Income from operations, excluding special charges, was $12.8 million during the fourth quarter of 2006. Factors contributing to the increase in income from operations were higher sales; lower selling, general and administrative expenses; and a litigation settlement of approximately $1.8 million.
For the 12 months ended December 31, 2007, sales increased 18.1%, including a favorable currency impact of 1.4%, to $814.2 million, up from $689.5 million in 2006. North American Glass sales increased 19.3% to $568.5 million. The increase in sales was primarily attributable to the full year consolidation of the sales of Crisa and an increase of more than 11% in shipments to U.S. and Canadian retail glassware customers. North American Other sales increased 5.8%, as shipments of World Tableware products increased 9.0%, shipments of Syracuse China products were up 5.0% and Traex sales increased less than 1%. International sales increased 28.0% to $136.7 million on the strength of increased shipments of both Royal Leerdam and Crisal products, the addition of shipments from Libbey China, and favorable currency impact of 8.3%. On a pro forma basis, giving effect to the consolidation of Crisa as of January 1, 2006, sales were up 6.6%.
Libbey reported income from operations of $66.1 million during 2007, compared to income from operations of $19.3 million for 2006. Income from operations margin of 8.1% for the full year 2007 was the highest percentage margin in five years. Adjusted income from operations, excluding special charges, was $37.8 million for the full year 2006. Primary contributors to the increase in income from operations were the consolidation of Crisa (including the benefit of the capacity rationalization), higher overall sales and improved margins.
“We are extremely pleased with the strength of our fourth quarter and full year 2007 performance,” said John F. Meier, chairman and chief executive officer. “We experienced increases in retail, foodservice, industrial and international glassware shipments during 2007. Sales to European glassware customers were robust. Crisa saw the benefits of the consolidation of their facilities. We expect first quarter  sales to be in the range of $185 million to $190 million, given the strength of our sales in the retail channel of distribution in North America and of our International operations during the fourth quarter of 2007. Earnings before interest, taxes, depreciation and amortization (EBITDA) are expected to be between $20 million and $22 million in the first quarter of 2008.”
Libbey also reported that it expects sales for 2008 to be in the range of $850 million to $870 million. “With EBITDA expected to be in the range of $113 million to $123 million for 2008, we are anticipating solid growth over 2007 EBITDA of $116.5 million, which included $5.5 million in gains on the sale of excess land,” said Meier.
Additional details are available at www.libbey.com.