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Libbey Inc. Reports Operating Results (10-Q)

July 30, 2010 | About:
10qk

10qk

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Libbey Inc. (LBY) filed Quarterly Report for the period ended 2010-06-30.

Libbey Inc. has a market cap of $185.8 million; its shares were traded at around $11.5 with and P/S ratio of 0.3. LBY is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

For the quarter ended June 30, 2010, gross profit increased by $13.7 million, or 40.1 percent, to $48.0 million, compared to $34.3 million in the year-ago quarter. Gross profit as a percentage of net sales increased to 23.7 percent, compared to 17.5 percent in the year-ago quarter. The major reason for the improvement in gross profit was increased production activity which resulted in a $13.7 million benefit, net of cost increases inherent with higher activity levels. A favorable currency impact contributed another $5.2 million primarily due to the impact of changes in the value of the Mexican peso. Unfavorable mix on the higher sales levels lowered gross profit by $1.8 million. Distribution costs increased by $1.6 million related to the higher level of sales, and margins were impacted by the $2.7 million write-down of certain after-processing equipment recorded in our International segment, offset by a $0.9 million insurance claim recovery.

Adjusted EBITDA increased by $12.1 million in the second quarter of 2010, to $37.3 million, compared to $25.2 million in the year-ago quarter. As a percentage of net sales, Adjusted EBITDA was 18.4 percent for the second quarter 2010, compared to 12.9 percent in the year-ago quarter. The key contributors to the increase in Adjusted EBITDA were those factors discussed above under Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), the exclusion of a $2.7 million write-down on certain after-processing equipment in our International segment offset by a $0.9 million insurance claim recovery in 2010, and $0.2 million of pension settlement charges in 2009.

We recorded net income of $9.6 million, or $0.47 per diluted share, in the second quarter of 2010, compared to $2.7 million, or $0.18 per diluted share, in the year-ago quarter. Net income as a percentage of net sales was 4.7 percent in the second quarter 2010, compared to 1.4 percent in the year-ago quarter. The improvement in Net Income and Diluted Net Income Per Share is generally due to the factors discussed in EBIT above and a $5.8 million reduction in interest expense offset by a $9.4 million increase in provision for (benefit from) income taxes. The reduction in interest expense is driven by lower debt levels and the impact of the debt refinancing completed in February 2010. The effective tax rate was a 26.7 percent expense for the quarter compared to a 181.1 percent benefit in the year-ago quarter. The effective tax rate was influenced by valuation allowances, changes in the mix of earnings in countries with differing statutory tax rates and changes in accruals related to uncertain tax positions.

For the six months ended June 30, 2010, gross profit increased by $36.9 million, or 82.0 percent, to $81.9 million, compared to $45.0 million in the year-ago period. Gross profit as a percentage of net sales increased to 21.7 percent, compared to 12.7 percent in the year-ago period. The major reason for the improvement in gross profit was increased production activity which resulted in a $28.3 million benefit, net of cost increases inherent with the higher level of activity. Favorable currency impact contributed another $9.3 million to the margin, as the movement in the Mexican peso contributed $9.0 million with the other $0.3 million from movement in the euro. Higher levels of net sales and favorable mix contributed another $0.9 million to gross profit, while special charges related to facility closures decreased by $1.8 million. These improvements were offset by a $2.3 million increase in distribution costs compared to the first six months of last year and the $2.7 million fixed asset write-down in 2010 related to after-processing equipment in our International segment.

Income (loss) from operations for the six months ended June 30, 2010 increased $34.5 million, to $34.0 million, compared to a loss of $(0.6) million in the year-ago period. Income from operations as a percentage of net sales increased to 9.0 percent in the first six months of 2010, compared to (0.2) percent in the year-ago period. The improvement in income from operations is a result of higher gross profit and gross profit margin (discussed above) and a $0.3 million decrease in special charges, offset by a $2.7 million increase in selling, general and administrative expenses. The increase in selling, general and administrative expenses was caused by increases of $4.2 million in labor and benefits, $0.5 million in legal and professional fees, $0.3 million in supplies and $0.3 million of unfavorable exchange impact, offset by $2.7 million of pension settlement expenses in 2009 that did not occur in 2010.

Adjusted EBITDA increased by $29.0 million, or 99.7 percent in the first six months of 2010, to $58.1 million, compared to $29.1 million in the year-ago period. As a percentage of net sales, Adjusted EBITDA was 15.4 percent for the first six months of 2010, compared to 8.2 percent in the year-ago period. The key contributors to the increase in Adjusted EBITDA were those factors discussed above under Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), and the exclusion of a $56.8 million gain on redemption of debt in 2010, a $2.7 million fixed asset write down of after-processing equipment in our International segment in 2010, a $0.9 million insurance claim recovery in 2010 and a $0.5 million facility closure charge in 2010, pension settlement charges of $2.7

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