EX-99.1 2 ex-991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
libbeylogoa21.jpg
Libbey Inc.
300 Madison Ave
Toledo, OH 43699
 
 
NEWS RELEASE

CORPORATE CONTACTS:
 
INVESTOR INQUIRIES:
Kim Hunter, Investor Relations
 
Chris Hodges or Sam Gibbons
(419) 325-2612
 
Alpha IR Group
khunte@libbey.com
 
(312) 445-2870
 
 
LBY@alpha-ir.com
Jamie McDaniel, Media
 
 
(419) 325-2672
 
 
jmcdan@libbey.com
 
 

FOR IMMEDIATE RELEASE
TUESDAY, FEBRUARY 28, 2017

LIBBEY INC. ANNOUNCES FOURTH QUARTER AND
FULL-YEAR 2016 FINANCIAL RESULTS
 
Renewed focus on new product development, business simplification initiatives and customer relationships allows Company to win market share in core foodservice business

TOLEDO, OHIO, FEBRUARY 28, 2017--Libbey Inc. (NYSE MKT: LBY), one of the largest glass tableware manufacturers in the world, today reported results for the fourth quarter ended December 31, 2016.
Full-Year 2016 Highlights
•
Net sales $793.4 million, down 3.5 percent versus prior year, or down 1.1 percent in constant currency
•
Net income $10.1 million, down $56.3 million versus prior year; 2015 included a non-repeating $43.8 million tax benefit; 2016 net income margin of 1.3 percent
•
Adjusted EBITDA $109.8 million, down $6.4 million versus prior year; 2016 Adjusted EBITDA margin of 13.8 percent
•
Company estimates Toledo work stoppage negatively impacted net sales by $7 million to $9 million and pre-tax income by $7 million to $8 million
•
During the year, the Company returned $12.1 million to shareholders through a combination of share repurchases and dividends

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“Fourth quarter results continued to be impacted by the recent trends we’ve observed in our foodservice and retail channels, consistent with the activity that we saw in the preceding quarter,” said William A. Foley, chairman and chief executive officer of Libbey Inc. “Foodservice unit volumes increased slightly, despite the impact of a Toledo work stoppage and an ongoing decline in restaurant traffic trends. By executing against our business strategy, we have continued to outperform our industry, and we are encouraged by indications that Libbey is continuing to win market share amidst a challenging, competitive environment.”
Foley added, “2016 was an important year from an operational standpoint, as we began to make proactive changes to ensure the business is adapting to shifts in consumer behaviors and addressing legacy issues of our business. Our new product development capabilities are improving, we’ve rationalized and streamlined our product portfolio and we’re taking new approaches to the ways in which we evaluate our manufacturing footprint to maximize profitability. We are seeing positive impacts from many of these initiatives that we prioritized during the year, and we remain confident that we are taking the appropriate steps to improve the long-term performance of the Company.”
Fourth Quarter Financial & Operating Highlights
•
Net sales in fourth quarter 2016 were $205.8 million, compared to $219.1 million in the prior-year fourth quarter, a 6.1 percent decrease (or a 3.6 percent decrease excluding $5.4 million currency impact).
•
Net loss in fourth quarter 2016 was $2.2 million, compared to net income of $32.1 million in fourth quarter 2015. The fourth quarter 2015 included the reversal of substantially all of the U.S. deferred tax asset valuation allowance of $43.8 million.
•
Adjusted EBITDA (see Table 1) in fourth quarter 2016 was $22.8 million, compared to $31.0 million in fourth quarter 2015.
•
Net sales in the U.S. and Canada segment were $129.5 million, a decrease of 7.3 percent versus net sales of $139.8 million in fourth quarter 2015. The decrease was primarily driven by lower retail and business-to-business net sales, which were down 17.2 percent and 6.9 percent, respectively, compared to fourth quarter 2015. Foodservice net sales decreased 1.4 percent compared to the prior-year fourth quarter.
•
Toledo work stoppage negatively impacted net sales by an estimated $7 million to $9 million and income before income taxes by approximately $7 million to $8 million. Adjusted EBITDA was negatively impacted by the estimated lost sales by approximately $3 million to $4 million.
•
Net sales in the Latin America segment were $36.4 million, compared to $40.2 million in fourth quarter 2015, a 9.5 percent decrease (or a 1.3 percent increase excluding $4.3 million currency impact). Retail net sales growth of 5.0 percent (or an 18.8 percent increase excluding $2.4 million currency impact) was primarily offset by weakness in business-to-business net sales.
•
Net sales in the EMEA segment were $31.7 million, compared to $31.5 million in fourth quarter 2015, an increase of 0.8 percent (or an increase of 2.3 percent adjusted for currency). Growth in the retail and business-to-business channels was partially offset by slower foodservice net sales.
•
Net sales in Other were $8.2 million in fourth quarter 2016, compared to $7.7 million in the comparable prior-year quarter, reflecting an increase of 6.3 percent (or an increase of 13.1 percent adjusted for currency).
•
The Company recorded tax expense of $5.7 million for fourth quarter 2016, compared to a tax benefit of $39.7 million in same period in 2015. The benefit recorded for fourth quarter 2015 included a tax benefit of $43.8 million related to the reversal of the valuation allowance recorded against U.S. deferred tax assets.

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In addition, the effective rate in both years was generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, non-taxable foreign translation gains and other activity in jurisdictions with recorded valuation allowances.
Full-Year 2016 Financial & Operating Highlights
•
Net sales for full-year 2016 were $793.4 million, compared to $822.3 million for full-year 2015, a decrease of 3.5 percent (or a decrease of 1.1 percent excluding $19.6 million currency impact).
•
Net income for full-year 2016 was $10.1 million, compared to $66.3 million during full-year 2015; 2015 included the reversal of substantially all of the U.S. deferred tax asset valuation allowance of $43.8 million.
•
Adjusted EBITDA (see Table 1) was $109.8 million for full-year 2016, compared to $116.1 million for full-year 2015.
•
Net sales in the U.S. and Canada segment were $488.2 million for full-year 2016, compared to $497.7 million for full-year 2015, a decrease of 1.9 percent. Retail net sales declined 10.2 percent, more than offsetting a 2.3 percent increase in foodservice net sales. Business-to-business net sales were down 0.7 percent.
•
Toledo work stoppage negatively impacted net sales by an estimated $7 million to $9 million and income before income taxes by approximately $7 million to $8 million. Adjusted EBITDA was negatively impacted by the estimated lost sales by approximately $3 million to $4 million.
•
Net sales in the Latin America segment were $151.4 million, compared to $167.1 million for full-year 2015; the 9.4 percent decrease (or 0.8 percent increase excluding $17.0 million currency impact) was primarily due to weakness in the business-to-business channel. Retail net sales for full-year 2016 increased 1.5 percent compared to the prior year (or increased 14.4 percent excluding $9.0 million currency impact).
•
Net sales in the EMEA segment decreased 2.4 percent (or decreased 2.0 percent adjusted for currency) to $119.8 million, compared to $122.7 million for full-year 2015. The decrease was primarily the result of weakness in the business-to-business channel.
•
Net sales in Other were $34.1 million for full-year 2016, compared to $34.9 million for full year 2015, reflecting a decrease of 2.2 percent (or an increase of 3.7 percent adjusted for currency).
•
The Company recorded tax expense of $17.7 million for 2016, compared to a tax benefit of $38.2 million for 2015. The benefit recorded for full-year 2015 includes a tax benefit of $43.8 million related to the reversal of the valuation allowance against its U.S. deferred tax assets. In addition, the effective tax rates for both years were generally influenced by foreign earnings with differing statutory rates, foreign withholding tax, accruals related to uncertain tax positions, non-taxable foreign translation gains and other activity in jurisdictions with recorded valuation allowances.
Balance Sheet and Liquidity
•
The Company had available capacity of $88.4 million under its ABL credit facility at December 31, 2016, with no loans outstanding, and cash on hand of $61.0 million.
•
At December 31, 2016, Trade Working Capital, defined as inventories and accounts receivable less accounts payable, was $183.5 million, a decrease of $17.3 million from $200.8 million at December 31, 2015 (see Table 3). The decrease was a result of lower accounts receivable and inventories with almost no change in accounts payable.


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Outlook
The Company expects macroeconomic, industry and competitive trends to remain consistent year-over-year and thus projects the following outlook for full-year 2017:
•
Net sales flat to slightly down on an as reported basis, compared to full-year 2016, as negative currency impacts offset projected growth.
•
Adjusted EBITDA margin of 13 percent to 14 percent.
•
Capital expenditures in the range of $50 million to $55 million.
Foley concluded, “As we look toward 2017, we plan to take the next steps to strengthen the functions we emphasized last year by maintaining an active new product development pipeline and continually evaluating opportunities to optimize the performance of our global manufacturing network. Longer term, we believe significant opportunities exist to grow sales through new product and category introductions, as well as continued market share expansion in underpenetrated categories.”
“While we’re focused on taking advantage of opportunities we see in our markets to drive the long-term growth of our business, we need also to continue to improve our operational and organizational excellence to support growth. Therefore, we will pursue ecommerce and begin an ERP implementation during 2017. For full-year 2017, we expect to be able to offset much of the cost of these initiatives, and we project our full year Adjusted EBITDA margin to be similar to, or slightly down from, last year. We see these investments as both defensive and offensive. They provide critical platforms for our growth and help position us for enhanced alignment with consumer purchasing preferences and improved operating efficiencies.”
“We also will continue to take a balanced approach to our capital allocation policies and remain committed to our dividend policy, which we recently increased by two percent to 11.75 cents per quarter. However, given the continued softness that we’re seeing in some of our end markets, we believe it is prudent to continue prioritizing debt reduction with our excess capital over the near term. We believe we are well positioned to return the Company to growth and look forward to driving value for shareholders in the future.
Webcast Information
Libbey will hold a conference call for investors on Tuesday, February 28, 2017, 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. A replay will be available for 7 days after the conclusion of the call.
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 Crisa®, Royal Leerdam®, Libbey Signature®, Masters Reserve®, World® Tableware, Syracuse® China, and Crisal Glass®. In 2016, Libbey Inc.'s net sales totaled $793.4 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

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Capital 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, liquidity 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 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 Free Cash Flow as net cash provided by (used in) operating activities less capital expenditures plus proceeds from asset sales and other.
•
We define Trade Working Capital as net accounts receivable plus net inventories less accounts payable.
•
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 by 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

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contained in the Company's Securities and Exchange Commission filings, including the Company's report on Form 10-K filed with the Commission on February 29, 2016. Important factors potentially affecting performance include but are not limited to risks related to our ability to borrow under our ABL credit agreement; increased competition from foreign suppliers endeavoring to sell glass tableware, ceramic dinnerware and metalware in the United States and Mexico; the impact of lower duties for imported products; global economic conditions and the related impact on consumer spending levels; 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; 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 high inflation in Mexico and exchange rate changes to the value of the Mexican peso and the earnings and cash flow of Libbey Mexico, expressed under U.S. GAAP; the inability to achieve savings and profit improvements at targeted levels in the Company's operations or within the intended time periods; and whether the Company completes any significant acquisition and whether such acquisitions can operate profitably. 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.



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Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)

 
Three months ended December 31,
 
2016
 
2015
 
 
 
 
Net sales
$
205,838

 
$
219,145

Freight billed to customers
807

 
810

Total revenues
206,645

 
219,955

Cost of sales
172,618

 
190,703

Gross profit
34,027

 
29,252

Selling, general and administrative expenses
27,636

 
33,717

Income (loss) from operations
6,391

 
(4,465
)
Other income
2,327

 
1,603

Earnings (loss) before interest and income taxes
8,718

 
(2,862
)
Interest expense
5,259

 
4,722

Income (loss) before income taxes
3,459

 
(7,584
)
Provision (benefit) for income taxes
5,708

 
(39,692
)
Net income (loss)
$
(2,249
)
 
$
32,108

 
 
 
 
Net income (loss) per share:
 
 
 
    Basic
$
(0.10
)
 
$
1.47

    Diluted
$
(0.10
)
 
$
1.45

Dividends declared per share
$
0.115

 
$
0.110

 
 
 
 
Weighted average shares:
 
 
 
    Basic
21,908

 
21,819

    Diluted
21,908

 
22,111




Libbey Inc.
Condensed Consolidated Statements of Operations
(dollars in thousands, except per share amounts)
(unaudited)
 
 
 
 
 
Year ended December 31,
 
2016
 
2015
 
 
 
 
Net sales
$
793,420

 
$
822,345

Freight billed to customers
2,790

 
2,885

Total revenues
796,210

 
825,230

Cost of sales
629,916

 
648,902

Gross profit
166,294

 
176,328

Selling, general and administrative expenses
120,984

 
132,607

Income from operations
45,310

 
43,721

Other income
3,362

 
2,880

Earnings before interest and income taxes
48,672

 
46,601

Interest expense
20,888

 
18,484

Income before income taxes
27,784

 
28,117

Provision (benefit) for income taxes
17,711

 
(38,216
)
Net income
$
10,073

 
$
66,333

 
 
 
 
Net income per share:
 
 
 
    Basic
$
0.46

 
$
3.04

    Diluted
$
0.46

 
$
2.99

Dividends declared per share
$
0.46

 
$
0.44

 
 
 
 
Weighted average shares:
 
 
 
    Basic
21,880

 
21,817

    Diluted
22,049

 
22,159

 
 
 
 



Libbey Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
 
December 31, 2016
 
December 31, 2015
 
(unaudited)
 
 
ASSETS:
 
 
 
Cash and cash equivalents
$
61,011

 
$
49,044

Accounts receivable — net
85,113

 
94,379

Inventories — net
170,009

 
178,027

Other current assets
16,777

 
19,326

Total current assets
332,910

 
340,776

Pension asset
—

 
977

Purchased intangibles — net
15,225

 
16,364

Goodwill
164,112

 
164,112

Deferred income taxes
40,016

 
48,662

Other assets
9,514

 
9,019

Total other assets
228,867

 
239,134

Property, plant and equipment — net
256,392

 
272,534

Total assets
$
818,169

 
$
852,444

 
 
 
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
 
 
 
Accounts payable
$
71,582

 
$
71,560

Salaries and wages
27,018

 
27,266

Accrued liabilities
41,807

 
45,179

Accrued income taxes
1,384

 
4,009

Pension liability (current portion)
2,461

 
2,297

Non-pension postretirement benefits (current portion)
4,892

 
4,903

Derivative liability
1,928

 
4,265

Long-term debt due within one year
5,009

 
4,747

Total current liabilities
156,081

 
164,226

Long-term debt
402,831

 
426,272

Pension liability
43,934

 
44,274

Non-pension postretirement benefits
55,373

 
55,282

Deferred income taxes
1,859

 
2,822

Other long-term liabilities
12,972

 
11,186

Total liabilities
673,050

 
704,062

 
 
 
 
Common stock and capital in excess of par value
329,941

 
330,974

Treasury stock
—

 
(4,448
)
Retained deficit
(59,625
)
 
(57,912
)
Accumulated other comprehensive loss
(125,197
)
 
(120,232
)
Total shareholders’ equity
145,119

 
148,382

Total liabilities and shareholders’ equity
$
818,169

 
$
852,444



Libbey Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
Three months ended December 31,
 
2016
 
2015
Operating activities:
 
 
 
Net income (loss)
$
(2,249
)
 
$
32,108

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
Depreciation and amortization
11,817

 
11,426

Loss on asset sales and disposals
122

 
177

Change in accounts receivable
12,374

 
1,390

Change in inventories
18,928

 
19,898

Change in accounts payable
6,188

 
5,190

Accrued interest and amortization of discounts and finance fees
424

 
345

Pension & non-pension postretirement benefits, net
(860
)
 
17,412

Accrued liabilities & prepaid expenses
(11,142
)
 
(8,660
)
Income taxes
3,952

 
(40,078
)
Share-based compensation expense
432

 
368

Excess tax benefit from share-based compensation arrangements
—

 
(2,797
)
Other operating activities
(936
)
 
(2,728
)
Net cash provided by operating activities
39,050

 
34,051

 
 
 
 
Investing activities:
 
 
 
Additions to property, plant and equipment
(11,081
)
 
(6,656
)
Proceeds from asset sales and other
—

 
5

Net cash used in investing activities
(11,081
)
 
(6,651
)
 
 
 
 
Financing activities:
 
 
 
Borrowings on ABL credit facility
—

 
18,400

Repayments on ABL credit facility
—

 
(25,400
)
Repayments on Term Loan B
(6,100
)
 
(1,100
)
Stock options exercised
247

 
4

Excess tax benefit from share-based compensation arrangements
—

 
2,797

Dividends
(2,519
)
 
(2,400
)
Net cash used in financing activities
(8,372
)
 
(7,699
)
 
 
 
 
Effect of exchange rate fluctuations on cash
(1,256
)
 
(758
)
Increase in cash
18,341

 
18,943

 
 
 
 
Cash & cash equivalents at beginning of period
42,670

 
30,101

Cash & cash equivalents at end of period
$
61,011

 
$
49,044










Libbey Inc.
Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
Year ended December 31,
 
2016
 
2015
Operating activities:
 
 
 
Net income
$
10,073

 
$
66,333

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
48,486

 
42,712

Loss on asset sales and disposals
287

 
567

Change in accounts receivable
8,660

 
(6,312
)
Change in inventories
5,979

 
(12,006
)
Change in accounts payable
(481
)
 
(3,466
)
Accrued interest and amortization of discounts and finance fees
(1,086
)
 
1,291

Pension & non-pension postretirement benefits, net
(2,513
)
 
18,865

Accrued liabilities & prepaid expenses
4,032

 
4,140

Income taxes
6,296

 
(45,003
)
Share-based compensation expense
4,766

 
5,917

Excess tax benefit from share-based compensation arrangements
(366
)
 
(2,797
)
Other operating activities
(1,490
)
 
(4,142
)
Net cash provided by operating activities
82,643

 
66,099

 
 
 
 
Investing activities:
 
 
 
Additions to property, plant and equipment
(34,604
)
 
(48,136
)
Proceeds from asset sales and other
—

 
7

Net cash used in investing activities
(34,604
)
 
(48,129
)
 
 
 
 
Financing activities:
 

 
 

Borrowings on ABL credit facility
6,000

 
62,900

Repayments on ABL credit facility
(6,000
)
 
(62,900
)
Other repayments
(350
)
 
(3,267
)
Other borrowings
339

 
—

Repayments on Term Loan B
(24,400
)
 
(4,400
)
Stock options exercised
1,400

 
3,338

Excess tax benefit from share-based compensation arrangements
366

 
2,797

Dividends
(10,070
)
 
(9,597
)
Treasury shares purchased
(2,000
)
 
(15,275
)
Net cash used in financing activities
(34,715
)
 
(26,404
)
 
 
 
 
Effect of exchange rate fluctuations on cash
(1,357
)
 
(2,566
)
Increase (decrease) in cash
11,967

 
(11,000
)
 
 
 
 
Cash & cash equivalents at beginning of year
49,044

 
60,044

Cash & cash equivalents at end of year
$
61,011

 
$
49,044




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. Generally Accepted Accounting Principle (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 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,
 
 
2016
 
2015
 
2016
 
2015
Reported net income (loss) (U.S. GAAP)
 
$
(2,249
)
 
$
32,108

 
$
10,073

 
$
66,333

Add:
 
 
 
 
 
 
 
 
   Interest expense
 
5,259

 
4,722

 
20,888

 
18,484

   Provision (benefit) for income taxes
 
5,708

 
(39,692
)
 
17,711

 
(38,216
)
   Depreciation and amortization
 
11,817

 
11,426

 
48,486

 
42,712

Add special items before interest and taxes:
 
 
 
 
 
 
 
 
   Pension settlement (1)
 
(44
)
 
21,693

 
168

 
21,693

   Product portfolio optimization (2)
 
(1,091
)
 
—

 
5,693

 
—

   Work Stoppage (3)
 
4,162

 
—

 
4,162

 
—

   Reorganization charges (4)
 
—

 
125

 
—

 
4,316

   Executive terminations
 
(61
)
 
635

 
4,460

 
870

   Derivatives (5)
 
(710
)
 
(93
)
 
(1,860
)
 
(218
)
   Environmental obligation (6)
 
—

 
34

 
—

 
157

Adjusted EBITDA (non-GAAP)
 
$
22,791

 
$
30,958


$
109,781

 
$
116,131

 
 
 
 
 
 
 
 
 
Net sales
 
$
205,838

 
$
219,145

 
$
793,420

 
$
822,345

Net income (loss) margin (U.S. GAAP)
 
(1.1
)%
 
14.7
%
 
1.3
%
 
8.1
%
Adjusted EBITDA margin (non-GAAP)
 
11.1
 %
 
14.1
%
 
13.8
%
 
14.1
%

(1) The 2015 pension settlement charge relates to EMEA unwinding direct ownership of its Dutch defined benefit pension plan.
(2) Product portfolio optimization relates to inventory reductions to simplify and improve our operations.
(3) Work stoppage relates to the lower production volume impact, shipping costs and other direct expenses associated with the two-week Toledo, Ohio work stoppage in the fourth quarter of 2016.
(4) Management reorganization to support our growth strategy.
(5) Derivatives relate to hedge ineffectiveness on our natural gas contracts as well as mark-to-market adjustments on our natural gas contracts that have been de-designated and those for which we did not elect hedge accounting.
(6) Environmental obligation relates to our assessment of Syracuse China Company as a potentially responsible party with respect to the Lower Ley Creek sub-site of the Onondaga Lake Superfund site.




Table 2
 
 
 
 
 
 
 
 
Reconciliation of Net Cash Provided By Operating Activities to Free Cash Flow
(dollars in thousands)
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
 
Three months ended December 31,
 
Year ended December 31,
 
 
2016
 
2015
 
2016
 
2015
Net cash provided by operating activities (U.S. GAAP)
 
$
39,050

 
$
34,051

 
$
82,643

 
$
66,099

Capital expenditures
 
(11,081
)
 
(6,656
)
 
(34,604
)
 
(48,136
)
Proceeds from asset sales and other
 
—

 
5

 
—

 
7

Free Cash Flow (non-GAAP)
 
$
27,969

 
$
27,400

 
$
48,039

 
$
17,970




Table 3
 
 
 
 
 
 
Reconciliation to Trade Working Capital
 
 
 
 
 
 
(dollars in thousands)
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
December 31, 2016
 
September 30, 2016
 
December 31, 2015
Add:
 
 
 
 
 
 
Accounts receivable — net
 
$
85,113

 
98,547

 
$
94,379

Inventories — net
 
170,009

 
191,479

 
178,027

Less: Accounts payable
 
71,582

 
63,191

 
71,560

Trade Working Capital (non-GAAP)
 
$
183,540

 
$
226,835

 
$
200,846



Table 4
 
 
 
 
 
 
 
 
Summary Business Segment Information
 
 
 
 
 
 
 
 
(dollars in thousands)
(unaudited)
 
Three months ended December 31,
 
Year ended December 31,
Net Sales:
 
2016
 
2015
 
2016
 
2015
 
 
 
 
 
 
 
 
U.S. & Canada (1)
 
$
129,549

 
$
139,774

 
$
488,162

 
$
497,728

Latin America (2)
 
36,418

 
40,231

 
151,406

 
167,069

EMEA (3)
 
31,707

 
31,457

 
119,750

 
122,664

Other (4)
 
8,164

 
7,683

 
34,102

 
34,884

Consolidated
 
$
205,838

 
$
219,145

 
$
793,420

 
$
822,345

 
 
 
 
 
 
 
 
 
Segment Earnings Before Interest & Taxes (Segment EBIT) (5) :
 
 
 
 
 
 
 
 
U.S. & Canada (1)
 
$
20,176

 
$
23,389

 
$
77,916

 
$
80,406

Latin America (2)
 
(3,353
)
 
3,646

 
10,731

 
22,017

EMEA (3)
 
700

 
(23
)
 
(1,002
)
 
1,251

Other (4)
 
17

 
539

 
915

 
4,390

Segment EBIT
 
$
17,540

 
$
27,551

 
$
88,560

 
$
108,064

 
 
 
 
 
 
 
 
 
Reconciliation of Segment EBIT to Net Income (Loss):
 
 
 
 
 
 
 
 
Segment EBIT
 
$
17,540

 
$
27,551

 
$
88,560

 
$
108,064

Retained corporate costs (6)
 
(6,566
)
 
(8,019
)
 
(27,265
)
 
(34,645
)
Pension settlement
 
44

 
(21,693
)
 
(168
)
 
(21,693
)
Environmental obligation
 
—

 
(34
)
 
—

 
(157
)
Reorganization charges
 
—

 
(125
)
 
—

 
(4,316
)
Derivatives
 
710

 
93

 
1,860

 
218

Executive terminations
 
61

 
(635
)
 
(4,460
)
 
(870
)
Product portfolio optimization
 
1,091

 
—

 
(5,693
)
 
—

Work stoppage
 
(4,162
)
 
—

 
(4,162
)
 
—

Interest expense
 
(5,259
)
 
(4,722
)
 
(20,888
)
 
(18,484
)
Income tax benefit (expense)
 
(5,708
)
 
39,692

 
(17,711
)
 
38,216

Net income (loss)
 
$
(2,249
)
 
$
32,108

 
$
10,073

 
$
66,333

 
 
 
 
 
 
 
 
 
Depreciation & Amortization:
 
 
 
 
 
 
 
 
U.S. & Canada (1)
 
$
3,030

 
$
3,425

 
$
12,748

 
$
12,214

Latin America (2)
 
5,343

 
4,361

 
19,068

 
14,738

EMEA (3)
 
1,717

 
2,065

 
9,377

 
8,510

Other (4)
 
1,426

 
1,421

 
5,588

 
5,855

Corporate
 
301

 
154

 
1,705

 
1,395

Consolidated
 
$
11,817

 
$
11,426

 
$
48,486

 
$
42,712

(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 including glass products for OEMs that have an end market destination outside of Latin America.
(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.
(6) Retained corporate costs include certain headquarter, administrative and facility costs, and other costs that are not allocable to the reporting segments.


Table 5
 
 
 
Reconciliation of Net Income 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, 2016
 
Year Ended December 31, 2015
 
 
Reported net income (U.S. GAAP)
$
10,073

 
$
66,333

Add:
 
 
 
   Interest expense
20,888

 
18,484

   Provision (benefit) for income taxes
17,711

 
(38,216
)
   Depreciation and amortization
48,486

 
42,712

   Special items before interest and taxes
12,623

 
26,818

Adjusted EBITDA (non-GAAP)
$
109,781

 
$
116,131

 
 
 
 
Reported debt on balance sheet (U.S. GAAP)
$
407,840

 
$
431,019

   Plus: Unamortized discount and finance fees
4,480

 
5,832

Gross debt
412,320

 
436,851

   Less: Cash and cash equivalents
61,011

 
49,044

Debt net of cash
$
351,309

 
$
387,807



 

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

 
3.3 x



Table 6
 
 
Full year Outlook
 
 
Reconciliation of Net Income margin to Adjusted EBITDA Margin
 
(percent of estimated 2017 net sales)
 
 
(unaudited)
 
 
 
 
Outlook for the year ended
December 31, 2017
 
 
 
Net income margin (U.S. GAAP)
 
2.5% - 3.5%

Add:
 
 
   Interest expense
 
2.5
%
   Provision for income taxes
 
2.0
%
   Depreciation and amortization
 
6.0
%
   Special items before interest and taxes (1)
 
—
%
Adjusted EBITDA Margin (non-GAAP)
 
13.0% - 14.0%

 
 
 
(1) We have not estimated any impact for special items in 2017.