Libbey Inc. Announces Third Quarter 2016 Financial Results

• Net sales for the first nine months of 2016 were $587.6 million, compared to $603.2 million for the first nine months of 2015, a decrease of 2.6 percent (or a decrease of 0.2 percent when adjusted for currency).
• Net income for the first nine months of 2016 was $12.3 million, compared to $34.2 million during the first nine months of 2015.
• Adjusted EBITDA (see Table 1) was $87.0 million for the first nine months of 2016, compared to $85.2 million for the first nine months of 2015.

Nine-Month Segment Sales and Operational Review

• Net sales in the U.S. and Canada segment were $358.6 million for the first nine months of 2016, compared to $358.0 million in the first nine months of 2015, an increase of 0.2 percent. Foodservice channel growth of 3.7 percent and business-to-business channel growth of 1.5 percent were partially offset by a 7.2 percent decline in the retail channel.
• Net sales in the Latin America segment were $115.0 million, compared to $126.8 million in the first nine months of 2015, a decrease of 9.3 percent (or an increase of 0.6 percent in constant currency), primarily due to weakness in the business-to-business channel. Retail sales in the first nine months of 2016 increased 0.4 percent versus the prior-year period (or increased 13.0 percent when adjusted for currency).
• Net sales in the EMEA segment decreased 3.5 percent (or decreased 3.6 percent excluding currency impact) to $88.0 million, compared to $91.2 million in the first nine months of 2015. The decrease was primarily the result of weakness in the business-to-business channel.
• Net sales in Other were $25.9 million in the first nine months of 2016, compared to $27.2 million in the comparable prior-year period, reflecting a decrease of 4.6 percent (or an increase of 0.9 percent in constant currency).
• Our effective tax rate was 49.3 percent for the nine months ended September 30, 2016, compared to 4.1 percent for the nine months ended September 30, 2015. The change in the effective tax rate was driven by a valuation allowance in the United States in 2015, which resulted in pre-tax income that generated very little tax expense, and for 2016, a reserve for uncertain tax positions, an unbenefited pre-tax loss in the Netherlands due to a valuation allowance, and a smaller proportion of pre-tax income in lower tax rate jurisdictions.

Balance Sheet and Liquidity

• The Company had available capacity of $92.4 million under its ABL credit facility at September 30, 2016, with no loans outstanding. The Company also had cash on hand of $42.7 million at September 30, 2016.
• At September 30, 2016, Trade Working Capital, defined as inventories and accounts receivable less accounts payable, was $226.8 million, a decrease of $5.1 million, compared to $231.9 million at September 30, 2015 (see Table 3). The decrease was a result of lower inventories, partially offset by higher accounts receivable and lower accounts payable.

Sherry Buck, chief financial officer, commented: "We made an additional optional, early repayment on our Term Loan B of $5 million during the quarter, and we plan to continue prioritizing debt reduction during the near-term in support of our goal of reaching a target leverage ratio of 2.5x to 3.0x Debt Net of Cash to Adjusted EBITDA (See Table 5). We remain committed to our plan to return fifty percent of Free Cash Flow to shareholders during the period 2015 to 2017."

Webcast Information

Libbey will hold a conference call for investors on Thursday, November 3, 2016, at 11 a.m. Eastern Daylight 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^®, World^® Tableware, Syracuse^® China, and Crisal Glass^®. In 2015, Libbey Inc.'s net sales totaled $822.3 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 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 greater transparency of financial results and business outlook. In addition, we use non-GAAP data internally to assess performance 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 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

Libbey Inc.

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