Libbey, Inc. (LBY)

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Libbey, Inc. (LBY)

Q3 2008 Earnings Call Transcript

October 30, 2008 11:00 am ET


Ken Boerger – VP & Treasurer

John Meier – Chairman & CEO

Greg Geswein – VP & CFO


Arnie Ursaner – CJS Securities

Carla Casella – JP Morgan

Doug Lane – Jefferies & Company

Bob Wetenhall – Royal Bank of Canada

Greg Weiss [ph] – WPC

Brian Schinderle – Wolf Point Capital

Jim Barrett – CL King & Associates

Amy Greene – Avondale Partners



Good morning, ladies and gentlemen, welcome to the Libbey, Inc. third quarter 2008 conference call. During today's presentation all parties will be in a listen-only mode. Following the presentation the conference will be open for questions. (Operator instructions) This conference is being recorded today on Thursday, the 30th of October, 2008.

I would now like to turn the conference over to Mr. Ken Boerger. Please go ahead, sir.

Ken Boerger

Good morning and welcome to Libbey's third quarter conference call. I'm Ken Boerger, Libbey's Vice President and Treasurer. With me on today's call are John Meier, Chairman and Chief Executive Officer, Greg Geswein, Vice President and Chief Financial Officer, and Scott Sellick, Vice President and Chief Accounting Officer.

I will start by reading the cautionary statement and then I will turn the call over to John Meier for his opening comments.

Material presented today includes forward-looking statements about Libbey, Inc. These statements only reflect Libbey's best assessment at this time, and are subject to risks and uncertainties, including market conditions, competitive pressures, significant cost increases, and currency fluctuations. Investors should not place undue reliance on such statements. For further information and important factors potentially affecting performance, please refer to today's press release and/or the Company's Form 10-K for the year-ended December 31st 2007.

And with that, I will turn the call over to John Meier.

John Meier

Thanks, Ken. Thank you for joining Libbey's quarterly conference call. As our pre-release conference call of October 17th discussed, various details on the broader business and today's release gives ample and full disclosure on our customer basis and their Q3 performance. I will focus my remarks on broader themes and directionally what we are seeing in our markets going forward. It is my belief the market has digested our Q3 performance and our commentary of October 17th.

Further, and as noted on October 17th, it is in this session that Greg Geswein, our CFO, will give deeper insight into all of our numbers.

Accordingly, my focus and comments are forward-looking. The reality is that our markets are still tepid. News of the day impacts the traffic-driven business in which Libbey participates. And that is a fundamental characterization of both our food service and retail businesses worldwide.

Consumer behavior in challenging economic times reflects in less restaurant traffic and more discriminating shopping behavior. Clearly, the very severe external events impacting financial markets of late September and early October chilled our customer bases. The good news is that our order flow in the USA and in Mexico in the last two weeks in key sectors has picked up.

To that end, in Mexico, increases retail business we expect October to be a record month, any month, any year. This is in local currency, of course. And given the 25% devaluation since September, it will not play through as strongly in our dollar reporting when it comes time to assess Q4. But frankly, that's not the point at the moment. The good news is the performance of the sector and this news is welcome. While one swallow does not make a spring, directionally it is encouraging.

Our USA businesses have also shown a pick up in the last half of the month, food service, retail and our industrial business. Europe, we expect will meet our expectations for the quarter and we expect China to do the same. But again, expectations as defined in our October 17th guidance and affirm today are reduced from how we viewed Q4 in August of this year, but unlike – not unlike the vast majority of all businesses I would suggest.

Let's talk about actions taken. In the face of these turbulent markets and a recession, we announced in our press release today actions taken that will impact 2009 in terms of hard, cold cash. We have identified over 10 categories of spending that have been significantly modified or outright cut for 2009.

Our press release shares a range of $20 million to $23 million of savings for the year 2009. This is a bold step, but I believe a necessary step. Painful in some respects as embodied in that list beyond capital expenditure cuts are also worldwide salary freezes and worldwide hiring freezes, among others. Our salary population has been notified of this 90 minutes ago.

Our view of 2009 is that it will be a challenging marketplace and we must plan accordingly. These announced actions are proactive, appropriate, and in my view necessary.

Going forward, last week Libbey exhibited in the New York Tabletop Show which is our second largest USA retail show. Our meetings with key retailers were good, our schedule was full and programs are being solidified for 2009. Their mood is cautious as they enter this fall selling season, but at the same time we noted that our middle market/cost driven retailers to have a more positive outlook as traffic is migrating to those sectors. We are well-positioned with those retailers also.

Our performance on the retail shelf will be a function of shopper sentiment and their migrating to lower price point categories. As stated on October 17th, food service in Q4 will be slower than last year and this is embedded in our guidance.

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