Luxfer today announced financial results for the second quarter 2020, which ended June 28, 2020. Financial results for all periods are presented in U.S. GAAP, as the Company became an SEC domestic issuer as of January 1, 2019.
Second Quarter 2020 Summary
(based on year-over-year comparisons unless otherwise noted)
Net sales of $89.5 million decreased 23.2%, including a 1.3% unfavorable impact from currency and a 2.7% decrease due to the divestiture of the Czech recycling operation 1
GAAP net income of $4.1 million, including $0.8 million in restructuring expenses, improved from a net income of $3.5 million; adjusted net income of $4.7 million decreased 62.1%
GAAP EPS of $0.15, improved from $0.13; adjusted EPS of $0.17 decreased 61.4%
Adjusted EBITDA of $10.4 million decreased 48.5%; adjusted EBITDA margin of 11.6% decreased 570 basis points
Free cash flow of $12.1 million increased from negative ($11.7) million in the prior year, with a net debt to EBITDA ratio of 1.5x and no debt maturity until September 2021
Achieved $0.7 million in incremental net cost savings and remain on track to reach total transformation plan savings of $24 million by year end 2021
MANCHESTER, UK — Luxfer Holdings PLC (NYSE: LXFR), a global manufacturer of highly-engineered industrial materials, today announced financial results for the second quarter of 2020, ending June 28, 2020.
Second Quarter 2020 Results
(based on year-over-year comparisons unless otherwise noted)
Consolidated net sales decreased 23.2% to $89.5 million from $116.5 million. Excluding a $3.1 million decrease in sales due to the divestiture of the Czech recycling operation, core ‘sales decreased 21.1%, including an unfavorable foreign currency exchange impact of $1.5 million, or 1.3%. The sales decline was broad-based and driven by the impact of the COVID-19 pandemic, particularly pronounced in the industrial and transportation end-markets.
GAAP net income was $4.1 million, or $0.15 per diluted share, compared to a net income of $3.5 million, or $0.13 per diluted share. These results include $0.8 million in restructuring expenses, compared to restructuring expenses of $12.7 million in 2019.
Adjusted net income decreased 62.1% to $4.7 million from $12.4 million. Adjusted diluted earnings per share decreased 61.4% to $0.17 from $0.44. Adjusted EBITDA was $10.4 million, compared to $20.2 million. Adjusted EBITDA margin of 11.6% decreased 570 basis points from 17.3%.
“I am very proud of the Luxfer team who together adapted and overcame disruptions brought on by COVID-19. I am grateful for their efforts to ensure business continuity while prioritizing the health and safety of our team members and communities,” stated Luxfer’s Chief Executive Officer, Alok Maskara. “Luxfer’s second quarter results reflect the global macro environment of the COVID-19 pandemic, with broad-based market weakness that was especially evident in our industrial and transportation end-markets. While the environment remains challenging, we made excellent progress on our transformation plan and executed substantial additional actions to partially mitigate the volume declines. In addition to reducing costs, our relentless focus on working capital initiatives resulted in strong free cash flow of $12.1 million in the quarter.”
Second Quarter 2020 Segment Results
(based on year-over-year comparisons unless otherwise noted)
Elektron Segment
Net sales of $39.1 million decreased 33.0% from $58.4 million. Foreign currency exchange negatively impacted sales by $0.6 million, or 1.0%. The divestiture of the Czech recycling operation reduced sales by $3.1 million, or 5.3%.
Adjusted EBITDA decreased 59.5% to $5.3 million (13.6% of sales) from $13.1 million (22.4% of sales).
Gas Cylinders Segment
Net sales of $50.4 million decreased 13.3% from $58.1 million. Foreign currency exchange negatively impacted sales by $0.9 million, or 1.5%.
Adjusted EBITDA decreased 28.2% to $5.1 million (10.1% of sales) from $7.1 million (12.2% of sales).
Capital Resources and Liquidity
Free Cash Flow was $12.1 million in the second quarter of 2020, compared to negative ($11.7) million a year ago. Quarterly cash usage included approximately $1.6 million for restructuring as part of the Company’s transformation plan, compared to approximately $12.3 million in the prior year. During the quarter, the Company paid $3.4 million in dividends, or $0.125 per share.
At quarter end, the Company had net debt of $82.4 million, with a net debt to EBITDA ratio of 1.5x. The Company believes that it has ample liquidity to withstand current market conditions, with approximately $130 million in an undrawn revolving credit facility.
Impact of COVID-19 on Operations
We continue to operate all of our locations, as permitted by local authorities, with numerous protocols and procedures to protect the health and well-being of our employees, our supply chain, and the communities in which we operate. We are closely monitoring the evolving situation and are maintaining enhanced safeguards while ensuring business continuity.
As part of our COVID-19 response, we took decisive actions early in Q2 to effectively manage capacity given rapid changes in customer demand patterns by implementing extensive furloughs, reduced work weeks, and permanent layoffs. We worked closely with our suppliers and were able to avoid any significant disruption in our supply chain.
Our demand level remains below normal, although we noticed sequential month-over- month improvement in June after some of the COVID-19 restrictions eased. Currently, most of our locations are operating at reduced capacity and many of our employees remain on furlough.
2020 Guidance
“Given the continued market uncertainty and volatility, Luxfer is not providing financial guidance for the remainder of the year. We will continue to focus on controllable business measures, such as cost reductions and cash generation,” stated Maskara. “We expect the current global economic conditions to continue to have a significant near-term impact on our business and have implemented various measures to position Luxfer for success when markets improve. We have a strong balance sheet and existing credit facilities, which provide financial flexibility that will enable us to emerge from the economic downturn as a stronger company.”
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