Luxfer Announces Q4 and FY 2020 Financial Results

23 February 2021

Fourth Quarter 2020 Summary (all comparisons year-over-year unless otherwise noted; results exclude aluminum products discontinued operations)

• Net sales of $82.1 million decreased 0.2%, including a 1.2% benefit from currency
• GAAP net income of $6.6 million, including $1.5 million in restructuring and other expenses, increased from
• $1.6 million in the prior year; adjusted net income of $7.7 million increased 35%
• GAAP EPS of $0.24 increased from $0.06; adjusted EPS of $0.27 increased 35%
• Adjusted EBITDA of $13.8 million increased 21.1%; adjusted EBITDA margin of 16.8% increased 290 basis points

Full Year 2020 Summary (all comparisons year-over-year unless otherwise noted; results exclude aluminum products discontinued operations)

• Net sales of $324.8 million decreased 13.0%; 2019 sales included a 2.0% contribution from the Czech recycling operation, which was divested in Q2 of that year
• GAAP net income of $20.8 million, which includes $9.3 million in restructuring and other expenses, improved from $8.7 million in the prior year; adjusted net income of $28.9 million decreased 29%
• GAAP EPS of $0.74 improved from $0.31; adjusted EPS of $1.03 decreased 30%
• Adjusted EBITDA of $53.9 million decreased 19.7%; adjusted EBITDA margin of 16.6% decreased 140 basis points
• Free cash flow of $41.3 million increased from an outflow of $8.1 million

Notable Strategic Updates

• Intent to exit non-strategic aluminum product lines, including Superform; moved to discontinued operations as of the end of 2020
• Board authorization of $25M share repurchase program
• Introducing 2021 adjusted EPS guidance range of $1.05 to $1.25

MANCHESTER, UK - (BUSINESS WIRE) - Luxfer Holdings PLC (NYSE: LXFR), a global manufacturer of highly- engineered industrial materials, today announced financial results for the fourth quarter and full year 2020, ending December 31, 2020. The company also announced its intent to divest of non-strategic Aluminum product lines, including Superform, which will be treated as discontinued operations within financial results.

Fourth Quarter 2020 Results (all comparisons year-over-year unless otherwise noted; results exclude discontinued operations)

Consolidated net sales decreased 0.2% to $82.1 million from $82.3 million, including a favorable foreign currency benefit of $1.0 million, or 1.2%. The sales decrease was due to the negative impact of COVID-19 on industrial end markets, partially offset by growth in alternative fuel including CNG and Hydrogen.

GAAP net income increased to $6.6 million, or $0.24 per diluted share, compared to $1.6 million, or $0.06 per diluted share. Results included $1.5 million in restructuring and other charges, compared to restructuring and other charges of $1.4 million in the prior year period.

Adjusted net income increased 35% to $7.7 million from $5.7 million. Adjusted diluted earnings per share increased 35% to $0.27 from $0.20. Adjusted EBITDA of $13.8 million increased 21.1%. Adjusted EBITDA margin of 16.8% expanded 290 basis points

“We are proud of Luxfer’s strong fourth quarter results despite sales being negatively impacted by the ongoing COVID-19 pandemic. I am grateful to all our employees who delivered strong cash and margin performance throughout the year, while continuing to operate safely. During the year, we made significant progress on our transformation plan, including achieving better-than-expected cost savings and the decision to divest non-strategic aluminum product lines. In addition, our Lean working capital initiatives delivered strong annual free cash flow of $41 million. Given the strength of our free cash flow and low debt levels, we will continue to strategically invest in future growth opportunities, while returning cash to shareholders in the form of dividends and share buy backs,” commented Luxfer’s Chief Executive Officer, Alok Maskara.

Full Year 2020 Results (all comparisons year-over-year unless otherwise noted; results exclude aluminum products discontinued operations)

Consolidated net sales decreased 13.0% to $324.8 million, including a 2.0% decrease due to the divestiture of the Czech recycling operation in the second quarter of 2019. The sales decline was broad-based and driven by the impact of the COVID-19 pandemic, which was more pronounced in industrial end markets while transportation and defense end markets saw a relatively smaller decline.

GAAP net income of $20.8 million or $0.74 per diluted share, was up $12.1 million and $0.43 per diluted share, respectively. These results included $9.3 million in restructuring and other charges, compared to restructuring and other charges of $28.4 million in 2019.

Adjusted net income of $28.9 million decreased 29.3%. Adjusted diluted earnings per share of $1.03, decreased 30%. Adjusted EBITDA of $53.9 million decreased 19.7%. Adjusted EBITDA margin of 16.6% decreased 140 basis points.

Segment Results (all comparisons year-over-year unless otherwise noted; results exclude aluminum products discontinued operations)

Elektron Segment

Fourth Quarter 2020

• Net sales of $47.2 million increased 1.3% as foreign currency exchange benefited sales by 1.1%, or $0.5 million
• Adjusted EBITDA increased 24.7% to $9.1 million (19.3% of sales) primarily due to cost actions

Full Year 2020

• Net sales of $182.9 million decreased 16.8%, including a 3.4% decrease due to the divestiture of the Czech recycling operation; the remaining business was primarily affected by the COVID-19 pandemic impact, specifically in industrial and transportation end markets
• Adjusted EBITDA of $32.6 million decreased 27.2% as cost actions partially offset the impact of volume declines

Gas Cylinders Segment

Fourth Quarter 2020

• Net sales of $34.9 million decreased 2.2%; foreign currency exchange benefited sales by $0.5 million, or 1.4%
• Adjusted EBITDA of $4.7 million increased 14.6% as cost savings more than offset the impact of volume declines

Full Year 2020

• Net sales of $141.9 million decreased 7.6%, primarily due to a decline in industrial and transportation end markets
• Adjusted EBITDA of $21.3 million decreased 4.5%, as cost actions partially offset the impact of volume declines

Intent to Divest Certain Aluminum Products, Including Superform

During 2020, the Company made the decision to divest most aluminum product lines, including Superform, which totaled $53 million in revenue for the year. Based on the approval of Luxfer’s Board of Directors to divest these assets and the probability that such divestiture will be consummated, the associated financial results will be presented as discontinued operations in our fourth quarter and full year 2020 financial statements and prior periods will be restated for consistency.

Maskara remarked, “After a thoughtful review of our portfolio of businesses and the future trajectory of Luxfer, we conclude that it is in the best interest of our shareholders, employees and customers to divest these assets. This will enable us to focus our strategic efforts and capital deployment as we invest to grow the Company. The remaining portfolio has stronger margins and growth profile with a narrow focus on high performance Magnesium Alloys, Zirconium Catalysts and high-pressure Composite Cylinders.”

Capital Resources and Liquidity

Free cash flow was $41.3 million for the year, compared to an outflow of $8.1 million in the prior year. Full year cash usage included approximately $4 million for restructuring as part of the Company’s transformation plan, compared to approximately $25 million in the prior year. During the quarter, the Company paid $3.4 million in ordinary dividends, or $0.125 per share. Given strong cash flow, the Company restored normal level of funding for growth and productivity although certain projects remain delayed due to COVID-19.

At quarter end, the Company had $1.5 million in cash and approximately $146 million in an undrawn revolving credit facility. Net debt totaled $51.9 million, resulting in a net debt to EBITDA ratio of 1.0x. During the fourth quarter, the Company used cash on the balance sheet to prepay $25 million of private placement debt due in September 2021.

2021 Guidance

“While significant market uncertainty remains, we have gained more visibility into customer demand patterns and are providing broad financial guidance for 2021. We expect Adjusted EPS to be in the range of $1.05 - $1.25. We have a strong balance sheet and undrawn credit facility, which provides financial flexibility for us continue investing for growth and explore portfolio opportunities to build an even stronger company,” added Maskara.

Conference Call Information

Luxfer has scheduled a conference call at 8:30 a.m. U.S. Eastern Daylight Time on Wednesday, February 24, 2021, during which management will provide a review of the Company’s financial results for the fourth quarter and full year of 2020. U.S. participants may access the conference call by telephoning +1-877-341-8545. Participants from other countries may access the conference call by telephoning +1-908-982-4601. The participant conference ID code is 9578286. The following link provides access to a webcast for the conference call:

https://event.on24.com/wcc/r/3009671/B1E4F0D6E1F5AD524F4944AD0BE526C2

A recording of the conference call will be available for replay two hours after the completion of the call and will remain accessible until the next quarterly report is released. To hear the recording, please call +1-855-859-2056 in the U.S. and +1-404-537-3406 in other countries. Enter conference ID code 9578286 when prompted. Slides used in the presentation and a recording of the call will also be available in the Investor Relations section of the Luxfer website at www.luxfer.com.

Non-GAAP Financial Measures

Luxfer Holdings PLC prepares its financial statements using U.S. Generally Accepted Accounting Principles (GAAP). When a company discloses material information containing non-GAAP financial measures, SEC regulations require that the disclosure include a presentation of the most directly comparable GAAP measure and a reconciliation of the GAAP and non-GAAP financial measures. Management’s inclusion of non-GAAP financial measures in this release is intended to supplement, not replace, the presentation of the financial results in accordance with GAAP. Luxfer management believes that these non-GAAP financial measures, when considered together with the GAAP financial measures, provide information that is useful to investors in understanding period- over-period operating results separate and apart from items that may, or could, have a disproportionately positive or negative impact on results in any period. Management also believes that these non-GAAP financial measures enhance the ability of investors to analyze the Company’s business trends and understand the Company’s performance. In addition, management may utilize non-GAAP financial measures as a guide in the Company’s forecasting, budgeting and long-term planning process. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures presented in accordance with GAAP.

Forward-Looking Statements

This release contains certain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Examples of such forward-looking statements include, but are not limited to: (i) statements regarding the Company’s results of operations and financial condition; (ii) statements of plans, objectives or goals of the Company or its management, including those related to financing, products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Words such as “believes,” “anticipates,” “expects,” “intends,” “forecasts,” and “plans,” and similar expressions, are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other
forward-looking statements will not be achieved. The Company cautions that several important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include, but are not limited to: (i) lower than expected future sales;
(ii) increasing competitive industry pressures; (iii) general economic conditions or conditions affecting demand for the products and services it offers, both domestically and internationally, including as a result of post-Brexit regulation, being less favorable than expected; (iv) worldwide economic and business conditions and conditions in the industries in which it operates; (v) fluctuations in the cost of raw materials, utilities and other inputs; (vi) currency fluctuations and hedging risks; (vii) its ability to protect its intellectual property; (viii) the significant amount of indebtedness it has incurred and may incur and the obligations to service such indebtedness and to comply with the covenants contained therein; and (ix) risks related to the impact of the global COVID-19 pandemic, such as the scope and duration of the outbreak, government actions and restrictive measures implemented in response, supply chain disruptions and other impacts to the business, and the Company’s ability to execute business continuity plans, as a result of the COVID-19 pandemic. The Company cautions that the foregoing list of important factors is not exhaustive. These factors are more fully discussed in the sections entitled “Forward-Looking Statements” and “Risk Factors” in its Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the U.S. Securities and Exchange Commission on March 10, 2020. When relying on forward-looking statements to make decisions with respect to the Company, investors and others should carefully consider the foregoing factors and other uncertainties and events. Such forward-looking statements speak only as of the date on which they are made, and the Company does not undertake any obligation to update or revise any of them, whether because of new information, future events or otherwise.

About Luxfer Holdings PLC (“Luxfer”)

Luxfer is a global manufacturer of highly-engineered industrial materials, which focuses on value creation by using its broad array of technical know-how and proprietary technologies. Luxfer’s high-performance materials, components and high-pressure gas containment devices are used in defense and emergency response, healthcare, transportation and general industrial applications. For more information, please visit www.luxfer.com.

Luxfer is listed on the New York Stock Exchange and its ordinary shares trade under the symbol LXFR.

Investor Contact:
Heather Harding Chief Financial Officer
+1-414-269-2419
Investor.Relations@luxfer.com