NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation and Responsibility for interim Financial Statements
We prepared the accompanying unaudited condensed consolidated financial statements of Luxfer Holdings PLC and all wholly-owned, majority owned or otherwise controlled subsidiaries on the same basis as our annual audited financial statements. We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
Our quarterly financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021. As used in this report, the terms "we," "us," "our," "Luxfer" and "the Company" mean Luxfer Holdings PLC and its subsidiaries, unless the context indicates another meaning.
In the opinion of management, our financial statements reflect all adjustments, which are only of a normal recurring nature, necessary for the fair statement of financial statements for interim periods in accordance with U.S. GAAP and with the instructions to Form 10-Q in Article 10 of Securities and Exchange Commission (SEC) Regulation S-X.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions about future events that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates, and any such differences may be material to our financial statements.
Our fiscal year ends on December 31. We report our interim quarterly periods on a 13-week quarter basis, ending on a Sunday. The Second Quarter 2022, ended on June 26, 2022, and the Second Quarter 2021, ended on June 27, 2021.
Accounting standards issued but not yet effective
None that will be material to the Company.
2. Earnings per share
Basic earnings per share are computed by dividing net income or loss for the period by the weighted-average number of ordinary shares outstanding, net of treasury shares and shares held in ESOP. Diluted earnings per share are computed by dividing net income or loss for the period by the weighted average number of ordinary shares outstanding and the dilutive ordinary shares equivalents.
Basic and diluted earnings per share were calculated as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | Year-to-date | |
| In millions except share and per-share data | 2022 | | 2021 | | 2022 | | 2021 | |
| Basic earnings: | | | | | | | | |
| Net income from continuing operations | $ | 9.6 | | | $ | 11.9 | | | $ | 17.3 | | | $ | 20.5 | | |
| Net (loss) / income from discontinued operations | (0.3) | | | (0.9) | | | (0.4) | | | 5.0 | | |
| Net income | $ | 9.3 | | | $ | 11.0 | | | $ | 16.9 | | | $ | 25.5 | | |
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| Weighted average number of £0.50 ordinary shares: | | | | | | | | |
| For basic earnings per share | 27,428,579 | | | 27,771,983 | | | 27,458,980 | | | 27,717,025 | | |
| Dilutive effect of potential common stock | 274,638 | | | 359,802 | | | 261,085 | | | 378,763 | | |
| For diluted earnings per share | 27,703,217 | | | 28,131,785 | | | 27,720,065 | | | 28,095,788 | | |
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| Earnings / (loss) per share using weighted average number of ordinary shares outstanding(1): | |
| Basic earnings per ordinary share for continuing operations | $ | 0.35 | | | $ | 0.43 | | | $ | 0.63 | | | $ | 0.74 | | |
| Basic (loss) / earnings per ordinary share for discontinued operations | (0.01) | | | (0.03) | | | (0.01) | | | 0.18 | | |
| Basic earnings per ordinary share | $ | 0.34 | | | $ | 0.40 | | | $ | 0.62 | | | $ | 0.92 | | |
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| Diluted earnings per ordinary share for continuing operations | $ | 0.35 | | | $ | 0.42 | | | $ | 0.62 | | | $ | 0.73 | | |
| Diluted (loss) / earnings per ordinary share for discontinued operations | (0.01) | | | (0.03) | | | (0.01) | | | 0.18 | | |
| Diluted earnings per ordinary share | $ | 0.34 | | | $ | 0.39 | | | $ | 0.61 | | | $ | 0.91 | | |
(1) The calculation of earnings per share is performed separately for continuing and discontinued operations. As a result, the sum of the two in any particular period may not equal the earnings-per-share amount in total
In the second quarter of 2022 and 2021 and year-to-date 2022, basic average shares outstanding and diluted average shares outstanding were the same for discontinued operations because the effect of potential shares of common stock was anti-dilutive since the Company generated a net loss from discontinued operations.
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3. Net Sales
Disaggregated sales disclosures for the quarter and year-to-date ended June 26, 2022, and June 27, 2021, are included below and in Note 14, Segmental Information.
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| | Second Quarter | |
| | 2022 | | 2021 | |
| In millions | Gas Cylinders | Elektron | Total | | Gas Cylinders | Elektron | Total | |
| General industrial | $ | 8.3 | | $ | 32.2 | | $ | 40.5 | | | $ | 9.9 | | $ | 25.7 | | $ | 35.6 | | |
| Transportation | 19.1 | | 16.2 | | 35.3 | | | 16.1 | | 11.9 | | 28.0 | | |
| Defense, First Response & Healthcare | 18.7 | | 15.0 | | 33.7 | | | 20.5 | | 14.9 | | 35.4 | | |
| | $ | 46.1 | | $ | 63.4 | | $ | 109.5 | | | $ | 46.5 | | $ | 52.5 | | $ | 99.0 | | |
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| | Year-to-date | |
| | 2022 | | 2021 | |
| In millions | Gas Cylinders | Elektron | Total | | Gas Cylinders | Elektron | Total | |
| General industrial | $ | 16.7 | | $ | 59.1 | | $ | 75.8 | | | $ | 15.7 | | $ | 47.4 | | $ | 63.1 | | |
| Transportation | 36.0 | | 29.1 | | 65.1 | | | 31.0 | | 23.7 | | 54.7 | | |
| Defense, First Response & Healthcare | 35.8 | | 29.8 | | 65.6 | | | 36.0 | | 30.4 | | 66.4 | | |
| | $ | 88.5 | | $ | 118.0 | | $ | 206.5 | | | $ | 82.7 | | $ | 101.5 | | $ | 184.2 | | |
The Company’s performance obligations are satisfied at a point in time. With the reclassification of our Superform business as discontinued operations, none of the Company's revenue from continuing operations is satisfied over time. As a result, the Company's contract receivables, contract assets and contract liabilities are included within current assets and liabilities held-for-sale.
4. Restructuring
The $0.3 million (2021: $0.2 million) and $1.7 million restructuring charges (2021: $1.6 million) in the second quarter and first half of 2022, respectively, included $0.1 million (2021: $0.2 million) and $1.5 million (2021: $0.7 million), respectively, of further costs associated with the announced closure of Luxfer Gas Cylinders France, and was largely legal and professional fees. In addition $0.2 million of costs were incurred in the second quarter of 2022 relating to one-time employee termination benefits in the Elektron division in relation to the consolidation of production facilities in the Magnesium Powders operations incurred in the second quarter of 2022.
The first half of 2021 also includes $0.9 million primarily of one-time employee termination benefits in the Elektron division, largely in relation to the divestiture of our small Luxfer Magtech production facility in Ontario, Canada.
Restructuring-related costs by reportable segment were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Second Quarter | | Year-to-date | |
| In millions | | 2022 | | 2021 | | 2022 | | 2021 | |
| Severance and related costs | | | | | | | | | |
| Gas Cylinders | | $ | 0.1 | | | $ | 0.2 | | | $ | 1.5 | | | $ | 0.7 | | |
| Elektron | | 0.2 | | | — | | | 0.2 | | | 0.9 | | |
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| Total restructuring charges | | $ | 0.3 | | | $ | 0.2 | | | $ | 1.7 | | | $ | 1.6 | | |
4. Restructuring (continued)
Activity related to restructuring, recorded in Other current liabilities in the consolidated balance sheets is summarized as follows:
| | | | | | | | | | | | | |
| In millions | 2022 | | | |
| Balance at January 1, | $ | 11.7 | | | | |
| Costs incurred | 1.7 | | | | |
| Cash payments and other | (7.0) | | | | |
| Balance at June 26, | $ | 6.4 | | | | |
5. Acquisition and disposal related costs
On March 15, 2021 the Company completed the acquisition of the Structural Composites Industries LLC (SCI) business of Worthington Industries, Inc., based in Pomona, California, for $19.3 million cash consideration. The acquisition of SCI strengthens Luxfer’s composite cylinder offerings and aligns with recent investment to enhance our alternative fuel capabilities to capitalize on the growing compressed natural gas (CNG) and hydrogen opportunities.
Acquisition-related costs of $0.3 million in the first half of 2022 and $0.9 million in the first half of 2021 represent transitional costs and professional fees incurred in relation to the SCI acquisition.
6. Other charges
There were no other charges in the first half of 2022. Other charges of $1.1 million in the first half of 2021 relates to the settlement of a class action lawsuit in the Gas Cylinders segment in relation to an alleged historic violation of the Californian Labor Code, concerning a Human Resources administration matter.
7. Supplementary balance sheet information
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| | | June 26, | | December 31, | |
| In millions | | 2022 | | 2021 | |
| Accounts and other receivables | | | | | |
| Trade receivables | | $ | 65.8 | | | $ | 45.8 | | |
| Related parties | | — | | | 0.1 | |
| Prepayments and accrued income | | 5.4 | | 8.5 | |
| Derivative financial instruments | | 0.2 | | 0.1 | |
| Deferred consideration | | 1.0 | | 1.0 | |
| Other receivables | | 2.8 | | 2.3 | |
| Total accounts and other receivables | | $ | 75.2 | | | $ | 57.8 | | |
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| Inventories | | | | | |
| Raw materials and supplies | | $ | 45.3 | | | $ | 39.3 | | |
| Work-in-process | | 34.9 | | | 26.7 | | |
| Finished goods | | 24.5 | | | 24.5 | | |
| Total inventories | | $ | 104.7 | | | $ | 90.5 | | |
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| Property, plant and equipment, net | | | | | |
| Land, buildings and leasehold improvements | | $ | 59.1 | | | $ | 64.6 | | |
| Machinery and equipment | | 254.2 | | | 266.3 | | |
| Construction in progress | | 8.8 | | | 8.4 | | |
| Total property, plant and equipment | | 322.1 | | | 339.3 | | |
| Accumulated depreciation and impairment | | (242.8) | | | (251.8) | | |
| Total property, plant and equipment, net | | $ | 79.3 | | | $ | 87.5 | | |
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| Other current liabilities | | | | | |
| Restructuring provision | | $ | 6.4 | | | $ | 11.7 | | |
| Short term provision | | 0.6 | | | 0.2 | | |
| | | | | | |
| Derivative financial instruments | | 0.5 | | | 0.1 | | |
| Operating lease liability | | 4.7 | | | 3.0 | | |
| Advance payments | | 5.7 | | | 4.6 | | |
| Total other current liabilities | | $ | 17.9 | | | $ | 19.6 | | |
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| Other non-current liabilities | | | | | |
| Contingent liabilities | | $ | 0.4 | | | $ | 1.8 | | |
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| Operating lease liability | | 16.1 | | | 9.8 | | |
| Other non-current liabilities | | 0.1 | | | — | | |
| Total other non-current liabilities | | $ | 16.6 | | | $ | 11.6 | | |
8. Goodwill and other identifiable intangible assets
Changes in goodwill during the first half ended June 26, 2022, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | Gas Cylinders | | Elektron | | Total | |
| At January 1, 2022 | $ | 27.6 | | | $ | 42.1 | | | $ | 69.7 | | |
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| Exchange difference | (2.1) | | | (1.3) | | | (3.4) | | |
| Net balance at June 26, 2022 | $ | 25.5 | | | $ | 40.8 | | | $ | 66.3 | | |
Accumulated goodwill impairment losses in relation to continuing activities were $8.0 million as of June 26, 2022 and December 31, 2021.
Identifiable intangible assets consisted of the following:
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| | Customer relationships | | Technology and trading related | | Total | |
| | $M | | $M | | $M | |
| Cost: | | | | | | |
| At January 1, 2022 | 15.2 | | | 8.2 | | | 23.4 | | |
| Exchange movements | — | | | (0.6) | | | (0.6) | | |
| At June 26, 2022 | 15.2 | | | 7.6 | | | 22.8 | | |
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| Accumulated amortization: | | | | | |
| At January 1, 2022 | 5.7 | | | 4.0 | | | 9.7 | | |
| Provided during the period | 0.2 | | | 0.2 | | | 0.4 | | |
| Exchange movements | — | | | (0.3) | | | (0.3) | | |
| At June 26, 2022 | 5.9 | | | 3.9 | | | 9.8 | | |
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| Net book values: | | | | | | |
| At January 1, 2022 | 9.5 | | | 4.2 | | | 13.7 | | |
| At June 26, 2022 | 9.3 | | | 3.7 | | | 13.0 | | |
Identifiable intangible asset amortization expense was $0.4 million and $0.4 million for the first half of 2022 and 2021 respectively.
Intangible asset amortization expense in 2022 and each of the following four years is expected to be approximately $1.0 million.
9. Debt
Debt outstanding was as follows:
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| In millions | June 26, 2022 | | December 31, 2021 | |
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| 4.88% Loan Notes due 2023 | 25.0 | | | 25.0 | | |
| 4.94% Loan Notes due 2026 | 25.0 | | | 25.0 | | |
| Revolving credit facility | 26.8 | | | 10.8 | | |
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| Unamortized debt issuance costs | (0.9) | | | (1.2) | | |
| Total debt | $ | 75.9 | | | $ | 59.6 | | |
| Less current portion | $ | — | | | $ | — | | |
| Non-current debt | $ | 75.9 | | | $ | 59.6 | | |
The weighted-average interest rate on the revolving credit facility was 2.62% for the Second Quarter of 2022 and 1.70% for the full-year 2021.
9. Debt (continued)
The maturity profile of the Company's debt, excluding unamortized issuance costs and discounts, is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | | 2022 | | 2023 | | 2024 | | 2025 | | 2026 | | Thereafter | | Total | |
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| Loan Notes due 2023 | | — | | | 25.0 | | | — | | | — | | | — | | | — | | | 25.0 | | |
| Loan Notes due 2026 | | — | | | — | | | — | | | — | | | 25.0 | | | — | | | 25.0 | | |
| Revolving credit facility | | — | | | — | | | — | | | — | | | 26.8 | | | — | | | 26.8 | | |
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| Total debt | | $ | — | | | $ | 25.0 | | | $ | — | | | $ | — | | | $ | 51.8 | | | $ | — | | | $ | 76.8 | | |
Loan notes due and shelf facility
The Note Purchase Agreement and Private Shelf Agreement requires us to maintain compliance with a minimum interest coverage ratio and a leverage ratio. We have been in compliance with the covenants under the Note Purchase and Private Shelf Agreement throughout all of the quarterly measurement dates from and including September 30, 2014, to June 26, 2022.
The Loan Notes due 2023 will be disclosed as a current liability at the Third Quarter, ended September 25, 2022.
The Loan Notes due 2023 and 2026, the Shelf Facility and the Note Purchase and Private Shelf Agreement are governed by the law of the State of New York.
Senior Facilities Agreement
During the first half of 2022, we drew down net $18.1 million on the Revolving Credit Facility and the balance outstanding at June 26, 2022, was $26.8 million, and at December 31, 2021, was $10.8 million, with $73.2 million undrawn at June 26, 2022.
We have been in compliance with the covenants under the Senior Facilities Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to June 26, 2022.
10. Discontinued Operations
Our Superform aluminum superplastic forming business operating in the U.S. was historically included in the Gas Cylinders segment. As a result of our decision to exit non-strategic aluminum product lines, we have reflected the results of operations of this business as discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. We expect the sale of our Superform business to occur in 2022.
The assets and liabilities of the Superform business have been presented within assets held-for-sale and liabilities held-for-sale in the consolidated balance sheets for 2022 and 2021.
In 2021, our Superform U.K. business was also disclosed within assets and liabilities held-for-sale. The business was sold in September 2021.
Results of discontinued operations in the first half of 2022 and 2021 were as follows:
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| | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | | 2022 | | 2021 | |
| Net sales | $ | 2.0 | | | $ | 4.9 | | | | $ | 3.7 | | | $ | 14.6 | | |
| Cost of goods sold | (1.6) | | | (5.6) | | | | (3.2) | | | (15.7) | | |
| Gross profit/(loss) | $ | 0.4 | | | $ | (0.7) | | | | $ | 0.5 | | | $ | (1.1) | | |
| Selling, general and administrative expenses | (0.2) | | | (0.3) | | | | (0.4) | | | (1.7) | | |
| Restructuring charges | (0.3) | | | — | | | | (0.3) | | | — | | |
| Acquisition and disposal related costs | (0.2) | | | — | | | | (0.2) | | | — | | |
| Operating loss | $ | (0.3) | | | $ | (1.0) | | | | $ | (0.4) | | | $ | (2.8) | | |
| Tax credit | — | | | 0.5 | | | | — | | | 0.7 | | |
| Net loss | $ | (0.3) | | | $ | (0.5) | | | | $ | (0.4) | | | $ | (2.1) | | |
In the First Quarter of 2021, the Company sold its U.S. aluminum gas cylinders business for $21.0 million which resulted in a gain on sale of $7.5 million, net of a $2.0 million tax charge which was recognized in the First Quarter of 2021. In the Second Quarter of 2021, there was a $0.4 million working capital adjustment, reducing the purchase price to $20.6 million and the gain on disposal to $7.1 million.
10. Discontinued Operations (continued)
The assets and liabilities classified as held-for-sale related to discontinued operations were as follows:
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| Held-for-sale assets | June 26, | | December 31, | |
| In millions | 2022 | | 2021 | |
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| Right-of-use-assets from operating leases | $ | 2.9 | | | $ | — | | |
| Inventory | 3.1 | | | 2.7 | | |
| Accounts and other receivables | 1.8 | | | 2.1 | | |
| Held-for-sale assets | $ | 7.8 | | | $ | 4.8 | | |
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| Held-for-sale liabilities | | | | |
| Accounts payable | 0.7 | | | 0.5 | | |
| Accrued liabilities | 0.5 | | | 0.1 | | |
| Other liabilities | 3.5 | | | — | | |
| Lease Liabilities | — | | | 0.8 | | |
| Held-for-sale liabilities | $ | 4.7 | | | $ | 1.4 | | |
Also included within assets held-for-sale in 2022 and 2021 are land and buildings valued at $1.2 million, and an additional $3.7 million in 2021, within our Elektron Segment.
The depreciation and amortization, capital expenditures and significant non-cash items were as follows:
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| | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | | 2022 | | 2021 | |
| Cash flows from discontinued operating activities: | | | | | | | | | |
| Depreciation | $ | — | | | $ | 0.1 | | | | $ | — | | | $ | 0.3 | | |
Cash balances are swept into the treasury entities at the end of each day, these sweeps are recorded within operating cash flows in the statements of cash flows.
11. Income Taxes
We manage our affairs so that we are centrally managed and controlled in the United Kingdom (“U.K.”) and therefore have our tax residency in the U.K. The provision for income taxes consists of provisions for the U.K. and international income taxes. We operate in an international environment with operations in various locations outside the U.K. Accordingly, the consolidated income tax rate is a composite rate reflecting the earnings in the various locations and the applicable rates.
The effective income tax rate on continuing operations for the first half ended June 26, 2022, was 22.1%, compared to 7.7% for the 26-week period ended June 27, 2021. The 2021 rate was impacted by a $2.8 million deferred tax credit as a result of the enacted increase in the U.K. tax rate from 19% to 25% from April 2023.
12. Share Plans
Total share-based compensation expense for the quarters ended June 26, 2022, and June 27, 2021, was as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | |
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| Total share-based compensation charges | $ | 0.7 | | | $ | 0.9 | | | $ | 0.9 | | | $ | 1.4 | | |
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In March 2022, we issued our annual share-based compensation grants under the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan. The total number of awards issued was approximately 167,400 and the weighted average fair value of options granted in 2022 was estimated to be $17.82 per share. Also in March 2022, approximately 17,000 awards were granted based on the achievement of total shareholder return targets from the period January 1, 2019 to December 31, 2021. 50% of these awards vested immediately upon grant, with the remaining 50% vesting in March 2023.
In June 2022, we issued our annual share-based compensation grants under the Luxfer Holdings PLC Non-Executive Directors' Equity Incentive Plan. The total number of awards issued was 26,295 and the weighted-average fair value of options granted was estimated to be $15.50 per share.
The following table illustrates the assumptions used in deriving the fair value of share options granted during 2022 and the year-ended December 31, 2021: | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | |
| Dividend yield (%) | 2.27 | | 2.27 | |
| Expected volatility range (%) | 42.80 - 59.03 | | 42.80 - 59.03 | |
| Risk-free interest rate (%) | 0.04 - 0.24 | | 0.04 - 0.24 | |
| Expected life of share options range (years) | 0.50 - 4.00 | | 0.50 - 4.00 | |
| Forfeiture rate | 5.00 | | | 5.00 | | |
| Weighted average exercise price ($) | $1.00 | | $1.00 | |
| Model used | Black-Scholes & Monte-Carlo | | Black-Scholes & Monte-Carlo | |
The expected life of the share options is based on historical data and current expectations, and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
13. Shareholders' Equity
Dividends paid and proposed | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | |
| Dividends declared and paid during the year: | | | | | | | | |
| Interim dividend declared January 4 2021, and paid February 4, 2021 ($0.125 per ordinary share) | $ | — | | | $ | — | | | $ | — | | | $ | 3.4 | | |
| Interim dividend declared April 5 2021, and paid May 5, 2021 ($0.125 per ordinary share) | — | | | 3.4 | | | — | | | 3.4 | | |
| Interim dividend declared January 4 2022, and paid February 2, 2022 ($0.125 per ordinary share) | — | | | — | | | 3.4 | | — | | — | | |
| Interim dividend declared March 10 2022, and paid May 4, 2022 ($0.130) per ordinary share) | — | | | — | | | 3.6 | | | — | | |
| | $ | — | | | $ | 3.4 | | | $ | 7.0 | | | $ | 6.8 | | |
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| In millions | 2022 | | 2021 | | | |
| Dividends declared and paid after the quarter end (not recognized as a liability at the quarter end): | | | | | | |
| Interim dividend declared July 6, and to be paid August 4, 2021 ($0.125 per ordinary share) | $ | — | | | $ | 3.4 | | | | |
| Interim dividend declared July 5, and to be paid August 4, 2022 ($0.130 per ordinary share) | 3.6 | | | — | | | | |
| | $ | 3.6 | | | $ | 3.4 | | | | |
14. Segmental Information
We classify our operations into two core business segments, Gas Cylinders and Elektron, based primarily on shared economic characteristics for the nature of the products and services; the nature of the production processes; the type or class of customer for their products and services; the methods used to distribute their products or provide their services; and the nature of the regulatory environment. The Company has four identified business units, which aggregate into the two reportable segments. Luxfer Gas Cylinders forms the Gas Cylinders segment, and Luxfer MEL Technologies, Luxfer Magtech and Luxfer Graphic Arts aggregate into the Elektron segment. The Superform business unit used to aggregate into the Gas Cylinders segment, but is now recognized as discontinued operations. A summary of the operations of the segments is provided below:
Gas Cylinders segment
Our Gas Cylinders segment manufactures and markets specialized products using composites and aluminum, including pressurized cylinders for use in various applications including self-contained breathing apparatus (SCBA) for firefighters, containment of oxygen and other medical gases for healthcare, alternative fuel vehicles, and general industrial.
Elektron segment Our Elektron segment focuses on specialty materials based primarily on magnesium and zirconium, with key product lines including advanced lightweight magnesium alloys with a variety of uses across a variety of industries; magnesium powders for use in countermeasure flares, as well as heater meals; photoengraving plates for graphic arts; and high-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, and many other performance products.
Other
Other primarily represents unallocated corporate expense and includes non-service related defined benefit pension cost / credit.
Management monitors the operating results of its reportable segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated by the chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments as the CEO, using adjusted EBITA(1) and adjusted EBITDA, which we defined as segment income and are based on operating income adjusted for share based compensation charges; loss on disposal of property, plant and equipment; restructuring charges; impairment charges; acquisition and disposal related gains and costs; other charges; depreciation and amortization; and unwind of the discount on deferred consideration.
1 Adjusted EBITA is adjusted EBITDA less depreciation
Unallocated assets and liabilities include those which are held on behalf of the Company and cannot be allocated to a segment, such as taxation, investments, cash, retirement benefits obligations, bank and other loans and holding company assets and liabilities.
Financial information by reportable segment for the Second Quarter and year-to-date ended June 26, 2022, and June 27, 2021, is included in the following summary:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net sales | | Adjusted EBITDA | |
| | Second Quarter | | Year-to-date | | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | |
| Gas Cylinders segment | $ | 46.1 | | | $ | 46.5 | | | $ | 88.5 | | | $ | 82.7 | | | $ | 3.7 | | | $ | 5.3 | | | $ | 6.4 | | | $ | 11.3 | | |
| Elektron segment | 63.4 | | | 52.5 | | | 118.0 | | | 101.5 | | | 13.2 | | | 12.0 | | | 26.6 | | | 23.7 | | |
| Consolidated | $ | 109.5 | | | $ | 99.0 | | | $ | 206.5 | | | $ | 184.2 | | | $ | 16.9 | | | $ | 17.3 | | | $ | 33.0 | | | $ | 35.0 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Depreciation and amortization | | Restructuring charges | |
| | Second Quarter | | Year-to-date | | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | | 2022 | | 2021 | |
| Gas Cylinders segment | $ | 1.2 | | | $ | 1.6 | | | $ | 2.6 | | | $ | 2.5 | | | $ | 0.1 | | | $ | 0.2 | | | $ | 1.5 | | | $ | 0.7 | | |
| Elektron segment | 2.2 | | | 2.4 | | | 4.5 | | | 4.9 | | | 0.2 | | | — | | | 0.2 | | | 0.9 | | |
| | | | | | | | | | | | | | | | | |
| Consolidated | $ | 3.4 | | | $ | 4.0 | | | $ | 7.1 | | | $ | 7.4 | | | $ | 0.3 | | | $ | 0.2 | | | $ | 1.7 | | | $ | 1.6 | | |
14. Segmental Information (continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total assets | | | Capital expenditures | |
| | June 26, | | December 31, | | | | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | | | 2022 | | 2021 | | 2022 | | 2021 | |
| Gas Cylinders segment | $ | 138.2 | | | $ | 122.7 | | | | | $ | 0.2 | | | $ | 0.2 | | | $ | 0.4 | | | $ | 0.5 | | |
| Elektron segment | 217.6 | | | 206.5 | | | | | 1.8 | | | 1.9 | | | 2.6 | | | 3.1 | | |
| Other | 32.6 | | | 34.8 | | | | | — | | | — | | | | | — | | |
| Discontinued operations | $ | 7.8 | | | $ | 4.8 | | | | | $ | — | | | $ | — | | | | | $ | — | | |
| Consolidated | $ | 396.2 | | | $ | 368.8 | | | | | $ | 2.0 | | | $ | 2.1 | | | $ | 3.0 | | | $ | 3.6 | | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | Property, plant and equipment, net | |
| | | June 26, | | December 31, | | | |
| In millions | | 2022 | | 2021 | | | |
| U.S. | | $ | 42.7 | | | $ | 46.9 | | | | |
| United Kingdom | | 32.2 | | | 36.0 | | | | |
| Canada | | 3.2 | | | 3.3 | | | | |
| Rest of Europe | | 1.0 | | | 1.0 | | | | |
| Asia Pacific | | 0.2 | | | 0.3 | | | | |
| | | $ | 79.3 | | | $ | 87.5 | | | | |
The following table presents a reconciliation of Adjusted EBITDA to net income from continuing operations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Second Quarter | | Year-to-date | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | |
| Adjusted EBITDA | $ | 16.9 | | | $ | 17.3 | | | $ | 33.0 | | | $ | 35.0 | | |
| Other share-based compensation charges | (0.7) | | | (0.9) | | | (0.9) | | | (1.4) | | |
| | | | | | | | | |
| Depreciation and amortization | (3.4) | | | (4.0) | | | (7.1) | | | (7.4) | | |
| | | | | | | | | |
| Gain on disposal of property, plant and equipment | 0.2 | | | — | | | 0.2 | | | — | | |
| Restructuring charges | (0.3) | | | (0.2) | | | (1.7) | | | (1.6) | | |
| | | | | | | | | |
| Acquisition and disposal related costs | (0.1) | | | (0.7) | | | (0.3) | | | (0.9) | | |
| Other charges | — | | | — | | | — | | | (1.1) | | |
| | | | | | | | | |
| Defined benefits pension credit | 0.3 | | | 0.6 | | | 0.7 | | | 1.2 | | |
| | | | | | | | | |
| Interest expense, net | (0.9) | | | (0.8) | | | (1.7) | | | (1.6) | | |
| | | | | | | | | |
| Net income before income taxes from continuing operations | $ | 12.0 | | | $ | 11.3 | | | $ | 22.2 | | | $ | 22.2 | | |
The following tables present certain geographic information by geographic region for the Second Quarter ended June 26, 2022, and June 27, 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Sales(1) | |
| | Second Quarter | | Year-to-date | |
| | 2022 | | 2021 | | 2022 | | 2021 | |
| | $M | Percent | | $M | Percent | | $M | Percent | | $M | Percent | |
| United States | $ | 61.7 | | 56.3 | % | | $ | 55.7 | | 56.3 | % | | $ | 117.0 | | 56.7 | % | | $ | 102.4 | | 55.6 | % | |
| U.K. | 6.0 | | 5.5 | % | | 5.7 | | 5.8 | % | | 11.4 | | 5.5 | % | | 11.0 | | 6.0 | % | |
| Germany | 6.4 | | 5.8 | % | | 4.4 | | 4.4 | % | | 10.9 | | 5.3 | % | | 8.1 | | 4.4 | % | |
| France | 2.6 | | 2.4 | % | | 3.4 | | 3.4 | % | | 4.9 | | 2.4 | % | | 6.7 | | 3.6 | % | |
| Italy | 2.4 | | 2.2 | % | | 2.4 | | 2.4 | % | | 5.9 | | 2.8 | % | | 6.0 | | 3.3 | % | |
| Top five countries | $ | 79.1 | | 72.2 | % | | $ | 71.6 | | 72.3 | % | | $ | 150.1 | | 72.7 | % | | $ | 134.2 | | 72.9 | % | |
| Rest of Europe | 6.4 | | 5.8 | % | | 7.0 | | 7.1 | % | | 12.4 | | 6.0 | % | | 14.1 | | 7.7 | % | |
| Asia Pacific | 17.8 | | 16.3 | % | | 13.4 | | 13.5 | % | | 32.4 | | 15.7 | % | | 24.4 | | 13.2 | % | |
| Other (2) | 6.2 | | 5.7 | % | | 7.0 | | 7.1 | % | | 11.6 | | 5.6 | % | | 11.5 | | 6.2 | % | |
| | $ | 109.5 | | | | $ | 99.0 | | | | $ | 206.5 | | | | $ | 184.2 | | | |
(1) Net sales are based on the geographic destination of sale.
(2) Other includes Canada, South America, Latin America and Africa.
15. Commitments and Contingencies
Committed and uncommitted banking facilities
The Company had committed banking facilities of $100.0 million at June 26, 2022, and December 31, 2021. Of these committed facilities, $26.8 million was drawn at June 26, 2022 and $10.8 million at December 31, 2021. The Company also had an additional $50.0 million of uncommitted facilities through an accordion provision.
The Company also has two separate (uncommitted) bonding facilities for bank guarantees, one denominated in GBP sterling of £0.5 million (2022: $0.6 million, 2021: $0.9 million), and one denominated in USD of $0.9 million (2021: $1.5 million). Of that dominated in GBP, £0.1 million ($0.1 million) and £0.1 million ($0.2 million) was utilized at June 26, 2022, and December 31, 2021, respectively. Of that denominated in USD, $0.9 million was utilized at June 26, 2022, and December 31, 2021, respectively.
The Company also has a $4.0 million separate overdraft facility of which none was drawn at June 26, 2022 and at December 31, 2021.
Contingencies
In November 2018, an explosion occurred at a third-party waste disposal and treatment site in Boise,
Idaho, reportedly causing property damage, personal injury, and one fatality. We had contracted with a service
company for removal and disposal of certain waste resulting from the magnesium powder manufacturing
operations at the Reade facility in Lakehurst, New Jersey. We believe this service company, in turn, apparently
contracted with the third-party disposal company, at whose facility the explosion occurred, for treatment and
disposal of the waste. In November 2020, we were named as a defendant in three lawsuits in relation to the
incident – one by the third-party disposal company, one by the estate of the decedent, and one by an injured
employee of the third-party disposal company. We do not believe that we are liable for the incident, have asserted such, and, therefore, do not currently expect this matter to have a material impact on the Company’s financial position or results of operations.
16. Subsequent Events
No material events.