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, except for the adoption for Accounting Standards Codification ("ASC") Topic 842, "Leases". 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, 2018. 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 of a normal recurring nature, necessary for presentation 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
,
2019
, ended
June 30, 2019
, and the
Second Quarter
,
2018
, ended
July 1, 2018
.
Adoption of new accounting standards
On January 1, 2019, we adopted ASC Topic 842, "Leases", and applied the modified retrospective approach to recognizing any right-of-use assets and lease liabilities. Upon adoption, we have recognized all of our leases greater than one-year in duration and greater than
$5,000
fair value, on the balance sheet as right-of-use assets and lease liabilities. This has resulted in us restating the prior period comparatives and have recognized a right-of-use asset of
$21.2 million
at January 1, 2018, with a corresponding lease liability, split
$3.1 million
, recognized in
Other current liabilities
, and
$18.1 million
recognized in
Other non-current liabilities
. Classification as either operating or finance is based on criteria largely similar to those applied in ASC 840 but without explicit bright lines. We have made certain assumptions in judgments when applying ASC 842, those judgments of most significance are as follows:
|
|
•
|
We elected the package of practical expedients available for transition which allow us to not reassess:
|
|
|
◦
|
Whether expired or existing contracts contain leases under the new definition of a lease;
|
|
|
◦
|
Lease classification for expired or existing leases; and
|
|
|
◦
|
Whether previously capitalized initial direct costs would qualify for capitalization under ASC 842.
|
|
|
•
|
We did not elect to use hindsight for transition when considering judgments and estimates such as assessments of lessee options to extend or terminate a lease or purchase the underlying asset.
|
|
|
•
|
We did not elect to reassess whether land easements meet the definition of a lease if they were not accounted for as leases under the former rules.
|
|
|
•
|
For all asset classes, we elected to not recognize a right-of-use asset and lease liability for leases with a term of 12 months or less.
|
|
|
•
|
For all asset classes, we elected to not separate non-lease components from lease components to which they relate and have accounted for the combined lease and non-lease components as a single lease component.
|
1. Basis of Presentation and Responsibility for interim Financial Statements (continued)
We determine if an arrangement is a lease at inception. Operating leases are included in our Consolidated Balance Sheet as
Right-of-use assets from operating leases
,
Current operating lease liabilities
and
Long-term operating lease liabilities
. Some of our lease agreements contain renewal options; however, we do not recognize right-of-use assets or lease liabilities for renewal periods unless it is determined that we are reasonably certain of renewing the lease at inception or when a triggering event occurs. Some of our lease agreements contain rent escalation clauses (including index-based escalations), rent holidays, capital improvement funding or other lease concessions. We recognize our minimum rental expense on a straight-line basis based on the fixed components of a lease arrangement. We amortize this expense over the term of the lease beginning with the date of initial possession, which is the date we enter the leased space and begin to make improvements in preparation for its intended use.
In determining our right-of-use assets and lease liabilities, we apply a discount rate to the minimum lease payments within each lease agreement. ASC 842 requires us to use the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. When we cannot readily determine the discount rate implicit in the lease agreement, we utilize our incremental borrowing rate. To estimate our specific incremental borrowing rates over various tenors (ranging from one-year through 30-years), a comparable market yield curve consistent with our credit quality was calibrated to our publicly outstanding debt instruments.
The standard had no impact on our results of operations or cash flows. In addition, new disclosures are provided to enable users to assess the amount, timing and uncertainty of cash flows arising from leases.
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 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 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
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
Net income / (loss)
|
$
|
3.5
|
|
|
$
|
11.4
|
|
|
$
|
(0.3
|
)
|
|
$
|
21.3
|
|
|
|
Weighted average number of £0.50 ordinary shares:
|
|
|
|
|
|
|
|
|
|
For basic earnings per share
|
27,302,174
|
|
|
26,558,883
|
|
|
27,168,170
|
|
|
26,535,824
|
|
|
|
Dilutive effect of potential common stock
|
587,735
|
|
|
1,025,632
|
|
|
—
|
|
|
860,733
|
|
|
|
For diluted earnings per share
|
27,889,909
|
|
|
27,584,515
|
|
|
27,168,170
|
|
|
27,396,557
|
|
|
|
Earnings per share using weighted average number of ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic earnings / (loss) per ordinary share
|
$
|
0.13
|
|
|
$
|
0.43
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.80
|
|
|
|
Diluted earnings / (loss) per ordinary share
|
$
|
0.13
|
|
|
$
|
0.41
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.78
|
|
|
The 2019 year-to-date basic average shares outstanding and diluted average shares outstanding were the same because the effect of potential shares of common stock was anti-dilutive since the Company generated a net loss for the period. As a result,
662,832
combined potential common stock were not included in the computation of diluted EPS.
3. Revenue
Disaggregated sales disclosures for the quarter ended and year-to-date ended
June 30, 2019
, and
July 1, 2018
, are included below and in Note 14, Segmental Information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
|
2019
|
|
2018
|
|
|
In millions
|
Gas Cylinders
|
Elektron
|
Total
|
|
Gas Cylinders
|
Elektron
|
Total
|
|
|
General industrial
|
$
|
11.0
|
|
$
|
28.5
|
|
$
|
39.5
|
|
|
$
|
13.8
|
|
$
|
32.6
|
|
$
|
46.4
|
|
|
|
Transportation
|
24.1
|
|
17.2
|
|
41.3
|
|
|
19.6
|
|
19.7
|
|
39.3
|
|
|
|
Defense and emergency
|
18.7
|
|
12.2
|
|
30.9
|
|
|
18.7
|
|
14.5
|
|
33.2
|
|
|
|
Healthcare
|
4.3
|
|
0.5
|
|
4.8
|
|
|
8.3
|
|
1.0
|
|
9.3
|
|
|
|
|
$
|
58.1
|
|
$
|
58.4
|
|
$
|
116.5
|
|
|
$
|
60.4
|
|
$
|
67.8
|
|
$
|
128.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date
|
|
|
|
2019
|
|
2018
|
|
|
In millions
|
Gas Cylinders
|
Elektron
|
Total
|
|
Gas Cylinders
|
Elektron
|
Total
|
|
|
General industrial
|
$
|
24.1
|
|
$
|
59.1
|
|
$
|
83.2
|
|
|
$
|
26.8
|
|
$
|
61.0
|
|
$
|
87.8
|
|
|
|
Transportation
|
45.0
|
|
36.3
|
|
81.3
|
|
|
36.3
|
|
37.1
|
|
73.4
|
|
|
|
Defense and emergency
|
37.4
|
|
22.7
|
|
60.1
|
|
|
41.9
|
|
28.1
|
|
70.0
|
|
|
|
Healthcare
|
10.0
|
|
2.3
|
|
12.3
|
|
|
14.7
|
|
2.0
|
|
16.7
|
|
|
|
|
$
|
116.5
|
|
$
|
120.4
|
|
$
|
236.9
|
|
|
$
|
119.7
|
|
$
|
128.2
|
|
$
|
247.9
|
|
|
The Company’s performance obligations are satisfied over time as work progresses or at a point in time. Design and tooling arrangements are the only contracts for which sales are recognized over time. Sales from these sources combined accounted for less than
3%
of the Company’s sales for the quarters ended and year-to-date ended
June 30, 2019
, and
July 1, 2018
. All consideration from contracts with customers is included in these amounts.
The following table provides information about contract receivables, contract assets and contract liabilities from contracts with customers:
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2019
|
|
December 31, 2018
|
|
|
Contract receivables
|
$
|
1.7
|
|
|
$
|
1.5
|
|
|
|
Contract assets
|
1.7
|
|
|
2.1
|
|
|
|
Contract liabilities
|
$
|
(0.6
|
)
|
|
$
|
(1.1
|
)
|
|
Contract assets consist of
$1.7 million
accrued unbilled amounts relating to tooling revenue and are recognized in
prepayments and accrued income
in the consolidated balance sheets. Of the
$2.1 million
contract assets recognized as of
December 31, 2018
,
$1.6 million
was billed to customers and transferred to receivables as of
June 30, 2019
.
Contract liabilities of
$0.6 million
consist of advance payments and billing above costs incurred and are recognized as
other current liabilities
. Significant changes in contract liabilities balances during the period are as follows:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
|
As at January 1,
|
$
|
(1.1
|
)
|
|
|
Payments received / amounts billed
|
(0.5
|
)
|
|
|
Costs incurred / revenue recognized
|
1.0
|
|
|
|
As at June 30,
|
$
|
(0.6
|
)
|
|
4. Restructuring
During the
Second Quarter
of
2019
and the year ended
December 31, 2018
, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. Initiatives during the
Second Quarter
of
2019
were predominantly in relation to the closure of the Gas Cylinders segment's French site and the decision to significantly reduce operations at one of Luxfer Magtech's U.S. sites within the Elektron segment. There is an expectation that further costs will be incurred during 2019.
Restructuring-related costs included within
Restructuring charges
in the Condensed Consolidated Financial Statements by reportable segment were as follows:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Severance and related costs
|
|
|
|
|
|
|
|
|
|
|
Gas Cylinders
|
|
$
|
7.7
|
|
|
$
|
(0.1
|
)
|
|
$
|
16.6
|
|
|
$
|
0.1
|
|
|
|
Elektron
|
|
—
|
|
|
0.4
|
|
|
0.1
|
|
|
0.9
|
|
|
|
|
|
7.7
|
|
|
0.3
|
|
|
16.7
|
|
|
1.0
|
|
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
Gas Cylinders
|
|
0.6
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
|
|
Elektron
|
|
4.4
|
|
|
—
|
|
|
4.4
|
|
|
—
|
|
|
|
|
|
5.0
|
|
|
—
|
|
|
5.0
|
|
|
—
|
|
|
|
Total restructuring charges
|
|
12.7
|
|
|
0.3
|
|
|
21.7
|
|
|
1.0
|
|
|
Activity related to restructuring, recorded in
Other current liabilities
in the consolidated balance sheets is summarized as follows:
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
|
Balance at January 1,
|
$
|
5.2
|
|
|
|
Costs incurred
|
14.2
|
|
|
|
Cash payments
|
(12.9
|
)
|
|
|
Balance at June 30,
|
$
|
6.5
|
|
|
5. Acquisition and disposal related gains / (costs)
A gain of
$2.9 million
in the Second Quarter of 2019 (2018:
nil
) relates the the sale of Magnesium Elektron CZ s.r.o. and has been recognized within acquisition and disposal related gains / (costs) in the consolidated statements of income.
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
|
In millions
|
2019
|
|
|
Cash proceeds
|
$
|
5.9
|
|
|
|
Less:
|
|
|
|
Cash held in business
|
(1.3
|
)
|
|
|
Purchase price adjustment
|
(0.2
|
)
|
|
|
Net proceeds
|
$
|
4.4
|
|
|
|
Net assets less cash
|
(3.6
|
)
|
|
|
Profit on disposal
|
$
|
0.8
|
|
|
|
Disposal costs
|
(0.4
|
)
|
|
|
Realized translation gain on disposal
|
2.5
|
|
|
|
Net profit on disposal
|
$
|
2.9
|
|
|
This gain was offset by a
$4.6 million
charge in the First Quarter of 2019 (2018:
Nil
) in relation to a reimbursement of costs following the terminated Neo acquisition.
6. Supplementary balance sheet information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
In millions
|
|
2019
|
|
2018
|
|
|
Accounts and other receivables
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
55.6
|
|
|
$
|
49.8
|
|
|
|
Related parties
|
|
1.1
|
|
|
0.9
|
|
|
|
Prepayments and accrued income
|
|
7.4
|
|
|
7.7
|
|
|
|
Derivative financial instruments
|
|
0.2
|
|
|
0.1
|
|
|
|
Other receivables
|
|
3.6
|
|
|
4.2
|
|
|
|
Total accounts and other receivables
|
|
$
|
67.9
|
|
|
$
|
62.7
|
|
|
|
Inventories
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
32.6
|
|
|
$
|
30.5
|
|
|
|
Work-in-process
|
|
36.2
|
|
|
33.1
|
|
|
|
Finished goods
|
|
29.9
|
|
|
30.0
|
|
|
|
Total inventories
|
|
$
|
98.7
|
|
|
$
|
93.6
|
|
|
|
Other current assets
|
|
|
|
|
|
|
Held-for-sale assets
|
|
$
|
4.1
|
|
|
$
|
10.7
|
|
|
|
Other current assets
|
|
1.6
|
|
|
—
|
|
|
|
Total other current assets
|
|
$
|
5.7
|
|
|
$
|
10.7
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
Land, buildings and leasehold improvements
|
|
$
|
66.1
|
|
|
$
|
73.3
|
|
|
|
Machinery and equipment
|
|
270.7
|
|
|
286.0
|
|
|
|
Construction in progress
|
|
14.9
|
|
|
10.1
|
|
|
|
Total property plant and equipment
|
|
351.7
|
|
|
369.4
|
|
|
|
Accumulated depreciation and impairment
|
|
(249.4
|
)
|
|
(262.5
|
)
|
|
|
Total property, plant and equipment, net
|
|
$
|
102.3
|
|
|
$
|
106.9
|
|
|
|
Current maturities of long-term debt and short-term borrowings
|
|
|
|
|
|
|
Overdrafts
|
|
7.2
|
|
|
3.5
|
|
|
|
Total current maturities of long-term debt and short-term borrowings
|
|
$
|
7.2
|
|
|
$
|
3.5
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
8.0
|
|
|
$
|
5.3
|
|
|
|
Held-for-sale liabilities
|
|
—
|
|
|
2.5
|
|
|
|
Derivative financial instruments
|
|
0.3
|
|
|
—
|
|
|
|
Operating lease liability
|
|
3.5
|
|
|
3.5
|
|
|
|
Other current liabilities
|
|
2.2
|
|
|
4.1
|
|
|
|
Total other current liabilities
|
|
$
|
14.0
|
|
|
$
|
15.4
|
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
1.1
|
|
|
$
|
0.8
|
|
|
|
Operating lease liability
|
|
12.9
|
|
|
14.9
|
|
|
|
Other non-current liabilities
|
|
0.4
|
|
|
0.5
|
|
|
|
Total other non-current liabilities
|
|
$
|
14.4
|
|
|
$
|
16.2
|
|
|
6. Supplementary balance sheet information (continued)
Held-for-sale assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Held-for-sale assets
|
June 30,
|
|
December 31,
|
|
|
In millions
|
2019
|
|
2018
|
|
|
Property, plant and equipment
|
$
|
3.8
|
|
|
$
|
5.5
|
|
|
|
Inventory
|
0.3
|
|
|
2.9
|
|
|
|
Accounts and other receivables
|
—
|
|
|
2.3
|
|
|
|
Held-for-sale assets
|
$
|
4.1
|
|
|
$
|
10.7
|
|
|
|
|
|
|
|
|
|
Held-for-sale liabilities
|
|
|
|
|
|
Accounts payable
|
$
|
—
|
|
|
$
|
2.5
|
|
|
|
Held-for-sale liabilities
|
$
|
—
|
|
|
$
|
2.5
|
|
|
$3.7 million
, (2018,
10.7 million
) of the held-for-sale assets relate to our Elektron segment, with the remaining
$0.4 million
relating to our Gas Cylinders segment. The held-for-sale liabilities in 2018 relate to our Elektron segment.
7. Goodwill and other identifiable intangible assets
Changes in goodwill during 2019, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Gas Cylinders
|
|
Elektron
|
|
Total
|
|
|
At January 1, 2019
|
$
|
26.3
|
|
|
$
|
41.3
|
|
|
$
|
67.6
|
|
|
|
Exchange difference
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
|
|
Balance at June 30, 2019
|
$
|
26.2
|
|
|
$
|
41.2
|
|
|
$
|
67.4
|
|
|
Identifiable intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
December 31, 2018
|
|
|
In millions
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
|
Customer relationships
|
$
|
13.4
|
|
|
$
|
(4.2
|
)
|
|
$
|
9.2
|
|
|
$
|
13.4
|
|
|
$
|
(3.8
|
)
|
|
$
|
9.6
|
|
|
|
Technology and trading related
|
7.8
|
|
|
(3.1
|
)
|
|
4.7
|
|
|
7.9
|
|
|
(2.9
|
)
|
|
5.0
|
|
|
|
|
$
|
21.2
|
|
|
$
|
(7.3
|
)
|
|
$
|
13.9
|
|
|
$
|
21.3
|
|
|
$
|
(6.7
|
)
|
|
$
|
14.6
|
|
|
Identifiable intangible asset amortization expense was
$0.6 million
for the
Second Quarter
of
2019
and
2018
, respectively.
Intangible asset amortization expense during the remainder of 2019 and over the next five years is expected to be approximately
$0.6 million
in 2019,
$1.1 million
in 2020,
$1.1 million
in 2021,
$1.1 million
in 2022,
$1.1 million
in 2023 and
$1.1 million
in 2024.
8. Debt
Debt outstanding was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
June 30, 2019
|
|
December 31, 2018
|
|
|
3.67% Loan Notes due 2021
|
$
|
25.0
|
|
|
$
|
25.0
|
|
|
|
4.88% Loan Notes due 2023
|
25.0
|
|
|
25.0
|
|
|
|
4.94% Loan Notes due 2026
|
25.0
|
|
|
25.0
|
|
|
|
Revolving credit facility
|
28.2
|
|
|
—
|
|
|
|
Other - Bank overdraft
|
7.2
|
|
|
3.5
|
|
|
|
Unamortized debt issuance costs
|
(1.2
|
)
|
|
(1.4
|
)
|
|
|
Total debt
|
$
|
109.2
|
|
|
$
|
77.1
|
|
|
|
Less current portion
|
$
|
(7.2
|
)
|
|
$
|
(3.5
|
)
|
|
|
Non-current debt
|
$
|
102.0
|
|
|
$
|
73.6
|
|
|
The weighted-average interest rate on the revolving credit facility was
2.33%
for the first half of
2019
and
3.58%
for the full-year 2018.
The maturity profile of the Company's debt, excluding unamortized issuance costs and discounts, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
Thereafter
|
|
Total
|
|
|
Loan Notes due 2021
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
|
Loan Notes due 2023
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.0
|
|
|
—
|
|
|
—
|
|
|
25.0
|
|
|
|
Loan Notes due 2026
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.0
|
|
|
25.0
|
|
|
|
Revolving credit facility
|
—
|
|
|
—
|
|
|
—
|
|
|
28.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
28.2
|
|
|
|
Other
|
7.2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.2
|
|
|
|
Total debt
|
$
|
7.2
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
28.2
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
110.4
|
|
|
Loan notes due and shelf facility
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 30, 2019
.
The Loan Notes due 2021, 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
Second Quarter
of 2019, we drew down
$16.9 million
on the Revolving Credit Facility and the balance outstanding at
June 30, 2019
, was
$28.2 million
, and at
December 31, 2018
, was
nil
.
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 30, 2019
.
9. Derivatives and Financial Instruments
The Company's financial instruments comprise bank and other loans, senior loan notes, derivatives, trade payables deferred and deferred contingent consideration. Other than derivatives, the main purpose of these financial instruments is to raise finance for the Company's operations. The Company also has various financial assets such as trade receivables and cash and cash equivalents, which arise directly from its operations.
Derivative financial instruments
We are exposed to market risk during the normal course of business from changes in currency exchange rates, interest rates and commodity prices such as aluminum prices. We manage exposures through a combination of normal operating and financing activities and through the use of derivative financial instruments such as foreign currency forward purchase contracts and aluminum forward purchase contracts. We do not use market risk-sensitive instruments for trading or speculative purposes. The Company had
$0.2 million
and
$0.1 million
derivative financial instruments disclosed within
Accounts and other receivables
as of
June 30, 2019
and
December 31, 2018
, respectively. There were also
$0.3 million
and
nil
derivative financial instruments recorded in
Other current liabilities
at
June 30, 2019
, and
December 31, 2018
, respectively.
The fair value of forward foreign currency exchange contracts deferred in equity was a loss of
$0.8 million
and a loss of
$0.4 million
at
June 30, 2019
, and
December 31, 2018
, respectively. During the
Second Quarter
of
2019
,
$0.2 million
was transferred to the Income Statement.
Forward foreign currency exchange contracts
The Company incurs currency transaction risk whenever one of the Company's operating subsidiaries enters into either a purchase or sales transaction in a currency other than its functional currency. Currency transaction risk is reduced by matching sales and expenses in the same currency. The Company's U.S. operations have little currency exposure, as most purchases, costs and sales are conducted in U.S. dollars. The Company's U.K. operations are exposed to exchange transaction risks, mainly because these operations sell goods priced in euros and U.S. dollars, and purchase raw materials priced in U.S. dollars and its functional currency is GBP sterling. The Company also incurs currency transaction risk if it lends currency other than its functional currency to one of its joint venture partners.
At June 30, 2019, and December 31, 2018, the Company held various forward foreign currency exchange contracts designated as hedges in respect of forward sales for U.S. dollars and euros for the receipt of GBP sterling or euros. The Company also held forward foreign currency exchange contracts designated as hedges in respect of forward purchases for euros, U.S. and Canadian dollars by the sale of GBP sterling. The contract totals in GBP sterling and euros, range of maturity dates and range of exchange rates are disclosed below, with the value denominated in GBP sterling given that is the currency the majority of the contracts are held in.
|
|
|
|
|
|
|
|
|
|
|
June 30, 2019
|
|
|
Sales hedges
|
U.S. dollars
|
|
Euros
|
|
|
Contract totals/£m
|
2.0
|
|
|
8.8
|
|
|
|
Maturity dates
|
07/19
|
|
|
07/19 to 08/19
|
|
|
|
Exchange rates
|
$1.2669 to $1.3419
|
|
|
€1.0949 to €1.1671
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase hedges
|
U.S. dollars
|
|
Euros
|
|
Canadian dollars
|
|
|
Contract totals/£m
|
5.4
|
|
|
0.9
|
|
|
2.6
|
|
|
|
Maturity dates
|
07/19 to 08/19
|
|
|
07/19 to 09/19
|
|
|
07/19
|
|
|
|
Exchange rates
|
$1.2703 to $1.3239
|
|
|
€1.1112 to €1.1286
|
|
|
$
|
1.6806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
Sales hedges
|
U.S. dollars
|
|
Euros
|
|
|
Contract totals/£m
|
4.8
|
|
|
7.2
|
|
|
|
Maturity dates
|
01/19 to 07/19
|
|
|
01/19 to 07/19
|
|
|
|
Exchange rates
|
$1.2519 to $1.3419
|
|
|
€1.0949 to €1.1702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase hedges
|
U.S. dollars
|
|
Euros
|
|
Canadian dollars
|
|
Czech koruna
|
|
|
Contract totals/£m
|
7.5
|
|
|
1.7
|
|
|
2.9
|
|
|
0.1
|
|
|
|
Maturity dates
|
01/19 to 07/19
|
|
|
01/19 to 06/19
|
|
|
01/19 to 03/19
|
|
|
01/19
|
|
|
|
Exchange rates
|
$1.2609 to $1.3380
|
|
|
€1.1074 to €1.1221
|
|
|
$1.7039 to $1.7416
|
|
|
CZK 28.4490
|
|
|
The above contracts are held in GBP sterling, therefore the analysis in the table has been given in GBP sterling to avoid any movements as a result of translation.
9. Derivatives and Financial Instruments (continued)
Fair value of financial instruments
The following methods were used to estimate the fair values of each class of financial instrument:
Cash at bank and in hand / overdrafts
The carrying value approximates to the fair value as a result of the short-term maturity of the instruments. Cash at bank and in hand are subject to a right to offset in the U.S.
Bank loans
Bank and other loans, excluding overdrafts, of
$103.2 million
were outstanding at
June 30, 2019
, and
$75.0 million
were outstanding at
December 31, 2018
. Bank and other loans are shown net of issue costs of
$1.2 million
and
$1.4 million
at
June 30, 2019
, and
December 31, 2018
, respectively, and are to be amortized to the expected maturity of the facilities. Of the bank and other loans outstanding,
$28.2 million
and
none
is variable interest rate debt and subject to floating interest rate risk, with the remainder being fixed rate debt, at
June 30, 2019
, and
December 31, 2018
, respectively.
Forward foreign currency exchange rate contracts
The fair value of these contracts was calculated by determining what the Company would be expected to receive or pay on termination of each individual contract by comparison to present market prices.
LME derivative contracts
The fair value of these contracts has been calculated by valuing the contracts against the equivalent forward rates quoted on the LME.
Deferred contingent consideration
The deferred contingent consideration is in relation to the acquisition of Truetech and Innotech (Luxfer Magtech) in 2014 and is linked to the future profitability of the entity.
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The fair values of the financial instruments of the Company at June 30,
2019
, were analyzed using the hierarchy as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
Foreign currency contract assets
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
Foreign currency contract liabilities
|
(0.3
|
)
|
|
—
|
|
|
(0.3
|
)
|
|
—
|
|
|
|
Interest bearing loans and borrowings:
|
|
|
|
|
|
|
|
|
|
Loan Notes due 2021
|
(25.0
|
)
|
|
—
|
|
|
(25.0
|
)
|
|
—
|
|
|
|
Loan Notes due 2023
|
(25.6
|
)
|
|
—
|
|
|
(25.6
|
)
|
|
—
|
|
|
|
Loan Notes due 2026
|
(26.2
|
)
|
|
—
|
|
|
(26.2
|
)
|
|
—
|
|
|
|
Revolving Credit Facility
|
(28.2
|
)
|
|
—
|
|
|
(28.2
|
)
|
|
—
|
|
|
|
Other financial liabilities:
|
|
|
|
|
|
|
|
|
|
Lease liabilities
|
(16.4
|
)
|
|
—
|
|
|
(16.4
|
)
|
|
—
|
|
|
|
Deferred contingent consideration
|
(0.5
|
)
|
|
—
|
|
|
—
|
|
|
(0.5
|
)
|
|
9. Derivatives and Financial Instruments (continued)
The following table presents the changes in Level 3 instruments for the
Second Quarter
ended
June 30, 2019
.
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
|
Balance at January 1,
|
$
|
0.9
|
|
|
|
Payments made during year
|
(0.5
|
)
|
|
|
Unwind of discount on deferred consideration
|
0.1
|
|
|
|
Balance at June 30,
|
$
|
0.5
|
|
|
|
Total losses for the period included in profit and loss for assets held at the end at June 30,
|
0.1
|
|
|
|
Change in unrealized (gains) or losses for the period included in profit and loss for assets held at the end at June 30,
|
$
|
0.1
|
|
|
10. 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 for the 26-week period ended
June 30, 2019
, was
117%
, compared to
23.3%
for the 26-week period ended
July 1, 2018
. The 2019 rate was adversely affected by the impact of non-deductible expenses related to the aborted acquisition of Neo Performance Materials and restructuring activities, partially offset by the non-taxable income in relation to the sale of our Czech business. We continue to actively pursue initiatives to reduce our effective tax rate. The tax rate in any quarter can be affected positively or negatively by adjustments that are required to be reported in the specific quarter of resolution.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the U.S. Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. For 2018, the Company considered in its estimated annual effective tax rate additional provisions of the Act including changes to the deduction for executive compensation and interest expense, a tax on global intangible low-taxed income provisions (“GILTI”), the base erosion anti-abuse tax, and a deduction for foreign-derived intangible income. The Company has elected to treat tax on GILTI income as a period cost and has therefore included it in its annual estimated effective tax rate.
11. Pension Plans
The principal defined benefit pension plan in the U.K. is the Luxfer Group Pension Plan. The Company’s other arrangements are less significant than the Luxfer Group Pension Plan, the largest being the BA Holdings, Inc. Pension Plan in the U.S.
Components of net periodic benefit cost for our pension plans for the Second Quarter ended June 30, 2019, and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
2018
|
|
|
Net periodic benefit credit
|
|
|
|
|
|
|
|
|
Interest cost
|
$
|
2.7
|
|
|
$
|
2.6
|
|
|
$
|
5.4
|
|
$
|
5.3
|
|
|
|
Expected return on plan assets
|
(3.7
|
)
|
|
(4.2
|
)
|
|
(7.5
|
)
|
(8.6
|
)
|
|
|
Amortization of:
|
|
|
|
|
|
|
|
|
Net actuarial loss
|
0.7
|
|
|
0.7
|
|
|
1.4
|
|
1.3
|
|
|
|
Prior service credit
|
(0.1
|
)
|
|
(0.1
|
)
|
|
(0.2
|
)
|
(0.2
|
)
|
|
|
Net periodic benefit credit
|
$
|
(0.4
|
)
|
|
$
|
(1.0
|
)
|
|
$
|
(0.9
|
)
|
$
|
(2.2
|
)
|
|
|
In respect of defined contribution plans
|
|
|
|
|
|
|
|
|
Total charge for defined contribution plans
|
1.2
|
|
|
1.2
|
|
|
2.4
|
|
2.6
|
|
|
|
Total charge for pension plans
|
$
|
0.8
|
|
|
$
|
0.2
|
|
|
$
|
1.5
|
|
$
|
0.4
|
|
|
In accordance with ASC 715, defined benefit credit is split in the income statement, with
$0.1 million
(2018: $
0.2 million
) of expenses recognized within
Selling, general and administrative expenses
during the second quarter of 2019 and
$0.2 million
(2018:
$0.4 million
) year-to-date. A credit of
$0.5 million
(2018:
$1.2 million
) has also been recognized below
Operating income
in the income statement during the second quarter of 2019,
$1.1 million
(2018:
$2.6 million
) year-to-date.
12. Share Plans
Total share-based compensation expense for the second quarter and two-quarters ended
June 30,
2019
, and July 1,
2018
, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
2018
|
|
|
Total share-based compensation charges
|
$
|
0.8
|
|
|
$
|
1.4
|
|
|
$
|
3.4
|
|
$
|
1.9
|
|
|
In March 2019, 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
200,000
and the weighted-average fair value of options granted in
2019
was estimated to be
$17.70
per share.
In May 2019, 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 approximately
4,000
and the weighted-average fair value of options granted was estimated to be
$15.00
per share.
The following table illustrates the assumptions used in deriving the fair value of share options granted during
2019
and the year-ended
December 31, 2018
,:
|
|
|
|
|
|
|
|
|
2019
|
|
2018
|
|
|
Dividend yield (%)
|
4.00
|
|
4.00
|
|
|
Expected volatility range (%)
|
22.65
|
|
22.65 - 35.77
|
|
|
Risk-free interest rate (%)
|
0.12
|
|
0.12 - 2.57
|
|
|
Expected life of share options range (years)
|
1.00 - 4.00
|
|
0.50 - 6.00
|
|
|
Weighted average exercise price ($)
|
$0.89
|
|
$0.65
|
|
|
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
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Dividends declared and paid during the year:
|
|
|
|
|
|
|
|
|
|
Interim dividend paid February 7, 2018 ($0.125 per ordinary share)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.4
|
|
|
|
Interim dividend paid May 2, 2018 ($0.125 per ordinary share)
|
—
|
|
|
3.3
|
|
|
—
|
|
|
3.3
|
|
|
|
Interim dividend paid February 6, 2019 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
Interim dividend paid May 1, 2019 ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
|
$
|
3.4
|
|
|
$
|
3.3
|
|
|
$
|
6.8
|
|
|
$
|
6.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
2018
|
|
|
Dividends declared after the period, (not recognized as a liability as at the period end):
|
|
|
|
|
|
Interim dividend declared July 2, and paid August 1, 2018: ($0.125 per ordinary share)
|
$
|
—
|
|
|
$
|
3.3
|
|
|
|
Interim dividend declared July 1, and to be paid August 1, 2019: ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
|
|
$
|
3.4
|
|
|
$
|
3.3
|
|
|
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
six
identified business units, which aggregate into the
two
reportable segments. Luxfer Gas Cylinders and Luxfer Superform aggregate into the Gas Cylinders segment, and Luxfer MEL Technologies, Luxfer Magtech, Luxfer Graphic Arts and Luxfer Czech Republic
(1)
aggregate into the Elektron segment. A summary of the operations of the segments is provided below:
Gas Cylinders segment
Our Gas Cylinders segment manufactures and markets specialized products using aluminum, titanium and carbon composites, 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. The segment also forms lightweight aluminum and titanium panels into highly complex shapes that are used mainly in the transportation industry.
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
(2)
and adjusted EBITDA, which we defined as segment income and is based on operating income adjusted for share-based compensation expense; qualifying restructuring charges; impairment charges; acquisition and disposal related gains and costs; loss on disposal of property, plant and equipment; depreciation and amortization; and unwind of discount on deferred consideration.
14. Segmental Information
(continued)
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 30, 2019
, and
July 1, 2018
, is included in the following summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
Adjusted EBITDA
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
58.1
|
|
|
$
|
60.4
|
|
|
$
|
116.5
|
|
|
$
|
119.7
|
|
|
|
$
|
7.1
|
|
|
$
|
5.0
|
|
|
$
|
11.6
|
|
|
$
|
11.0
|
|
|
|
Elektron segment
|
58.4
|
|
|
67.8
|
|
|
120.4
|
|
|
128.2
|
|
|
|
13.1
|
|
|
16.4
|
|
|
27.1
|
|
|
29.6
|
|
|
|
Consolidated
|
$
|
116.5
|
|
|
$
|
128.2
|
|
|
$
|
236.9
|
|
|
$
|
247.9
|
|
|
|
$
|
20.2
|
|
|
$
|
21.4
|
|
|
$
|
38.7
|
|
|
$
|
40.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
Restructuring charges
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
1.4
|
|
|
$
|
1.9
|
|
|
$
|
2.8
|
|
|
$
|
3.9
|
|
|
|
$
|
8.3
|
|
|
$
|
(0.1
|
)
|
|
$
|
17.2
|
|
|
$
|
0.1
|
|
|
|
Elektron segment
|
2.6
|
|
|
3.0
|
|
|
4.9
|
|
|
5.9
|
|
|
|
4.4
|
|
|
0.4
|
|
|
4.5
|
|
|
0.9
|
|
|
|
Consolidated
|
$
|
4.0
|
|
|
$
|
4.9
|
|
|
$
|
7.7
|
|
|
$
|
9.8
|
|
|
|
$
|
12.7
|
|
|
$
|
0.3
|
|
|
$
|
21.7
|
|
|
$
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
Capital expenditures
|
|
|
|
June 30,
|
|
December 31,
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
161.5
|
|
|
$
|
156.3
|
|
|
|
$
|
1.3
|
|
|
$
|
0.3
|
|
|
$
|
2.4
|
|
|
$
|
0.7
|
|
|
|
Elektron segment
|
214.2
|
|
|
218.2
|
|
|
|
2.6
|
|
|
2.1
|
|
|
5.2
|
|
|
3.1
|
|
|
|
Other
|
36.4
|
|
|
34.3
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
412.1
|
|
|
$
|
408.8
|
|
|
|
$
|
3.9
|
|
|
$
|
2.4
|
|
|
$
|
7.6
|
|
|
$
|
3.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
In millions
|
|
2019
|
|
2018
|
|
|
United States
|
|
$
|
59.4
|
|
|
$
|
66.1
|
|
|
|
United Kingdom
|
|
37.9
|
|
|
36.0
|
|
|
|
Rest of Europe
|
|
1.0
|
|
|
1.1
|
|
|
|
Asia Pacific
|
|
0.3
|
|
|
0.3
|
|
|
|
Other
(2)
|
|
3.7
|
|
|
3.4
|
|
|
|
|
|
$
|
102.3
|
|
|
$
|
106.9
|
|
|
(1)
The Luxfer Czech Republic business unit was sold at the end of the Second Quarter of 2019. Its results of operations are included within the current quarter and year-to-date figures.
(2)
Adjusted EBITA is adjusted EBITDA less depreciation and loss on disposal of property, plant and equipment.
14. Segmental Information
(continued)
The following table presents a reconciliation of Adjusted EBITDA to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Adjusted EBITDA
|
$
|
20.2
|
|
|
$
|
21.4
|
|
|
$
|
38.7
|
|
|
$
|
40.6
|
|
|
|
Other share-based compensation charges
|
(0.8
|
)
|
|
(1.4
|
)
|
|
(3.4
|
)
|
|
(1.9
|
)
|
|
|
Depreciation and amortization
|
(4.0
|
)
|
|
(4.9
|
)
|
|
(7.7
|
)
|
|
(9.8
|
)
|
|
|
Unwind discount on deferred consideration
|
(0.1
|
)
|
|
(0.2
|
)
|
|
(0.1
|
)
|
|
(0.3
|
)
|
|
|
Restructuring charges
|
(12.7
|
)
|
|
(0.3
|
)
|
|
(21.7
|
)
|
|
(1.0
|
)
|
|
|
Fair value adjustment to held-for-sale assets
|
—
|
|
|
—
|
|
|
0.2
|
|
|
—
|
|
|
|
Acquisition and disposal related gains / (costs)
|
2.9
|
|
|
—
|
|
|
(1.7
|
)
|
|
—
|
|
|
|
Defined benefits pension mark-to-market gain
|
0.5
|
|
|
1.2
|
|
|
1.1
|
|
|
2.6
|
|
|
|
Interest expense, net
|
(1.1
|
)
|
|
(1.0
|
)
|
|
(2.2
|
)
|
|
(2.5
|
)
|
|
|
Provision for income taxes
|
(1.4
|
)
|
|
(3.4
|
)
|
|
(3.5
|
)
|
|
(6.4
|
)
|
|
|
Net income
|
$
|
3.5
|
|
|
$
|
11.4
|
|
|
$
|
(0.3
|
)
|
|
$
|
21.3
|
|
|
The following tables present certain geographic information by geographic region for the Second Quarter and Year-to-date, ended June 30, 2019 and July 1, 2018, respectively:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
(1)
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
|
2019
|
2018
|
|
2019
|
2018
|
|
|
|
$M
|
Percent
|
$M
|
Percent
|
|
$M
|
Percent
|
$M
|
Percent
|
|
|
United States
|
$
|
63.0
|
|
54.0
|
%
|
$
|
65.9
|
|
51.5
|
%
|
|
$
|
124.4
|
|
52.5
|
%
|
$
|
128.2
|
|
51.8
|
%
|
|
|
U.K.
|
9.1
|
|
7.8
|
%
|
11.8
|
|
9.2
|
%
|
|
20.6
|
|
8.7
|
%
|
23.4
|
|
9.4
|
%
|
|
|
Germany
|
5.8
|
|
5.0
|
%
|
9.6
|
|
7.5
|
%
|
|
14.0
|
|
5.9
|
%
|
21.0
|
|
8.5
|
%
|
|
|
Italy
|
5.2
|
|
4.5
|
%
|
4.8
|
|
3.7
|
%
|
|
11.7
|
|
4.9
|
%
|
10.1
|
|
4.1
|
%
|
|
|
France
|
4.2
|
|
3.6
|
%
|
4.1
|
|
3.2
|
%
|
|
9.4
|
|
4.0
|
%
|
9.0
|
|
3.6
|
%
|
|
|
Top five countries
|
$
|
87.3
|
|
74.9
|
%
|
$
|
96.2
|
|
75.1
|
%
|
|
$
|
180.1
|
|
76.0
|
%
|
$
|
191.7
|
|
77.4
|
%
|
|
|
Rest of Europe
|
10.1
|
|
8.7
|
%
|
9.8
|
|
7.6
|
%
|
|
21.9
|
|
9.2
|
%
|
17.4
|
|
7.0
|
%
|
|
|
Asia Pacific
|
12.7
|
|
10.9
|
%
|
15.8
|
|
12.3
|
%
|
|
24.3
|
|
10.3
|
%
|
26.4
|
|
10.6
|
%
|
|
|
Other
(2)
|
6.4
|
|
5.5
|
%
|
6.4
|
|
5.0
|
%
|
|
10.6
|
|
4.5
|
%
|
12.4
|
|
5.0
|
%
|
|
|
|
$
|
116.5
|
|
|
$
|
128.2
|
|
|
|
$
|
236.9
|
|
|
$
|
247.9
|
|
|
|
(1) Net sales are based on the geographic destination of sale.
(2) Other includes Canada, South America, Latin America and Africa.
15. Leases
We have operating leases for buildings, vehicles and certain equipment. The majority of our leases have remaining lease terms of
one
to
nine years
, with one building having
54 years
remaining.
The components of lease expense were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
|
2018
|
|
|
Operating lease cost
|
$
|
1.1
|
|
|
$
|
1.0
|
|
|
$
|
2.2
|
|
|
$
|
1.9
|
|
|
None of our leases were classified as finance leases in 2019 or 2018.
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Second Quarter
|
|
Year-to-date
|
|
|
In millions
|
2019
|
|
2018
|
|
2019
|
2018
|
|
|
Operating cash flows from operating leases
|
$
|
1.1
|
|
|
$
|
1.0
|
|
|
$
|
2.2
|
|
$
|
1.9
|
|
|
15. Leases (continued)
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
December 31,
|
|
|
In millions
|
2019
|
|
2018
|
|
|
Operating leases
|
|
|
|
|
|
Operating lease right-of-use asset
|
$
|
16.4
|
|
|
$
|
18.4
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
3.5
|
|
|
3.5
|
|
|
|
Other non-current liabilities
|
12.9
|
|
|
14.9
|
|
|
|
|
$
|
16.4
|
|
|
$
|
18.4
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term (Years)
|
3.6
|
|
|
3.7
|
|
|
|
Weighted Average Discount Rate
|
4.46
|
%
|
|
4.46
|
%
|
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
2019
|
|
|
2019 (excluding the first quarter of 2019)
|
|
|
$
|
2.1
|
|
|
|
2020
|
|
|
3.9
|
|
|
|
2021
|
|
|
3.1
|
|
|
|
2022
|
|
|
2.1
|
|
|
|
2023
|
|
|
1.5
|
|
|
|
2024
|
|
|
1.2
|
|
|
|
Thereafter
|
|
|
9.7
|
|
|
|
Total lease payments
|
|
|
$
|
23.6
|
|
|
|
Less imputed interest
|
|
|
(7.2
|
)
|
|
|
Total
|
|
|
$
|
16.4
|
|
|
16. Commitments and Contingencies
Committed banking facilities
At
June 30, 2019
, and December 31,
2018
, the Company had committed banking facilities of
$150.0 million
. The facilities were for providing loans and overdrafts, with a separate facility for letters of credit which at
June 30, 2019
and December 31,2018, was
£7.0 million
(
$8.9 million
). Of the committed facilities,
$7.2 million
was drawn for overdrafts,
no
loans were drawn and
no
letters of credit were utilized at
June 30, 2019
,
$3.5 million
,
nil
and
nil
at
December 31, 2018
. The Company also has a separate bonding facility for bank guarantees denominated in GBP sterling of
£3.0 million
(
$3.8 million
), of which GBP sterling of
£1.0 million
(
$1.4 million
) was utilized at
June 30, 2019
, and
December 31, 2018
, respectively.
Contingencies
During February 2014, a cylinder was sold to a long-term customer and ruptured at one of their gas facilities. As a result of this rupture, three people were noted to have minor injuries such as loss of hearing. There was no major damage to assets of the customer. A claim was launched by the three people who were injured in the incident and a prosecutor has been appointed. We had reviewed our quality control checks from around the time which the cylinder was produced and no instances of failures were noted. It has also been noted by the investigator that the customer has poor quality and safety checks. As a result, we do not believe that we are liable for the incident, and therefore, do not currently expect this case to have a material impact on the Company's financial position or results of operations.
17. Subsequent Events
In July 2019, the Company commenced a planned project to remove low-level naturally occurring radioactive material (NORM) from a redundant building at its Manchester, UK site. The work represents remediation of a historic environmental issue, is expected to complete in the second quarter of 2020 and incur costs estimated at
$2.6 million
.