NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation and Responsibility for interim Financial Statements
We prepared the accompanying unaudited consolidated condensed 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 Update ("ASU") 2016-13, "current expected credit loss model". 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, 2019. 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 Third Quarter 2020, ended on September 27, 2020, and the Third Quarter 2019, ended on September 29, 2019.
Impact of COVID-19 on the Financial Statements
In March 2020, the World Health Organization characterized the coronavirus ("COVID-19") a pandemic. The rapid spread of the pandemic and the continuously evolving responses to combat it have had an increasingly negative impact on the global economy. At this time, Luxfer is operating all of its facilities, following earlier temporary closures at a small number of locations. However, due to weaker demand resulting from uncertain economic conditions, potential supply constraints, and the continued spread of COVID-19, Luxfer has temporarily reduced capacity at certain facilities with partial furloughing of the workforce. We have also identified additional cost saving programs, including headcount reductions as a direct response to the impact of the pandemic. As the situation evolves and if warranted, the Company may suspend or reduce operations at additional facilities. In view of the rapidly changing business environment, unprecedented market volatility and heightened degree of uncertainty resulting from COVID-19, we are currently unable to fully determine its future impact on our business. However, we are monitoring the progression of the pandemic and its potential effect on our financial position, results of operations and cash flows.
The Company recognized that the COVID-19 pandemic constituted a triggering event in accordance with ASC 350 Intangibles - Goodwill and Other, during the First Quarter of 2020 and therefore performed an impairment assessment of its goodwill and other intangible assets. Based on the forecast at that time, we did not identify any impairments, nor marginal outcomes. A re-forecast was performed in July and October, which took into account the impact COVID-19 has had on our second and third quarter results. The re-forecast did not change our assessment of fair value, with no impairments nor marginal outcomes identified. Assumptions and judgments are required in calculating the fair value of the reporting units. In developing our discounted cash flow analysis, assumptions about future revenues and expenses, capital expenditures and changes in working capital are based on our annual operating plan and long-term business plan for each of our reporting units. These plans take into consideration numerous factors including historical experience, anticipated future economic conditions, changes in raw material prices and growth expectations for the industries and end markets we participate in. These assumptions and judgments may change as we learn more about the impact of the COVID-19 pandemic.
In relation to liquidity, the Company has access to a revolving credit facility (see Note 10) and has performed stress testing on financial covenants using current forecast information and has not identified any liquidity concerns.
Adoption of new accounting standards
Current expected credit loss ("CECL") model
On January 1, 2020, the Company adopted ASU 2016-13, financial instruments - Credit Losses (Topic 326): Measurement of credit losses on Financial Instruments prospectively. The ASU replaces the incurred loss impairment model with an expected credit loss impairment model for financial instruments, including trade receivables.
•Under the CECL model, the Company is required to consider whether expected credit losses should be recognized for trade receivables that are considered “current” (i.e., not past due).
•When using historical loss rates in a provision matrix, the Company is required to consider whether and, if so, how the historical loss rates differ from what is currently expected over the life of the trade receivables (on the basis of current conditions and reasonable and supportable forecasts about the future).
Upon adoption, there was no adjustment needed to opening retained earnings as at January 1, 2020.
As a result of implementing ASU 2016-13, the Company did not recognize any material additional allowance within Accounts and Other Receivables as at January 1, 2020. Accounts and Other Receivables are shown net of a $0.6 million allowance at September 27, 2020.
The Company is exposed to credit losses primarily through sales of products. The Company’s expected loss allowance methodology for accounts receivable is developed using historical collection experience, current and future economic and market conditions and a review of the current status of customers' trade accounts receivables. Due to the short-term nature of such receivables, the estimate of accounts receivable amounts that may not be collected is based on aging of the accounts receivable balances and the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company considered the current and expected future economic and market conditions surrounding the COVID-19 pandemic and determined that the estimate of credit losses was not significantly impacted.
Estimates are used to determine the allowance. It is based on assessment of anticipated receipts and all other historical, current and future information that is reasonably available.
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
In millions
|
QTD
|
YTD
|
|
|
Balance at June 28, / January 1,
|
$
|
1.6
|
|
$
|
1.3
|
|
|
|
Adoption of ASU 2016-13, cumulative-effect adjustment to retained earnings
|
—
|
|
—
|
|
|
|
Provisions for expected credit losses
|
(1.0)
|
|
(0.6)
|
|
|
|
Other, including foreign currency translation
|
—
|
|
(0.1)
|
|
|
|
Balance at September 27,
|
$
|
0.6
|
|
$
|
0.6
|
|
|
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 for the period by the weighted average number of ordinary shares outstanding, net of Treasury shares, shares held in ESOP and the dilutive ordinary shares equivalents.
Basic and diluted earnings per share were calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions except share and per-share data
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
|
|
Net income
|
$
|
2.6
|
|
|
$
|
5.8
|
|
|
$
|
12.9
|
|
|
$
|
5.5
|
|
|
|
Weighted average number of £0.50 ordinary shares:
|
|
|
|
|
|
|
|
|
|
For basic earnings per share
|
27,619,298
|
|
|
27,393,743
|
|
|
27,532,823
|
|
|
27,243,638
|
|
|
|
Dilutive effect of potential common stock
|
394,408
|
|
|
475,673
|
|
|
426,119
|
|
|
599,887
|
|
|
|
For diluted earnings per share
|
28,013,706
|
|
|
27,869,416
|
|
|
27,958,942
|
|
|
27,843,525
|
|
|
|
Earnings per share using weighted average number of ordinary shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
|
$
|
0.09
|
|
|
$
|
0.21
|
|
|
$
|
0.47
|
|
|
$
|
0.20
|
|
|
|
Diluted earnings per ordinary share
|
$
|
0.09
|
|
|
$
|
0.21
|
|
|
$
|
0.46
|
|
|
$
|
0.20
|
|
|
3. Net Sales
Disaggregated sales disclosures for the quarter and year-to-date ended September 27, 2020, and September 29, 2019, are included below and in Note 14, Segmental Information.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
In millions
|
Gas Cylinders
|
Elektron
|
Total
|
|
Gas Cylinders
|
Elektron
|
Total
|
|
|
General industrial
|
$
|
11.5
|
|
$
|
20.0
|
|
$
|
31.5
|
|
|
$
|
10.1
|
|
$
|
29.0
|
|
$
|
39.1
|
|
|
|
Transportation
|
16.5
|
|
9.9
|
|
26.4
|
|
|
20.8
|
|
11.9
|
|
32.7
|
|
|
|
Defense, First Response & Healthcare
|
17.0
|
|
15.5
|
|
32.5
|
|
|
23.3
|
|
12.0
|
|
35.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
45.0
|
|
$
|
45.4
|
|
$
|
90.4
|
|
|
$
|
54.2
|
|
$
|
52.9
|
|
$
|
107.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
In millions
|
Gas Cylinders
|
Elektron
|
Total
|
|
Gas Cylinders
|
Elektron
|
Total
|
|
|
General industrial
|
$
|
34.3
|
|
$
|
65.6
|
|
$
|
99.9
|
|
|
$
|
34.2
|
|
$
|
88.1
|
|
$
|
122.3
|
|
|
|
Transportation
|
53.9
|
|
29.7
|
|
83.6
|
|
|
65.8
|
|
48.2
|
|
114.0
|
|
|
|
Defense, First Response & Healthcare
|
59.8
|
|
40.4
|
|
100.2
|
|
|
70.7
|
|
37.0
|
|
107.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
148.0
|
|
$
|
135.7
|
|
$
|
283.7
|
|
|
$
|
170.7
|
|
$
|
173.3
|
|
$
|
344.0
|
|
|
3. Net Sales (continued)
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 1% of the Company’s sales for the quarters and year-to-date ended September 27, 2020, and September 29, 2019. 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
|
September 27, 2020
|
|
December 31, 2019
|
|
|
Contract receivables
|
$
|
1.1
|
|
|
$
|
1.7
|
|
|
|
Contract assets
|
0.2
|
|
|
1.3
|
|
|
|
Contract liabilities
|
(0.2)
|
|
|
(0.5)
|
|
|
Contract assets consist of $0.2 million accrued unbilled amounts relating to tooling revenue and are recognized in prepayments and accrued income in the consolidated balance sheets. Of the $1.3 million contract assets recognized as of December 31, 2019, $1.2 million was billed to customers and transferred to receivables as of September 27, 2020.
Contract liabilities of $0.2 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
|
2020
|
|
|
As at January 1,
|
$
|
(0.5)
|
|
|
|
Net (payments received) / amounts billed
|
(0.6)
|
|
|
|
Net (costs incurred) / revenue recognized
|
0.9
|
|
|
|
As at September 27,
|
$
|
(0.2)
|
|
|
4. Restructuring
During the Third Quarter of 2020 we continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business. The $4.3 million restructuring charge in the Third Quarter of 2020 was predominantly ($3.3 million) the result of further costs associated with the announced closure of Luxfer Gas Cylinders France, including one-time employee benefit costs, and associated legal and professional fees. There was an additional $1.0 million of one-time employee benefit expense resulting from actions to reduce our fixed cost-base in light of the COVID-19 pandemic.
Restructuring-related costs included within Restructuring charges in the Condensed Consolidated Financial Statements by reportable segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Severance and related costs
|
|
|
|
|
|
|
|
|
|
|
Gas Cylinders segment
|
|
$
|
3.4
|
|
|
$
|
2.3
|
|
|
$
|
6.8
|
|
|
$
|
18.9
|
|
|
|
Elektron segment
|
|
0.9
|
|
|
0.3
|
|
|
1.0
|
|
|
0.4
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
|
|
|
$
|
4.3
|
|
|
$
|
2.6
|
|
|
$
|
7.9
|
|
|
$
|
19.3
|
|
|
|
Asset impairments
|
|
|
|
|
|
|
|
|
|
|
Gas Cylinders segment
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.6
|
|
|
|
Elektron segment
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5.0
|
|
|
|
Total restructuring charges
|
|
$
|
4.3
|
|
|
$
|
2.6
|
|
|
$
|
7.9
|
|
|
$
|
24.3
|
|
|
4. Restructuring (continued)
Activity related to restructuring, recorded in Other current liabilities in the consolidated balance sheets is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
|
|
|
Balance at January 1,
|
$
|
6.5
|
|
|
|
|
|
Costs incurred
|
7.9
|
|
|
|
|
|
Cash payments and other
|
(5.0)
|
|
|
|
|
|
Balance at September 27,
|
$
|
9.4
|
|
|
|
|
5. Acquisition and disposal related gains / (costs)
Acquisition-related costs of $0.2 million were incurred during the First Quarter of 2020 and represents amounts incurred in relation to M&A exploration activities net of a $0.1 million release of deferred contingent consideration.
In July 2020 we sold our 51% investment in Luxfer Uttam India Private Limited to our joint venture partner resulting in a gain on sale of less than $0.1 million.
The net $1.7 million charge for the first nine-months of 2019 was in relation to a $2.9 million gain in the Second Quarter of 2019 related to the sale of Magnesium Elektron CZ s.r.o. This gain was offset by a $4.6 million charge in the First Quarter of 2019 in relation to reimbursement of costs following the terminated Neo acquisition.
6. Other income
Other income of $2.3 million for the Third Quarter of 2020 represents payments received from a European automotive customer for compensation in relation to a contribution of loss and product volumes relating to our Gas Cylinders segment.
7. Other charges
Other charges of $2.7 million incurred in the Third Quarter of 2019 were the result of the Company's decision to commence a 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 legacy environmental issue and is
expected to complete in the first quarter of 2021 but with no significant further costs envisaged.
8. Supplementary balance sheet information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27,
|
|
December 31,
|
|
|
In millions
|
|
2020
|
|
2019
|
|
|
Accounts and other receivables
|
|
|
|
|
|
|
Trade receivables
|
|
$
|
45.2
|
|
|
$
|
52.4
|
|
|
|
Related parties
|
|
0.1
|
|
|
2.7
|
|
|
|
Prepayments and accrued income
|
|
6.4
|
|
|
6.7
|
|
|
|
Derivative financial instruments
|
|
0.1
|
|
|
0.3
|
|
|
|
Deferred consideration
|
|
0.5
|
|
|
—
|
|
|
|
Other receivables
|
|
3.6
|
|
|
4.2
|
|
|
|
Total accounts and other receivables
|
|
$
|
55.9
|
|
|
$
|
66.3
|
|
|
|
Inventories
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
30.0
|
|
|
$
|
33.4
|
|
|
|
Work-in-process
|
|
26.4
|
|
|
32.2
|
|
|
|
Finished goods
|
|
28.3
|
|
|
28.9
|
|
|
|
Total inventories
|
|
$
|
84.7
|
|
|
$
|
94.5
|
|
|
|
Other current assets
|
|
|
|
|
|
|
Held-for-sale assets
|
|
$
|
3.7
|
|
|
$
|
3.9
|
|
|
|
Income tax receivable
|
|
0.6
|
|
|
1.1
|
|
|
|
Total other current assets
|
|
$
|
4.3
|
|
|
$
|
5.0
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
Land, buildings and leasehold improvements
|
|
$
|
70.3
|
|
|
$
|
68.1
|
|
|
|
Machinery and equipment
|
|
285.5
|
|
|
287.7
|
|
|
|
Construction in progress
|
|
6.9
|
|
|
8.9
|
|
|
|
Total property, plant and equipment
|
|
362.7
|
|
|
364.7
|
|
|
|
Accumulated depreciation and impairment
|
|
(270.4)
|
|
|
(265.8)
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
92.3
|
|
|
$
|
98.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
9.5
|
|
|
$
|
6.6
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
0.1
|
|
|
—
|
|
|
|
Operating lease liability
|
|
3.0
|
|
|
3.3
|
|
|
|
Other current liabilities
|
|
1.7
|
|
|
2.4
|
|
|
|
Total other current liabilities
|
|
$
|
14.3
|
|
|
$
|
12.3
|
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
1.0
|
|
|
$
|
0.9
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability
|
|
9.5
|
|
|
11.7
|
|
|
|
Other non-current liabilities
|
|
0.1
|
|
|
0.2
|
|
|
|
Total other non-current liabilities
|
|
$
|
10.6
|
|
|
$
|
12.8
|
|
|
8. Supplementary balance sheet information (continued)
Held-for-sale assets and liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held-for-sale assets
|
September 27,
|
|
December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Property, plant and equipment
|
$
|
3.7
|
|
|
$
|
3.7
|
|
|
|
Inventory
|
—
|
|
|
0.2
|
|
|
|
|
|
|
|
|
|
Held-for-sale assets
|
$
|
3.7
|
|
|
$
|
3.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2018, a building within our Elektron Segment was classified as held-for-sale assets, presented within other current assets. The building was part of a site closure announced in 2017 and was readily available for sale at December 31, 2018. As a result of delays, extended as a result of COVID-19, the site at Riverhead, NY is now expected to be sold during the first half of 2021 and is included within held-for-sale assets as of September 27, 2020 and December 31, 2019.
9. Goodwill and other identifiable intangible assets
Changes in goodwill during the first three-quarters ended September 27, 2020, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Gas Cylinders
|
|
Elektron
|
|
Total
|
|
|
At January 1, 2020
|
$
|
27.0
|
|
|
$
|
41.8
|
|
|
$
|
68.8
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference
|
(0.8)
|
|
|
(0.5)
|
|
|
(1.3)
|
|
|
|
Balance at September 27, 2020
|
$
|
26.2
|
|
|
$
|
41.3
|
|
|
$
|
67.5
|
|
|
Identifiable intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 27, 2020
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
In millions
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
|
Customer relationships
|
$
|
13.4
|
|
|
$
|
(5.0)
|
|
|
$
|
8.4
|
|
|
$
|
13.4
|
|
|
$
|
(4.6)
|
|
|
$
|
8.8
|
|
|
|
Technology and trading related
|
7.7
|
|
|
(3.4)
|
|
|
4.3
|
|
|
8.1
|
|
|
(3.3)
|
|
|
4.8
|
|
|
|
|
$
|
21.1
|
|
|
$
|
(8.4)
|
|
|
$
|
12.7
|
|
|
$
|
21.5
|
|
|
$
|
(7.9)
|
|
|
$
|
13.6
|
|
|
Identifiable intangible asset amortization expense was $0.6 million and $0.9 million for the first three-quarters of 2020 and 2019 respectively.
Intangible asset amortization expense during the remainder of 2020 and over the next five years is expected to be approximately $0.1 million in 2020, $0.7 million in 2021, $0.7 million in 2022, $0.7 million in 2023, $0.7 million in 2024 and $0.7 million in 2025.
10. Debt
Debt outstanding was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
September 27, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
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
|
—
|
|
|
17.5
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs
|
(0.3)
|
|
|
(1.1)
|
|
|
|
Total debt
|
$
|
74.7
|
|
|
$
|
91.4
|
|
|
|
Less current portion
|
$
|
(25.0)
|
|
|
$
|
—
|
|
|
|
Non-current debt
|
$
|
49.7
|
|
|
$
|
91.4
|
|
|
Unamortized debt issuance costs of $0.5 million associated with the revolving credit facility have been reclassified into other receivables, presented within Accounts and other receivables, for the third quarter 2020 given the the balance of the facility is nil.
The weighted-average interest rate on the revolving credit facility was 2.16% for the Third Quarter of 2020 and 2.47% for the full-year 2019.
The maturity profile of the Company's debt, excluding unamortized issuance costs and discounts, is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
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
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
75.0
|
|
|
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 September 27, 2020.
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 Third Quarter of 2020, we repaid $16.5 million on the Revolving Credit Facility and the balance outstanding at September 27, 2020, was nil, and at December 31, 2019, was $17.5 million, with $150.0 million undrawn at September 27, 2020, $132.5 million at December 31, 2019.
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 September 27, 2020.
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 for the 39-week period ended September 27, 2020, was 30.1%, compared to 42.7% for the 39-week period ended September 29, 2019. The 2020 tax rate has been affected by the reduction in the Canadian tax rate which is applied to deferred tax assets. However, there is no material change to our cash tax rate as a result of these items. The 2019 rate was affected by the impact of non-deductible expenses related to the aborted acquisition of Neo Performance Materials and restructuring activities. 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.
12. Share Plans
Total share-based compensation expense for the three-quarters ended September 27, 2020, and September 29, 2019, was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation charges
|
$
|
0.8
|
|
|
$
|
0.6
|
|
|
$
|
2.1
|
|
|
$
|
4.0
|
|
|
|
|
|
|
|
|
|
|
|
|
In March 2020, 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 130,000 and the weighted average fair value of options granted in 2020 was estimated to be $11.30 per share.
In May 2020, we issued additional share-based compensation grants under the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan. The total number of awards issued was 2,000 and the weighted average fair value of options granted in 2020 was estimated to be $13.13 per share.
In June 2020, 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 27,280 and the weighted-average fair value of options granted was estimated to be $13.38 per share.
In September 2020, we issued additional share-based compensation grants under the Luxfer Holdings PLC Long-Term Umbrella 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 $11.84 per share.
The following table illustrates the assumptions used in deriving the fair value of share options granted during 2020 and the year-ended December 31, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Dividend yield (%)
|
3.39 - 4.09
|
|
2.10
|
|
|
Expected volatility range (%)
|
36.48 - 56.28
|
|
35.06 - 44.20
|
|
|
Risk-free interest rate (%)
|
0.16 - 0.49
|
|
0.74 - 2.52
|
|
|
Expected life of share options range (years)
|
0.50 - 4.00
|
|
0.50 - 4.00
|
|
|
Weighted average exercise price ($)
|
$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
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Dividends declared and paid during the year:
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
Interim dividend paid August 7, 2019 ($0.125 per ordinary share)
|
—
|
|
|
3.4
|
|
|
—
|
|
|
3.4
|
|
|
|
Interim dividend paid February 5, 2020 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
Interim dividend paid May 6, 2020 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
Interim dividend paid August 5, 2020 ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
|
$
|
3.4
|
|
|
$
|
3.4
|
|
|
$
|
10.2
|
|
|
$
|
10.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
|
|
|
Dividends declared and paid after the quarter end (not recognized as a liability at the quarter end):
|
|
|
|
|
|
|
|
Interim dividend declared October 3, and paid November 6, 2019: ($0.125 per ordinary share)
|
$
|
—
|
|
|
$
|
3.4
|
|
|
|
|
|
Interim dividend declared October 5, and to be paid November 4, 2020: ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
|
|
|
|
$
|
3.4
|
|
|
$
|
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 five 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 and Luxfer Graphic Arts aggregate into the Elektron segment. In the first two quarters of 2019, prior to its divestiture, Luxfer Czech Republic also aggregated 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 EBITA1 and adjusted EBITDA, which we define 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 discount on deferred consideration.
1 Adjusted EBITA is adjusted EBITDA less depreciation
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 Third Quarter and year-to-date ended September 27, 2020, and September 29, 2019, is included in the following summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Gas Cylinders segment
|
$
|
45.0
|
|
|
$
|
54.2
|
|
|
$
|
148.0
|
|
|
$
|
170.7
|
|
|
$
|
7.6
|
|
|
$
|
6.3
|
|
|
$
|
16.2
|
|
|
$
|
17.9
|
|
|
|
Elektron segment
|
45.4
|
|
|
52.9
|
|
|
135.7
|
|
|
173.3
|
|
|
6.6
|
|
|
10.4
|
|
|
23.5
|
|
|
37.5
|
|
|
|
Consolidated
|
$
|
90.4
|
|
|
$
|
107.1
|
|
|
$
|
283.7
|
|
|
$
|
344.0
|
|
|
$
|
14.2
|
|
|
$
|
16.7
|
|
|
$
|
39.7
|
|
|
$
|
55.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
|
|
|
Restructuring charges
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Gas Cylinders segment
|
$
|
1.2
|
|
|
$
|
1.3
|
|
|
$
|
3.6
|
|
|
$
|
4.1
|
|
|
$
|
3.4
|
|
|
$
|
2.3
|
|
|
$
|
6.8
|
|
|
$
|
19.5
|
|
|
|
Elektron segment
|
2.4
|
|
|
2.3
|
|
|
7.2
|
|
|
7.2
|
|
|
0.9
|
|
|
0.3
|
|
|
1.0
|
|
|
4.8
|
|
|
|
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
|
Consolidated
|
$
|
3.6
|
|
|
$
|
3.6
|
|
|
$
|
10.8
|
|
|
$
|
11.3
|
|
|
$
|
4.3
|
|
|
$
|
2.6
|
|
|
$
|
7.9
|
|
|
$
|
24.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
|
Capital expenditures
|
|
|
|
|
|
|
|
|
|
September 27,
|
|
December 31,
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Gas Cylinders segment
|
$
|
134.5
|
|
|
$
|
156.0
|
|
|
|
|
$
|
0.7
|
|
|
$
|
0.5
|
|
|
$
|
1.7
|
|
|
$
|
2.9
|
|
|
|
Elektron segment
|
190.5
|
|
|
200.8
|
|
|
|
|
0.9
|
|
|
0.3
|
|
|
3.4
|
|
|
8.2
|
|
|
|
Other
|
34.6
|
|
|
33.5
|
|
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Consolidated
|
$
|
359.6
|
|
|
$
|
390.3
|
|
|
|
|
$
|
1.6
|
|
|
$
|
0.8
|
|
|
$
|
5.1
|
|
|
$
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
September 27,
|
|
December 31,
|
|
|
|
|
In millions
|
|
2020
|
|
2019
|
|
|
|
|
United States
|
|
$
|
53.1
|
|
|
$
|
57.3
|
|
|
|
|
|
United Kingdom
|
|
34.2
|
|
|
36.7
|
|
|
|
|
|
Canada
|
|
3.6
|
|
|
3.6
|
|
|
|
|
|
France
|
|
1.1
|
|
|
1.0
|
|
|
|
|
|
Asia Pacific
|
|
0.3
|
|
|
0.3
|
|
|
|
|
|
|
|
$
|
92.3
|
|
|
$
|
98.9
|
|
|
|
|
14. Segmental Information (continued)
The following table presents a reconciliation of Adjusted EBITDA to net income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
Year-to-date
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
|
Adjusted EBITDA
|
$
|
14.2
|
|
|
$
|
16.7
|
|
|
$
|
39.7
|
|
|
$
|
55.4
|
|
|
|
Other share-based compensation charges
|
(0.8)
|
|
|
(0.6)
|
|
|
(2.1)
|
|
|
(4.0)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
(3.6)
|
|
|
(3.6)
|
|
|
(10.8)
|
|
|
(11.3)
|
|
|
|
Unwind discount on deferred consideration
|
—
|
|
|
(0.1)
|
|
|
—
|
|
|
(0.2)
|
|
|
|
Restructuring charges
|
(4.3)
|
|
|
(2.6)
|
|
|
(7.9)
|
|
|
(24.3)
|
|
|
|
Impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
0.2
|
|
|
|
Acquisition and disposal related gains / (costs)
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
(1.7)
|
|
|
|
Other charges (2)
|
—
|
|
|
(2.7)
|
|
|
—
|
|
|
(2.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefits pension credit
|
1.1
|
|
|
0.6
|
|
|
3.3
|
|
|
1.7
|
|
|
|
Interest expense, net
|
(1.2)
|
|
|
(1.3)
|
|
|
(3.5)
|
|
|
(3.5)
|
|
|
|
Provision for income taxes
|
(2.8)
|
|
|
(0.6)
|
|
|
(5.6)
|
|
|
(4.1)
|
|
|
|
Net income
|
$
|
2.6
|
|
|
$
|
5.8
|
|
|
$
|
12.9
|
|
|
$
|
5.5
|
|
|
The following tables present certain geographic information by geographic region for the Third Quarter ended September 27, 2020, and September 29, 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter
|
|
|
|
|
|
Year-to-date
|
|
|
|
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
$M
|
Percent
|
|
$M
|
Percent
|
|
$M
|
Percent
|
|
$M
|
Percent
|
|
|
United States
|
$
|
49.4
|
|
54.7
|
%
|
|
$
|
58.0
|
|
54.1
|
%
|
|
$
|
159.3
|
|
56.1
|
%
|
|
$
|
182.4
|
|
52.9
|
%
|
|
|
U.K.
|
5.4
|
|
6.0
|
%
|
|
7.9
|
|
7.4
|
%
|
|
18.5
|
|
6.5
|
%
|
|
28.5
|
|
8.3
|
%
|
|
|
France
|
5.0
|
|
5.5
|
%
|
|
3.5
|
|
3.3
|
%
|
|
14.1
|
|
5.0
|
%
|
|
12.9
|
|
3.8
|
%
|
|
|
Italy
|
2.6
|
|
2.9
|
%
|
|
5.1
|
|
4.8
|
%
|
|
11.4
|
|
4.0
|
%
|
|
16.8
|
|
4.9
|
%
|
|
|
Germany
|
3.1
|
|
3.4
|
%
|
|
4.2
|
|
3.9
|
%
|
|
11.1
|
|
3.9
|
%
|
|
18.2
|
|
5.3
|
%
|
|
|
Top five countries
|
$
|
65.5
|
|
72.5
|
%
|
|
$
|
78.7
|
|
73.6
|
%
|
|
$
|
214.4
|
|
75.5
|
%
|
|
$
|
258.8
|
|
75.2
|
%
|
|
|
Rest of Europe
|
5.9
|
|
6.5
|
%
|
|
8.6
|
|
8.0
|
%
|
|
18.3
|
|
6.5
|
%
|
|
30.5
|
|
8.9
|
%
|
|
|
Asia Pacific
|
12.5
|
|
13.8
|
%
|
|
13.0
|
|
12.1
|
%
|
|
34.5
|
|
12.2
|
%
|
|
37.3
|
|
10.8
|
%
|
|
|
Other (4)
|
6.5
|
|
7.2
|
%
|
|
6.8
|
|
6.3
|
%
|
|
16.5
|
|
5.8
|
%
|
|
17.4
|
|
5.1
|
%
|
|
|
|
$
|
90.4
|
|
|
|
$
|
107.1
|
|
|
|
$
|
283.7
|
|
|
|
$
|
344.0
|
|
|
|
(2) Other charges relates to an expense incurred in relation to the Company's decision to commence a project to remove low-level naturally occurring radioactive material.
(3) Net sales are based on the geographic destination of sale.
(4) 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 $150.0 million at September 27, 2020 and December 31, 2019. Of these committed facilities, nothing was drawn at September 27, 2020, and $17.5 million at December 31, 2019.
The Company had a separate (uncommitted) facility for letters of credit which at September 27, 2020, was £1.0 million ($1.3 million) and December 31, 2019, was £1.0 million ($1.3 million). None of these were utilized at September 27, 2020 and December 31, 2019 respectively.
The Company also has two separate (uncommitted) bonding facilities for bank guarantees; one denominated in GBP sterling of £4.5 million (2020: $5.7 million, 2019: $5.9 million), and one denominated in USD of $1.5 million (2019: $0.4 million). Of that denominated in GBP, £1.2 million ( $1.5 million) and £1.6 million ($2.3 million) was utilized at September 27, 2020, and December 31, 2019, respectively. Of that dominated in USD, $0.8 million was utilized in September 27, 2020 and was fully utilized at December 31, 2019.
The Company also has a $4.0 million (December 31, 2019: nil) separate overdraft facility of which none was drawn at September 27, 2020.
Capital commitments
At September 27, 2020, the Company had capital expenditure commitments of $0.8 million for the acquisition of new plant and equipment.
Inventory commitments
None
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. We have reviewed our quality control checks from around the time which the cylinder was produced and no instances of failures have been 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.
16. Subsequent Events
None material.