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12: R2 Condensed Consolidated Statements of Income HTML 129K
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13: R3 Condensed Consolidated Statements of Comprehensive HTML 48K
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20: R10 Earnings per share HTML 49K
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(Exact Name of Registrant
as Specified in Its Charter)
iEngland and Wales
i98-1024030
State
or Other Jurisdiction of Incorporation or Organization
I.R.S. Employer Identification No.
i8989 North Port Washington Road, Suite 211,
iMilwaukee,
iWI, i53217
Address of principal executive offices
Registrant’s telephone number, including area code: i+1i414-i269-2419
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
iOrdinary Shares, nominal value £0.50 each
iLXFR
iNew
York Stock Exchange
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. iYesx No o
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). iYesx No o
Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See definition of "large accelerated filer", "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.:
Large accelerated filer
o
iAccelerated
Filer
x
Non-accelerated filer
o
Smaller reporting company
i☐
Emerging growth company
i☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ix
The
number of shares outstanding of Registrant’s only class of ordinary stock on iApril 2, 2023, was i26,931,897.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
First
Quarter
In millions, except share and per share data
2023
2022
Net sales
$
i101.3
$
i97.0
Cost
of goods sold
(i80.2)
(i72.8)
Gross
profit
i21.1
i24.2
Selling,
general and administrative expenses
(i12.5)
(i10.7)
Research
and development
(i1.2)
(i1.3)
Restructuring
charges
(i0.3)
(i1.4)
Acquisition
and disposal related costs
i—
(i0.2)
Operating
income
i7.1
i10.6
Interest
expense
(i1.3)
(i0.8)
Defined
benefit pension (charge) / credit
(i8.9)
i0.4
(Loss)
/ income before income taxes
(i3.1)
i10.2
Credit
/ (provision) for income taxes
i3.6
(i2.5)
Net
income from continuing operations
i0.5
i7.7
Net
income / (loss) from discontinued operations
$
i—
$
(i0.1)
Net
income
$
i0.5
$
i7.6
Earnings
/ (loss) per share1
Basic from continuing operations
$
i0.02
$
i0.28
Basic
from discontinued operations2
$
i—
$
i—
Basic
$
i0.02
$
i0.28
Diluted
from continuing operations
$
i0.02
$
i0.28
Diluted
from discontinued operations2
$
i—
$
i—
Diluted
$
i0.02
$
i0.28
Weighted
average ordinary shares outstanding
Basic
i26,921,010
i27,490,741
Diluted
i27,071,494
i27,696,118
See
accompanying notes to condensed consolidated financial statements
1The 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.
2The loss per share for discontinued operations in the First Quarter of 2022 has not been diluted, since the incremental shares included in the weighted-average number of shares outstanding would have been anti-dilutive.
1
LUXFER
HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
First Quarter
In millions
2023
2022
Net
income
$
i0.5
$
i7.6
Other
comprehensive income / (loss)
Net change in foreign currency translation adjustment, net of tax
i3.4
(i1.8)
Pension
and post-retirement actuarial gains, net of $i4.9 and $i0.1
tax, respectively
i6.8
i0.4
Other
comprehensive income / (loss), net of tax
i10.2
(i1.4)
Total
comprehensive income
$
i10.7
$
i6.2
See
accompanying notes to condensed consolidated financial statements
2
LUXFER HOLDINGS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
April
02,
December 31,
In millions, except share and per share data
2023
2022
Current assets
Cash and cash equivalents
$
i1.8
$
i12.6
Restricted
cash
i0.3
i0.3
Accounts
and other receivables, net of allowances of $i0.5 and $i0.4, respectively
i74.2
i67.8
Inventories
i129.4
i111.1
Current
assets held-for-sale
i7.8
i9.3
Total
current assets
$
i213.5
$
i201.1
Non-current
assets
Property, plant and equipment, net
$
i77.6
$
i77.7
Right-of-use
assets from operating leases
i19.2
i19.8
Goodwill
i66.5
i65.6
Intangibles,
net
i12.4
i12.5
Deferred
tax assets
i3.2
i3.0
Investments
and loans to joint ventures and other affiliates
i0.3
i0.4
Pensions
and other retirement benefits
i28.4
i27.0
Total
assets
$
i421.1
$
i407.1
Current
liabilities
Short-term debt
$
i25.0
$
i25.0
Accounts
payable
i39.3
i37.8
Accrued
liabilities
i28.9
i29.4
Taxes
on income
i2.7
i1.8
Current
liabilities held-for-sale
i4.1
i5.0
Other
current liabilities
i11.8
i11.2
Total
current liabilities
$
i111.8
$
i110.2
Non-current
liabilities
Long-term debt
$
i66.4
$
i56.2
Pensions
and other retirement benefits
i—
i4.5
Deferred
tax liabilities
i11.4
i9.9
Other
non-current liabilities
i17.5
i19.0
Total
liabilities
$
i207.1
$
i199.8
Commitments
and contingencies (Note 15)
Shareholders' equity
Ordinary shares of £ii0.50/
par value; authorized ii40,000,000/ shares for
2023 and 2022; issued and outstanding ii28,944,000/ for
2023 and 2022
$
i26.5
$
i26.5
Additional
paid-in capital
i221.7
i221.4
Treasury
shares
(i21.2)
(i20.4)
Own
shares held by ESOP
(i1.0)
(i1.0)
Retained
earnings
i117.2
i120.2
Accumulated
other comprehensive loss
(i129.2)
(i139.4)
Total
shareholders' equity
$
i214.0
$
i207.3
Total
liabilities and shareholders' equity
$
i421.1
$
i407.1
See
accompanying notes to condensed consolidated financial statements
3
LUXFER HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
First
Quarter
In millions
2023
2022
Operating activities
Net income
$
i0.5
$
i7.6
Net
(income) / loss from discontinued operations
i—
i0.1
Net
income from continuing operations
$
i0.5
$
i7.7
Adjustments
to reconcile net income to net cash used by operating activities
Depreciation
i3.1
i3.5
Amortization
of purchased intangible assets
i0.2
i0.2
Amortization
of debt issuance costs
i0.1
i0.2
Share-based
compensation charges
i0.6
i0.2
Deferred
income taxes
i1.2
i0.1
Defined
benefit pension charge / (credit)
i8.9
(i0.4)
Defined
benefit pension contributions
(i2.3)
i—
Changes
in assets and liabilities
Accounts and other receivables
(i2.3)
(i12.2)
Inventories
(i17.1)
(i16.2)
Other
current assets
i1.5
(i3.0)
Accounts
payable
(i2.4)
i6.8
Accrued
liabilities
(i1.0)
i3.4
Other
current liabilities
(i4.4)
i2.0
Other
non-current assets and liabilities
(i1.0)
(i1.6)
Net
cash used by operating activities - continuing
(i14.4)
(i9.3)
Net
cash provided by operating activities - discontinued
i—
i—
Net
cash used by operating activities
$
(i14.4)
$
(i9.3)
Investing
activities
Capital expenditures
$
(i2.0)
$
(i1.0)
Net
cash used by investing activities - continuing
(i2.0)
(i1.0)
Net
cash used by investing activities - discontinued
i—
i—
Net
cash used by investing activities
$
(i2.0)
$
(i1.0)
Financing
activities
Net drawdown of long-term borrowings
$
i9.9
$
i26.7
Repurchase
of own shares
(i0.8)
(i1.5)
Share-based
compensation cash paid
(i0.3)
(i0.4)
Dividends
paid
(i3.5)
(i3.4)
Net
cash provided by financing activities
$
i5.3
$
i21.4
Effect
of exchange rate changes on cash and cash equivalents
i0.3
(i0.2)
Net
increase
$
(i10.8)
$
i10.9
Cash,
cash equivalents and restricted cash; beginning of year
i12.9
i6.4
Cash,
cash equivalents and restricted cash; end of the First Quarter
i2.1
i17.3
Supplemental
cash flow information:
Interest payments
$
i1.4
$
i0.8
Income
tax receipts, net
(i0.5)
(i0.1)
See
accompanying notes to condensed consolidated financial statements
4
LUXFER HOLDINGS PLC
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)
See
accompanying notes to condensed consolidated financial statements
5
LUXFER HOLDINGS PLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. iiBasis
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, 2022. 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.
iOur fiscal year ends on December 31. We report our interim quarterly periods on a 13-week quarter basis, ending on a Sunday. The First Quarter 2023, ended on April 2, 2023, and the First Quarter
2022, ended on March 27, 2022.
i
Accounting standards issued but not yet effective
None that are expected to be material to the Company.
6
2. iEarnings
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.
i
Basic and diluted earnings per share were calculated as follows:
First
Quarter
In millions except share and per-share data
2023
2022
Basic earnings:
Net income from continuing operations
$
i0.5
$
i7.7
Net
income / (loss) from discontinued operations
i—
(i0.1)
Net
income
$
i0.5
$
i7.6
Weighted
average number of £ii0.50/ ordinary shares:
For
basic earnings per share
i26,921,010
i27,490,741
Dilutive
effect of potential common stock
i150,484
i205,377
For
diluted earnings per share
i27,071,494
i27,696,118
Earnings
/ (loss) per share using weighted average number of ordinary shares outstanding(1):
Basic earnings per ordinary share for continuing operations
$
i0.02
$
i0.28
Basic
earnings / (loss) per ordinary share for discontinued operations
i—
i—
Basic
earnings per ordinary share
$
i0.02
$
i0.28
Diluted
earnings per ordinary share for continuing operations
$
i0.02
$
i0.28
Diluted
earnings / (loss) per ordinary share for discontinued operations
i—
i—
Diluted
earnings per ordinary share
$
i0.02
$
i0.28
(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 first quarter of 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.
.
7
3. iNet
Sales
i
Disaggregated sales disclosures for the quarters ended April 2, 2023, and March 27, 2022, are included below and in Note 13, Segmental Information.
First
Quarter
2023
2022
In millions
Gas Cylinders
Elektron
Total
Gas Cylinders
Elektron
Total
General industrial
$
i9.5
$
i22.9
$
i32.4
$
i8.4
$
i26.9
$
i35.3
Transportation
i13.9
i12.8
i26.7
i16.9
i12.9
i29.8
Defense,
First Response & Healthcare
i18.1
i24.1
i42.2
i17.1
i14.8
i31.9
$
i41.5
$
i59.8
$
i101.3
$
i42.4
$
i54.6
$
i97.0
/
The
Company’s performance obligations are satisfied at a point in time. With the classification 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. iRestructuring
The
$i0.3 million (2021: $i1.4 million) restructuring charges in the first quarter of 2023,
predominantly relates to costs incurred in streamlining our North American Gas Cylinder business. The $i1.4 million restructuring charge in 2022 relates solely to costs associated with the closure of Luxfer Gas Cylinders France, which ceased operations in 2019.
iRestructuring-related
costs by reportable segment were as follows:
First Quarter
In millions
2023
2022
Severance
and related costs
Gas Cylinders
$
i0.3
$
i1.4
Elektron
i—
i—
Total
restructuring charges
$
i0.3
$
i1.4
/
i
Activity
related to restructuring, recorded in Other current liabilities in the consolidated balance sheets is summarized as follows:
In millions
2023
Balance at January 1,
$
i3.7
Costs
incurred
i0.3
Cash payments and other
(i0.2)
Balance
at April 2,
$
i3.8
/
5. iAcquisition
and disposal related costs
Acquisition-related costs of $i0.2 million in the first quarter of 2022 represent professional fees incurred in relation to the SCI acquisition.
8
6. iiSupplementary
balance sheet information/
April 2,
December 31,
In millions
2023
2022
Accounts
and other receivables
Trade receivables
$
i62.0
$
i56.4
Related
parties
i0.1
i0.1
Prepayments
and accrued income
i6.5
i6.6
Derivative
financial instruments
i0.1
i0.7
Other
receivables
i5.5
i4.0
Total
accounts and other receivables
$
i74.2
$
i67.8
Inventories
Raw
materials and supplies
$
i55.9
$
i42.7
Work-in-process
i44.3
i44.0
Finished
goods
i29.2
i24.4
Total
inventories
$
i129.4
$
i111.1
Property,
plant and equipment, net
Land, buildings and leasehold improvements
$
i59.7
$
i58.9
Machinery
and equipment
i258.8
i254.9
Construction
in progress
i11.7
i9.8
Total
property, plant and equipment
i330.2
i323.6
Accumulated
depreciation and impairment
(i252.6)
(i245.9)
Total
property, plant and equipment, net
$
i77.6
$
i77.7
Other
current liabilities
Restructuring provision
$
i3.8
$
i3.7
Short
term provision
i—
i0.1
Derivative
financial instruments
i0.2
i0.4
Operating
lease liability
i5.5
i4.7
Advance
payments
i2.3
i2.3
Total
other current liabilities
$
i11.8
$
i11.2
Other
non-current liabilities
Contingent liabilities
$
i0.5
$
i0.7
Operating
lease liability
i16.8
i18.2
Other
non-current liabilities
i0.2
i0.1
Total
other non-current liabilities
$
i17.5
$
i19.0
9
7.
iGoodwill and other identifiable intangible assets
i
Changes in goodwill during the first three months ended April 2, 2023, were as follows:
The
weighted-average interest rate on the revolving credit facility was i6.00% for the First Quarter of 2023 and i3.80% for the full-year 2022.
10
8. Debt
(continued)
iThe maturity profile of the Company's debt, excluding unamortized issuance costs and discounts, is as follows:
In
millions
2023
2024
2025
2026
Thereafter
Total
Loan
Notes due 2023
i25.0
i—
i—
i—
i—
i25.0
Loan
Notes due 2026
i—
i—
i—
i25.0
i—
i25.0
Revolving
credit facility
i—
i—
i—
i42.2
i—
i42.2
Total
debt
$
i25.0
$
i—
$
i—
$
i67.2
$
i—
$
i92.2
/
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 April 2, 2023.
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 quarter of 2023, we drew down net $i9.9
million on the Revolving Credit Facility and the balance outstanding at April 2, 2023, was $i42.2 million, and at December 31, 2022, was $i31.9
million, with $i82.8 million undrawn at April 2, 2023.
We have been in compliance with the covenants under the Senior Facilities Agreement throughout all of the quarterly measurement dates to April 2, 2023.
9. iDiscontinued
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 2023.
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 2023 and 2022.
i
Results
of discontinued operations in the first quarter of 2023 and 2022 were as follows:
First Quarter
In millions
2023
2022
Net
sales
$
i2.3
$
i1.7
Cost
of goods sold
(i1.9)
(i1.6)
Gross
profit
$
i0.4
$
i0.1
Selling,
general and administrative expenses
(i0.3)
(i0.2)
Restructuring
charges
(i0.1)
i—
Operating profit
/ (loss)
$
i—
$
(i0.1)
Tax
(charge) / credit
i—
i—
Net
profit / (loss)
$
i—
$
(i0.1)
/
11
9. Discontinued
Operations (continued)
The assets and liabilities classified as held-for-sale related to discontinued operations were as follows:
Held-for-sale assets
April 2,
December 31,
In millions
2023
2022
Inventory
i2.4
i2.7
Accounts
and other receivables
i1.6
i2.7
Current
assets
$
i4.0
$
i5.4
Right-of-use-assets
i2.6
i2.7
Held-for-sale
assets
$
i6.6
$
i8.1
Held-for-sale
liabilities
Accounts payable
i0.8
i0.8
Accrued
liabilities
i0.4
i0.2
Other
liabilities
i2.9
i4.0
Held-for-sale
liabilities
$
i4.1
$
i5.0
Also
included within assets held-for-sale in 2023 and 2022 are land and buildings valued at $i1.2 million, within our Elektron Segment.
There was no depreciation and amortization, capital expenditures and significant non-cash items.
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.
10. iIncome 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 Quarter ended April 2, 2023, was i116.0%, compared to i24.5%
for the Quarter ended March 27, 2022. The rate was impacted by non-deductible expenses and a deferred tax credit, primarily in relation to the U.S. pension buyout.
12
11. iShare
Plans
iTotal share-based compensation expense for the quarters ended April 2, 2023 and March 27, 2022 was as follows:
First
Quarter
In millions
2023
2022
Total
share-based compensation charges
$
i0.6
$
i0.2
/
In
March 2023, 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 i126,600 and the weighted average fair value of options granted in 2023 was estimated to be $i17.94
per share.
Also in March 2023, approximately i10,000 awards were granted based on the achievement of total shareholder return targets from the period January 1, 2020 to December 31, 2022. i50%
of these awards vested immediately upon grant, with the remaining i50% vesting in March 2024.
iThe
following table illustrates the assumptions used in deriving the fair value of share options granted during the First Quarter of 2023 and the year-ended December 31, 2022:
The expected life of the share options is based on historical data and current expectations, and is not necessarily indicative of exercise patterns that may occur. The expected volatility reflects the assumption that the historical volatility over a period similar to the life of the options is indicative of future trends, which may not necessarily be the actual outcome.
12. iShareholders'
Equity
Dividends paid and proposedi
First
Quarter
In millions
2023
2022
Dividends declared and paid during the year:
Interim dividend paid February
4, 2022 ($i0.125 per ordinary share)
$
—
$
i3.4
Interim
dividend paid February 1 2023 ($i0.130 per ordinary share)
i3.5
—
Interim
dividend declared March 10 2022, and paid May 4, 2022 ($i0.130) per ordinary share)
—
i3.6
$
i3.5
$
i7.0
/
In
millions
2023
2022
Dividends declared and paid after the quarter end (not recognized as a liability at the quarter end):
Interim dividend declared April 3 2023,
and to be paid May 3, 2023 ($i0.130 per ordinary share)
i3.5
—
$
i3.5
$
—
13
13. iSegmental
Information
We classify our operations into itwo 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 ifour identified business units, which aggregate into the itwo 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 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.
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.
i
Financial
information by reportable segment for the Quarters ended April 2, 2023, and March 27, 2022, is included in the following summary:
Net
sales
Adjusted EBITDA
First Quarter
First Quarter
In millions
2023
2022
2023
2022
Gas
Cylinders segment
$
i41.5
$
i42.4
$
i2.5
$
i2.7
Elektron
segment
i59.8
i54.6
i8.8
i13.4
Consolidated
$
i101.3
$
i97.0
$
i11.3
$
i16.1
Depreciation
and amortization
Restructuring charges
First Quarter
First Quarter
In millions
2023
2022
2023
2022
Gas
Cylinders segment
$
i1.1
$
i1.4
$
i0.3
$
i1.4
Elektron
segment
i2.2
i2.3
i—
i—
Consolidated
$
i3.3
$
i3.7
$
i0.3
$
i1.4
/
14
13. Segmental
Information (continued)
Total assets
Capital expenditures
First
Quarter,
December 31,
First Quarter
In millions
2023
2022
2023
2022
Gas
Cylinders segment
$
i143.3
$
i133.1
$
i0.3
$
i0.2
Elektron
segment
i234.4
i216.4
i1.7
i0.8
Other
i36.8
i49.5
i—
i—
Discontinued
operations
$
i6.6
$
i8.1
$
(i0.1)
$
i—
Consolidated
$
i421.1
$
i407.1
$
i1.9
$
i1.0
i
Property,
plant and equipment, net
First Quarter
December 31,
In millions
2023
2022
U.S.
$
i40.5
$
i41.6
United
Kingdom
i33.0
i32.0
Canada
i2.7
i2.8
Rest
of Europe
i1.0
i1.0
Asia
Pacific
i0.4
i0.3
$
i77.6
$
i77.7
/iThe
following table presents a reconciliation of Adjusted EBITDA to net income from continuing operations:
First Quarter
In millions
2023
2022
Adjusted
EBITDA
$
i11.3
$
i16.1
Other
share-based compensation charges
(i0.6)
(i0.2)
Depreciation
and amortization
(i3.3)
(i3.7)
Restructuring
charges
(i0.3)
(i1.4)
Acquisition
and disposal related costs
i—
(i0.2)
Defined
benefits pension credit
(i8.9)
i0.4
Interest
expense, net
(i1.3)
(i0.8)
Net
(loss) / income before income taxes from continuing operations
$
(i3.1)
$
i10.2
i
The
following tables present certain geographic information by geographic region for the First Quarter ended April 2, 2023, and March 27, 2022:
Net Sales(1)
First
Quarter
2023
2022
$M
Percent
$M
Percent
United
States
$
i57.7
i57.0
%
$
i55.3
i57.0
%
U.K.
i5.6
i5.5
%
i5.4
i5.6
%
Germany
i6.3
i6.2
%
i4.5
i4.6
%
France
i2.1
i2.1
%
i3.5
i3.6
%
Italy
i3.3
i3.3
%
i2.3
i2.4
%
Top
five countries
$
i75.0
i74.1
%
$
i71.0
i73.2
%
Rest
of Europe
i7.4
i7.3
%
i6.0
i6.2
%
Asia
Pacific
i14.8
i14.6
%
i14.6
i15.1
%
Other
(2)
i4.1
i4.0
%
i5.4
i5.6
%
$
i101.3
$
i97.0
(1)
Net sales are based on the geographic destination of sale.
(2) Other includes Canada, South America, Latin America and Africa.
In
November 2018, an alleged explosion occurred at a third-party waste disposal and treatment site in Grand View, Idaho, reportedly causing property damage, personal injury, and ione fatality. We contracted with a service company for removal and disposal of certain waste resulting from the magnesium powder manufacturing operations at the Reade facility in Manchester, New Jersey. We believe this service company, in turn, 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 ithree 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 believe that we are not liable for the incident, have asserted such, and continue to fully defend the Company against these lawsuits. Therefore, we do not currently expect any eventual outcome in these matters to have a material impact on the
Company's financial position or results of operations.
15. iPension Settlement
In the first quarter of 2023, there was a $i9.2 million
charge in relation to the sale of the U.S. pension plan liability to an insurer, which included $i2.3 million cash and $i6.9 million
in relation to the derecognition of the U.S. pension liability and reallocation of accumulated actuarial losses from other comprehensive income. This was partially offset by a $i0.3 million (2022: $i0.4 million)
defined benefit credit on the U.K. pension plan, consistent with the prior year.
16. iSubsequent Events
No material events.
16
Item
2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Information regarding forward-looking statements
This Interim Report on Form 10-Q contains certain statements, statistics and projections that are, or may be, forward-looking. These forward-looking statements are subject to known and unknown risks, uncertainties, assumptions and other factors that could cause our actual results of operations, financial condition, liquidity, performance, prospects, opportunities, achievements or industry results, as well as those of the markets we serve or intend to serve, to differ materially from those expressed in, or suggested by, these forward-looking statements. The accuracy and completeness of all such statements, including, without limitation, statements regarding our future financial position, strategy, plans and objectives for the management of future operations,
is not warranted or guaranteed. These statements typically contain words such as "believes,""intends,""expects,""anticipates,""estimates,""may,""will,""should" and words of similar import. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. Although we believe that the expectations reflected in such statements are reasonable, no assurance can be given that such expectations will prove to be correct. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements. These factors include, but are not limited to, factors identified in "Business,""Risk factors,"
and "Management's Discussion and Analysis of Financial Condition and Results of Operations," or elsewhere in this Interim Report, as well as:
•general economic conditions, or conditions affecting demand for the services offered by us in the markets in which we operate, both domestically and internationally, being less favorable than expected;
•worldwide economic and business conditions and conditions in the industries in which we operate;
•post-pandemic impact of COVID-19 and future pandemics;
•fluctuations in the cost and / or availability of raw materials, labor and energy, as well as our ability to pass on cost increases to customers;
•currency
fluctuations and other financial risks;
•our ability to protect our intellectual property;
•the amount of indebtedness we have incurred and may incur, and the obligations to service such indebtedness and to comply with the covenants contained therein;
•relationships with our customers and suppliers;
•increased competition from other companies in the industries in which we operate;
•changing technology;
•our ability to execute and integrate new acquisitions;
•claims for personal injury, death or
property damage arising from the use of products produced by us;
•the occurrence of accidents or other interruptions to our production processes;
•changes in our business strategy or development plans, and our expected level of capital expenditure;
•our ability to attract and retain qualified personnel;
•restrictions on the ability of Luxfer Holdings PLC to receive dividends or loans from certain of its subsidiaries;
•climate change regulations and the potential impact on energy costs;
•regulatory,
environmental, legislative and judicial developments; and
•our intention to pay dividends.
Please read the sections "Business" and "Risk factors" included within the 2022 Annual Report on Form 10-K and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Risk factors" of this Interim Report on Form 10-Q for a more complete discussion of the factors that could affect our performance and the industries in which we operate, as well as those discussed in other documents we file or furnish with the SEC.
17
About Luxfer
Luxfer is a global industrial company
innovating niche applications in materials engineering. Luxfer focuses on value creation by using its broad array of technical know-how and proprietary technologies to help create a safe, clean and energy-efficient world. Luxfer's high-performance materials, components and high-pressure gas containment devices are used in defense, first response and healthcare, transportation and general industrial applications.
Key trends and uncertainties regarding our existing business
Margin pressure resulting from supply chain challenges
We have, and continue to experience supply chain challenges characterized by significant increases in material cost inflation on key inputs (including magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases. Additionally, force majeure still remains in place for our key supplier
of U.S. sourced magnesium, with supply not expected to recommence until at least Q3 of 2023. However, we have been successful in securing alternative sources of supply outside of the U.S.
In the majority of cases we are able to pass through inflationary costs to our customers, although we are still constrained by contracts, particularly in the Gas Cylinders segment, the longest running of which is not subject to renewal until mid-2024. Currently, our expectation is that the impact of material availability / inflation, energy cost inflation and labor and transport constraints will continue throughout 2023; but that we will be able to source sufficient material to meet demand and that in the majority of cases we expect to be able to pass on cost increases. However the outlook remains highly uncertain with both the size
and timing of future cost increases difficult to predict.
Operating objectives and trends
In 2023, we expect the following operating objectives and trends to impact our business:
•Continuing high activity on revenue growth initiatives with particular focus on increasing volumes;
•Actions to ensure continuity of supply of critical materials and services while safeguarding margins;
•Execution of productivity improvements and increases in selling prices to mitigate and pass through current cost pressure;
•Further improvements in ESG standing through investment in new projects;
•Focus
on recruiting, developing and maintaining talent, through our new leadership development programs, while driving a high-performance culture; and
•Continued emphasis on operating cash generation and maintaining strong working capital performance.
18
CONSOLIDATED RESULTS OF OPERATIONS
The consolidated results of operations for the First Quarter of 2023 and 2022 of Luxfer were as follows:
First
Quarter
% / point change
In millions
2023
2022
2023 v 2022
Net sales
$
101.3
$
97.0
4.4
%
Cost
of goods sold
(80.2)
(72.8)
10.2
%
Gross profit
21.1
24.2
(12.8)
%
%
of net sales
20.8
%
24.9
%
(4.1)
Selling, general and administrative expenses
(12.5)
(10.7)
16.8
%
%
of net sales
12.3
%
11.0
%
1.3
Research and development
(1.2)
(1.3)
(7.7)
%
%
of net sales
1.2
%
1.3
%
(0.1)
Restructuring charges
(0.3)
(1.4)
(78.6)
%
%
of net sales
0.3
%
1.4
%
(1.1)
Acquisition
and disposal related costs
—
(0.2)
(100.0)
%
% of net sales
—
%
0.2
%
(0.2)
Operating
income
$
7.1
$
10.6
(33.0)
%
% of net sales
7.0
%
10.9
%
(3.9)
Net
interest expense
(1.3)
(0.8)
62.5
%
% of net sales
1.3
%
0.8
%
0.5
Defined
benefit pension (charge) / credit
(8.9)
0.4
n/a
% of net sales
(8.8)
%
0.4
%
(9.2)
(Loss)
/ income before income taxes
$
(3.1)
$
10.2
(130.4)
%
% of net sales
(3.1)
%
10.5
%
(13.6)
Credit
/ (provision) for income taxes
3.6
(2.5)
(244.0)
%
Effective tax rate
116.1
%
24.5
%
91.6
Net
income from continuing activities
$
0.5
$
7.7
(93.5)
%
% of net sales
0.5
%
7.9
%
(7.4)
19
Net
sales
Adjusting for foreign exchange headwinds of $2.3 million, net sales have increased by 6.8% in the first of 2023 respectively. The passing through of material cost inflation, where not constrained by contract, accounted for approximately $11.1 million of the increase in consolidated net sales in the first quarter, of 2023 from 2022. Furthermore, there was a benefit in the quarter from:
•Increased sales of magnesium alloys, especially those used in aerospace applications;
•Higher demand for our zirconium products, particularly those used in auto-catalysis and pharmaceutical applications;
•Strong demand for our chemical detection
and response kits; and
•Year-over-year growth in SCBA and medical cylinder sales.
These increases were partially offset by:
•Timing of sales for flameless ration heaters ("FRH") and Meals-Ready-to Eat products ("MRE");
•Decreased demand for photo-engraving plates;
•Lower sales of Solumag® due to destocking by customers in the Oil and Gas industry; and
•Alternative fuel cylinders being down on prior year due to timing of customer projects.
Gross
profit
The 4.1 percentage point decrease in gross profit as a percentage of sales in the first quarter of 2023 from 2022 was primarily the result of the continued increased material and labor costs and other supply chain investments to overcome disruption, not fully covered by price increases, particularly in the Gas Cylinders Division.
Selling, general and administrative expenses ("SG&A")
SG&A costs as a percentage of sales in 2023 from 2022 has increased by 1.3 percentage points largely due to $1.1 million of legal costs expensed in the Elektron segment.
Research and development costs
Research and development costs as a percentage
of sales decreased by 0.1 percentage points in the first quarter of 2023 relative to 2022 respectively, with the slight reduction due to the inflationary impact on sales.
Restructuring charges
The $0.3 million restructuring charge in the first quarter of 2023, predominantly relates to costs incurred in respect of cost savings initiatives affecting our North American Gas Cylinders business.
The $1.4 million restructuring charge in 2022 relates solely to costs associated with the closure of Luxfer Gas Cylinders France, which ceased operations in 2019.
Acquisition and disposal related costs
Acquisition related costs of $0.2 million in 2022 represents amounts incurred in relation
to the acquisition of SCI.
Net interest expense
Net interest expense of $1.3 million in the first quarter of 2023 increased $0.5 million from $0.8 million in the first quarter 2022, due to combination of higher interest rates and increased drawings.
20
Defined benefit pension (charge) / credit
In the first quarter of 2023, there was a $9.2 million charge in relation to the sale of the U.S. pension plan liability to an insurer, which included $2.3 million cash and $6.9 million in relation to the derecognition of the U.S. pension
liability and reallocation of accumulated actuarial losses from other comprehensive income. This was partially offset by a $0.3 million (2022: $0.4 million) defined benefit credit on the U.K. pension plan, consistent with the prior year.
Provision for income taxes
The movement in the statutory effective tax rate from 24.5% in 2022, to 116.1% in 2023, was primarily due to non-deductible expenses and deferred tax credit, predominantly in relation to the previously mentioned pension buyout. When stripping out the impact of this, as well as other less significant adjusting items, the adjusted effective tax rate has reduced slightly to 21.7% in 2023 from 22.0% in 2022, largely as a result of jurisdictional profit mix.
21
RECONCILIATION
OF NON-GAAP FINANCIAL MEASURES TO GAAP MEASURES
The following table of non-GAAP summary financial data presents a reconciliation of net income to adjusted net income for the periods presented, being the most comparable GAAP measure. Management believes that adjusted net income, adjusted earnings per share, adjusted EBITA and adjusted EBITDA are key performance indicators (KPIs) used by the investment community and that such presentation will enhance an investor’s understanding of the Company's operational results. In addition, Luxfer's CEO and other senior management use these KPIs, among others, to evaluate business performance. However, investors should not consider adjusted net income and adjusted earnings per share in isolation as an alternative to net income and earnings per share when evaluating Luxfer's operating performance or measuring
Luxfer's profitability.
First Quarter
In millions except per share data
2023
2022
Net
income from continuing operations
$
0.5
$
7.7
Accounting charges relating to acquisitions and disposals of businesses:
Amortization
on acquired intangibles
0.2
0.2
Acquisition and disposal related costs
—
0.2
Defined benefit pension charge
/ (credit)
8.9
(0.4)
Restructuring charges
0.3
1.4
Share-based
compensation charges
0.6
0.2
Tax impact of defined benefit pension settlement
(4.9)
—
Income
tax on adjusted items
(0.2)
(0.1)
Adjusted net income
$
5.4
$
9.2
Adjusted
earnings per ordinary share
Diluted earnings per ordinary share
$
0.02
$
0.28
Impact of adjusted items
0.18
0.05
Adjusted
diluted earnings per ordinary share(1)
$
0.20
$
0.33
(1) For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding during the financial year has been adjusted for the dilutive effects of all potential ordinary shares and share options granted to employees, except where there is a loss in the period, then no adjustment is made.
First
Quarter
In millions
2023
2022
Adjusted net income
$
5.4
$
9.2
Add
back:
Tax impact of defined benefit pension settlement
4.9
—
Income
tax on adjusted items
0.2
0.1
Provision for income taxes
(3.6)
2.5
Net finance costs
1.3
0.8
Adjusted
EBITA
$
8.2
$
12.6
Depreciation
3.1
3.5
Adjusted
EBITDA
$
11.3
$
16.1
22
The following table presents a reconciliation for the adjusted effective tax rate, which management believes is a KPI used by the investment community and that such presentation will enhance an investor’s understanding of the
Company's operational results.
First Quarter
In millions
2023
2022
Adjusted
net income
$
5.4
$
9.2
Add back:
Tax impact of defined benefit pension settlement
4.9
—
Income
tax on adjusted items
0.2
0.1
Provision for income taxes
(3.6)
2.5
Adjusted income before income taxes
$
6.9
$
11.8
Adjusted
provision for income taxes
1.5
2.6
Adjusted effective tax rate
21.7
%
22.0
%
SEGMENT
RESULTS OF OPERATIONS
The summary that follows provides a discussion of the results of operations of each of our two reportable segments (Gas Cylinders and Elektron). Both segments comprise various product offerings that serve multiple end markets.
Adjusted EBITDA represents operating income adjusted for share based compensation charges; restructuring charges; acquisition and disposal related gains and costs; depreciation and amortization. A reconciliation to net income and taxes can be found in Note 13 to the condensed consolidated financial statements.
GAS CYLINDERS
The net sales and adjusted EBITDA for Gas Cylinders were as follows:
First
Quarter
% / point change
In millions
2023
2022
2023 v 2022
Net sales
$
41.5
$
42.4
(2.1)%
Adjusted
EBITDA
2.5
2.7
(7.4)%
% of net sales
6.0
%
6.4
%
(0.4)
Net
sales
The 2.1% decrease in Gas Cylinders sales in the first quarter of 2023 from 2022 was primarily the result of:
•Reduction in alternative fuel cylinder sales; and
•$1.5 million FX headwind.
These decreases have been partially offset by:
•Increased demand for SCBA cylinders; and
•Improved sales of medical oxygen cylinders.
Adjusted EBITDA
There was a 0.4 percentage point decrease in adjusted EBITDA for Gas Cylinders as a percentage of net sales in the first quarter of 2023 relative
to 2022. Pricing increases have matched inflation as our ability to pass-through cost increases improved. Volume and mix reductions more than offset favorable foreign exchange impact.
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ELEKTRON
The net sales and adjusted EBITDA for Elektron were as follows:
First
Quarter
% / point change
In millions
2023
2022
2023 v 2022
Net sales
$
59.8
$
54.6
9.5%
Adjusted
EBITDA
8.8
13.4
(34.3)%
% of net sales
14.7
%
24.5
%
(9.8)
Net
sales
The 9.5% increase in Elektron sales in the first quarter of 2023 from 2022 was primarily the result of:
•Increased sales of magnesium alloys, especially those used in aerospace applications;
•Higher demand for our zirconium products, particularly those used in auto-catalysis and pharmaceutical applications; and
•Strong demand for our chemical detection and response kits.
These increases were partially offset by:
•Timing of sales for flameless ration heaters ("FRH") and Meals-Ready-to Eat products ("MRE");
•Decreased demand
for photo-engraving plates; and
•Destocking by customers in the Oil and Gas industry.
Net sales were also impacted by $0.8 million of FX headwinds.
Adjusted EBITDA
The 9.8 percentage point decrease in adjusted EBITDA for Elektron as a percentage of net sales in the first quarter of 2023 from 2022 was impacted by $1.1 million of legal costs recognized in the quarter, coupled with accelerated cost recovery in the first quarter of 2022 and lower sales in certain higher margin end markets in the first quarter of 2023.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity requirements arise primarily from obligations
under our indebtedness, capital expenditures, acquisitions, the funding of working capital and the funding of hedging facilities to manage foreign exchange and commodity purchase price risks. We meet these requirements primarily through cash flows from operating activities, cash deposits and borrowings under the Revolving Credit Facility and accompanying ancillary hedging facilities and the Loan Notes due, 2023 and 2026. Our principal liquidity needs are:
•funding acquisitions, including deferred contingent consideration payments;
•capital expenditure requirements;
•payment of shareholder dividends;
•servicing interest on the Loan Notes, which is payable at each quarter end, in addition to interest
and / or commitment fees on the Senior Facilities Agreement;
•working capital requirements, particularly in the short term as we aim to safeguard the business from supply chain constraints, as well as to achieve organic sales growth; and
•hedging facilities used to manage our foreign exchange risks.
From time to time, we consider acquisitions or investments in other businesses that we believe would be appropriate additions to our business.
We believe that, in the long term, cash generated from our operations will be adequate to meet our anticipated requirements for working capital, capital expenditures and interest payments on our indebtedness. In the short term, we believe we have sufficient credit facilities to cover any variation in our cash
flow generation. However, any major repayments of indebtedness will be dependent on our ability to raise alternative financing or to realize substantial returns from operational sales. Also, our ability to expand operations through sales development and capital expenditures could be constrained by the availability of liquidity, which, in turn, could impact the profitability of our operations.
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We have been in compliance with the covenants under the Loan Notes and the Senior Facilities Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to April 2 2023.
Luxfer conducts all of its operations through its subsidiaries,
joint ventures and affiliates. Accordingly, Luxfer's main cash source is dividends from its subsidiaries. The ability of each subsidiary to make distributions depends on the funds that a subsidiary receives from its operations in excess of the funds necessary for its operations, obligations or other business plans. We have not historically experienced any material impediment to these distributions, and we do not expect any local legal or regulatory regimes to have any impact on our ability to meet our liquidity requirements in the future. In addition, since our subsidiaries are wholly-owned, our claims will generally rank junior to all other obligations of the subsidiaries. If our operating subsidiaries
are unable to make distributions, our growth may slow, unless we are able to obtain additional debt or equity financing. In the event of a subsidiary's liquidation, there may not be assets sufficient for us to recoup our investment in the subsidiary.
Our ability to maintain or increase the generation of cash from our operations in the future will depend significantly on the competitiveness of and demand for our products, including our success in launching new products. Achieving such success is a key objective of our business strategy. Due to commercial, competitive and external economic factors, however, we cannot guarantee that we will generate sufficient cash flows from operations or that future working capital will be available in an amount sufficient to enable us to service our indebtedness or make necessary capital expenditures.
Cash
Flows
Operating activities
Cash used by operating activities was $14.4 million for the first quarter of 2023 compared to $9.3 million in the first quarter of 2022. It was primarily related to net income from operating activities offset by significant increases in working capital related to inventory build to protect supply chain, and net of the following non-cash items: depreciation and amortization; share-based compensation charges; pension credit and net changes to assets and liabilities. In 2023, the Company also contributed $2.3 million in relation to the sale of the U.S. pension plan to an insurer.
Investing activities
Net cash used by investing activities was $2.0 million for the first quarter of 2023,
compared to net cash used for investing activities of $1.0 million in 2022, as a result of increased capital expenditure in the quarter.
Financing activities
In the first quarter of 2023, net cash provided by financing activities was $5.3 million, compared to $21.4 million inflow in 2022. We made net drawdown on our banking facilities of $9.9 million (2022: $26.7 million drawdown) and dividend payments of $3.5 million (2022: $3.4 million), equating to $0.13 and $0.125 per ordinary share respectively. In addition, we paid out $0.3 million (2022: $0.4 million) in settling share based compensation and $0.8 million (2022: $1.5 million) in repurchasing our own shares as part of the share buyback program which equates to 48,000 shares (2022: 60,100 shares).
Capital Resources
Dividends
We
paid year-to-date dividends in 2023 of $3.5 million (2022: $3.4 million year-to-date), or $0.13 per ordinary share (2021: $0.125).
Any payment of dividends is also subject to the provisions of the U.K. Companies Act, according to which dividends may only be paid out of profits available for distribution determined by reference to financial statements prepared in accordance with the Companies Act and U.K.-adopted Internatioanl Accounting Standards, which differ in some respects from GAAP. In the event that dividends are paid in the future, holders of the ordinary shares will be entitled to receive payments in U.S. dollars in respect of dividends on the underlying ordinary shares in accordance with the deposit agreement. Furthermore, because we are a holding company, any dividend payments would depend on cash flows from our subsidiaries.
25
Authorized
shares
Our authorized share capital consists of 40.0 million ordinary shares with a par value of £0.50 per share.
Contractual obligations
The following summarizes our significant contractual obligations that impact our liquidity:
Payments
Due by Period
Total
Less than 1 year
1 – 3 years
3 – 5 years
After 5 years
(in $ million)
Contractual cash obligations
Loan
Notes due 2023
$
25.0
$
25.0
$
—
$
—
$
—
Loan Notes due 2026
25.0
—
—
25.0
—
Revolving
credit facility
42.2
—
—
42.2
—
Obligations under operating leases
28.7
5.1
9.7
4.6
9.3
Capital
commitments
1.2
1.2
—
—
—
Interest payments
15.2
4.4
7.9
2.9
—
Total
contractual cash obligations
$
137.3
$
35.7
$
17.6
$
74.7
$
9.3
Off-balance sheet measures
At
April 2, 2023, we had no off-balance sheet arrangements other than the two bonding facilities disclosed in Note 14.
NEW ACCOUNTING STANDARDS
See Note 1 of the Notes to Condensed Consolidated Financial Statements for information pertaining to recently adopted accounting standards or accounting standards to be adopted in the future.
CRITICAL ACCOUNTING POLICIES
We have adopted various accounting policies to prepare the consolidated financial statements in accordance with GAAP. Certain of our accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. In our 2022 Annual
Report on Form 10-K, filed with the SEC on March 1, 2023, we identified the critical accounting policies which affect our more significant estimates and assumptions used in preparing our consolidated financial statements.
26
Item 3. Quantitative and qualitative disclosures about market risk
There have been no material changes in our market risk during the first quarter ended April
2, 2023. For additional information, refer to Item 7A of our 2022 Annual Report on Form 10-K, filed with the SEC on March 1, 2023.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We maintain a system of disclosure controls and procedures designed to provide reasonable assurance as to the reliability of our published financial statements and other disclosures included in this report. Our management evaluated, with the participation of our Chief Executive Officer and our Chief Financial Officer, the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the
quarter ended April 2, 2023, pursuant to Rule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon their evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were effective, at a reasonable assurance level, as of the quarter ended April 2, 2023, to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms, and to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely
decisions regarding required disclosures.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended April 2, 2023, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
27
PART II - OTHER INFORMATION
Item
1. Legal Proceedings
The Company is a defendant in various lawsuits and is subject to various claims that arise in the normal course of business, the most significant of which are summarized in Note 14 (commitments and contingencies) to the consolidated financial statements in ITEM 1. In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse impact is remote.
Item 1A. Risk Factors
There have been no material changes from the risk factors previously disclosed in Item 1A. of our 2022 Annual Report on Form 10-K filed with
the SEC on March 1, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
101 The financial statements from the Company’s Interim Report on Form 10-Q for the quarter ended April 2, 2023, formatted in XBRL: (i) Condensed Consolidated Statements of Income, (ii) Condensed Consolidated Statements of Comprehensive Income, (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, (v) Condensed Consolidated Statements of Changes in Equity, and (vi) Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags.
29
SIGNATURES
Pursuant
to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
