NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business description
Luxfer Holdings PLC is a global manufacturer of highly-engineered materials, which focuses on using its broad array of technical know-how and propriety technologies. Luxfer's high-performance materials, components and high-pressure gas containment devices are used in defense and emergency response, healthcare, transportation and general industrial applications. It comprises two reportable segments being Gas Cylinders and Elektron.
Principles of consolidation
The consolidated financial statements comprise the financial statements of Luxfer Holdings PLC and its subsidiaries (collectively "we," "our," "Luxfer" or "the Company" ) that we control. Investments in unconsolidated affiliates, where we have the ability to exercise significant influence over the operating and financial policies, are accounted for using the equity method. All inter-company balances and transactions, including unrealized profits arising from intra-company transactions, have been eliminated in full.
The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") and are presented in U.S. dollars ("USD"). The books of the Company's non-U.S. entities are converted to USD at each reporting period date in accordance with the accounting policy below. The functional currency of the holding company Luxfer Holdings PLC and its U.K. subsidiaries is pounds sterling (GBP), being the most appropriate currency for those particular operations.
Discontinued operations
Certain amounts in prior-year financial statements were reclassified to conform to the current-year presentation primarily due to the classification of certain businesses as discontinued operations.
Fiscal year
Our fiscal year ends on December 31. We report our interim quarterly periods on a 13-week basis ending on a Sunday.
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 and / or output restrictions at a small number of locations. However, due to weaker demand resulting from uncertain economic conditions, potential supply constraints, and the continued impact of COVID-19, Luxfer has implemented additional cost saving programs, including headcount reductions. As the situation evolves and if warranted, the Company may again suspend or reduce operations at certain 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. During the year, quarterly re-forecasts were performed to assess the impact COVID-19 was having on our results and liquidity, and in the fourth quarter we carried out our annual goodwill and other intangibles impairment test using cash flows from the annual and strategic plan budgeting exercise. Neither the in-year re-forecasts nor outcomes of the 2021 budget, changed 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 11) and has performed stress testing on financial covenants using current forecast information and has not identified any liquidity concerns.
Use of estimates
The preparation of our consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and accompanying notes, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include our accounting for valuation of goodwill, estimated losses on accounts receivable, estimated realizable value on excess and obsolete inventory, assets acquired and liabilities assumed in acquisitions, estimated selling proceeds from assets held for sale, contingent liabilities, measurement of contingent consideration, income taxes and pension benefits. Actual results could differ from our estimates.
Goodwill and other identifiable intangible assets
Business combinations are accounted for using the purchase method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interest in the acquiree. The measurement of non-controlling interest is at fair value and is determined on a transaction by transaction basis. Acquisition costs are expensed as incurred.
Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.
Goodwill is tested at least annually for impairment or more frequently if events or changes in circumstances indicate that the asset might be impaired. In 2020, the Company has adopted Accounting Standard Update ("ASU") 2017-04) - intangibles - goodwill and other (Topic 350): Simplifying the test for goodwill impairment.. Goodwill is tested for impairment by either performing a qualitative evaluation or a quantitative test. The qualitative evaluation is an assessment of factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We may elect not to perform the qualitative assessment for some or all reporting units and perform a quantitative impairment test. In 2020, management have chosen to bypass the qualitative evaluation.
For the quantitative impairment test, the fair value of each reporting unit is determined using a discounted cash flow analysis. Projecting discounted future cash flows requires us to make significant estimates regarding future revenue growth rates including the perpetual growth rate; anticipated operating margins; and the discount rates applied to the estimated future cash flows. Actual results may differ from those used in our valuations. This non-recurring fair value measurement is a "Level 3" measurement under the fair value hierarchy described in Note 12.
1. Summary of Significant Accounting Policies (continued)
Goodwill and other identifiable intangible assets (continued)
In developing our discounted cash flow analysis, assumptions about future revenue growth rates and anticipated operating margins 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 are determined over a three year long-term planning period. The three year growth rates for revenues and operating profits vary for each reporting unit being evaluated. Revenues and operating profit beyond 2022 are projected to grow at a perpetual growth rate of 1.8%.
Discount rate assumptions for each reporting unit take into consideration our assessment of risks inherent in the future cash flows of the respective reporting unit and our weighted-average cost of capital. We utilized discount rates ranging from 8.0% to 9.0% in determining the discounted cash flows in our fair value analysis.
We completed our quantitative goodwill impairment evaluation as of the last day of the third quarter of 2020, 2019 and 2018 with each of our reporting units' fair value being substantially in excess of its carrying value apart from our Superform business unit within the Gas Cylinders segment. This resulted in an impairment in full of $1.3 million, previously disclosed within impairment costs on the income statement in 2018, now reclassified to discontinued operations.
Other intangible assets are measured initially at cost, or where acquired in a business combination at fair value, and are amortized on a straight-line basis over their estimated useful lives as shown in the table below.
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Customer relationships
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10 - 15 years
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Technology and trading related
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5 - 25 years
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The carrying values are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Reviews are made annually of the estimated remaining lives and residual values of the patents and trademarks.
Variable interest entities
We have had interests in certain joint venture entities that were variable interest entities ("VIEs"). Determining whether to consolidate a VIE may require judgment in assessing (i) whether an entity is a VIE and (ii) if we are the entity's primary beneficiary and thus required to consolidate the entity. To determine if we are the primary beneficiary of a VIE, we evaluate whether we have (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our evaluation includes identification of significant activities and an assessment of our ability to direct those activities based on governance provisions and arrangements to provide or receive product and process technology, product supply, operations services, equity funding and financing and other applicable agreements and circumstances. Our assessment of whether we are a primary beneficiary of a VIE requires the application of significant assumptions and judgment.
1. Summary of Significant Accounting Policies (continued)
Investments in affiliates
The company owns interest in the following affiliate:
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Name of company
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Country of
incorporation
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Holding
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Proportion of voting rights and shares held
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Classification
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Consolidation method
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Nikkei-MEL Co. Limited
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Japan
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Ordinary shares
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50%
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Joint venture
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Equity method
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Sub161 Pty Limited, our Australian associate (VIE) in which we held a 26% interest, was liquidated and deregistered as a legal entity in November 2020. We were not the primary beneficiary of the VIE and so did not consolidate it and used the equity method to account for its results. We had previously fully impaired our investment and there was no gain or loss resulting from the liquidation.
Property, plant and equipment, net
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Depreciation is calculated on a straight-line basis over the estimated useful life of the particular asset. The depreciation expense during 2020, 2019 and 2018 was $12.6 million, $12.0 million and $15.8 million, respectively. The estimated useful lives is summarized as follows:
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Freehold buildings
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10 - 33 years
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Leasehold land and buildings
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The lesser of life of lease or freehold rate
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Machinery and equipment
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3 - 25 years
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Including:
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Heavy production equipment (including casting, rolling, extrusion and press equipment)
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20 - 25 years
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Chemical production plant and robotics
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7 - 10 years
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Other production machinery
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5 - 10 years
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Furniture, fittings, storage and equipment
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3 - 10 years
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Computer software
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4 - 7 years
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Freehold land is not depreciated.
Reviews are made annually of the estimated remaining lives and residual values of individual productive assets, taking account of commercial and technological obsolescence as well as normal wear and tear.
We review the carrying value for any individual asset for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceeds the estimated recoverable amount, the asset is written-down to its estimated recoverable amount. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows (undiscounted and without interest charges) of the related operations. If these cash flows are less than the carrying value of such asset or asset group, an impairment loss is recognized for the difference between estimated fair value and carrying value. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced for the cost to dispose of the assets. The measurement of impairment requires us to estimate future cash flows and the fair value of long-lived assets. During 2020 we did not record any impairment (2019: $4.6 million) in relation to restructuring activities. There was also a $5.2 million impairment charge in 2019, recorded within impairment charges, relating to plant and equipment held in our Superform business, following the downturn in the European luxury automotive market. This amount has been reclassified into discontinued operations. In 2018, the $3.4 million charge arose from the fair value adjustment in relation to the sale of the Czech business, recorded in impairment charges.
1. Summary of Significant Accounting Policies (continued)
Impairments
The Company will recognize impairments in relation to property, plant and equipment, investments and goodwill, other identifiable intangible assets and other long-lived assets in accordance with the above policies. Impairments relating to restructuring activities, incurred to exit an activity or location, will be recorded within the restructuring line on the Statement of Income. Other impairments will be recorded within impairment charges line on the Statement of Income.
Impairment in 2019 relates to: a $5.2 million charge relating to plant and equipment held in our Superform business (now included in discontinued operations); partially offset by a true-up upon the final sale of the Czech business, $0.2 million credit, (2018: $3.4 million charge). In 2018 there was also a $2.4 million write-off in relation to the acquisition of Luxfer Holdings NA LLC and $1.3 million of goodwill impairment within the Superform business unit (now included in discontinued operations).
Revenue Recognition
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of the Company’s contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. There is no variable consideration or obligations for returns, refunds, and no other related obligations in the Company’s contracts.
Payment terms and conditions vary by contract type and may include a requirement of payment in advance. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined its contracts do not include a significant financing component.
The Company’s revenue is primarily derived from the following sources and are recognized when or as the Company satisfies a performance obligation by transferring a good or service to a customer.
Product revenues
We recognize revenue when it is realized or realizable and has been earned. Revenue is recognized when persuasive evidence of an arrangement exists, shipment or delivery has occurred (depending on the terms of the sale), which is when the transfer of product or control occurs, our price to the buyer is fixed or determinable, and the ability to collect is reasonably assured.
Royalties
Royalty revenue is recognized on an accrual basis in accordance with the substance of the relevant agreements, provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably.
Tooling revenue
Revenue from certain long-term tooling contracts is recognized over the contractual period under the cost-to-cost measure of progress as this is when the benefit is received by the customer. Incremental direct costs associated with the contract include, direct labor hours, direct raw material costs and other associated costs. Under this method, sales and gross profit are recognized as work is performed either based on the relationship between the actual costs incurred and the total estimated costs at completion (“the cost-to-cost method”) or based on efforts for measuring progress towards completion in situations in which this approach is more representative of the progress on the contract than the cost-to-cost method. We record costs and earnings in excess of billings on uncompleted contracts within Other current assets and billings in excess of costs and earnings on uncompleted contracts within Other current liabilities in the Consolidated Balance Sheets. Where customer acceptance is on final completion and handover of the tool, revenue is recognized at the point the customer accepts ownership of the tool. All tooling revenue relates to discontinued operations resulting in all related activity included in discontinued operations and associated balances included in assets and liabilities held-for-sale.
Practical Expedients
The Company applies the practical expedient and does not disclose information about remaining performance obligations for contracts that have original expected durations of one year or less.
1. Summary of Significant Accounting Policies (continued)
Cash, Cash Equivalents and Restricted Cash
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Restricted cash is recognized separately in the Consolidated Balance Sheets. Restricted cash balances were less than $0.1 million at December 31, 2020 and $0.1 million at December 31, 2019. The amounts were held in escrow to disburse environmental liabilities recognized as a result of the acquisition of the Specialty Metals division of ESM Inc in 2017.
Inventories
Inventories are stated at the lower of cost or net realizable value. Raw materials are valued on a first-in, first-out basis. Strategic purchases of inventories in order to secure supply and reduce the impact of price volatility on the cost of inventories are valued on a weighted-average cost basis. Work in progress and finished goods costs comprise direct materials and, where applicable, direct labor costs, an apportionment of production overheads and any other costs that have been incurred in bringing the inventories to their present location and condition. Inventories are reviewed on a regular basis, and we will make allowance for excess or obsolete inventories and write-down to net realizable value based primarily on committed sales prices and our estimates of expected and future product demand and related pricing.
Research and Development
Included within research and development costs are directly attributable salaries, materials and consumables, as well as third-party contractor fees and research costs. These costs are expensed as incurred.
Foreign currencies
Transactions in currencies other than an operation's functional currency are initially recorded in the functional currency at the rate of exchange prevailing on the dates of transactions. At each balance sheet date, the foreign currency monetary assets and liabilities of each operation are translated into the functional currency of that operation at the rates prevailing on the balance sheet date.
All differences are taken to the consolidated statement of income / (loss), with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a foreign entity. These differences on foreign currency borrowings are taken directly to equity until the disposal of the net investment, at which time they are recognized in the consolidated statement of income / (loss). Tax charges and credits attributable to exchange differences on those borrowings are also included in equity.
On consolidation, the assets and liabilities of the Company's foreign operations are translated at exchange rates prevailing on the balance sheet date. Income and expense items are translated at the average exchange rates for the period. Exchange differences that arise, if any, are included in Accumulated other comprehensive income / (loss) (“AOCI”), a separate component of equity. Such translation differences are recognized in the consolidated statements of income / (loss) in the period in which the Company loses control of the operation or liquidation.
During 2020, the average USD/GBP sterling exchange rate was £0.7805 compared to the 2019 average of £0.7820. This change resulted in a positive impact of $0.3 million on revenue and a negative impact of $0.2 million on operating income. Based on the 2020 level of revenue and income, a weakening in GBP sterling leading to a £0.05 increase in the USD/GBP sterling exchange rate would result in a decrease of $8.5 million in revenue and $0.7 million in operating net income.
During 2020, the average USD/Euro exchange rate was €0.8888, compared to the 2019 average of €0.8943. This change resulted in a negative impact of $0.1 million on revenue and $0.3 million on operating profit. Based on the 2020 level of revenue and income, a weakening in the Euro leading to a €0.05 increase in the Euro to U.S. dollar exchange rate would result in a decrease of less than $0.1 million in revenue and $0.3 million decrease to operating profit.
1. Summary of Significant Accounting Policies (continued)
Income taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. When the Company does not believe that, on the basis of available information, it is more likely than not that deferred tax assets will be fully recovered, it recognizes a valuation allowance against its deferred tax assets to reduce the deferred tax assets to the amount more likely than not to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactments date.
Furthermore, a tax benefit from a tax position may be recognized in the financial statements only if it is more-likely-than-not that the position is sustainable, based solely on its technical merits and consideration of the relevant tax authority’s widely understood administrative practices and precedents. The tax benefit recognized, when the likelihood of realization is more likely-than-not (i.e. greater than 50 percent), is measured at the largest amount that is greater than 50 percent likely of being realized upon settlement.
Employee benefit plans
The Company operates funded defined benefit pension plans in the U.K., the U.S. and France. The levels of funding are determined by periodic actuarial valuations that take into account changes in actuarial assumptions, including discount rates and expected returns on plan assets. The assets of the plans are generally held in separate trustee-administered funds. The Company also operates defined contribution plans in the U.K., the U.S., Australia and Canada.
Actuarial assumptions are updated annually and are disclosed in Note 14. We recognize changes in the fair value of plan assets and net actuarial gains or losses for pension and other post-retirement benefits annually in the fourth quarter each year (“mark-to-market adjustment”) and, if applicable, in any quarter in which an interim remeasurement is triggered. Net actuarial gains and losses occur when the actual experience differs from any of the various assumptions used to value our pension and other post-retirement plans or when assumptions change, as they may each year. The remaining components of pension expense, including service and interest costs and estimated return on plan assets, are recorded on a quarterly basis.
Payments to defined contribution plans are charged as an expense as they fall due.
Commitments and contingencies
Loss contingencies are recognized when the Company has a present obligation as a result of a past event, it is probable that a transfer of resources will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
Share-based compensation
We account for share-based compensation awards on a fair value basis. The estimated grant date fair value of each option award is recognized in income on an accelerated basis over the requisite service period (generally the vesting period). The estimated fair value of each option award is calculated using either the Black-Scholes option-pricing model, or using a Monte-Carlo simulation, both of which are subjective and involves the application of significant estimates and assumptions, including the expected term of the award, implied volatility, expected dividend yield and the risk-free interest rate. Restricted share awards and units are recorded as compensation cost on an accelerated basis over the requisite service periods based on the market value on the date of the grant.
Performance share units ("PSU") are stock awards where the ultimate number of shares issued will be contingent on the Company's performance against certain financial performance targets. The fair value of each PSU is based on the market value on the date of grant. We recognize expense based upon the fair value of the awards on the grant date and the estimated vesting of the PSUs granted. The estimated vesting of the performance share units is based on the probability of achieving certain financial performance thresholds over the specified performance period.
1. Summary of Significant Accounting Policies (continued)
Trade receivables and concentration of credit risk
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.
We are exposed to credit risk in the event of nonpayment by customers. However we mitigate our exposure to credit risk by performing ongoing credit evaluations and, when deemed necessary, utilizing credit insurance, prepayments or guarantees. No individual customer represented more than 10% of our revenue or accounts receivable. The concentration of credit risks from financial instruments related to the markets we serve is not expected to have a material adverse effect on our consolidated financial position, cash flows or future results of operations.
Derivative financial instruments
We recognize all derivatives as either assets or liabilities (within accounts and other receivables or accounts payable) at fair value in our Consolidated Balance Sheets. If the derivative is designated and is effective as a cash-flow hedge, changes in the fair value of the derivative are recorded in AOCI as a separate component of equity in the Consolidated Statements of Changes in Equity and are recognized in cost of goods sold in the Consolidated Statements of Income when the hedged item affects earnings. If the underlying hedged transaction ceases to exist or if the hedge becomes ineffective, all changes in fair value of the related derivatives that have not been settled are recognized in current earnings in cost of goods sold. For a derivative that is not designated as or does not qualify as a hedge, changes in fair value are reported in income immediately, again in cost of goods sold. We use derivative instruments for the purpose of hedging commodity price risk and currency exposures, which exist as part of ongoing business operations.
New accounting standards
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 $0.5 million allowance at December 31, 2020.
1. Summary of Significant Accounting Policies (continued)
New accounting standards (continued)
The following table provides a roll-forward of the allowance for credit losses that is deducted from the amortized cost basis of accounts receivable to present the net amount expected to be collected.
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In millions
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2020
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Balance at January 1,
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$
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1.3
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Adoption of ASU 2016-13, cumulative-effect for changes for adoption of credit loss guidance
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—
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Recoveries for expected credit losses
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(0.7)
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Other, including foreign currency translation
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(0.1)
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Balance at December 31,
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$
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0.5
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On January 1, 2020, the Company adopted ASU 2017-04 which simplifies the goodwill impairment test. The update removes the requirement to determine the fair value of individual assets and liabilities in order to calculate a reporting unit’s “implied” goodwill under current GAAP. Specifically, the amendments in ASU 2017-04 eliminate Step 2 of the goodwill impairment test. As such, the Company will perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value. If fair value exceeds the carrying amount, no impairment should be recorded. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment losses on goodwill cannot be reversed once recognized.
Accounting standards which have been early adopted
None
Accounting standards issued but not yet effective
In December 2019, FASB issued an amendment to simplify the accounting for income taxes. The new standard is effective for fiscal years beginning after December 15, 2020.
2. Revenue
Disaggregated revenue from continuing operations for the fiscal years ended December 31, 2020, 2019, and 2018, are included below and in Note 17, Segmental Information.
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Years ended December 31,
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2020
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2019
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2018
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In millions
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Gas Cylinders
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Elektron
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Total
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Gas Cylinders
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Elektron
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Total
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Gas Cylinders
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Elektron
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Total
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General industrial
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$
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24.2
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$
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87.7
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$
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111.9
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$
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24.7
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$
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111.7
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$
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136.4
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$
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28.0
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$
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123.9
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$
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151.9
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Transportation
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49.8
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42.3
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92.1
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48.5
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59.5
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108.0
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33.1
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72.8
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105.9
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Defense, First Response & Healthcare
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67.9
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52.9
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120.8
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80.3
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48.7
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129.0
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91.0
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53.1
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144.1
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$
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141.9
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$
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182.9
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$
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324.8
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$
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153.5
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$
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219.9
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$
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373.4
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$
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152.1
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$
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249.8
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$
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401.9
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The Company’s performance obligations are satisfied at a point in time. With the reclassification of our Superform business as discontinued operations, none of the Company's revenue is satisfied over time. As a result, the Company's contract receivables, contract assets and contract liabilities at December 31, 2020 and 2019 are disclosed with current assets and liabilities held-for-sale.
3. Acquisitions and disposals
In 2020, the Company sold its 51% investment in Luxfer Uttam India Private Limited to our joint venture partner for INR 137.4 million ($1.8 million) cash. Allowing for legal costs, we generated a profit on disposal of less than $0.1 million. During the year we also incurred $0.4 million costs in relation to M&A exploration activities offset by deferred consideration adjustments and profit on previously written-down inventory.
In 2019, acquisition and disposal related costs of $1.4 million were incurred. The amount includes a $3.5 million charge in relation to the reimbursement of costs and $0.9 million of professional and legal fees incurred in connection with the terminated Neo acquisition, partially offset by a $2.9 million gain from the sale of Magnesium Elektron CZ s.r.o in the second quarter of 2019 and a $0.1 million credit on the remeasurement of the deferred contingent consideration.
The net gain on disposal of the Czech business is outlined below:
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2019
|
|
|
Cash proceeds
|
5.9
|
|
|
|
Less:
|
|
|
|
Cash held in business
|
(1.3)
|
|
|
|
Purchase price adjustment
|
(0.2)
|
|
|
|
Net proceeds
|
4.4
|
|
|
|
Net assets less cash
|
(3.6)
|
|
|
|
Gain on disposal
|
0.8
|
|
|
|
Disposal costs
|
(0.4)
|
|
|
|
Realized translation gain on disposal
|
2.5
|
|
|
|
Net gain on disposal
|
2.9
|
|
|
On December 28, 2018, Luxfer Holdings NA LLC (a 49% owned VIE joint venture) disposed of the assets and selected liabilities of Gas Transport Leasing LLC (its wholly-owned subsidiary) with the remaining 51% of Luxfer Holdings NA LLC simultaneously acquired by the Company. The disposal of the assets and selected liabilities to the JV partner was for consideration of $2.2 million. The Company acquired the residual 51% of Luxfer Holdings NA LLC, in return for the forgiveness of the JV partner's share on a loan from Luxfer Holdings PLC, being $2.1 million. The fair value of the net assets of Luxfer Holdings NA LLC at the acquisition date was assessed as $4.0 million, valuing the residual 51% stake at $2.1 million, resulting in no goodwill being recognized on the step acquisition.
3. Acquisitions and disposals (continued)
The principal assets acquired included cash of $2.7 million (including $2.2 million from the sale of the leasing business), inventory ($1.1 million), accounts and other receivables ($0.8 million), property, plant and equipment ($0.2 million), with accounts payable of $0.8 million. There were no identified intangibles. As a consequence of the transaction we fully impaired our equity investment (from a pre-acquisition fair value of $1.6 million) and partially impaired the loan to the equity investment; the combined effect resulting in a net charge of $2.4 million being recognized in the consolidated statement of income, within impairment charges. At December 31, 2018, Luxfer Holdings NA LLC is 100% owned by the Company, was no longer considered a VIE and is a fully consolidated subsidiary. As the acquisition occurred very close to the year end date, no revenue or earnings are recorded in the consolidated statement of income for the reporting period.
Deferred contingent consideration
The deferred contingent consideration was in relation to the acquisition of Truetech and Innotech (Luxfer Magtech) in 2015 and was linked to the future profitability of the entity. Where appropriate, this was payable annually from 2015 to 2020. The deferred contingent consideration totaled nil at December 31, 2020 (2019: $0.5 million), following the final payment in 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Net cash flows on purchase of business:
|
|
|
|
|
|
Included in net cash flows from financing activities:
|
|
|
|
|
|
Deferred consideration paid
|
$
|
(0.4)
|
|
|
$
|
(0.5)
|
|
|
|
Net cash flows on purchase of business
|
$
|
(0.4)
|
|
|
$
|
(0.5)
|
|
|
4. Restructuring
During 2020, 2019 and 2018, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.
In 2020, there was a further $7.5 million of costs in relation to the closure of Luxfer Gas Cylinders' French site. It is expected that there will be further costs incurred in 2021. In response to uncertain global economic conditions, we undertook actions to reduce the Company's cost structure and improve operating efficiency. These actions included a workforce reduction program resulting in $1.4 million of severance -related charges, of which $0.4 million and $0.9 million was incurred in the Gas Cylinders and Elektron segment respectively, and $0.1 million Other.
In 2019, there was $20.1 million of costs in relation to the closure of Luxfer Gas Cylinders' French site. Within the Elektron segment, there was $4.6 million of asset write-downs and one-time employee benefits, following the decision to scale down production at one of our Luxfer Magtech sites. There were other simplification costs incurred of $1.2 million across both segments.
In 2018, the restructuring charge included an other-than-temporary impairment and employee severance charges in the Gas Cylinders segment in relation to the Company's announcement that it was under consultation to close its French site. Within the Elektron segment, there have been asset write-downs in connection to the closure of our Luxfer Graphic Arts site in Findlay, OH, with consolidation of operations in Madison, IL; and the previously announced closure of our Luxfer Magtech site in Riverhead, NY.
Restructuring related costs included in Restructuring charges in the Consolidated statement of income / (loss) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
Severance and related costs
|
|
$
|
(8.9)
|
|
|
$
|
(20.9)
|
|
|
$
|
(6.5)
|
|
|
|
Asset impairment
|
|
—
|
|
|
(5.0)
|
|
|
(6.8)
|
|
|
|
Other
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
|
Total restructuring charges
|
|
$
|
(8.9)
|
|
|
$
|
(25.9)
|
|
|
$
|
(13.2)
|
|
|
Other restructuring costs primarily consist of various contract termination and revision costs as well as legal costs.
4. Restructuring (continued)
Restructuring costs by reportable segment were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
|
$
|
(7.9)
|
|
|
$
|
(20.7)
|
|
|
$
|
(9.8)
|
|
|
|
Elektron segment
|
|
(0.9)
|
|
|
(5.2)
|
|
|
(3.4)
|
|
|
|
Other
|
|
$
|
(0.1)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
Total restructuring charges
|
|
$
|
(8.9)
|
|
|
$
|
(25.9)
|
|
|
$
|
(13.2)
|
|
|
Activity related to restructuring, recorded in other current liabilities in the consolidated balance sheets is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Balance at January 1,
|
$
|
6.5
|
|
|
$
|
5.2
|
|
|
|
Costs incurred
|
8.9
|
|
|
20.9
|
|
|
|
Cash payments and other
|
(6.4)
|
|
|
(19.6)
|
|
|
|
Balance at December 31,
|
$
|
9.0
|
|
|
$
|
6.5
|
|
|
5. Other charges
In 2019, the Company decided to commence a project to remove low-level naturally occurring radioactive material (NORM) from a redundant building at Elektron's Manchester, UK site. The work represents remediation of a legacy environmental issue and is expected to complete in the first quarter of 2021. In 2020 and 2019, the Company recognized $0.4 million and $2.5 million respectively, in other charges on the Statements of Income related to this remediation.
6. Earnings per share
Basic earnings per share are computed by dividing net income for the period by the weighted-average number of ordinary shares outstanding, net of Treasury shares and shares held in ESOP. Diluted earnings per share are computed by dividing net income for the period by the weighted average number of ordinary shares outstanding and the dilutive ordinary shares equivalents.
Basic and diluted earnings per share were calculated as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions except share and per-share data
|
2020
|
|
2019
|
|
2018
|
|
|
Basic earnings:
|
|
|
|
|
|
|
|
Net income from continuing operations
|
$
|
20.8
|
|
|
$
|
8.7
|
|
|
$
|
27.7
|
|
|
|
Net loss from discontinued operations
|
(0.8)
|
|
|
(5.6)
|
|
|
(2.7)
|
|
|
|
Net income
|
$
|
20.0
|
|
|
$
|
3.1
|
|
|
$
|
25.0
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of £0.50 ordinary shares:
|
|
|
|
|
|
|
|
For basic earnings per share
|
27,557,219
|
|
|
27,289,042
|
|
|
26,708,469
|
|
|
|
Dilutive effect of potential common stock
|
414,163
|
|
|
593,822
|
|
|
983,793
|
|
|
|
For diluted earnings per share
|
27,971,382
|
|
|
27,882,864
|
|
|
27,692,262
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share using weighted average number of ordinary shares outstanding:(1)
|
|
|
|
|
|
|
|
Basic earnings per ordinary share for continuing operations
|
$
|
0.75
|
|
|
$
|
0.32
|
|
|
$
|
1.04
|
|
|
|
Basic loss per ordinary share for discontinued operations
|
$
|
(0.03)
|
|
|
$
|
(0.21)
|
|
|
$
|
(0.10)
|
|
|
|
Basic earnings per ordinary share
|
$
|
0.73
|
|
|
$
|
0.11
|
|
|
$
|
0.94
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per ordinary share for continuing activities
|
$
|
0.74
|
|
|
$
|
0.31
|
|
|
$
|
1.00
|
|
|
|
Diluted loss per ordinary share for discontinued operations
|
$
|
(0.03)
|
|
|
$
|
(0.21)
|
|
|
$
|
(0.10)
|
|
|
|
Diluted earnings per ordinary share
|
$
|
0.72
|
|
|
$
|
0.11
|
|
|
$
|
0.90
|
|
|
(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 year may not equal the earnings-per-share amount in total.
7. Discontinued operations
Our Superform aluminum superplastic forming business operating from sites in the U.S. and the U.K, and our U.S. aluminum gas cylinder business were 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 these businesses as discontinued operations in the Consolidated Statements of Income for all periods presented. We expect the sale of these businesses to occur in 2021.
The assets and liabilities of the above businesses have been presented within Current assets held-for-sale and Current liabilities held-for-sale in the consolidated balance sheets. As the businesses met the criteria for held-for-sale and discontinued operations, the balance sheet at December 31, 2019 has also been adjusted to reflect the the assets and liabilities as held-for-sale. The Company has determined that the carrying value of the held-for-sale assets is recoverable and as a result no loss allowances have been recognized.
Results of discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
Net sales
|
|
$
|
53.2
|
|
|
$
|
70.1
|
|
|
$
|
86.0
|
|
|
|
Cost of goods sold
|
|
(51.5)
|
|
|
(65.8)
|
|
|
(81.8)
|
|
|
|
Gross profit
|
|
$
|
1.7
|
|
|
$
|
4.3
|
|
|
$
|
4.2
|
|
|
|
Selling, general and administrative expenses
|
|
(5.8)
|
|
|
(5.3)
|
|
|
(6.3)
|
|
|
|
Restructuring charges
|
|
(0.1)
|
|
|
(0.1)
|
|
|
(0.2)
|
|
|
|
Impairment charges
|
|
—
|
|
|
(5.2)
|
|
|
(1.3)
|
|
|
|
Other income
|
|
3.4
|
|
|
—
|
|
|
—
|
|
|
|
Operating loss
|
|
$
|
(0.8)
|
|
|
$
|
(6.3)
|
|
|
$
|
(3.6)
|
|
|
|
Net interest expense
|
|
$
|
—
|
|
|
$
|
(0.2)
|
|
|
$
|
(0.1)
|
|
|
|
Net loss before income taxes
|
|
$
|
(0.8)
|
|
|
$
|
(6.5)
|
|
|
$
|
(3.7)
|
|
|
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
0.9
|
|
|
$
|
1.0
|
|
|
|
Net loss
|
|
$
|
(0.8)
|
|
|
$
|
(5.6)
|
|
|
$
|
(2.7)
|
|
|
The assets and liabilities classified as held-for-sale were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Accounts and other receivables
|
$
|
8.7
|
|
|
$
|
13.5
|
|
|
|
Inventories
|
12.6
|
|
|
16.9
|
|
|
|
|
|
|
|
|
|
Current assets
|
21.3
|
|
|
30.4
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
7.9
|
|
|
8.7
|
|
|
|
Right-of-use assets
|
3.1
|
|
|
3.8
|
|
|
|
Other non-current assets
|
|
|
|
|
|
Total assets
|
$
|
32.3
|
|
|
$
|
42.9
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
$
|
4.3
|
|
|
$
|
6.2
|
|
|
|
Accrued liabilities
|
1.5
|
|
|
1.6
|
|
|
|
Other current liabilities
|
1.5
|
|
|
0.6
|
|
|
|
Current liabilities
|
$
|
7.3
|
|
|
$
|
8.4
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
$
|
4.1
|
|
|
$
|
4.5
|
|
|
|
Total liabilities
|
$
|
11.4
|
|
|
$
|
12.9
|
|
|
Also included within assets held-for-sale in 2020 and 2019 is one building valued at $3.7 million, within our Elektron Segment. In 2019 there was also inventory valued at $0.2 million in relation to one of our operations within our Gas Cylinders Segment, see Note 9.
7. Discontinued operations (continued)
The depreciation and amortization, capital expenditures and significant operating noncash items were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
Cash flows from discontinued operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
$
|
1.1
|
|
|
$
|
1.1
|
|
|
$
|
1.1
|
|
|
|
Impairment charges
|
|
—
|
|
|
5.2
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from discontinued investing activities:
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
$
|
0.3
|
|
|
$
|
0.8
|
|
|
$
|
0.7
|
|
|
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.
8. Goodwill and other identifiable intangible assets
Changes in goodwill during the years ended December 31, 2020 and 2019 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Gas Cylinders
|
|
Elektron
|
|
Total
|
|
|
At January 1, 2019
|
$
|
26.3
|
|
|
$
|
41.3
|
|
|
$
|
67.6
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference
|
0.7
|
|
|
0.5
|
|
|
1.2
|
|
|
|
At December 31, 2019
|
$
|
27.0
|
|
|
$
|
41.8
|
|
|
$
|
68.8
|
|
|
|
|
|
|
|
|
|
|
|
Exchange difference
|
0.9
|
|
|
0.5
|
|
|
1.4
|
|
|
|
Net balance at December 31, 2020
|
$
|
27.9
|
|
|
$
|
42.3
|
|
|
$
|
70.2
|
|
|
Accumulated goodwill impairment losses in relation to continuing activities were $8.0 million as of December 31, 2020 and 2019.
Identifiable intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
In millions
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
Gross
|
|
Accumulated amortization
|
|
Net
|
|
|
Customer relationships
|
$
|
13.4
|
|
|
$
|
(5.2)
|
|
|
$
|
8.2
|
|
|
$
|
13.4
|
|
|
$
|
(4.6)
|
|
|
$
|
8.8
|
|
|
|
Technology and trading related
|
8.3
|
|
|
(3.7)
|
|
|
4.6
|
|
|
8.1
|
|
|
(3.3)
|
|
|
4.8
|
|
|
|
|
$
|
21.7
|
|
|
$
|
(8.9)
|
|
|
$
|
12.8
|
|
|
$
|
21.5
|
|
|
$
|
(7.9)
|
|
|
$
|
13.6
|
|
|
Identifiable intangible asset amortization expense in 2020, 2019 and 2018 was $0.7 million, $1.2 million and $1.2 million, respectively.
In 2018, we recorded, within impairment charges, an impairment charge of $1.3 million in the Gas Cylinders segment, associated with our Superform business unit which is now reflected in discontinued operations and no further charge to be made as amount is fully written down.
Intangible asset amortization expense over the next five years is expected to be approximately $0.7 million in each of the next five years.
The weighted-average amortization period for the customer relationships is 10 years and for the technology and trading related assets is 11 years.
9. Supplementary balance sheet information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
2020
|
|
2019
|
|
|
Accounts and other receivables
|
|
|
|
|
|
|
Trade receivables, net
|
|
$
|
33.6
|
|
|
$
|
40.8
|
|
|
|
Related parties
|
|
0.2
|
|
|
2.7
|
|
|
Prepayments and accrued income
|
|
5.5
|
|
4.8
|
|
|
Derivative financial instruments
|
|
0.2
|
|
0.3
|
|
|
Deferred consideration
|
|
0.2
|
|
—
|
|
|
Other receivables
|
|
3.4
|
|
4.2
|
|
|
Total accounts and other receivables
|
|
$
|
43.1
|
|
|
$
|
52.8
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
|
|
|
|
|
Raw materials and supplies
|
|
$
|
26.2
|
|
|
$
|
27.9
|
|
|
|
Work-in-process
|
|
19.7
|
|
|
24.2
|
|
|
|
Finished goods
|
|
22.9
|
|
|
25.5
|
|
|
|
Total inventories
|
|
$
|
68.8
|
|
|
$
|
77.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax receivable
|
|
1.5
|
|
|
1.1
|
|
|
|
Total other current assets
|
|
$
|
1.5
|
|
|
$
|
1.1
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
|
|
|
|
Land, buildings and leasehold improvements
|
|
$
|
65.2
|
|
|
$
|
61.4
|
|
|
|
Machinery and equipment
|
|
255.3
|
|
|
245.7
|
|
|
|
Construction in progress
|
|
7.8
|
|
|
8.9
|
|
|
|
Total property plant and equipment
|
|
328.3
|
|
|
316.0
|
|
|
|
Accumulated depreciation and impairment
|
|
(242.3)
|
|
|
(225.8)
|
|
|
|
Total property, plant and equipment, net
|
|
$
|
86.0
|
|
|
$
|
90.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
10.1
|
|
|
$
|
6.6
|
|
|
|
|
|
|
|
|
|
|
Derivative financial instruments
|
|
0.4
|
|
|
—
|
|
|
|
Operating lease liability
|
|
2.9
|
|
|
2.3
|
|
|
|
Other current liabilities
|
|
0.1
|
|
|
1.8
|
|
|
|
Total other current liabilities
|
|
$
|
13.5
|
|
|
$
|
10.7
|
|
|
|
|
|
|
|
|
|
|
Other non-current liabilities
|
|
|
|
|
|
|
Contingent liabilities
|
|
$
|
1.0
|
|
|
$
|
0.9
|
|
|
|
|
|
|
|
|
|
|
Operating lease liability
|
|
6.7
|
|
|
8.9
|
|
|
|
Other non-current liabilities
|
|
—
|
|
|
0.1
|
|
|
|
Total other non-current liabilities
|
|
$
|
7.7
|
|
|
$
|
9.9
|
|
|
9. Supplementary balance sheet information (continued)
Impairment of property, plant and equipment
Property, plant and equipment, net, includes an impairment of $4.6 million recognized within restructuring charges and $5.2 million recognized within impairment charges in 2019, now recognized within discontinued operations. There were no impairments of property, plant and equipment recognized in 2020.
The $4.6 million recognized within restructuring charges in 2019 relates to the write-down of land and buildings within the Elektron segment as a result of announced exits.
The $5.2 million recognized as an impairment charge in 2019 relates to the downturn in the European luxury automotive market which has adversely impacted our Superform business within the Gas Cylinders segment. The impairment charge and the property, plant and equipment, net, were reclassified as discontinued operations in 2020 for all periods presented. See Note 7.
Held-for-sale assets and liabilities
In 2020, the Company classified its Superform aluminum superplastic forming business operating from sites in the U.S. and the U.K, and our U.S. aluminum gas cylinder business as assets and liabilities held-for-sale in accordance with ASC 205-20 Discontinued Operations. These assets and liabilities were reclassified in 2019 to conform to the current year presentation. See Note 7 for breakdown of this disposal group.
There was also one building valued at $3.7 million, within our Elektron Segment classified as held-for-sale assets, previously included within other current assets. The building was classified as held-for-sale in 2019, as the expectation was that the building would be sold in 2020. There are conditions attached to the sale which the Company now expects to be met in 2021 and as such the building continues to be classified as held-for-sale.
In 2019 here was also $0.2 million of inventory which has been reclassified as held-for-sale assets in relation to one of our operations within our Gas Cylinders Segment.
The respective assets and liabilities of the above disposal groups have been reclassified as held-for-sale per the table below.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassified to held-for-sale assets
|
December 31, 2020
|
|
December 31, 2019
|
|
|
In millions
|
|
|
|
|
|
Property, plant and equipment
|
$
|
11.6
|
|
|
$
|
12.4
|
|
|
|
Right-of-use-asset
|
3.1
|
|
|
3.8
|
|
|
|
Inventory
|
12.6
|
|
|
17.1
|
|
|
|
Accounts and other receivables
|
8.7
|
|
|
13.5
|
|
|
|
|
|
|
|
|
|
Held-for-sale assets
|
$
|
36.0
|
|
|
$
|
46.8
|
|
|
|
|
|
|
|
|
|
Reclassified to held-for-sale liabilities
|
|
|
|
|
|
Accounts payables
|
$
|
4.3
|
|
|
$
|
6.2
|
|
|
|
Accrued liabilities
|
1.5
|
|
|
1.6
|
|
|
|
Other current liabilities
|
5.6
|
|
|
5.1
|
|
|
|
Held-for-sale liabilities
|
$
|
11.4
|
|
|
$
|
12.9
|
|
|
There has been no reclassification of items from other comprehensive income to the income statement as a result of items reclassified to held-for-sale,
10. Accumulated Other Comprehensive Loss
Components of Accumulated Other Comprehensive Loss consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2020
|
|
December 31, 2019
|
|
|
Cumulative translation adjustments
|
$
|
(51.7)
|
|
|
$
|
(55.5)
|
|
|
|
Pension plans actuarial loss, net of tax
|
(114.1)
|
|
|
(94.1)
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive loss
|
$
|
(165.8)
|
|
|
$
|
(149.6)
|
|
|
Reclassifications out of accumulated other comprehensive loss
During 2019, a $2.5 million translation gain was reclassified out of accumulated other comprehensive loss and into the income statement, within acquisition related costs / credits. This amount was realized on the disposal of Elektron's magnesium recycling business in the Czech Republic.
11. Debt
Debt outstanding was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
December 31, 2020
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
3.67% Loan Notes due 2021
|
$
|
—
|
|
|
$
|
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
|
4.1
|
|
|
17.5
|
|
|
|
|
|
|
|
|
|
Unamortized debt issuance costs
|
(0.7)
|
|
|
(1.1)
|
|
|
|
Total debt
|
$
|
53.4
|
|
|
$
|
91.4
|
|
|
|
|
|
|
|
|
|
Non-current debt
|
$
|
53.4
|
|
|
$
|
91.4
|
|
|
On July 31, 2017, an extension to the Senior Facilities Agreement was agreed which provides $150 million in committed debt facilities, in the form of a multi-currency revolving credit facility, with an additional $50 million of uncommitted facilities through an accordion provision. The Senior Facilities Agreement was due to mature in April 2019, but was extended until the end of July 2022. Finance costs of $1.0 million were capitalized following this extension. The loan amendment has been treated, in part, as an extinguishment and new loan, as some of the lenders left the consortium, with the other portion deemed to be a modification of the existing facility. The Senior Facility Agreement bears interest equal to a margin based upon the Company's leverage plus either EURIBOR or LIBOR, depending on the currency drawn down. Note that GBP sterling drawings will be subject to interest rates based on SONIA (Sterling Overnight Index Average) once LIBOR is phased out by the end of 2021. We do not expect this change to have a material effect on our interest expense.
The weighted-average interest rate on the revolving credit facility was 2.19% and 2.47% in 2020 and 2019, respectively.
The maturity profile of the Company's debt, excluding unamortized issuance costs and discounts is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2021
|
|
2022
|
|
2023
|
|
2024
|
|
2025
|
|
Thereafter
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Notes due 2023
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
|
Loan Notes due 2026
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25.0
|
|
|
25.0
|
|
|
|
Revolving credit facility
|
—
|
|
|
4.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
4.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
$
|
—
|
|
|
$
|
4.1
|
|
|
$
|
25.0
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25.0
|
|
|
$
|
54.1
|
|
|
11. Debt (continued)
Loan notes due and shelf facility
The Loan Notes due 2021 were due to mature on September 15, 2021, however we voluntarily chose to repay the notes early, on December 31, 2020, largely using surplus cash generated from operations, plus a small drawing on the Senior Facilities Agreement.
We have been in compliance with the covenants under the Note Purchase and Private Shelf Agreement throughout all of the quarterly measurement dates in 2020 with an expectation of compliance in 2021.
Senior Facilities Agreement
The Senior Facilities Agreement contains a number of additional undertakings and covenants that, among other things, restrict, subject to certain exceptions, our and our subsidiaries' ability to:
•engage in mergers, divestitures, consolidations or divisions;
•change the nature of our business;
•make certain acquisitions;
•participate in certain joint ventures;
•grant liens or other security interests on our assets;
•sell, lease, transfer or otherwise dispose of assets, including receivables;
•enter into certain non-arm's-length transactions;
•grant guarantees;
•pay off certain existing indebtedness;
•make investments, loans or grant credit;
•repurchase our shares;
•issue shares or other securities; and
•redeem, repurchase, decease, retire or repay any of our share capital.
We are permitted to dispose of assets up to $25 million in aggregate until July 2022, without restriction as to the use of the proceeds under the Senior Facilities Agreement. Above this level, we would need to seek agreement from the majority of the lenders under the Senior Facilities Agreement. In addition, we may pay dividends, subject to certain limitations.
In addition, the Senior Facilities Agreement requires us to maintain compliance with an interest coverage ratio and a leverage ratio. The interest coverage ratio measures our EBITDA (as defined in the Senior Facilities Agreement) to Net Finance Charges (as defined in the Senior Facilities Agreement). We are required to maintain a minimum interest coverage ratio of 4.0:1. The leverage ratio measures our Total Net Debt (as defined in the Senior Facilities Agreement) to the Relevant Period Adjusted Acquisition EBITDA (as defined in the Senior Facilities Agreement). We are required to maintain a leverage ratio of no more than 3.0:1.
Any breach of a covenant in the Senior Facilities Agreement could result in a default under the Senior Facilities Agreement, in which case lenders could elect to declare all borrowed amounts immediately due and payable if the default is not remedied or waived within any applicable grace periods. Additionally, our and our subsidiaries' ability to make investments, incur liens and make certain restricted payments is also tied to ratios based on EBITDA.
We have been in compliance with the covenants under the Senior Facilities Agreement throughout all of the quarterly measurement dates throughout 2020 with an expectation of compliance in 2021.
12. Derivatives and Financial Instruments
The Company's financial instruments comprise bank and other loans, senior loan notes, derivatives, trade payables, deferred consideration and deferred contingent consideration. Other than derivatives, the main purpose of these financial instruments is to raise finance for the Company's operations. The Company also has various financial assets such as trade receivables and cash and cash equivalents, which arise directly from its operations.
Derivative financial instruments We are exposed to market risk during the normal course of business from changes in currency exchange rates, interest rates and commodity prices such as aluminum prices. We manage exposures through a combination of normal operating and financing activities and through the use of derivative financial instruments such as foreign currency forward purchase contracts and aluminum forward purchase contracts. We do not use market risk-sensitive instruments for trading or speculative purposes. In 2020, the Company had $0.2 million (2019: $0.3 million) derivative financial instruments recorded within accounts and other receivables. The value of derivative financial instruments recorded in liabilities in 2020 was $0.4 million and in 2019 was less than $0.1 million.
At December 31, 2020, the fair value of forward foreign currency exchange contracts deferred in equity was nil (2019: nil and 2018: liability of $0.4 million). During 2020, nil (2019: gain of $0.1 million and 2018: loss of $0.1 million) has been transferred to the consolidated income statement in respect of contracts that have matured in the year.
Aluminum forward purchase contracts
Aluminum is traded on the London Metal Exchange ("LME") and therefore the Group is able to use LME derivative contracts to hedge a portion of its price exposure. In 2020 the Group purchased approximately 7,000 (2019: 8,000) metric tons of primary aluminum for use in continuing operations. The processed waste can be sold as scrap aluminum at prices linked to the LME price. Based on the 2020 level of aluminum purchases for continuing operations, a $100 increase in the LME price of aluminum would increase our Gas Cylinders segment's costs by approximately $0.7 million.
Forward foreign currency exchange contracts
The Company incurs currency transaction risk whenever one of the Company's operating subsidiaries enters into either a purchase or sales transaction in a currency other than its functional currency. Currency transaction risk is reduced by matching sales and expenses in the same currency. The Company's U.S. operations have little currency exposure as most purchases, costs and sales are conducted in U.S. dollars. The Company's U.K. operations are exposed to exchange transaction risks, mainly because these operations sell goods priced in euros and U.S. dollars, and purchase raw materials priced in U.S. dollars. The Company also incurs currency transaction risk if it lends currency other than its functional currency to one of its joint venture partners.
At December 31, 2020 and 2019, the Company held various forward foreign currency exchange contracts designated as hedges in respect of forward sales for U.S. dollars, euros, Canadian dollars and Japanese yen for the receipt of GBP sterling or euros. The Company also held forward foreign currency exchange contracts designated as hedges in respect of forward purchases for U.S. dollars, euros, Canadian dollars, Australian dollars and Chinese Yuan by the sale of GBP sterling. The contract totals in GBP sterling and euros, range of maturity dates and range of exchange rates are disclosed below, with the value denominated in GBP sterling given that is the currency the majority of the contracts are held in.
12. Derivatives and Financial Instruments (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
|
|
Sales hedges
|
U.S. dollars
|
|
Euros
|
|
Japanese Yen
|
|
Canadian dollars
|
|
|
Contract totals/£m
|
3.0
|
|
|
11.1
|
|
|
0.1
|
|
|
0.1
|
|
|
|
Maturity dates
|
01/21 to 03/21
|
|
01/21 to 04/21
|
|
01/21
|
|
01/21
|
|
|
Exchange rates
|
$1.3045 to $1.3667
|
|
€1.0917 to €1.1181
|
|
JPY136.89
|
|
$1.7409
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase hedges
|
U.S. dollars
|
|
Euros
|
|
Canadian dollars
|
|
Australian dollars
|
|
Chinese yuan
|
|
|
Contract totals/£m
|
4.8
|
|
|
1.7
|
|
|
9.4
|
|
|
0.9
|
|
0.9
|
|
|
Maturity dates
|
01/21 to 04/21
|
|
01/21 to 02/21
|
|
01/21
|
|
01/21
|
|
03/21
|
|
|
Exchange rates
|
$1.3046 to $1.3667
|
|
€1.1065 to €1.0944
|
|
$1.7409 to $1.7201
|
|
$1.7729
|
|
¥8.9184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
Sales hedges
|
U.S. dollars
|
|
Euros
|
|
Japanese Yen
|
|
|
Contract totals/£m
|
0.1
|
|
|
7.6
|
|
|
0.1
|
|
|
|
Maturity dates
|
01/20
|
|
01/20 to 03/20
|
|
01/20
|
|
|
Exchange rates
|
$1.2914
|
|
€1.1551 to €1.1750
|
|
JPY142.86
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase hedges
|
U.S. dollars
|
|
Euros
|
|
Canadian dollars
|
|
|
Contract totals/£m
|
1.3
|
|
|
0.8
|
|
|
7.0
|
|
|
|
Maturity dates
|
03/20
|
|
03/20
|
|
01/20
|
|
|
Exchange rates
|
$1.3228
|
|
€1.1663
|
|
$1.7137 to $1.7664
|
|
The above contracts are held in GBP sterling, therefore the analysis in the table has been given in GBP sterling to avoid any movements as a result of translation.
Fair value of financial instruments
The following methods were used to estimate the fair values of each class of financial instrument:
Cash at bank and in hand
The carrying value approximates the fair value as a result of the short-term maturity of the instruments. Cash at bank and in hand are subject to a right to offset in the U.S.
Bank loans
At December 31, 2020, bank and other loans of $54.1 million (2019: $92.5 million) were outstanding. At December 31, 2020, bank and other loans are shown net of issue costs of $0.7 million (2019: $1.1 million), and these issue costs are to be amortized to the expected maturity of the facilities. This carrying value is equal to its fair value. At December 31, 2020, $4.1 million (2019: $17.5 million) of the total $54.1 million (2019: $92.5 million) bank and other loans was variable interest rate debt and subject to floating interest rate risk, with the remainder being fixed rate debt.
Forward foreign currency exchange rate contracts
The fair value of these contracts was calculated by determining what the Company would be expected to receive or pay on termination of each individual contract by comparison to present market prices.
London metal exchange ("LME") derivative contracts
The fair value of these contracts has been calculated by valuing the contracts against the equivalent forward rates quoted on the LME.
12. Derivatives and Financial Instruments (continued)
Fair value of financial instruments (continued)
The Company uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities.
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly.
Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.
The fair values of the financial instruments of the Company at December 31, 2020, were analyzed using the hierarchy as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
|
Derivative financial assets:
|
|
|
|
|
|
|
|
|
|
Foreign currency contract assets
|
$
|
0.2
|
|
|
$
|
—
|
|
|
$
|
0.2
|
|
|
$
|
—
|
|
|
|
Derivative financial liabilities:
|
|
|
|
|
|
|
|
|
|
Foreign currency contract liabilities
|
0.4
|
|
|
—
|
|
|
0.4
|
|
|
—
|
|
|
|
Interest bearing loans and borrowings:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loan Notes due 2023
|
25.0
|
|
|
—
|
|
|
25.0
|
|
|
—
|
|
|
|
Loan Notes due 2026
|
25.0
|
|
|
—
|
|
|
25.0
|
|
|
—
|
|
|
|
Revolving credit facility
|
4.1
|
|
|
—
|
|
|
4.1
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents the changes in Level 3 instruments for the year ended December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
|
Balance at January 1
|
$
|
0.5
|
|
|
|
Payments made during year
|
(0.4)
|
|
|
|
|
|
|
|
Remeasurement of deferred consideration (recognized in acquisition-related costs)
|
(0.1)
|
|
|
|
Balance at December 31
|
$
|
—
|
|
|
|
Total gains for the period included in profit and loss
|
0.1
|
|
|
|
|
|
|
The deferred contingent consideration above related to estimates of amounts payable in the future regarding acquisitions made in prior years. This deferred contingent consideration was based upon an estimate of the future profitability of the businesses versus targets agreed upon as part of the acquisitions.
13. Income Taxes
Income before income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
U.K.
|
|
$
|
21.0
|
|
|
$
|
13.4
|
|
|
$
|
26.5
|
|
|
|
International(1)
|
|
6.7
|
|
|
2.9
|
|
|
7.7
|
|
|
|
Income before income taxes
|
|
$
|
27.7
|
|
|
$
|
16.3
|
|
|
$
|
34.2
|
|
|
(1) "International" reflects non-U.K. income before income taxes.
The provision for income taxes consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
|
2020
|
|
2019
|
|
2018
|
|
|
Currently payable
|
|
|
|
|
|
|
|
|
U.K.
|
|
$
|
(0.2)
|
|
|
$
|
0.7
|
|
|
$
|
0.4
|
|
|
|
International(1)
|
|
2.3
|
|
|
2.9
|
|
|
6.4
|
|
|
|
Total current taxes
|
|
$
|
2.1
|
|
|
$
|
3.6
|
|
|
$
|
6.8
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
U.K.
|
|
$
|
2.1
|
|
|
$
|
4.5
|
|
|
$
|
2.9
|
|
|
|
International(1)
|
|
2.7
|
|
|
(0.5)
|
|
|
(3.2)
|
|
|
|
Total deferred taxes
|
|
$
|
4.8
|
|
|
$
|
4.0
|
|
|
$
|
(0.3)
|
|
|
|
Total provision for income taxes
|
|
$
|
6.9
|
|
|
$
|
7.6
|
|
|
$
|
6.5
|
|
|
(1) "International" reflects non-U.K. income taxes.
Differences between the financial reporting and the corresponding tax basis of assets and liabilities and the different income tax rates and laws applicable to the Company, among other factors, give rise to permanent differences between the statutory tax rate applicable in the U.K. and the effective tax rate presented in the consolidated income statement, which in 2020, 2019 and 2018 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Income before income taxes
|
$
|
27.7
|
|
|
$
|
16.3
|
|
|
$
|
34.2
|
|
|
|
Provision for income taxes at the U.K. statutory tax rate (2019: 19%, 2018:19%, 2017: 19.25%)
|
5.3
|
|
|
3.1
|
|
|
6.6
|
|
|
|
Effect of:
|
|
|
|
|
|
|
|
Non-deductible expenses
|
1.7
|
|
|
2.7
|
|
|
0.1
|
|
|
|
Movement in valuation allowances
|
0.8
|
|
|
1.2
|
|
|
—
|
|
|
|
Differences in income tax rates in countries where the Company operates(1)
|
(0.1)
|
|
|
1.1
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
Effect of changes in tax rates (2)
|
0.1
|
|
|
(0.1)
|
|
|
0.2
|
|
|
|
Movement in uncertain tax positions
|
(0.4)
|
|
|
0.4
|
|
|
0.1
|
|
|
|
Other
|
(0.5)
|
|
|
(0.8)
|
|
|
(1.0)
|
|
|
|
Total provision for income taxes
|
$
|
6.9
|
|
|
$
|
7.6
|
|
|
$
|
6.5
|
|
|
(1) Refers mainly to the effects of the differences between the statutory income tax rate in the U.K. against the applicable income tax rates of each country where the Company operates.
(2) A reduction in the U.K. corporation tax rate was expected to 17% from April 1, 2020 however this decision was reversed in 2020.
13. Income Taxes (continued)
Reconciliations of the beginning and ending gross unrecognized tax benefits were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Beginning balance
|
$
|
3.2
|
|
|
$
|
3.2
|
|
|
$
|
2.8
|
|
|
|
Gross increases based on tax positions related to the current year
|
0.6
|
|
|
0.6
|
|
|
1.4
|
|
|
|
Reductions due to expiry of statute of limitations
|
(1.4)
|
|
|
(0.6)
|
|
|
(1.0)
|
|
|
|
Ending balance
|
$
|
2.4
|
|
|
$
|
3.2
|
|
|
$
|
3.2
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
|
$
|
2.4
|
|
|
$
|
3.2
|
|
|
$
|
3.2
|
|
|
The Company's unrecognized tax benefits relate to the pricing of its various inter-company transactions. Because the transfer pricing calculation is often multifaceted, taking into account economics, finance, industry practice, and functional analysis, a company's transfer pricing position often sits at a particular point along a wide continuum of possible pricing outcomes. The inherent subjectivity in pricing inter-company balances gives rise to measurement uncertainty. Management has considered the valuation uncertainty in determining the measurement of the uncertain tax position. There are no current tax audit examinations. Management estimates that it is reasonably possible that approximately $1.2 million of our gross unrecognized tax benefits ($0.2 million of our net unrecognized tax benefits) may be recognized by the end of 2021 as a result of a lapse of the statute of limitations.
At December 31, 2020, 2019 and 2018, there were $0.5 million, $0.7 million, and $0.7 million of unrecognized tax benefits respectively, that if recognized would affect the annual effective tax rate.
The Company recognizes interest accrued and penalties relating to unrecognized tax benefits in the income tax line. During the years ended December 31, 2020, 2019 and 2018, the Company recognized approximately $0.1, $nil and $nil respectively, in interest and penalties.
The following is a summary of the tax years open by major tax jurisdiction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jurisdiction
|
|
Years open
|
|
|
U.K.
|
|
2018 - 2020
|
|
|
U.S. Federal
|
|
2017 - 2020
|
|
|
U.S. State and local
|
|
2017 - 2020
|
|
|
France
|
|
2017 - 2020
|
|
|
Germany
|
|
2016 - 2020
|
|
|
China
|
|
2017 - 2020
|
|
|
Canada
|
|
2016 - 2020
|
|
13. Income Taxes (continued)
Taxes have not been provided on undistributed earnings of subsidiaries where it is our intention to reinvest these earnings permanently or to repatriate the earnings only when it is tax efficient to do so. The amount of unremitted earnings at December 31, 2020, was approximately $56.4 million (at December 31, 2019: $47.2 million, at December 31, 2018: $62.4 million). If these earnings were remitted, it is estimated that the additional income tax arising would be approximately $0.8 million (at December 31, 2019: $0.7 million, at December 31, 2018: $0.6 million).
Deferred taxes were recorded in the Consolidated Balance Sheets as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Deferred tax assets
|
$
|
16.5
|
|
|
$
|
15.8
|
|
|
|
Deferred tax liabilities
|
(2.0)
|
|
|
(1.9)
|
|
|
|
Net deferred tax assets
|
$
|
14.5
|
|
|
$
|
13.9
|
|
|
The tax effects of the major items recorded in deferred tax assets and liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Deferred tax assets
|
|
|
|
|
|
Pension benefits
|
$
|
9.9
|
|
|
$
|
5.8
|
|
|
|
Accrued liabilities
|
0.7
|
|
|
0.9
|
|
|
|
Tax loss and credit carry forwards
|
25.8
|
|
|
23.8
|
|
|
|
Share based compensation
|
1.9
|
|
|
1.4
|
|
|
|
Other
|
1.5
|
|
|
4.7
|
|
|
|
Total deferred tax assets
|
39.8
|
|
|
36.6
|
|
|
|
Valuation allowances
|
(19.3)
|
|
|
(16.2)
|
|
|
|
Deferred tax assets, net of valuation allowances
|
$
|
20.5
|
|
|
$
|
20.4
|
|
|
|
Deferred tax liabilities
|
|
|
|
|
|
Property, plant and equipment
|
$
|
1.7
|
|
|
$
|
2.4
|
|
|
|
Goodwill and other intangibles
|
3.2
|
|
|
2.7
|
|
|
|
Other
|
1.1
|
|
|
1.4
|
|
|
|
Total deferred tax liabilities
|
$
|
6.0
|
|
|
$
|
6.5
|
|
|
|
Net deferred tax assets
|
$
|
14.5
|
|
|
$
|
13.9
|
|
|
Deferred tax liabilities and assets represent the tax effect of temporary differences between the value of assets and liabilities for financial statement purposes and such values as measured by the relevant jurisdiction's tax laws and regulations. Deferred tax assets and liabilities from the same tax jurisdiction have been netted, resulting in assets and liabilities being recorded under the deferred taxation captions on the consolidated balance sheet.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and carryforwards become deductible or creditable. Management considers the scheduled reversal of existing taxable temporary differences, projected future taxable income, and tax-planning strategies in making this assessment.
13. Income Taxes (continued)
At December 31, 2020, the Company had carried forward tax losses and tax credits of $104.2 million (U.K.: $30.0 million, non-U.K.: $74.2 million). Carried forward tax losses and tax credits for 2019 were $94.9 million (U.K.: $32.8 million, non-U.K.: $62.1 million) and for 2018 were $81.0 million (U.K.: $38.8 million, non-U.K.: $42.2 million). To the extent that these losses are not already recognized as deferred income taxes assets, and are available to offset against future taxable profits, it is expected that the future effective tax rate would be below the standard rate in the country where the profits are offset. A valuation allowance of $19.3 million (2019: $14.9 million, 2018: $15.0 million) exists for deferred tax benefits related to the tax loss and tax credit carry forwards and other benefits that may not be realized. The apportionment of the valuation allowance between the U.K. and non-U.K. jurisdictions is U.K.: $3.2 million, non-U.K.: $16.1 million (2019: U.K.: $2.8 million, non-U.K.: $12.1 million; 2018: U.K.: $4.1 million, non-U.K.: $10.9 million). The non-U.K. valuation allowances relate predominantly to tax losses in France, Germany and Canada.
Of the carried forward tax losses and tax credits as at December 31, 2020, $20.0 million expire between 2023 and 2034 and $84.2 million are available for indefinite carry-forward.
14. Pension Plans
The Company has defined benefit pension plans in the U.K., the U.S. and France. The levels of funding are determined by periodic actuarial valuations. The assets of the plans are generally held in separate trustee-administered funds. The Company also operates defined contribution plans in the U.K., the U.S., Australia and Canada.
The "10% corridor" method for recognizing gains and losses has been adopted. This methodology means that cumulative gains and losses up to an amount equal to 10% of the higher of the liabilities and the assets (the corridor) have no impact on the pension cost. Cumulative gains or losses greater than this corridor are amortized over the average future lifetime of the members in the Plans.
The principal defined benefit pension plans in the Company is the U.K. Luxfer Group Pension Plan ("the Plan"), which closed to new members in 1998, new employees then being eligible for a defined contribution plan. In April 2016, the Plan was closed to further benefit accrual with members being offered contributions to a defined contribution plan. The Company's other arrangements are less significant than the Plan, the largest being the BA Holdings, Inc. Pension Plan in the U.S. In December 2005, this plan was closed to further benefit accrual with members being offered contributions to that company's 401(k) plan. At January 1, 2016, the U.S. pension plans (BA Holdings, Inc. Pension Plan and Luxfer Hourly Pension Plan) merged into one plan.
The following tables present reconciliations of plan benefit obligations, fair value of plan assets and the funded status of pension plans as of and for the years ended December 31, 2020 and 2019:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
|
In millions
|
U.K.
|
|
U.S./ other
|
|
Total
|
|
U.K.
|
|
U.S./ other
|
|
Total
|
|
|
Change in benefit obligations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligation at January 1
|
$
|
359.2
|
|
|
$
|
47.1
|
|
|
$
|
406.3
|
|
|
$
|
315.2
|
|
|
$
|
46.8
|
|
|
$
|
362
|
|
|
|
Service cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.1
|
|
|
0.1
|
|
|
|
Interest cost
|
7.0
|
|
|
1.4
|
|
|
8.4
|
|
|
9.2
|
|
|
1.9
|
|
|
11.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Curtailment gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8)
|
|
|
(1.8)
|
|
|
|
Settlement gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.7)
|
|
|
(2.7)
|
|
|
|
Actuarial loss
|
39.7
|
|
|
4.7
|
|
|
44.4
|
|
|
38.4
|
|
|
5.0
|
|
|
43.4
|
|
|
|
Exchange difference
|
12.7
|
|
|
—
|
|
|
12.7
|
|
|
10.0
|
|
|
—
|
|
|
10
|
|
|
|
Benefits paid
|
(14.7)
|
|
|
(2.5)
|
|
|
(17.2)
|
|
|
(13.6)
|
|
|
(2.2)
|
|
|
(15.8)
|
|
|
|
Prior service cost
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Benefit obligation at December 31
|
$
|
404.0
|
|
|
$
|
50.7
|
|
|
$
|
454.7
|
|
|
$
|
359.2
|
|
|
$
|
47.1
|
|
|
$
|
406.3
|
|
|
|
Change in plan assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value of plan assets at January 1
|
$
|
328.7
|
|
|
$
|
42.4
|
|
|
$
|
371.1
|
|
|
$
|
283.4
|
|
|
$
|
38.6
|
|
|
$
|
322.0
|
|
|
|
Actual return on assets
|
27.9
|
|
|
5.1
|
|
|
33.0
|
|
|
45.4
|
|
|
6.7
|
|
|
52.1
|
|
|
|
Exchange difference
|
11.2
|
|
|
—
|
|
|
11.2
|
|
|
7.6
|
|
|
—
|
|
|
7.6
|
|
|
|
Contributions from employer
|
5.8
|
|
|
—
|
|
|
5.8
|
|
|
5.9
|
|
|
2.0
|
|
|
7.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefits paid
|
(14.7)
|
|
|
(2.5)
|
|
|
(17.2)
|
|
|
(13.6)
|
|
|
(2.2)
|
|
|
(15.8)
|
|
|
|
Settlement loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2.7)
|
|
|
(2.7)
|
|
|
|
Fair value of plan assets at December 31
|
$
|
358.9
|
|
|
$
|
45.0
|
|
|
$
|
403.9
|
|
|
$
|
328.7
|
|
|
$
|
42.4
|
|
|
$
|
371.1
|
|
|
|
Funded status
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Benefit obligations in excess of the fair value of plan assets
|
$
|
(45.1)
|
|
|
$
|
(5.7)
|
|
|
$
|
(50.8)
|
|
|
$
|
(30.5)
|
|
|
$
|
(4.7)
|
|
|
$
|
(35.2)
|
|
|
The net benefit obligations of $50.8 million and $35.2 million at December 31, 2020, and December 31, 2019, respectively, are recorded in non-current liabilities in the consolidated balance sheets.
14. Pension Plans (continued)
The amounts recognized in the consolidated statements of income in respect of the pension plans were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
2018
|
|
2018
|
|
2018
|
|
|
In millions
|
U.K.
|
|
U.S. / other
|
|
Total
|
|
U.K.
|
|
U.S. / other
|
|
Total
|
|
U.K.
|
|
U.S. / other
|
|
Total
|
|
|
In respect of defined benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current service cost
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
|
Interest cost
|
7.0
|
|
|
1.4
|
|
|
8.4
|
|
|
9.2
|
|
|
1.9
|
|
|
11.1
|
|
|
8.6
|
|
|
1.8
|
|
|
10.4
|
|
|
|
Expected return on assets
|
(12.2)
|
|
|
(2.3)
|
|
|
(14.5)
|
|
|
(13.4)
|
|
|
(2.3)
|
|
|
(15.7)
|
|
|
(14.5)
|
|
|
(2.2)
|
|
|
(16.7)
|
|
|
|
Curtailment gain
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1.8)
|
|
|
(1.8)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Settlement loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.8
|
|
|
0.8
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
Amortization of net actuarial loss
|
2.3
|
|
|
0.3
|
|
|
2.6
|
|
|
2.5
|
|
|
0.6
|
|
|
3.1
|
|
|
2.3
|
|
|
0.4
|
|
|
2.7
|
|
|
|
Amortization of prior service credit
|
(0.4)
|
|
|
—
|
|
|
(0.4)
|
|
|
(0.4)
|
|
|
—
|
|
|
(0.4)
|
|
|
(0.5)
|
|
|
—
|
|
|
(0.5)
|
|
|
|
Total (credit) / charge for defined benefit plans
|
$
|
(3.3)
|
|
|
$
|
(0.6)
|
|
|
$
|
(3.9)
|
|
|
$
|
(2.1)
|
|
|
$
|
(0.7)
|
|
|
$
|
(2.8)
|
|
|
$
|
(4.1)
|
|
|
$
|
0.1
|
|
|
$
|
(4.0)
|
|
|
|
In respect of defined contribution plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total charge for defined contribution plans
|
$
|
1.5
|
|
|
$
|
1.9
|
|
|
$
|
3.4
|
|
|
$
|
2.1
|
|
|
$
|
2.1
|
|
|
$
|
4.2
|
|
|
$
|
2.1
|
|
|
$
|
2.3
|
|
|
$
|
4.4
|
|
|
|
Total charge / (credit) for pension plans
|
$
|
(1.8)
|
|
|
$
|
1.3
|
|
|
$
|
(0.5)
|
|
|
$
|
—
|
|
|
$
|
1.4
|
|
|
$
|
1.4
|
|
|
$
|
(2.0)
|
|
|
$
|
2.4
|
|
|
$
|
0.4
|
|
|
In accordance with ASC 715, defined benefit pension credit is split in the income statement, with $0.4 million (2019: $0.3 million; 2018: $0.7 million) of expenses recognized within sales, general and administrative expenses and a credit of $4.3 million (2019: $1.3 million credit; 2018: $4.7 million credit) recognized below operating income in the income statement. In 2019 a credit of $1.8 million was recognized in relation to the curtailment gain on the French pension plan, recognized in restructuring charge.
The following table shows other changes in plan assets and benefit obligations recognized in other comprehensive loss ("AOCI") during the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Net actuarial (loss)
|
$
|
(26.9)
|
|
|
$
|
(7.5)
|
|
|
$
|
1.4
|
|
|
|
Amortization of actuarial loss
|
2.6
|
|
|
3.1
|
|
|
2.7
|
|
|
|
|
|
|
|
|
|
|
|
Prior service cost
|
(0.1)
|
|
|
—
|
|
|
(2.2)
|
|
|
|
Amortization of prior service credit
|
(0.4)
|
|
|
(0.4)
|
|
|
(0.5)
|
|
|
|
Total recognized in other comprehensive loss
|
(24.8)
|
|
|
(4.8)
|
|
|
1.4
|
|
|
|
Total credit recognized in net periodic benefit cost and other comprehensive income
|
$
|
(20.9)
|
|
|
$
|
(2.0)
|
|
|
$
|
5.4
|
|
|
The estimated net loss for defined benefit plans included in AOCI that will be recognized in net periodic benefit cost during 2021 is $3.4 million, consisting of amortization of net actuarial loss of $3.8 million, partially offset by amortization of prior service credit of $0.4 million.
The following table shows the amounts included in AOCI that have not yet been recognized as components of net periodic benefit cost for the years ended December 31:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Net actuarial loss
|
$
|
(165.1)
|
|
|
$
|
(140.8)
|
|
|
|
Net prior service credit
|
11.8
|
|
|
12.3
|
|
|
|
Total included in AOCI not yet recognized in the statement of loss
|
$
|
(153.3)
|
|
|
$
|
(128.5)
|
|
|
14. Pension Plans (continued)
In September 2019, the UK Statistics Authority announced plans to reform the RPI inflation index. On November 25, 2020, the government and UK Statistics Authority confirmed these plans to reform the RPI index to bring it into line with the CPIH index from 2030, with no compensation for the holders of index-linked gilts. Inflation measured by the CPIH is consistently significantly lower than that measured by RPI, and therefore these plans imply a significant expected reduction in RPI inflation from 2030 onwards. As a result of this we have taken a stepped approach and used different inflation rates pre and post 2030.
The financial assumptions used in the calculations were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Projected Unit Credit Valuation
|
|
|
|
U.K.
|
|
U.S.
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
%
|
|
|
Discount rate
|
1.40
|
|
|
2.10
|
|
|
2.90
|
|
|
2.30
|
|
|
3.10
|
|
|
4.20
|
|
|
|
Expected return on assets
|
3.00
|
|
|
4.10
|
|
|
4.90
|
|
|
5.00
|
|
|
6.20
|
|
|
6.20
|
|
|
|
Pre-2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Price Inflation
|
2.90
|
|
|
2.90
|
|
|
3.30
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Consumer Price Inflation
|
1.80
|
|
|
2.00
|
|
|
2.20
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Pension increases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre 6 April 1997
|
1.70
|
|
|
1.80
|
|
|
2.00
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
1997 - 2005
|
1.90
|
|
|
2.10
|
|
|
2.20
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Post 5 April 2005
|
1.60
|
|
|
1.70
|
|
|
1.80
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Post-2030
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Price Inflation
|
2.70
|
|
|
2.90
|
|
|
3.30
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Consumer Price Inflation
|
2.60
|
|
|
2.00
|
|
|
2.20
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Pension increases
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pre 6 April 1997
|
2.20
|
|
|
1.80
|
|
|
2.00
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
1997 - 2005
|
2.60
|
|
|
2.10
|
|
|
2.20
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
|
Post 5 April 2005
|
2.00
|
|
|
1.70
|
|
|
1.80
|
|
|
n/a
|
|
n/a
|
|
n/a
|
|
The discount rate used represents the annualized yield based on a cash-flow matched methodology with reference to an AA corporate bond spot curve and having regard to the duration of the Plan’s liabilities. The inflation rate is derived using a similar cash flow matched methodology as used for the discount rate but having regard to the difference between yields on fixed-interest and index-linked United Kingdom government gilts. The expected return on assets assumption is set having regard to the asset allocation and expected return on each asset class as at the balance sheet date.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
|
Other principal actuarial assumptions:
|
Years
|
|
Years
|
|
|
Life expectancy of male / female in the U.K. aged 65 at accounting date
|
21.5 / 24.3
|
|
21.5 / 24.2
|
|
|
Life expectancy of male / female in the U.K. aged 65 at 20 years after accounting date
|
22.9 / 25.8
|
|
22.8 / 25.7
|
|
Investment strategies
For the principal defined benefit plan in the Company and the U.K., the Luxfer Group Pension Plan, the assets are invested in a diversified range of asset classes and include matching assets (comprising fixed-interest and index-linked bonds and swaps) and growth assets (comprising all other assets). The Trustees of the Plan have formulated a de-risking strategy to help control the short-term risk of volatility associated with holding growth assets. The Trustees also monitor the cost of a buy-in to secure pensioner liabilities with an insurance company to ensure they and the Company are able to act if such an opportunity arises. Other options to progressively reduce the scale of the liabilities are discussed between the Trustees and the Company.
14. Pension Plans (continued)
Risk exposures
The plans hold a high proportion of assets in equity and other growth investments, with the intention of growing the value of assets relative to liabilities. The Company is at risk if the value of liabilities grows at a faster rate than the plans assets, or if there is a significant fall in the value of these assets not matched by a fall in the value of liabilities. If these events occurred, this would be expected to lead to an increase in the Company's future cash contributions.
Special events
In June 2019, the closure of Luxfer Gas Cylinders' French site affected the French pension plan. This resulted in a curtailment gain of $1.8 million and triggered immediate recognition of the unamortized net actuarial losses of $0.3 million.
In December 2019, the U.S. plan offered deferred members the opportunity to receive a lump sum in respect of their benefits in the Plan. The result of this exercise was that lump sums totaling $2.7 million were paid out with a corresponding $3.6 million of defined benefit obligation being extinguished. This triggered immediate recognition of the unamortized net actuarial losses of $0.8 million.
In October 2018, following a High Court ruling in the U.K., a $2.2 million allowance in relation to the expected future costs of equalizing Guaranteed Minimum Pensions (GMPs) in the U.K. Plan has been included in the obligations on the balance sheet at December 31, 2018. An additional obligation of $0.1 million was recognized at December 31, 2020 following a further U.K. ruling in November 2020 to equalize GMP benefits post 1990 for those members that have since transferred out of the Plan. The total allowance is being amortized in the income statement over the future lifetime of the Plan members.
The fair value of plan assets were:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2020
|
|
2020
|
|
2019
|
|
2019
|
|
2019
|
|
|
In millions
|
U.K.
|
|
U.S./ other
|
|
Total
|
|
U.K.
|
|
U.S./ other
|
|
Total
|
|
|
Assets in active markets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equities and growth funds
|
$
|
152.3
|
|
|
$
|
26.9
|
|
|
$
|
179.2
|
|
|
$
|
146.8
|
|
|
$
|
26.2
|
|
|
$
|
173.0
|
|
|
|
Government bonds
|
63.1
|
|
|
—
|
|
|
63.1
|
|
|
52.7
|
|
|
—
|
|
|
52.7
|
|
|
|
Corporate bonds
|
141.6
|
|
|
18.1
|
|
|
159.7
|
|
|
129.1
|
|
|
16.2
|
|
|
145.3
|
|
|
|
Cash
|
1.9
|
|
|
—
|
|
|
1.9
|
|
|
0.1
|
|
|
—
|
|
|
0.1
|
|
|
|
Total fair value of plan assets
|
$
|
358.9
|
|
|
$
|
45.0
|
|
|
$
|
403.9
|
|
|
$
|
328.7
|
|
|
$
|
42.4
|
|
|
$
|
371.1
|
|
|
All investments were classified as Level 2 in the fair value hierarchy as of December 31, 2020 and December 31, 2019.
The following benefit payments are expected to be paid by the plans for the years ended December 31 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
U.K. pension plans
|
|
U.S./ other pension plans
|
|
2021
|
$
|
15.0
|
|
|
$
|
2.5
|
|
|
2022
|
15.3
|
|
|
2.5
|
|
|
2023
|
15.6
|
|
|
2.5
|
|
|
2024
|
15.8
|
|
|
2.5
|
|
|
2025
|
16.1
|
|
|
2.5
|
|
|
Thereafter
|
84.5
|
|
|
12.3
|
|
The estimated amount of employer contributions expected to be paid to the defined benefit pension plans for the year ending December 31, 2021, is $5.8 million (2020: $5.8 million actual employer contributions).
15. Shareholders' Equity
(a)Ordinary share capital
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
December 31, 2019
|
|
December 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
No.
|
|
No.
|
|
Millions
|
|
|
Millions
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of £0.50 each
|
40,000,000
|
|
|
40,000,000
|
|
|
$
|
35.7
|
|
(1)
|
|
$
|
35.7
|
|
(1)
|
|
|
Deferred ordinary shares of £0.0001 each
|
761,835,338,444
|
|
|
761,835,338,444
|
|
|
149.9
|
|
(1)
|
|
149.9
|
|
(1)
|
|
|
|
761,875,338,444
|
|
|
761,875,338,444
|
|
|
$
|
185.6
|
|
(1)
|
|
$
|
185.6
|
|
(1)
|
|
|
Allotted, called up and fully paid:
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of £0.50 each
|
29,000,000
|
|
|
29,000,000
|
|
|
$
|
26.6
|
|
(1)
|
|
$
|
26.6
|
|
(1)
|
|
|
Deferred ordinary shares of £0.0001 each
|
761,835,338,444
|
|
|
761,835,338,444
|
|
|
149.9
|
|
(1)
|
|
149.9
|
|
(1)
|
|
|
|
761,864,338,444
|
|
|
761,864,338,444
|
|
|
$
|
176.5
|
|
(1)
|
|
$
|
176.5
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)The Company's ordinary and deferred share capital are shown in U.S. dollars at the exchange rate prevailing at the month-end spot rate at the time of the share capital being issued.
The rights of the shares are as follows:
Ordinary shares of £0.50 each
The ordinary shares carry no entitlement to an automatic dividend but rank pari passu in respect of any dividend declared and paid. The ordinary shares were allotted and issued to satisfy share awards which vested under the Company's share award and share incentive plans.
At December 31, 2020, there were 27,636,153 (2019: 27,431,283) ordinary shares of Luxfer Holdings PLC listed on the New York Stock Exchange (NYSE).
Deferred ordinary shares of £0.0001 each
The deferred shares have no entitlement to dividends or to vote. On a liquidation, (but not otherwise) the holders of the deferred shares shall be entitled to the repayment of the paid up nominal amount of the deferred shares, but only after any payment to the holders of ordinary shares of an amount equal to 100 times the amount paid up on such ordinary shares.
(b) Treasury Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
At January 1, 2019
|
$
|
(4.3)
|
|
|
|
|
|
|
|
Utilization of treasury shares
|
0.3
|
|
|
|
At December 31, 2019
|
(4.0)
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020
|
$
|
(4.0)
|
|
|
In June 2015, the Board announced a share buy-back program of up to $10 million to cover the needs of employee share plans. Shareholder approval for this program was granted at the 2014 Annual General Meeting (for repurchases up to an aggregate amount of 2,700,000 ordinary shares or ADSs).
During 2019 and 2020, no ordinary shares were repurchased under the share buy-back program. At December 31, 2020, there were 350,335 (2019: 352,499) treasury shares held at a cost of $4.0 million (2019: $4.0 million).
15. Shareholders' Equity (continued)
(c) Own shares held by ESOP
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
|
At January 1, 2019
|
$
|
(2.2)
|
|
|
|
|
|
|
|
Shares sold from ESOP
|
0.2
|
|
|
|
|
|
|
|
Utilization of ESOP shares
|
0.3
|
|
|
|
At December 31, 2019
|
(1.7)
|
|
|
|
|
|
|
|
Shares sold from ESOP
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2020
|
$
|
(1.4)
|
|
|
At December 31, 2020, there were 1,013,512 ordinary shares of £0.50 each (2019: 1,216,220 ordinary shares of £0.50 each) held by The Luxfer Group Employee Share Ownership Plan (the "ESOP").
(d) Dividends paid and proposed
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Dividends declared and paid during the year:
|
|
|
|
|
|
|
|
Interim dividend paid February 7, 2018 ($0.125 per ordinary share)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.4
|
|
|
|
Interim dividend paid May 2, 2018 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.3
|
|
|
|
Interim dividend paid August 1, 2018 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.3
|
|
|
|
Interim dividend paid November 7, 2018 ($0.125 per ordinary share)
|
—
|
|
|
—
|
|
|
3.4
|
|
|
|
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
|
|
|
—
|
|
|
|
Interim dividend paid November 6, 2019 ($0.125 per ordinary share)
|
—
|
|
|
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
|
|
|
—
|
|
|
—
|
|
|
|
Interim dividend paid November 4, 2020 ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
13.6
|
|
|
$
|
13.6
|
|
|
$
|
13.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Dividends declared and paid after December 31 (not recognized as a liability at December 31):
|
|
|
|
|
|
|
|
Interim dividend paid February 6, 2019: ($0.125 per ordinary share)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3.4
|
|
|
|
Interim dividend paid February 5, 2020: ($0.125 per ordinary share)
|
—
|
|
|
3.4
|
|
|
—
|
|
|
|
Interim dividend paid February 4, 2021: ($0.125 per ordinary share)
|
3.4
|
|
|
—
|
|
|
—
|
|
|
|
|
$
|
3.4
|
|
|
$
|
3.4
|
|
|
$
|
3.4
|
|
|
|
|
|
|
|
|
|
|
16. Share Plans
(a) The Luxfer Group Employee Share Ownership Plan
The trust
In 1997, the Company established an employee benefit trust ("the ESOP") with independent Trustees, to purchase and hold shares in the Company in trust to be used to satisfy options granted to eligible senior employees under the Company's share plans established from time to time.
The ESOP was established with the benefit of a gift equivalent to the set up and running costs. Purchase monies and costs required by the ESOP Trustees to purchase shares for and under the provisions of the trust are provided by way of an interest free loan from a Company subsidiary. The loan is repayable, in normal circumstances, out of monies received from senior employees when they exercise options granted to them over shares. Surplus shares are held by the ESOP Trustees to satisfy future option awards. The ESOP Trustees have waived their right to receive dividends on shares held in trust. The Remuneration Committee is charged with determining which senior employees are to be granted options and in what number subject to the relevant plan rules.
The current plan
The current share option plan, implemented by the Company in February 2007 is The Luxfer Holdings Executive Share Option Plan ("the Plan"), which consists of two parts. Part A of the Plan is approved by HM Revenue & Customs and Part B is unapproved. Options can be exercised at any time up to the tenth anniversary of their grant subject to the rules of the relevant part of the Plan. As a result of the Company's initial public offering of ordinary shares in 2012, all leaver restrictions over the shares were released. There are no other performance criteria attached to the options.
Changes in the year
The change in the number of shares held by the Trustees of the ESOP and the number of share options held over those shares are shown below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares held by ESOP Trustees
|
|
|
|
£0.0001 deferred shares
|
|
£0.50 ordinary shares
|
|
|
At January 1, 2020
|
15,977,968,688
|
|
|
1,216,220
|
|
|
|
|
|
|
|
|
|
Shares utilized during the year
|
—
|
|
|
(131,909)
|
|
|
|
|
|
|
|
|
|
Shares sold from the ESOP during the year
|
—
|
|
|
(70,799)
|
|
|
|
At December 31, 2020
|
15,977,968,688
|
|
|
1,013,512
|
|
|
At December 31, 2020, the loan outstanding from the ESOP was $0.6 million (2019: $0.6 million).
The market value of each £0.50 ordinary share held by the ESOP at December 31, 2020, was $16.42 (2019: $18.51).
(b) Share-based compensation
Luxfer Holdings PLC Long-Term Umbrella Incentive Plan and Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan
As an important retention tool and to align the long-term financial interests of our management with those of our shareholders, the Company adopted the Luxfer Holdings PLC Long-Term Umbrella Incentive Plan (the "LTIP") for the Company's senior employees, and the Luxfer Holdings PLC Non-Executive Directors Equity Incentive Plan (the "Director EIP") for the Non-Executive Directors.
The equity or equity-related awards under the LTIP and the Director EIP are based on the ordinary shares of the Company. The Remuneration Committee administers the LTIP and has the power to determine to whom the awards will be granted, the amount, type and other terms. Awards granted under the LTIP generally vest one-quarter each year over a four-year period, subject to continuous employment and certain other conditions, with the exercise period expiring six years after grant date. Awards granted under the Director EIP are non-discretionary, are purely time-based and vest over one year, with settlement occurring immediately on vesting.
16. Share Plans (continued)
(b) Share-based compensation (continued)
Share option and restricted stock awards
In March 2020, a combined 132,900 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. In May 2020, a combined 2,000 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. In June 2020, a combined 27,280 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards that would fully vest one year later. In September 2020, a combined 3,892 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later.
In March 2019, a combined 196,320 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later. In May 2019, a combined 3,981 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, which were all time-based awards that would fully vest one year later. In December 2019, a combined 6,000 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over four years and expiring two years later.
In March 2018, a combined 432,600 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over three years and expiring two years later. In April 2018, a combined 11,936 of Restricted Stock Units and Options over ordinary shares were granted under the Director EIP, of which 2,000 would vest over three years and 9,936 would fully vest one year later. The Director EIP are all time-based awards.
In January 2018, Heather Harding was granted share options in respect of her appointment to the role of Chief Financial Officer. These time, and performance-based options were outside the terms of reference of the LTIP but granted in accordance with the provisions of the Remuneration Policy. The details of the awards are as follows:
The Remuneration Committee determined that the new Chief Financial Officer should acquire 21,000 nominal cost RSUs to vest over three years.
Performance-based awards amounting to 30,000 shares should be made to the new Chief Financial Officer which would vest upon achievement of attaining a specified adjusted diluted EPS target at each annual measurement date. Three levels of target were set:
•The lower target must be achieved by the measurement date at the end of 2020 and will result in the vesting of 5,000 shares.
•The mid-point target must be achieved by the measurement date at the end of 2022 and will result in the vesting of a further 10,000 shares.
•The top target must be achieved by the measurement date at the end of 2024 and will result in the vesting of a further 15,000 shares.
These awards have vested in full at the maximum level as all performance criteria were confirmed as having been met by the Remuneration Committee in the first quarter of 2019.
16. Share Plans (continued)
(b) Share-based compensation (continued)
Total share-based compensation expense for 2020, 2019 and 2018 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Years ended December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total share-based compensation charges
|
$
|
2.8
|
|
|
$
|
4.5
|
|
|
$
|
4.8
|
|
|
There were no cancellations or modifications to the awards in 2020, 2019 or 2018.
The actual tax benefit realized for the tax deductions from option exercises totaled $0.6 million, $0.9 million and $0.2 million in 2020, 2019 and 2018, respectively.
The following tables illustrates the number of, and movements in, share options during the year, with each option relating to 1 ordinary share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
|
|
Weighted- average exercise price
|
|
Weighted- average remaining contractual life (years)
|
|
Aggregate intrinsic value ($M)
|
|
|
At January 1, 2020
|
467,362
|
|
|
$
|
0.75
|
|
|
1.7
|
|
$
|
8.7
|
|
|
|
Granted during the year
|
166,072
|
|
|
$
|
1.00
|
|
|
|
|
|
|
|
Exercised during the year
|
(222,375)
|
|
|
$
|
0.71
|
|
|
|
|
|
|
|
Accrued dividend awards
|
14,727
|
|
|
$
|
0.84
|
|
|
|
|
|
|
|
Lapsed during the year
|
(12,982)
|
|
|
$
|
0.90
|
|
|
|
|
|
|
|
At December 31, 2020
|
412,804
|
|
|
$
|
0.87
|
|
|
1.9
|
|
$
|
6.8
|
|
|
|
Options exercisable at December 31, 2020
|
11,495
|
|
|
$
|
0.66
|
|
|
2.4
|
|
$
|
0.2
|
|
|
|
Options expected to vest as of December 31, 2020
|
401,309
|
|
|
$
|
0.88
|
|
|
1.9
|
|
$
|
6.6
|
|
|
The weighted average fair value of options granted in 2020, 2019 and 2018 was estimated to be $9.41, $17.65 and $11.02 per share, respectively. The total intrinsic value of options that were exercised during 2020, 2019 and 2018 was $3.0 million, $11.2 million and $9.3 million, respectively. At December 31, 2020, the total unrecognized compensation cost related to share options was $2.2 million (2019: $2.7 million). This cost is expected to be recognized over a weighted average period of 1.3 years (2019: 1.3 years ).
The following table illustrates the assumptions used in deriving the fair value of share options during the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Dividend yield (%)
|
3.39 - 4.09
|
|
2.10
|
|
|
4.00
|
|
|
|
Expected volatility range (%)
|
36.48 - 56.28
|
|
35.06 - 44.20
|
|
22.65 - 35.77
|
|
|
Risk-free interest rate (%)
|
0.18 - 0.49
|
|
0.74 - 2.52
|
|
0.12 - 2.57
|
|
|
Expected life of share options range (years)
|
0.50 - 4.00
|
|
0.50 - 4.00
|
|
0.50 - 6.00
|
|
|
Forfeiture rate (%)
|
5.00
|
|
|
5.00
|
|
|
5.00
|
|
|
|
Weighted average exercise price ($)
|
$1.00
|
|
$1.00
|
|
$0.65
|
|
|
Models used
|
Black-Scholes & Monte-Carlo
|
|
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.
Employee share incentive plans The Company operates an all-employee share incentive plan in its U.K. and U.S. operations and may look to implement plans in other geographic regions.
17. Segmental Information
We classify our operations into two core business segments, Gas Cylinders and Elektron, based primarily on shared economic characteristics for the nature of the products and services; the nature of the production processes; the type or class of customer for their products and services; the methods used to distribute their products or provide their services; and the nature of the regulatory environment. The Company has four identified business units, which aggregate into the two reportable segments. Luxfer Gas Cylinders forms the Gas Cylinders segment, and Luxfer MEL Technologies, Luxfer Magtech and Luxfer Graphic Arts aggregate into the Elektron segment. The Superform business unit, used to aggregate into the Gas Cylinders segment, but is now recognized within discontinued operations. Prior to its sale at the end of the second quarter of 2019, there was a further business unit, Luxfer Czech Republic which was part of 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 carbon 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 and has been identified as the CEO, using adjusted EBITA(1) and adjusted EBITDA, which is defined as segment income and is 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.
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 years ended December 31, is included in the following summary:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
|
Adjusted EBITDA
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
141.9
|
|
|
$
|
153.5
|
|
|
$
|
152.1
|
|
|
|
$
|
21.3
|
|
|
$
|
22.3
|
|
|
$
|
23.4
|
|
|
|
Elektron segment
|
182.9
|
|
|
219.9
|
|
|
249.8
|
|
|
|
32.6
|
|
|
44.8
|
|
|
56.2
|
|
|
|
Consolidated
|
$
|
324.8
|
|
|
$
|
373.4
|
|
|
$
|
401.9
|
|
|
|
$
|
53.9
|
|
|
$
|
67.1
|
|
|
$
|
79.6
|
|
|
During 2020, 2019 and 2018 there were $0.4 million of sales made from the Elektron segment to the Gas Cylinders segment.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
Restructuring Charges
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
3.7
|
|
|
$
|
3.6
|
|
|
$
|
5.2
|
|
|
|
$
|
7.9
|
|
|
$
|
20.7
|
|
|
$
|
9.8
|
|
|
|
Elektron segment
|
9.6
|
|
|
9.6
|
|
|
11.7
|
|
|
|
0.9
|
|
|
5.2
|
|
|
3.4
|
|
|
|
Other segment
|
—
|
|
|
—
|
|
|
—
|
|
|
|
0.1
|
|
|
—
|
|
|
—
|
|
|
|
Consolidated
|
$
|
13.3
|
|
|
$
|
13.2
|
|
|
$
|
16.9
|
|
|
|
$
|
8.9
|
|
|
$
|
25.9
|
|
|
$
|
13.2
|
|
|
(1) Adjusted EBITA is adjusted EBITDA less depreciation and loss on disposal of property, plant and equipment.
17. Segmental Information (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
Capital expenditure
|
|
|
In millions
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2018
|
|
|
Gas Cylinders segment
|
$
|
99.7
|
|
|
$
|
113.1
|
|
|
$
|
2.0
|
|
|
$
|
3.1
|
|
|
$
|
2.1
|
|
|
|
Elektron segment
|
189.7
|
|
|
200.8
|
|
|
5.1
|
|
|
10.9
|
|
|
10.5
|
|
|
|
Other
|
24.7
|
|
|
33.5
|
|
|
—
|
|
|
—
|
|
|
0.3
|
|
|
|
Discontinued operations
|
32.3
|
|
|
42.9
|
|
|
0.3
|
|
|
0.8
|
|
|
0.7
|
|
|
|
|
$
|
346.4
|
|
|
$
|
390.3
|
|
|
$
|
7.4
|
|
|
$
|
14.8
|
|
|
$
|
13.6
|
|
|
The following table presents a reconciliation of Adjusted EBITDA to net income from continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Adjusted EBITDA
|
$
|
53.9
|
|
|
$
|
67.1
|
|
|
$
|
79.6
|
|
|
|
Other share based compensation charges
|
(2.8)
|
|
|
(4.5)
|
|
|
(4.8)
|
|
|
|
Loss on disposal of property, plant and equipment
|
(0.1)
|
|
|
(0.2)
|
|
|
(0.3)
|
|
|
|
Depreciation and amortization
|
(13.3)
|
|
|
(13.2)
|
|
|
(16.9)
|
|
|
|
Unwind discount on deferred consideration
|
—
|
|
|
(0.2)
|
|
|
(0.2)
|
|
|
|
Restructuring charges
|
(8.9)
|
|
|
(25.9)
|
|
|
(13.2)
|
|
|
|
Impairment credit / (charge)
|
—
|
|
|
0.2
|
|
|
(5.9)
|
|
|
|
Acquisition costs
|
—
|
|
|
(1.4)
|
|
|
(4.3)
|
|
|
|
Other charges
|
(0.4)
|
|
|
(2.5)
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Defined benefits pension gain
|
4.3
|
|
|
1.3
|
|
|
4.7
|
|
|
|
Interest expense, net
|
(5.0)
|
|
|
(4.4)
|
|
|
(4.5)
|
|
|
|
Provision for taxes
|
(6.9)
|
|
|
(7.6)
|
|
|
(6.5)
|
|
|
|
Net income from continuing operations
|
$
|
20.8
|
|
|
$
|
8.7
|
|
|
$
|
27.7
|
|
|
Equity income of unconsolidated affiliates for 2020, 2019 and 2018 relates predominantly to the Gas Cylinders Segment.
17. Segmental Information (continued)
The following tables present certain geographic information by geographic region for the years ended December 31,:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales(1)
|
|
|
|
2020
|
|
2019
|
|
2018
|
|
|
|
$M
|
Percent
|
|
$M
|
Percent
|
|
$M
|
Percent
|
|
|
United States
|
$
|
173.0
|
|
53.3
|
%
|
|
$
|
201.4
|
|
53.9
|
%
|
|
$
|
205.5
|
|
51.2
|
%
|
|
|
U.K.
|
18.7
|
|
5.8
|
%
|
|
23.9
|
|
6.4
|
%
|
|
28.6
|
|
7.1
|
%
|
|
|
Germany
|
15.7
|
|
4.8
|
%
|
|
21.8
|
|
5.8
|
%
|
|
41.8
|
|
10.4
|
%
|
|
|
Italy
|
10.5
|
|
3.2
|
%
|
|
13.3
|
|
3.6
|
%
|
|
12.6
|
|
3.1
|
%
|
|
|
France
|
20.2
|
|
6.2
|
%
|
|
15.9
|
|
4.3
|
%
|
|
16.4
|
|
4.1
|
%
|
|
|
Top five countries
|
$
|
238.1
|
|
73.3
|
%
|
|
$
|
276.3
|
|
74.0
|
%
|
|
$
|
304.9
|
|
75.9
|
%
|
|
|
Rest of Europe
|
25.4
|
|
7.8
|
%
|
|
37.7
|
|
10.1
|
%
|
|
32.7
|
|
8.1
|
%
|
|
|
Asia Pacific
|
45.2
|
|
13.9
|
%
|
|
42.8
|
|
11.5
|
%
|
|
48.0
|
|
11.9
|
%
|
|
|
Other (2)
|
16.1
|
|
5.0
|
%
|
|
16.6
|
|
4.4
|
%
|
|
16.3
|
|
4.1
|
%
|
|
|
|
$
|
324.8
|
|
|
|
$
|
373.4
|
|
|
|
$
|
401.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
|
In millions
|
|
2020
|
|
2019
|
|
|
United States
|
|
$
|
44.3
|
|
|
$
|
48.6
|
|
|
|
United Kingdom
|
|
36.6
|
|
|
36.7
|
|
|
|
Canada
|
|
3.7
|
|
3.6
|
|
|
Rest of Europe
|
|
1.1
|
|
|
1.0
|
|
|
|
Asia Pacific
|
|
0.3
|
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
86.0
|
|
|
$
|
90.2
|
|
|
(1) Net sales are based on the geographic destination of sale.
18. Leases
We have operating leases for buildings, vehicles and certain equipment. The majority of our leases have remaining lease terms of one to nine years, with one building having 53 years remaining.
The components of the lease expense is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year to date
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Operating lease cost
|
$
|
3.8
|
|
|
$
|
4.1
|
|
|
$
|
4.8
|
|
|
None of our leases were classified as finance leases in any of the years disclosed.
Supplemental cash flow information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year-to-date
|
|
|
In millions
|
2020
|
|
2019
|
|
2018
|
|
|
Operating cash flows from operating leases
|
$
|
3.8
|
|
|
$
|
4.1
|
|
|
$
|
4.8
|
|
|
Supplemental balance sheet information related to leases was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
In millions
|
2020
|
|
2019
|
|
|
Operating leases
|
|
|
|
|
|
Operating lease right-of-use asset
|
$
|
9.5
|
|
|
$
|
11.0
|
|
|
|
|
|
|
|
|
|
Other current liabilities
|
2.9
|
|
|
2.3
|
|
|
|
Other non-current liabilities
|
6.7
|
|
|
8.9
|
|
|
|
|
$
|
9.6
|
|
|
$
|
11.2
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term (Years)
|
21.9
|
|
17.1
|
|
|
Weighted Average Discount Rate
|
4.43
|
%
|
|
4.46
|
%
|
|
Maturities of lease liabilities were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In millions
|
|
|
2020
|
|
|
2021
|
|
|
$
|
2.4
|
|
|
|
2022
|
|
|
1.7
|
|
|
|
2023
|
|
|
1.5
|
|
|
|
2024
|
|
|
1.1
|
|
|
|
2025
|
|
|
0.7
|
|
|
|
Thereafter
|
|
|
8.5
|
|
|
|
Total lease payments
|
|
|
$
|
15.9
|
|
|
|
Less imputed interest
|
|
|
(6.3)
|
|
|
|
Total
|
|
|
$
|
9.6
|
|
|
19. Commitments and Contingencies
Capital commitments
At December 31, 2020, the Company had capital expenditure commitments of $1.1 million (2019: $1.0 million and 2018: $2.5 million) for the acquisition of new plant and equipment.
Committed banking facilities
At December 31, 2020 and 2019 the Company had committed banking facilities of $150.0 million. Of the committed facilities, $4.1 million was drawn at December 31, 2020 ( 2019: $17.5 million).
The Company had a separate (uncommitted) facility for letters of credit which at December 31, 2020 and 2019 was £1.0 million ($1.3 million). None of this were utilized at December 31, 2020 and 2019 respectively.
The Company also has two separate (uncommitted) bonding facilities for bank guarantees; one denominated in GBP sterling of £4.5 million (2020: $6.1 million, 2019: $5.9 million), and one denominated in USD of $1.5 million (2019: $0.4 million). Of that dominated in GBP, £1.0 million ($1.4 million) was utilized at December 31, 2020 (2019: £1.6 million / $2.3 million). Of that denominated in USD, $0.8 million was utilized in December 31, 2020 (2019: fully utilized).
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 injuries such as loss of hearing. There was no major damage to assets of the customer. A claim has been 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.
In November 2018, an alleged explosion occurred at a third-party waste disposal and treatment site in Boise, Idaho, reportedly causing property damage, personal injury, and one fatality. We had contracted with a service company for removal and disposal of certain waste resulting from the magnesium powder manufacturing operations at the Reade facility in Manchester, New Jersey. We believe this service company, in turn, apparently contracted with the third-party disposal company, at whose facility the explosion occurred, for treatment and disposal of the waste. In November 2020, we were named as a defendant in three lawsuits in relation to the incident – one by the third-party disposal company, one by the estate of the decedent, and one by an injured employee of the third-party disposal company. At present, we have received insufficient information on the cause of the explosion. We do not believe that we are liable for the incident, have asserted such, and, therefore, do not currently expect this matter to have a material impact on the Company’s financial position or results of operations.
20. Selected Quarterly Data (unaudited)
The following tables present 2020 and 2019 quarterly financial information for continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
In millions, except per-share data
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Full Year
|
|
|
Net sales
|
|
$
|
88.4
|
|
|
$
|
76.6
|
|
|
$
|
77.7
|
|
|
$
|
82.1
|
|
|
$
|
324.8
|
|
|
|
Gross profit
|
|
24.1
|
|
|
18.0
|
|
|
18.9
|
|
|
19.9
|
|
|
80.9
|
|
|
|
Operating income
|
|
9.0
|
|
|
5.8
|
|
|
5.3
|
|
|
8.4
|
|
|
28.5
|
|
|
|
Net income
|
|
7.2
|
|
|
4.6
|
|
|
2.4
|
|
|
6.6
|
|
|
20.8
|
|
|
|
Earnings per ordinary share(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per ordinary share
|
|
$
|
0.26
|
|
|
$
|
0.17
|
|
|
$
|
0.09
|
|
|
$
|
0.24
|
|
|
$
|
0.75
|
|
|
|
Diluted earnings per ordinary share
|
|
0.26
|
|
|
0.16
|
|
|
0.09
|
|
|
0.24
|
|
|
0.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
In millions, except per-share data
|
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
|
Full Year
|
|
|
Net sales
|
|
$
|
102.3
|
|
|
$
|
98.0
|
|
|
$
|
90.8
|
|
|
$
|
82.3
|
|
|
$
|
373.4
|
|
|
|
Gross profit
|
|
29.2
|
|
|
30.4
|
|
|
24.4
|
|
|
19.7
|
|
|
$
|
103.7
|
|
|
|
Operating (loss) / income
|
|
(0.5)
|
|
|
5.9
|
|
|
7.1
|
|
|
6.2
|
|
|
$
|
18.7
|
|
|
|
Net (loss) / income
|
|
(3.3)
|
|
|
4.1
|
|
|
6.3
|
|
|
1.6
|
|
|
$
|
8.7
|
|
|
|
(Loss) / earnings per ordinary share(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) / earnings per ordinary share
|
|
$
|
(0.12)
|
|
|
$
|
0.15
|
|
|
$
|
0.23
|
|
|
$
|
0.06
|
|
|
$
|
0.32
|
|
|
|
Diluted (loss) / earnings per ordinary share
|
|
(0.12)
|
|
|
0.15
|
|
|
0.23
|
|
|
0.06
|
|
|
0.31
|
|
|
(1) Amounts may not total to annual earnings because each quarter and year are calculated separately based on basic and diluted weighted-average ordinary shares outstanding during the period.
21. Related-Party Transactions
Joint venture in which the Company is a venturer
In July 2020, the Company sold its 51% investment in the equity of its previous joint venture (see note 3 Acquisitions and Disposals), Luxfer Uttam India Private Limited. During 2020, prior to the sale, the Gas Cylinders segment made $1.5 million (2019: $6.4 million) of sales to the joint venture. At December 31, 2020, the entity was no longer a related-party. At December 31, 2019 the gross amounts receivable from the joint venture amounted to $2.9 million and the net amounts receivable amounted to $2.7 million.
In addition, in 2018 we transferred goods to Luxfer Uttam on extended credit terms with a sales value of $1.6 million, where we did not deem it to be probable that we would collect substantially all of the consideration. In accordance with ASC 606, Revenue from Contracts with Customers, we did not recognize any revenue in relation to this transaction in 2018, however, this revenue was recognized, in full, during 2019.
During 2020, the Company also maintained its 50% investment in the equity of the joint venture, Nikkei-MEL Company Limited. During 2020, the Elektron segment made $0.6 million of sales to the joint venture (2019: $0.7 million). At December 31, 2020, the gross and net amounts receivable from the joint venture amounted to $0.2 million (2019: $0.1 million).
Associates in which the Company holds an interest
During 2020, Sub161 Pty Limited, in which the Company held 26.4% equity, was liquidated as it no longer traded. During 2020, the Company made $nil sales (2019: $nil) to the associate. At December 31, 2020, the amounts receivable from the associate denominated in Australian dollars was $nil (2019: $nil).
Transactions with other related parties
At December 31, 2020, the directors and key management comprising the members of the Executive Leadership Team, owned 425,413 £0.50 ordinary shares (2019: 377,424 £0.50 ordinary shares) and held awards over a further 248,522 £0.50 ordinary shares (2019: 302,752 £0.50 ordinary shares).
During the years ended December 31, 2020 and December 31, 2019, share options held by members of the Executive Leadership Team were exercised.
Cherokee Properties Inc. represented a related party in 2019 due to its association with Chris Barnes, who was until July 2019 the president of one of our operating segments and is the president of Cherokee Properties Inc. During 2019, we engaged with Cherokee Properties Inc. for rental and associated costs regarding our manufacturing site in Madison, IL, for the value of $1.1 million. We continue to engage with Cherokee Properties Inc. although not as a related-party.
Other than the transactions with the joint ventures, associates and key management personnel disclosed above, no other related-party transactions have been identified.
22. Subsequent Events
No material subsequent events.