NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Business description
Luxfer Holdings PLC is a global industrial company innovating niche applications in materials engineering. Luxfer focuses on value creation by using its broad array of technical know-how and proprietary technologies to help create a safe, clean and energy-efficient world. Luxfer's high-performance materials, components and high-pressure gas containment devices are used in defense, first response and healthcare, transportation and general industrial applications. 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, is USD (2020: pounds sterling ("GBP")) and that of its U.K. subsidiaries is GBP, being the most appropriate currency for those particular operations.
Discontinued operations
Certain amounts relating to our discontinued businesses are recorded within assets or liabilities held-for-sale on the consolidated balance sheets and within net loss from discontinued operations on the consolidated statements of income.
Fiscal year
Our fiscal year ends on December 31.
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 in the reported amounts of revenues and expenses during the reporting period. Significant estimates include our assessment of goodwill for impairment, 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, income taxes and pension benefits. Actual results could differ from our estimates.
1. Summary of Significant Accounting Policies (continued)
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, 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. 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 only perform a quantitative impairment test. At the end of the third quarter of 2022, management carried out its qualitative review, which showed no indicators of impairment, as a result, the Company concluded its review at this point and was not required to perform a quantitative review.
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.
| | | | | | | | | | | |
| Customer relationships | 15 - 25 years | |
| Technology and trading related | 5 - 25 years | |
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.
Investments in affiliates
The company owns interest in the following affiliate:
| | | | | | | | | | | | | | | | | | | | | | | |
| Name of company | Country of
incorporation | Holding | Proportion of voting rights and shares held | Classification | Consolidation method | |
| Nikkei-MEL Co. Limited | Japan | Ordinary shares | 50% | Joint venture | Equity method | |
Property, plant and equipment, net
Property, plant and equipment are 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 2022, 2021 and 2020 was $12.9 million, $14.7 million and $12.6 million, respectively. The estimated useful lives are summarized as follows:
| | | | | | | | | | | |
| Freehold buildings | 10 - 33 years | |
| Leasehold land and buildings | The lesser of life of lease or freehold rate | |
| Machinery and equipment | 3 - 25 years | |
| Including: | | |
| Heavy production equipment (including casting, rolling, extrusion and press equipment) | 20 - 25 years | |
| Chemical production plant and robotics | 7 - 10 years | |
| Other production machinery | 5 - 10 years | |
| Furniture, fittings, storage and equipment | 3 - 10 years | |
| Computer equipment | 5 years | |
Freehold land is not depreciated.
1. Summary of Significant Accounting Policies (continued)
Property, plant and equipment, net (continued)
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 or asset group 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 2021, we recorded an impairment charge of $1.5 million within discontinued operations. There were no impairment charges recognized in 2022 and 2020.
Impairments
The Company will recognize impairments in relation to property, plant and equipment, investments, 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 Statements of Income. Other impairments will be recorded within the impairment charges line on the Statements of Income. Impairments related to discontinued operations will be recorded within the net loss from discontinued operations line on the Statements of Income.
Within discontinued operations in 2022, there was a $2.6 million impairment charge relating to the right of use asset previously held as a sublet to Neos International Limited, the right of use asset were building leases retained on sale of Superform U.K.
Also within discontinued operations in 2021, there was a $1.5 million impairment charge relating to plant and equipment held in our Superform U.S. business, reflecting updated expectations of fair market value.
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, or 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 general, our payment terms are 30 to 60 days. 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 the following are met: (i) persuasive evidence of an arrangement exists; (ii) shipment or delivery has occurred (depending on the terms of the sale), which is when the transfer of product or control occurs; (iii) our price to the buyer is fixed or determinable; and (iv) 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.
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 $0.3 million at December 31, 2022, and $0.2 million at December 31, 2021. The amounts held in escrow were held in relation to a payment received for an historic doubtful debt in our Elektron division and workers' compensation insurance.
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 including, 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 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, 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. 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 (“AOCI”), a separate component of equity. Such translation differences are recognized in the consolidated statements of income in the period in which the Company either loses control of the operation or liquidation occurs.
During 2022, the average USD/GBP sterling exchange rate was £0.8108 compared to the 2021 average of £0.7264. This change resulted in a negative impact of $15.6 million on revenue and $2.3 million on operating income. Based on the 2022 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 $8.7 million in revenue and a decrease of $1.0 million in operating net income.
On January 1, 2021 the functional currency of Luxfer Holdings PLC was changed from the local currency, GBP to the reporting currency, USD reflecting that the majority of the parent company's cash flows are now denominated in USD, including intercompany loans and interest payments as well as dividends paid to its shareholders. The change was triggered by a revision to our intercompany financing model which now aims to manage foreign exchange risk through Luxfer Group Limited, whose functional currency remains GBP (the same as its local currency).
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 at the grant date. 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 a Monte-Carlo simulation, both of which are subjective and involve 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 PSUs 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.
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 other current liabilities) at fair value in our Consolidated Balance Sheets. Any changes in fair value are reported in the income statement immediately in cost of sales. 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
There were no new accounting standards issued which required adoption in the fiscal year ended December 31, 2022.
Accounting standards which have been early adopted
None
Accounting standards issued but not yet effective
There are no accounting standards that have been issued, but are not yet effective, that are expected to have a material impact on our results of operations or balance sheet presentation.
2. Revenue
Disaggregated revenue from continuing operations for the fiscal years ended December 31, 2022, 2021, and 2020, are included below and in Note 17, Segment Information.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| | 2022 | | 2021 | | 2020 | |
| In millions | Gas Cylinders | Elektron | Total | | Gas Cylinders | Elektron | Total | | Gas Cylinders | Elektron | Total | |
| General industrial | $ | 34.0 | | $ | 121.5 | | $ | 155.5 | | | $ | 33.4 | | $ | 95.8 | | $ | 129.2 | | | $ | 24.2 | | $ | 87.7 | | $ | 111.9 | | |
| Transportation | 77.8 | | 55.1 | | 132.9 | | | 71.2 | | 45.8 | | 117.0 | | | 49.8 | | 42.3 | | 92.1 | | |
| Defense, First Response & Healthcare | 71.9 | | 63.1 | | 135.0 | | | 73.7 | | 54.2 | | 127.9 | | | 67.9 | | 52.9 | | 120.8 | | |
| | $ | 183.7 | | $ | 239.7 | | $ | 423.4 | | | $ | 178.3 | | $ | 195.8 | | $ | 374.1 | | | $ | 141.9 | | $ | 182.9 | | $ | 324.8 | | |
The Company’s performance obligations are satisfied at a point in time. With the classification of our Superform business as discontinued operations, none of the Company's revenue is satisfied over time. As a result, the Company's contract receivables, contract assets and contract liabilities at December 31, 2022, December 31, 2021 and December 31, 2020 are included within current assets and liabilities held-for-sale.
3. Acquisitions and disposals
In March 2021, the Company completed the acquisition of the Structural Composites Industries LLC ("SCI") business of Worthington Industries, Inc., based in Pomona, California, for $19.3 million cash consideration. The fair value of assets and liabilities acquired were equal to the cash consideration paid.
Acquisition-related costs of $0.3 million and $1.5 million in 2022 and 2021 respectively, represent transitional costs and professional fees incurred in relation to the above SCI acquisition.
In 2021, the Company recognized a net gain on disposition of $6.6 million, consisting of a $7.1 million gain on our U.S. aluminum business, sold in March 2021, partially offset by a $0.5 million loss on our Superform U.K. business sold in September 2021.
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 adjustment and profit on previous written-down inventory.
4. Restructuring charges
During 2022, 2021 and 2020, we initiated and continued execution of certain business restructuring initiatives aimed at reducing our fixed cost structure and realigning our business.
In 2022, there was an additional $1.7 million of costs in relation to the closure of Luxfer Gas Cylinders' French site, which was largely legal and professional fees. In addition, $0.2 million of costs were incurred relating to one-time employee termination benefits, in the Elektron division, in relation to the consolidation of production facilities in the Magnesium Powders operations.
In 2021, there was $5.0 million of costs in relation to the closure of Luxfer Gas Cylinders' French site, which includes an additional $1.0 million charge for environmental remediation and $2.4 million employee litigation claims, with the remaining largely legal and professional fees. A further $0.3 million of miscellaneous project costs were incurred in the Gas Cylinders Segment during 2021. There was also $0.9 million of one-time employee termination costs in the Elektron division, largely in relation to the divestiture of our small Luxfer Magtech production facility in Ontario, Canada.
In 2020, there was $7.5 million of costs in relation to the closure of Luxfer Gas Cylinders' French site. 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 were incurred in the Gas Cylinders and Elektron Segments respectively, and $0.1 million which is unallocated.
4. Restructuring charges (continued)
All restructuring charges in the consolidated statement of income are in relation to severance and related costs for 2022, 2021 and 2020.
Restructuring costs by reportable segment were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years ended December 31, | |
| In millions | | 2022 | | 2021 | | 2020 | |
| Gas Cylinders Segment | | $ | (1.7) | | | $ | (5.3) | | | $ | (7.9) | | |
| Elektron Segment | | (0.2) | | | (0.9) | | | (0.9) | | |
| Other | | $ | — | | | $ | — | | | $ | (0.1) | | |
| Total restructuring charges | | $ | (1.9) | | | $ | (6.2) | | | $ | (8.9) | | |
Activity related to restructuring, recorded in other current liabilities in the consolidated balance sheets is summarized as follows:
| | | | | | | | | | | | | | | | | |
| In millions | 2022 | | 2021 | |
| Balance at January 1, | $ | 11.7 | | | $ | 9.0 | | |
| Costs incurred | 1.9 | | | 6.2 | | |
| Cash payments and other | (9.9) | | | (3.5) | | |
| Balance at December 31, | $ | 3.7 | | | $ | 11.7 | | |
5. Other charges
Other charges of $1.1 million in 2021 relates to the settlement of a class action lawsuit in the Gas Cylinders segment in relation to an alleged historic violation of the California Labor Code, concerning a Human Resources administration matter. The Company paid the settlement during the year, with no additional charge to the income statement expected.
In 2020 the Company recognized $0.4 million in other charges relating to the remediation of a legacy environmental issue which commenced in 2019. This was completed in 2021 and all liabilities settled.
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 share equivalents.
Basic and diluted earnings per share were calculated as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions except share and per-share data | 2022 | | 2021 | | 2020 | |
| Basic earnings: | | | | | | |
| Net income from continuing operations | $ | 32.0 | | | $ | 30.0 | | | $ | 20.8 | | |
| Net gain / (loss) from discontinued operations | (5.1) | | | (0.1) | | | (0.8) | | |
| Net income | $ | 26.9 | | | $ | 29.9 | | | $ | 20.0 | | |
| | | | | | | |
| Weighted average number of £0.50 ordinary shares: | | | | | | |
| For basic earnings per share | 27,304,847 | | | 27,698,691 | | | 27,557,219 | | |
| Dilutive effect of potential common stock | 236,355 | | | 333,815 | | | 414,163 | | |
| For diluted earnings per share | 27,541,202 | | | 28,032,506 | | | 27,971,382 | | |
| | | | | | | |
| Earnings / (loss) per share using weighted average number of ordinary shares outstanding:(1) | | | | | | |
| Basic from continuing operations | $ | 1.17 | | | $ | 1.08 | | | $ | 0.75 | | |
| Basic from discontinued operations | $ | (0.19) | | | $ | — | | | $ | (0.03) | | |
| Basic earnings per ordinary share | $ | 0.99 | | | $ | 1.08 | | | $ | 0.73 | | |
| | | | | | | |
| Diluted from continuing operations | $ | 1.16 | | | $ | 1.07 | | | $ | 0.74 | | |
| Diluted from discontinued operations | $ | (0.19) | | | $ | — | | | $ | (0.03) | | |
| Diluted earnings per ordinary share | $ | 0.98 | | | $ | 1.07 | | | $ | 0.72 | | |
(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, which operated 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 in 2020, 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 our Superform U.S. business to be sold within the next twelve months.
Our U.S. aluminum gas cylinder business was sold in March 2021 for $20.2 million, net of working capital adjustments. The Company recognized a gain on disposition, net of tax, of $7.1 million.
In September 2021, our Superform U.K. business was sold for $4.0 million, net of working capital adjustments. The Company recognized a loss on disposition, net of tax, of $0.5 million.
In 2022, the Company recognized impairment and disposal-related costs of $2.6 million and $2.0 million respectively, in relation to the previous dispositions which occurred 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 at December 31, 2022, and December 31, 2021. In 2021, Company recognized a $1.5 million impairment charge relating to plant and equipment held in our Superform U.S. business reflecting updated expectations of fair market value.
7. Discontinued operations (continued)
Results of discontinued operations were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | | 2022 | | 2021 | | 2020 | |
| Net sales | | $ | 7.7 | | | $ | 20.9 | | | $ | 53.2 | | |
| Cost of goods sold | | (6.9) | | | (21.8) | | | (51.5) | | |
| Gross (loss) / profit | | 0.8 | | | (0.9) | | | 1.7 | | |
| Selling, general and administrative expenses | | (0.9) | | | (2.9) | | | (5.8) | | |
| Restructuring charges | | (0.3) | | | (1.0) | | | (0.1) | | |
| Acquisition and disposal costs | | (2.0) | | | — | | | — | | |
| Impairment charges | | (2.6) | | | (1.5) | | | — | | |
| Other income | | — | | | — | | | 3.4 | | |
| | | | | | | | |
| | | | | | | | |
| Net loss before income taxes | | (5.0) | | | (6.3) | | | (0.8) | | |
| Provision for income taxes | | (0.1) | | | (0.4) | | | — | | |
| Net loss | | $ | (5.1) | | | $ | (6.7) | | | $ | (0.8) | | |
The assets and liabilities classified as held-for-sale were as follows:
| | | | | | | | | | | | | | | | | |
| In millions | December 31, 2022 | | December 31, 2021 | |
| Accounts and other receivables | $ | 2.7 | | | $ | 2.1 | | |
| Inventories | 2.7 | | | 2.7 | | |
| | | | | |
| Current assets | 5.4 | | | 4.8 | | |
| | | | | |
| | | | | |
| Right-of-use assets | 2.7 | | | — | | |
| | | | | |
| Total assets | $ | 8.1 | | | $ | 4.8 | | |
| | | | | |
| Accounts payable | 0.8 | | | 0.5 | | |
| Accrued liabilities | 0.2 | | | 0.1 | | |
| Other current liabilities | 4.0 | | | 0.8 | | |
| Current liabilities | 5.0 | | | 1.4 | | |
| | | | | |
| | | | | |
| Total liabilities | $ | 5.0 | | | $ | 1.4 | | |
Also included within assets held-for-sale in 2022 are land and buildings valued at $1.2 million, and an additional $3.7 million in 2021, within our Elektron Segment.
The depreciation and amortization, capital expenditures and significant operating non-cash items were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | | 2022 | | 2021 | | 2020 | |
| Non-cash add-backs to cash flows from discontinued operating activities: | | | | | | | |
| Depreciation | | $ | 0.1 | | | $ | 0.5 | | | $ | 1.1 | | |
| Impairment charges | | — | | | 1.5 | | | — | | |
| Settlements from sale of businesses | | 1.0 | | | — | | | — | | |
| | | | | | | | |
| Cash flows from discontinued investing activities: | | | | | | | |
| Capital expenditures | | $ | 0.1 | | | $ | 0.1 | | | $ | 0.3 | | |
Cash balances are swept into the treasury entities at the end of each day, and 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, 2022 and 2021 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | Gas Cylinders | | Elektron | | Total | |
| At January 1, 2021 | $ | 27.9 | | | $ | 42.3 | | | $ | 70.2 | | |
| | | | | | | |
| Exchange difference | (0.3) | | | (0.2) | | | (0.5) | | |
| At December 31, 2021 | 27.6 | | | 42.1 | | | 69.7 | | |
| | | | | | | |
| Exchange difference | (2.6) | | | (1.5) | | | (4.1) | | |
| Net balance at December 31, 2022 | $ | 25.0 | | | $ | 40.6 | | | $ | 65.6 | | |
Accumulated goodwill impairment losses in relation to continuing operations were $8.0 million as of December 31, 2022 and 2021.
Changes in the gross value of identifiable intangible assets during the year ended December 31, 2022, were as follows:
| | | | | | | | | | | | | | | | | |
| In millions | Customer relationships | Technology and trading related | Total | |
| At January 1, 2021 | $ | 13.4 | | $ | 8.3 | | $ | 21.7 | | |
| Additions | 1.8 | | — | | 1.8 | | |
| Exchange movements | — | | (0.1) | | (0.1) | | |
| At December 31, 2021 | $ | 15.2 | | $ | 8.2 | | $ | 23.4 | | |
| | | | | |
| Exchange movements | — | | (0.8) | | (0.8) | | |
| At December 31, 2022 | $ | 15.2 | | $ | 7.4 | | $ | 22.6 | | |
| | | | | |
| | | | | |
Identifiable intangible assets consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 | |
| In millions | Gross | | Accumulated amortization | | Net | | Gross | | Accumulated amortization | | Net | |
| Customer relationships | $ | 15.2 | | | $ | (6.1) | | | $ | 9.1 | | | $ | 15.2 | | | $ | (5.7) | | | $ | 9.5 | | |
| Technology and trading related | 7.4 | | | (4.0) | | | 3.4 | | | 8.2 | | | (4.0) | | | 4.2 | | |
| Total identifiable intangibles | $ | 22.6 | | | $ | (10.1) | | | $ | 12.5 | | | $ | 23.4 | | | $ | (9.7) | | | $ | 13.7 | | |
Identifiable intangible asset amortization expense in 2022, 2021 and 2020 was $0.7 million, $0.9 million and $0.7 million, respectively.
Intangible asset amortization expense over the next five years is expected to be approximately $0.7 million per year.
The weighted-average amortization period for the customer relationships is 16 years and for the technology and trading related assets is 14 years.
9. Supplementary balance sheet information
| | | | | | | | | | | | | | | | | | | | |
| In millions | | 2022 | | 2021 | |
| Accounts and other receivables | | | | | |
| Trade receivables, net | | $ | 56.4 | | | $ | 45.8 | | |
| Related parties | | 0.1 | | | 0.1 | |
| Prepayments and accrued income | | 6.6 | | 8.5 | |
| Derivative financial instruments | | 0.7 | | 0.1 | |
| Deferred consideration | | — | | 1.0 | |
| Other receivables | | 4.0 | | 2.3 | |
| Total accounts and other receivables | | $ | 67.8 | | | $ | 57.8 | | |
| | | | | | |
| Inventories | | | | | |
| Raw materials and supplies | | $ | 42.7 | | | $ | 39.3 | | |
| Work-in-process | | 44.0 | | | 26.7 | | |
| Finished goods | | 24.4 | | | 24.5 | | |
| Total inventories | | $ | 111.1 | | | $ | 90.5 | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Property, plant and equipment, net | | | | | |
| Land, buildings and leasehold improvements | | $ | 58.9 | | | $ | 64.6 | | |
| Machinery and equipment | | 254.9 | | | 266.3 | | |
| Construction in progress | | 9.8 | | | 8.4 | | |
| Total property plant and equipment | | 323.6 | | | 339.3 | | |
| Accumulated depreciation and impairment | | (245.9) | | | (251.8) | | |
| Total property, plant and equipment, net | | $ | 77.7 | | | $ | 87.5 | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| | | | | | |
| Other current liabilities | | | | | |
| Short term provision | | $ | 0.1 | | | $ | 0.2 | | |
| Restructuring provision | | 3.7 | | | 11.7 | | |
| Derivative financial instruments | | 0.4 | | | 0.1 | | |
| Operating lease liability | | 4.7 | | | 3.0 | | |
| Advance payments | | 2.3 | | | 4.6 | | |
| Total other current liabilities | | $ | 11.2 | | | $ | 19.6 | | |
| | | | | | |
| Other non-current liabilities | | | | | |
| Contingent liabilities | | $ | 0.7 | | | $ | 1.8 | | |
| | | | | | |
| Operating lease liability | | 18.2 | | | 9.8 | | |
| Other non-current liabilities | | 0.1 | | | — | | |
| Total other non-current liabilities | | $ | 19.0 | | | $ | 11.6 | | |
Impairment of property, plant and equipment
There were no impairments of property, plant and equipment recognized in 2022, 2021 or 2020 in continuing operations.
10. Accumulated Other Comprehensive Loss
Components of Accumulated Other Comprehensive Loss consist of the following:
| | | | | | | | | | | | | | | | | |
| In millions | December 31, 2022 | | December 31, 2021 | |
| Cumulative translation adjustments | $ | (65.7) | | | $ | (52.5) | | |
| Pension plans actuarial loss, net of tax | (73.7) | | | (82.5) | | |
| | | | | |
| Accumulated other comprehensive loss | $ | (139.4) | | | $ | (135.0) | | |
11. Debt
Debt outstanding was as follows:
| | | | | | | | | | | | | | | | | |
| In millions | December 31, 2022 | | December 31, 2021 | |
| | | | | |
| | | | | |
| 4.88% Loan Notes due June 2023 | 25.0 | | | 25.0 | | |
| 4.94% Loan Notes due June 2026 | 25.0 | | | 25.0 | | |
| Revolving credit facility | 31.9 | | | 10.8 | | |
| | | | | |
| Unamortized debt issuance costs | (0.7) | | | (1.2) | | |
| Total debt | $ | 81.2 | | | $ | 59.6 | | |
| Less current portion | (25.0) | | | — | | |
| Non-current debt | $ | 56.2 | | | $ | 59.6 | | |
In October 2021, the Company completed a refinancing of its existing Revolving Credit Facility, ("RCF"), extending its tenure to October 2026, while providing increased flexibility to incur additional indebtedness outside of this agreement if required and reducing the covenant burden.
At December 31, 2022 $100 million of committed debt facilities in the form of a multi-currency (GBP sterling, U.S. dollars or euros) RCF was available to the Company. In addition, $50 million of uncommitted facility capacity was available through an accordion increase clause. On January 3, 2023, the accordion increase clause was partial triggered increasing the RCF to $125 million with a corresponding reduction in the uncommitted accordion capacity to $25 million.
The RCF bears interest equal to an applicable margin, based upon the Company's leverage, plus either EURIBOR, in the case of amounts drawn in euros, or SONIA (Sterling Overnight Index Average), in the case of amounts drawn in GBP sterling, or SOFR (Secured Overnight Financing Rate) in the case of amounts drawn in U.S. dollars. The weighted-average interest rate on the RCF was 3.80% and 1.70% in 2022 and 2021, respectively.
The maturity profile of the Company's debt, excluding unamortized issuance costs and discounts is, as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| In millions | 2023 | | 2024 | | 2025 | | 2026 | | | | Total | |
| | | | | | | | | | | | | |
| Loan Notes due June 2023 | $ | 25.0 | | | $ | — | | | $ | — | | | $ | — | | | | | $ | 25.0 | | |
| Loan Notes due June 2026 | — | | | — | | | — | | | 25.0 | | | | | 25.0 | | |
| Revolving credit facility due October 2026 | — | | | — | | | — | | | 31.9 | | | | | 31.9 | | |
| | | | | | | | | | | | | |
| Total debt | $ | 25.0 | | | $ | — | | | $ | — | | | $ | 56.9 | | | | | $ | 81.9 | | |
11. Debt (continued)
Loan notes due and shelf facility
We have been in compliance with the covenants under the Note Purchase and Private Shelf Agreement throughout all of the quarterly measurement dates in 2022.
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; and
•issue shares or other securities;
The RCF 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 RCF) to Net Finance Charges (as defined in the RCF). 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 RCF) to the Relevant Period Adjusted Acquisition EBITDA (as defined in the RCF). We are required to maintain a leverage ratio of no more than 3.0:1.
Any breach of a covenant in the RCF could result in a default under the RCF, 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 subsidiaries' ability to make investments, incur liens and make certain restricted payments is also controlled by limits within the RCF.
We have been in compliance with the covenants under the SFA throughout all of the quarterly measurement dates in 2022, with an expectation of compliance in 2023.
12. Derivatives and Financial Instruments
The Company's financial instruments comprise bank and other loans, senior loan notes, derivatives and trade payables. 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 magnesium and 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. We do not use market risk-sensitive instruments for trading or speculative purposes. In 2022, the Company had $0.7 million (2021: $0.1 million) derivative financial instruments recorded within accounts and other receivables. The value of derivative financial instruments recorded in other current liabilities in 2022 was $0.4 million (2021: $0.1 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 its joint venture partners.
At December 31, 2022 and 2021, 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 overleaf, with the value denominated in GBP sterling, given that it is the currency the majority of the contracts are held in.
12. Derivatives and Financial Instruments (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | | |
| Sales hedges | U.S. dollars | | Euros | | Canadian Dollars | | | |
| Contract totals/£m | 13.4 | | 12.8 | | 0.1 | | | |
| Maturity dates | 01/23 to 03/23 | | 01/23 to 03/23 | | 01/23 | | | |
| Exchange rates | $1.1207 to $1.2083 | | €1.1234 to €1.1468 | | $1.6320 | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase hedges | U.S. dollars | | Euros | | Canadian dollars | | Australian dollars | | Chinese yuan | |
| Contract totals/£m | 9.2 | | | 2.6 | | | 9.5 | | | 1.0 | | 1.6 | |
| Maturity dates | 01/23 to 04/23 | | 01/23 to 04/23 | | 01/23 | | 01/23 | | 01/23 to 03/23 | |
| Exchange rates | $1.1040 to $1.2084 | | €1.1437 to €1.2240 | | $1.6796 to $1.6239 | | $1.7787 | | ¥8.3906 to ¥8.4126 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | |
| Sales hedges | U.S. dollars | | Euros | | Japanese Yen | |
| Contract totals/£m | 5.0 | | 9.8 | | 0.1 | |
| Maturity dates | 01/22 to 03/22 | | 01/22 to 03/22 | | 01/22 to 03/22 | |
| Exchange rates | $1.3455 to $1.3788 | | €1.1697 to €1.1906 | | ¥155.2443 to ¥156.6793 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Purchase hedges | U.S. dollars | | Euros | | Canadian dollars | | Australian dollars | | Chinese yuan | |
| Contract totals/£m | 4.5 | | | 3.5 | | | 7.5 | | | 0.9 | | | 1.5 | | |
| Maturity dates | 01/22 to 04/22 | | 01/22 to 02/22 | | 01/22 | | 01/22 | | 03/22 | |
| Exchange rates | $1.3451 to $1.3781 | | €1.1812 to €1.1662 | | $1.7172 to $1.6762 | | $1.8598 | | ¥8.6126 | |
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. and U.K.
Bank loans
At December 31, 2022, bank and other loans of $81.9 million (2021: $60.8 million) were outstanding. At December 31, 2022, bank and other loans are shown net of issue costs of $0.7 million (2021: $1.2 million), and these issue costs are to be amortized to the expected maturity of the facilities. This carrying value approximates to its fair value at December 31, 2022 and 2021 respectively. At December 31, 2022, $31.9 million (2021: $10.8 million) of the total $81.9 million (2021: $60.8 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.
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 that 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, 2022 and 2021, were analyzed using the hierarchy as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | |
| In millions | Total | | Level 1 | | Level 2 | | Level 3 | |
| Derivative financial assets: | | | | | | | | |
| Foreign currency contract assets | $ | 0.7 | | | $ | — | | | $ | 0.7 | | | $ | — | | |
| 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 | 31.9 | | | — | | | 31.9 | | | — | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2021 | |
| In millions | Total | | Level 1 | | Level 2 | | Level 3 | |
| Derivative financial assets: | | | | | | | | |
| Foreign currency contract assets | $ | 0.1 | | | $ | — | | | $ | 0.1 | | | $ | — | | |
| Derivative financial liabilities: | | | | | | | | |
| Foreign currency contract liabilities | 0.1 | | | — | | | 0.1 | | | — | | |
| Interest bearing loans and borrowings: | | | | | | | | |
| | | | | | | | | |
| Loan Notes due 2023 | 25.0 | | | — | | | 25.0 | | | — | | |
| Loan Notes due 2026 | 25.0 | | | — | | | 25.0 | | | — | | |
| Revolving credit facility | 10.8 | | | — | | | 10.8 | | | — | | |
| | | | | | | | | |
| | | | | | | | | |
13. Income Taxes
Income before income taxes consisted of the following:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Years ended December 31, | |
| In millions | | 2022 | | 2021 | | 2020 | |
| U.K. | | $ | 10.9 | | | $ | 21.8 | | | $ | 21.0 | | |
| International(1) | | 30.1 | | | 13.6 | | | 6.7 | | |
| Income before income taxes | | $ | 41.0 | | | $ | 35.4 | | | $ | 27.7 | | |
(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 | | 2022 | | 2021 | | 2020 | |
| Currently payable | | | | | | | |
| U.K. | | $ | (3.5) | | | $ | 2.0 | | | $ | (0.2) | | |
| International(1) | | 2.7 | | | 5.4 | | | 2.3 | | |
| Total current taxes | | $ | (0.8) | | | $ | 7.4 | | | $ | 2.1 | | |
| Deferred | | | | | | | |
| U.K. | | $ | 7.1 | | | $ | (1.1) | | | $ | 2.1 | | |
| International(1) | | 2.7 | | | (0.9) | | | 2.7 | | |
| Total deferred taxes | | $ | 9.8 | | | $ | (2.0) | | | $ | 4.8 | | |
| Total provision for income taxes | | $ | 9.0 | | | $ | 5.4 | | | $ | 6.9 | | |
(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 2022, 2021 and 2020, were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions | 2022 | | 2021 | | 2020 | |
| Income before income taxes | $ | 41.0 | | | $ | 35.4 | | | $ | 27.7 | | |
| Provision for income taxes at the U.K. statutory tax rate (2022: 19%, 2021:19%, 2020: 19%) | 7.8 | | | 6.7 | | | 5.3 | | |
| Effect of: | | | | | | |
| Non-deductible expenses | 0.7 | | | 1.9 | | | 1.7 | | |
| Movement in valuation allowances | 0.6 | | | (0.6) | | | 0.8 | | |
| Differences in income tax rates in countries where the Company operates(1) | 1.5 | | | 0.5 | | | (0.1) | | |
| | | | | | | |
| Effect of changes in tax rates (2) | (0.1) | | | (2.0) | | | 0.1 | | |
| Movement in uncertain tax positions | — | | | — | | | (0.4) | | |
| Other | (1.5) | | | (1.1) | | | (0.5) | | |
| Total provision for income taxes | $ | 9.0 | | | $ | 5.4 | | | $ | 6.9 | | |
(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) An increase in the U.K. corporation tax rate from 19% to 25%, effective from April 1, 2023, was announced in March 2021. Rate changes also occur in each period as a result of changes in the average state tax rate in the U.S.
13. Income Taxes (continued)
Reconciliations of the beginning and ending gross unrecognized tax benefits were as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions | 2022 | | 2021 | | 2020 | |
| Beginning balance | $ | 1.8 | | | $ | 2.4 | | | $ | 3.2 | | |
| Gross increases based on tax positions related to the current year | — | | | 0.1 | | | 0.6 | | |
| Reductions due to expiry of statute of limitations | (0.7) | | | (0.7) | | | (1.4) | | |
| Ending balance | $ | 1.1 | | | $ | 1.8 | | | $ | 2.4 | | |
| | | | | | | |
| Non-current | $ | 1.1 | | | $ | 1.8 | | | $ | 2.4 | | |
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.
At December 31, 2022, 2021 and 2020, there were $0.3 million, $0.4 million, and $0.5 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, 2022, 2021 and 2020, the Company recognized approximately $nil, $nil and $0.1 million, respectively, in interest and penalties.
The following is a summary of the tax years open by major tax jurisdiction:
| | | | | | | | | | | | | | |
| Jurisdiction | | Years open | |
| U.K. | | 2020 - 2022 | |
| U.S. Federal | | 2019 - 2022 | |
| U.S. State and local | | 2019 - 2022 | |
| France | | 2019 - 2022 | |
| Germany | | 2018 - 2022 | |
| China | | 2019 - 2022 | |
| Canada | | 2018 - 2022 | |
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, 2022 was approximately $83.1 million (at December 31, 2021: $70.3 million, at December 31, 2020: $56.4 million). If these earnings were remitted, it is estimated that the additional income tax arising would be approximately $1.2 million (at December 31, 2021: $1.0 million, at December 31, 2020: $0.8 million).
Deferred taxes were recorded in the Consolidated Balance Sheets as follows:
| | | | | | | | | | | | | | | | | |
| | December 31, | |
| In millions | 2022 | | 2021 | |
| Deferred tax assets | $ | 3.0 | | | $ | 8.0 | | |
| Deferred tax liabilities | (9.9) | | | (2.7) | | |
| Net deferred tax (liabilities) / assets | $ | (6.9) | | | $ | 5.3 | | |
The tax effects of the major items recorded in deferred tax assets and liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| | December 31, | |
| In millions | 2022 | | 2021 | |
| Deferred tax assets | | | | |
| Pension benefits | $ | — | | | $ | 0.5 | | |
| Accrued liabilities | 0.8 | | | 1.5 | | |
| Tax loss and credit carry forwards | 18.9 | | | 28.3 | | |
| Employee compensation benefits | 1.3 | | | 2.9 | | |
| Operating leases | 4.0 | | | 1.1 | | |
| Other | 0.4 | | | 1.0 | | |
| Total deferred tax assets | 25.4 | | | 35.3 | | |
| Valuation allowances | (16.5) | | | (18.0) | | |
| Deferred tax assets, net of valuation allowances | $ | 8.9 | | | $ | 17.3 | | |
| Deferred tax liabilities | | | | |
| Property, plant and equipment | $ | 4.3 | | | $ | 4.5 | | |
| Pension benefits | 3.7 | | | 3.5 | | |
| Goodwill and other intangibles | 3.9 | | | 2.4 | | |
| Operating leases | 3.9 | | | 0.3 | | |
| Other | — | | | 1.3 | | |
| Total deferred tax liabilities | $ | 15.8 | | | $ | 12.0 | | |
| Net deferred tax assets | $ | (6.9) | | | $ | 5.3 | | |
QDeferred 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.
In March 2021 an increase in the U.K. corporation tax rate from 19% to 25% was announced, effective from April 1, 2023. Deferred tax liabilities and assets which are expected to unwind after April 1, 2023 have been valued at 25%.
13. Income Taxes (continued)
At December 31, 2022, the Company had carried forward tax losses and tax credits of $74.8 million (U.K.: $15.6 million, non-U.K.: $59.2 million). Carried forward tax losses and tax credits for 2021 were $106.3 million (U.K.: $43.0 million, non-U.K.: $63.3 million) and for 2020 were $104.2 million (U.K.: $30.0 million, non-U.K.: $74.2 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 $16.5 million (2021: $18.0 million, 2020: $19.3 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.: $3.5 million, non-U.K.: $13.0 million (2021: U.K.: $4.1 million, non-U.K.: $13.9 million; 2020: U.K.: $3.2 million, non-U.K.: $16.1 million). The non-U.K. valuation allowances relates to tax losses in France and Germany.
Of the carried forward tax losses and tax credits as at December 31, 2022, $11.9 million expire between 2023 and 2033, and $62.6 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 plan in the Company is the U.K. Luxfer Group Pension Plan ("the Plan"), which closed to new members in 1998, with 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 pension benefit obligations, fair value of plan assets and the funded status of pension plans as of and for the years ended December 31, 2022 and 2021:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2022 | | 2022 | | 2021 | | 2021 | | 2021 | |
| In millions | U.K. | | U.S. / other | | Total | | U.K. | | U.S. / other | | Total | |
| Change in benefit obligations | | | | | | | | | | | | |
| Benefit obligation at January 1 | $ | 362.9 | | | $ | 48.7 | | | $ | 411.6 | | | $ | 404.0 | | | $ | 50.7 | | | $ | 454.7 | | |
| | | | | | | | | | | | | |
| Interest cost | 6.2 | | | 1.3 | | | 7.5 | | | 5.6 | | | 1.1 | | | 6.7 | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Settlement gain | — | | | (5.9) | | | (5.9) | | | — | | | — | | | — | | |
| Actuarial gains | (93.7) | | | (9.0) | | | (102.7) | | | (29.6) | | | (0.8) | | | (30.4) | | |
| Exchange difference | (37.0) | | | — | | | (37.0) | | | (4.0) | | | — | | | (4.0) | | |
| Benefits paid | (12.8) | | | (2.5) | | | (15.3) | | | (13.1) | | | (2.3) | | | (15.4) | | |
| | | | | | | | | | | | | |
| Benefit obligation at December 31 | $ | 225.6 | | | $ | 32.6 | | | $ | 258.2 | | | $ | 362.9 | | | $ | 48.7 | | | $ | 411.6 | | |
| Change in plan assets | | | | | | | | | | | | |
| Fair value of plan assets at January 1 | $ | 376.6 | | | $ | 46.8 | | | $ | 423.4 | | | $ | 358.9 | | | $ | 45.0 | | | $ | 403.9 | | |
| Actual return on assets | (71.2) | | | (10.4) | | | (81.6) | | | 16.3 | | | 4.1 | | | 20.4 | | |
| Exchange difference | (40.4) | | | — | | | (40.4) | | | (3.7) | | | — | | | (3.7) | | |
| Contributions from employer | 0.4 | | | — | | | 0.4 | | | 18.2 | | | — | | | 18.2 | | |
| | | | | | | | | | | | | |
| Benefits paid | (12.8) | | | (2.4) | | | (15.2) | | | (13.1) | | | (2.3) | | | (15.4) | | |
| Settlement loss | — | | | (5.9) | | | (5.9) | | | — | | | — | | | — | | |
| Fair value of plan assets at December 31 | $ | 252.6 | | | $ | 28.1 | | | $ | 280.7 | | | $ | 376.6 | | | $ | 46.8 | | | $ | 423.4 | | |
| Funded status | | | | | | | | | | | | |
| Net benefit surplus / (obligation) | $ | 27.0 | | | $ | (4.5) | | | $ | 22.5 | | | $ | 13.7 | | | $ | (1.9) | | | $ | 11.8 | | |
The net benefit surplus of $27.0 million (2021: $13.7 million) in the U.K. plan is recorded in non-current assets at December 31, 2022, and the net benefit obligation of $4.5 million (2021: $1.9 million) in the U.S. / other is recorded in non-current liabilities at December 31, 2022.
In December 2021, the Company made a special one-off deficit reduction payment to the U.K. Plan of $12.7 million. The payment means the Company is not expected to make any additional deficit recovery contributions to the Plan until at least December 2024. Contributions of $0.4m were paid to the U.K. plan in relation to the Pension Protection Fund levy.
14. Pension Plans (continued)
The amounts recognized in the Consolidated Statements of Income in respect of the pension plans were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2022 | | 2022 | | 2021 | | 2021 | | 2021 | | 2020 | | 2020 | | 2020 | |
| 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 | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | |
| Interest cost | 6.2 | | | 1.3 | | | 7.5 | | | 5.6 | | | 1.1 | | | 6.7 | | | 7.0 | | | 1.4 | | | 8.4 | | |
| Expected return on assets | (10.4) | | | (0.7) | | | (11.1) | | | (10.2) | | | (1.8) | | | (12.0) | | | (12.2) | | | (2.3) | | | (14.5) | | |
| Curtailment gain | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Settlement loss | — | | | 2.0 | | | 2.0 | | | — | | | — | | | — | | | — | | | — | | | — | | |
| Amortization of net actuarial loss | 1.8 | | | 0.3 | | | 2.1 | | | 3.4 | | | 0.4 | | | 3.8 | | | 2.3 | | | 0.3 | | | 2.6 | | |
| Amortization of prior service credit | (0.4) | | | — | | | (0.4) | | | (0.4) | | | — | | | (0.4) | | | (0.4) | | | — | | | (0.4) | | |
| Total (credit) / expense for defined benefit plans | $ | (2.8) | | | $ | 2.9 | | | $ | 0.1 | | | $ | (1.6) | | | $ | (0.3) | | | $ | (1.9) | | | $ | (3.3) | | | $ | (0.6) | | | $ | (3.9) | | |
| In respect of defined contribution plans: | | | | | | | | | | | | | | | | | | |
| Total charge for defined contribution plans | $ | 2.0 | | | $ | 1.7 | | | $ | 3.7 | | | $ | 2.1 | | | $ | 1.5 | | | $ | 3.6 | | | $ | 1.5 | | | $ | 1.9 | | | $ | 3.4 | | |
| Total charge / (credit) for benefit plans | $ | (0.8) | | | $ | 4.6 | | | $ | 3.8 | | | $ | 0.5 | | | $ | 1.2 | | | $ | 1.7 | | | $ | (1.8) | | | $ | 1.3 | | | $ | (0.5) | | |
In accordance with ASC 715, defined benefit pension credit is split in the income statement, with $0.2 million (2021: $0.4 million; 2020: $0.4 million) of expenses recognized within sales, general and administrative expenses and a credit of $0.1 million (2021: $2.3 million credit; 2020: $4.3 million credit) recognized below operating income in the income statement.
The following table shows other changes in plan assets and benefit obligations recognized in other comprehensive income during the years ended December 31:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | 2022 | | 2021 | | 2020 | |
| Net actuarial gain / (loss) | $ | 8.2 | | | $ | 38.8 | | | $ | (26.9) | | |
| Amortization of actuarial loss | 2.1 | | | 3.8 | | | 2.6 | | |
| Actuarial loss recognized due to settlement event | 2.0 | | | — | | | — | | |
| Prior service cost | — | | | — | | | (0.1) | | |
| Amortization of prior service credit | (0.4) | | | (0.4) | | | (0.4) | | |
| Total recognized in other comprehensive income / (loss) | 11.9 | | | 42.2 | | | (24.8) | | |
| Total recognized in net periodic benefit cost and other comprehensive income / (loss) | $ | 11.8 | | | $ | 44.1 | | | $ | (20.9) | | |
The estimated net loss for defined benefit plans included in AOCI that will be recognized in net periodic benefit cost during 2023 is $12.7 million, consisting of amortization of net actuarial loss of $13.1 million, partially offset by amortization of prior service credit of $0.4 million. In accordance with ASC 715, recognition of all accumulated losses will be triggered at the settlement date of the planned buyout of the U.S. scheme.
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 | 2022 | | 2021 | |
| Gross actuarial loss | $ | (110.2) | | | $ | (122.5) | | |
| Gross prior service credit | 11.0 | | | 11.4 | | |
| Total included in AOCI not yet recognized in the statement of income | $ | (99.2) | | | $ | (111.1) | | |
14. Pension Plans (continued)
In September 2019, the U.K. Statistics Authority announced plans to reform the RPI inflation index. On November 25, 2020, the government and U.K. 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.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. | |
| | 2022 | | 2021 | | 2020 | | 2022 | | 2021 | | 2020 | |
| | % | | % | | % | | % | | % | | % | |
| Discount rate | 4.80 | | | 1.90 | | | 1.40 | | | 5.10 | | | 2.70 | | | 2.30 | | |
| Expected return on assets | 5.60 | | | 3.30 | | | 3.00 | | | 4.70 | | | 2.50 | | | 5.00 | | |
| Pre-2030 | | | | | | | | | | | | |
| Retail Price Inflation | 3.20 | | | 3.30 | | | 2.90 | | | n/a | | n/a | | n/a | |
| Consumer Price Inflation | 2.10 | | | 2.20 | | | 1.80 | | | n/a | | n/a | | n/a | |
| Pension increases | | | | | | | | | | | | |
| Pre 6 April 1997 | 1.90 | | | 2.00 | | | 1.70 | | | n/a | | n/a | | n/a | |
| 1997 - 2005 | 2.10 | | | 2.20 | | | 1.90 | | | n/a | | n/a | | n/a | |
| Post 5 April 2005 | 1.70 | | | 1.80 | | | 1.60 | | | n/a | | n/a | | n/a | |
| Post-2030 | | | | | | | | | | | | |
| Retail Price Inflation | 3.20 | | | 3.30 | | | 2.70 | | | n/a | | n/a | | n/a | |
| Consumer Price Inflation | 3.10 | | | 3.20 | | | 2.60 | | | n/a | | n/a | | n/a | |
| Pension increases | | | | | | | | | | | | |
| Pre 6 April 1997 | 2.40 | | | 2.50 | | | 2.20 | | | n/a | | n/a | | n/a | |
| 1997 - 2005 | 3.00 | | | 3.10 | | | 2.60 | | | n/a | | n/a | | n/a | |
| Post 5 April 2005 | 2.20 | | | 2.20 | | | 2.00 | | | n/a | | n/a | | n/a | |
The discount rate used for the UK Plan 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 with regard to the difference between yields on fixed-interest and index-linked United Kingdom government gilts. The expected return on assets assumption is set with regard to the asset allocation and expected return on each asset class as of the balance sheet date.
| | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | |
| Other principal actuarial assumptions: | Years | | Years | |
| Life expectancy of male / female in the U.K. aged 65 at accounting date | 21.2 / 23.0 | | 21.1 / 22.9 | |
| Life expectancy of male / female in the U.K. aged 65 at 20 years after accounting date | 22.5 / 24.5 | | 22.4 / 24.4 | |
Investment strategies
For the principal defined benefit plan in the Company and the U.K., the Luxfer Group Pension Plan, (the "Plan," as defined above), 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 U.K. plan currently has a long-term strategic target to hold 25 percent 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 any of these events occurred, it would be expected to lead to an increase in the Company's future cash contributions.
Special events
In 2021, the Company decided to terminate its U.S. Pension Plan. In accordance with ASC 715, the liabilities must be valued based on market expectations for the period over which the obligations are to be settled. The Company is committed to buying out the U.S. plan with an insurer in 2023, with the full buyout expected in early 2023. Therefore, at the 2022 year-end, the obligation reflects the expected cost of securing the plan's benefits with an insurer.
The fair value of plan assets were:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2022 | | 2022 | | 2021 | | 2021 | | 2021 | |
| In millions | U.K. | | U.S. / other | | Total | | U.K. | | U.S. / other | | Total | |
| Assets in active markets: | | | | | | | | | | | | |
| Equities and growth funds | $ | 78.3 | | | $ | — | | | $ | 78.3 | | | $ | 149.9 | | | $ | — | | | $ | 149.9 | | |
| Government bonds | 65.7 | | | — | | | 65.7 | | | 64.6 | | | — | | | 64.6 | | |
| Corporate bonds | 106.1 | | | 27.5 | | | 133.6 | | | 147.5 | | | 46.6 | | | 194.1 | | |
| Cash | 2.5 | | | 0.6 | | | 3.1 | | | 14.6 | | | 0.2 | | | 14.8 | | |
| Total fair value of plan assets | $ | 252.6 | | | $ | 28.1 | | | $ | 280.7 | | | $ | 376.6 | | | $ | 46.8 | | | $ | 423.4 | | |
All investments, apart from cash, were classified as Level 2 in the fair value hierarchy as of December 31, 2022, and December 31, 2021. Cash is classified as Level 1 in the fair value hierarchy as of December 31, 2022, and December 31, 2021.
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 (1) |
| 2023 | $ | 13.1 | | | $ | 0.7 | |
| 2024 | 13.4 | | | — | |
| 2025 | 13.6 | | | — | |
| 2026 | 13.9 | | | — | |
| 2027 | 14.2 | | | — | |
| Thereafter | 74.8 | | | — | |
(1) The expected payments reflect the current projection of benefits due to be paid. Upon completion of the d buyout this will be a nil value. The expected buyout completion date is in quarter one of 2023.
The estimated amount of employer deficit recovery contributions expected to be paid to the defined benefit pension plans for the year ending December 31, 2023, is nil (2022: nil actual employer contributions). There will also be an additional employer contribution into the U.S. plan as a result of the planned buyout, this is estimated to be approximately $3.5 million.
15. Shareholders' Equity
(a)Ordinary share capital
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 | | December 31, 2022 | | | December 31, 2021 | | |
| | 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 | — | | | 761,835,318,444 | | | — | | (1) | | 149.9 | | (1) | |
| | 40,000,000 | | | 761,875,318,444 | | | $ | 35.7 | | (1) | | $ | 185.6 | | (1) | |
| Allotted, called up and fully paid: | | | | | | | | | | |
| Ordinary shares of £0.50 each | 28,944,000 | | | 28,944,000 | | | $ | 26.5 | | (1) | | $ | 26.5 | | (1) | |
| Deferred ordinary shares of £0.0001 each | — | | | 761,835,318,444 | | | — | | (1) | | 149.9 | | (1) | |
| | 28,944,000 | | | 761,864,262,444 | | | $ | 26.5 | | (1) | | $ | 176.4 | | (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, 2022, there were 26,934,973 (2021: 27,529,824) ordinary shares of Luxfer Holdings PLC listed on the New York Stock Exchange (NYSE).
Deferred ordinary shares of £0.0001 each
In July 2022 the Company made a payment of $0.1 million to cancel the entirety of deferred shares held, $149.8 million was reallocated to additional paid-in capital to reflect the capital reduction in deferred shares.
(b) Treasury Shares
| | | | | | | | | | | |
| In millions | | |
| At January 1, 2021 | $ | (4.0) | | |
| Purchase of treasury shares | (6.4) | | |
| Cancellation of treasury shares | 0.7 | | |
| Utilization of treasury shares | 0.1 | | |
| At December 31, 2021 | (9.6) | | |
| Purchase of treasury shares | (11.1) | | |
| | | |
| Utilization of treasury shares | 0.3 | | |
| At December 31, 2022 | $ | (20.4) | | |
In 2022, the Company purchased 711,572 ordinary shares for a total cost of $11.1 million. 9,424 of these shares were utilized at $0.3 million, with the remaining 702,148 retained within Treasury shares.
In 2021, the Company purchased 297,678 total shares for $6.4 million. Of the 297,678 shares repurchased in the year, 56,000 at $0.7 million have been cancelled. 16,395 shares were utilized at $0.1 million, with the remaining 225,283 retained within Treasury shares.
At December 31, 2022, there were 1,277,766 (2021: 575,618) treasury shares held at a cost of $20.4 million (2021: $9.6 million).
15. Shareholders' Equity (continued)
(c) Company shares held by ESOP
| | | | | | | | | | | |
| In millions | | |
| At January 1, 2021 | $ | (1.4) | | |
| | | |
| | | |
| | | |
| Utilization of ESOP shares | 0.3 | | |
| At December 31, 2021 | (1.1) | | |
| | | |
| | | |
| | | |
| Utilization of ESOP shares | 0.1 | | |
| At December 31, 2022 | $ | (1.0) | | |
At December 31, 2022, there were 721,261 ordinary shares at £0.50 each (2021: 838,558 ordinary shares of £0.50 each) held by The Luxfer Group Employee Share Ownership Plan (the "ESOP").
(d) Dividends paid and proposed
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | 2022 | | 2021 | | 2020 | |
| Dividends declared and paid during the year: | | | | | | |
| 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 | | |
| Interim dividend paid February 4, 2021 ($0.125 per ordinary share) | — | | | 3.4 | | | — | | |
| Interim dividend paid May 5, 2021 ($0.125 per ordinary share) | — | | | 3.4 | | | — | | |
| Interim dividend paid August 4, 2021 ($0.125 per ordinary share) | — | | | 3.4 | | | — | | |
| Interim dividend paid November 3, 2021 ($0.125 per ordinary share) | — | | | 3.4 | | | — | | |
| Interim dividend paid February 2, 2022 ($0.125 per ordinary share) | 3.4 | | | — | | | — | | |
| Interim dividend paid May 4, 2022 ($0.130 per ordinary share) | 3.6 | | | — | | | — | | |
| Interim dividend paid August 3, 2022 ($0.130 per ordinary share) | 3.6 | | | — | | | — | | |
| Interim dividend paid November 2, 2022 ($0.130 per ordinary share) | 3.6 | | | — | | | — | | |
| | $ | 14.2 | | | $ | 13.6 | | | $ | 13.6 | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | 2022 | | 2021 | | 2020 | |
| Dividends declared and paid after December 31 (not recognized as a liability at December 31): | | | | | | |
| Interim dividend paid February 4, 2021: ($0.125 per ordinary share) | $ | — | | | $ | — | | | $ | 3.4 | | |
| Interim dividend paid February 2, 2022: ($0.125 per ordinary share) | — | | | 3.4 | | | — | | |
| Interim dividend paid February 1, 2023: ($0.130 per ordinary share) | 3.6 | | | — | | | — | | |
| | $ | 3.6 | | | $ | 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, 2022 | 15,977,968,688 | | | 838,558 | | |
| | | | | |
| Shares utilized during the year | — | | | (117,297) | | |
| | | | | |
| Shares sold from the ESOP during the year | (15,977,968,688) | | | — | | |
| At December 31, 2022 | — | | | 721,261 | | |
At December 31, 2022, the loan outstanding from the ESOP was $0.5 million (2021: $0.5 million).
The market value of each £0.50 ordinary share held by the ESOP at December 31, 2022, was $13.72 (2021: $19.31).
(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 2022, a combined 130,000 of Restricted Stock Units and Options over ordinary shares were granted under the LTIP, which were all time-based awards vesting over a period between three and four years and expiring two years later. Also throughout 2022, a maximum 280,000 awards were granted based on the achievement of shareholder return targets. In May 2022, 19,000 additional awards were granted under the LTIP, which were all time-based awards vesting over four years and an additional 15,000 awards were granted under the LTIP, which vested immediately. In June 2022, a combined 26,000 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 March 2021, a combined 110,000 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. Also throughout 2021, a maximum 100,000 awards were granted based on the achievement of shareholder return targets. In June 2021, a combined 19,000 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 March 2020, a combined 132,900 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 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. Also throughout 2020, a maximum 95,000 awards were granted based on the achievement of shareholder return targets. In June 2020, a combined 27,280 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 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.
Total share-based compensation expense for 2022, 2021 and 2020 was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions | 2022 | | 2021 | | 2020 | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Total share-based compensation charges | $ | 2.5 | | | $ | 2.8 | | | $ | 2.8 | | |
There were no cancellations or modifications to the awards in 2022, 2021 or 2020.
The actual tax benefit realized for the tax deductions from option exercises totaled $0.8 million, $1.1 million and $0.6 million in 2022, 2021 and 2020, respectively.
The following tables illustrates the number of, and movements in, share options during the year, with each option relating to one ordinary share:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Number of shares | | Weighted- average exercise price | | Weighted- average remaining contractual life (years) | | Aggregate intrinsic value ($M) | |
| At January 1, 2022 | 547,522 | | | $ | 0.99 | | | 2.2 | | $ | 10.6 | | |
| Granted during the year | 472,695 | | | $ | 1.00 | | | | | | |
| Exercised during the year | (173,017) | | | $ | 0.98 | | | | | | |
| Accrued dividend awards | 8,829 | | | $ | 1.00 | | | | | | |
| Lapsed during the year | (276,876) | | | $ | 0.96 | | | | | | |
| At December 31, 2022 | 579,153 | | | $ | 1.00 | | | 3.0 | | $ | 8.0 | | |
| Options exercisable at December 31, 2022 | 9,862 | | | $ | 1.00 | | | 3.3 | | $ | 0.1 | | |
| Options expected to vest as of December 31, 2022 | 434,548 | | | $ | 1.00 | | | 3.0 | | $ | 6.0 | | |
The weighted average fair value of options granted in 2022, 2021 and 2020 was estimated to be $16.45, $20.56 and $9.41 per share, respectively. The total intrinsic value of options that were exercised during 2022, 2021 and 2020 was $2.9 million, $5.8 million and $3.0 million, respectively. At December 31, 2022, the total unrecognized compensation cost related to share options was $3.1 million (2021: $2.8 million). This cost is expected to be recognized over a weighted average period of 2.7 years (2021: 1.9 years ).
16. Share Plans (continued)
(b) Share-based compensation (continued)
The following table illustrates the assumptions used in deriving the fair value of share options during the year:
| | | | | | | | | | | | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 | |
| Dividend yield (%) | 2.75 - 3.41 | | 2.27 | | 3.39 - 4.09 | |
| Expected volatility range (%) | 36.11 - 49.43 | | 42.80 - 59.03 | | 36.48 - 56.28 | |
| Risk-free interest rate (%) | 1.28 - 2.99 | | 0.04 - 0.24 | | 0.18 - 0.49 | |
| Expected life of share options range (years) | 0.50 - 4.00 | | 0.50 - 4.00 | | 0.50 - 4.00 | |
| Forfeiture rate (%) | 5.00 | | | 5.00 | | | 5.00 | | |
| Weighted average exercise price ($) | $1.00 | | $1.00 | | $1.00 | |
| 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. Segment 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. A summary of the operations of the segments is provided below:
Gas Cylinders segment
Our Gas Cylinders segment manufactures and markets specialized highly-engineered cylinders, using composites and aluminum alloys, 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 applications.
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; photo-engraving plates for graphic arts; and high-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advances ceramics, fiber-optic fuel cells, and many other performance products.
Other
Other, as used below, 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, the CEO, who is responsible for allocating resources and assessing performance of the operating segments, 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; acquisitions and disposals costs; other charges, and depreciation and amortization.
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 | 2022 | | 2021 | | 2020 | | | 2022 | | 2021 | | 2020 | |
| Gas Cylinders segment | $ | 183.7 | | | $ | 178.3 | | | $ | 141.9 | | | | $ | 12.8 | | | $ | 22.7 | | | $ | 21.3 | | |
| Elektron segment | 239.7 | | | 195.8 | | | 182.9 | | | | 50.3 | | | 40.7 | | | 32.6 | | |
| Consolidated | $ | 423.4 | | | $ | 374.1 | | | $ | 324.8 | | | | $ | 63.1 | | | $ | 63.4 | | | $ | 53.9 | | |
During 2022 there were no sales made from the Elektron segment to the Gas Cylinders segment (2021:nil and 2020: nil)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Depreciation and amortization | | | Restructuring Charges | |
| In millions | 2022 | | 2021 | | 2020 | | | 2022 | | 2021 | | 2020 | |
| Gas Cylinders segment | $ | 4.8 | | | $ | 5.8 | | | $ | 3.7 | | | | $ | 1.7 | | | $ | 5.3 | | | $ | 7.9 | | |
| Elektron segment | 8.8 | | | 9.8 | | | 9.6 | | | | 0.2 | | | 0.9 | | | 0.9 | | |
| Other segment | — | | | — | | | — | | | | — | | | — | | | 0.1 | | |
| Consolidated | $ | 13.6 | | | $ | 15.6 | | | $ | 13.3 | | | | $ | 1.9 | | | $ | 6.2 | | | $ | 8.9 | | |
(1) Adjusted EBITA is adjusted EBITDA less depreciation and loss on disposal of property, plant and equipment.
17. Segment Information (continued)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Total assets | | Capital expenditure | |
| In millions | 2022 | | 2021 | | 2022 | | 2021 | | 2020 | |
| Gas Cylinders segment | $ | 133.1 | | | $ | 122.7 | | | $ | 1.2 | | | $ | 1.0 | | | $ | 2.0 | | |
| Elektron segment | 216.4 | | | 206.5 | | | 7.4 | | | 7.9 | | | 5.1 | | |
| Other | 49.5 | | | 34.8 | | | — | | | — | | | — | | |
| Discontinued operations | 8.1 | | | 4.8 | | | — | | | 0.1 | | | 0.3 | | |
| | $ | 407.1 | | | $ | 368.8 | | | $ | 8.6 | | | $ | 9.0 | | | $ | 7.4 | | |
The following table presents a reconciliation of Adjusted EBITDA to net income from continuing operations:
| | | | | | | | | | | | | | | | | | | | | | | |
| In millions | 2022 | | 2021 | | 2020 | |
| Adjusted EBITDA | $ | 63.1 | | | $ | 63.4 | | | $ | 53.9 | | |
| Share-based compensation charges | (2.5) | | | (2.8) | | | (2.8) | | |
| Loss on disposal of property, plant and equipment | — | | | — | | | (0.1) | | |
| Depreciation and amortization | (13.6) | | | (15.6) | | | (13.3) | | |
| | | | | | | |
| Restructuring charges | (1.9) | | | (6.2) | | | (8.9) | | |
| | | | | | | |
| Acquisition and disposal costs | (0.3) | | | (1.5) | | | — | | |
| Other charges | — | | | (1.1) | | | (0.4) | | |
| | | | | | | |
| Defined benefits pension credit | 0.1 | | | 2.3 | | | 4.3 | | |
| Interest expense, net | (3.9) | | | (3.1) | | | (5.0) | | |
| Provision for taxes | (9.0) | | | (5.4) | | | (6.9) | | |
| Net income from continuing operations | $ | 32.0 | | | $ | 30.0 | | | $ | 20.8 | | |
Equity loss of unconsolidated affiliates for 2021 relates predominantly to the Gas Cylinders Segment.
The following tables present certain geographic information by geographic region for the years ended December 31:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Net Sales(1) | |
| | 2022 | | 2021 | | 2020 | |
| | $M | Percent | | $M | Percent | | $M | Percent | |
| United States | $ | 243.2 | | 57.4 | % | | $ | 207.8 | | 55.6 | % | | $ | 173.0 | | 53.3 | % | |
| U.K. | 20.7 | | 4.9 | % | | 24.4 | | 6.6 | % | | 18.7 | | 5.8 | % | |
| Germany | 19.2 | | 4.5 | % | | 17.7 | | 4.7 | % | | 15.7 | | 4.8 | % | |
| Italy | 11.4 | | 2.7 | % | | 11.0 | | 2.9 | % | | 10.5 | | 3.2 | % | |
| France | 8.5 | | 2.0 | % | | 12.5 | | 3.3 | % | | 20.2 | | 6.2 | % | |
| Top five countries | $ | 303.0 | | 71.5 | % | | $ | 273.4 | | 73.1 | % | | $ | 238.1 | | 73.3 | % | |
| Rest of Europe | 28.0 | | 6.6 | % | | 25.8 | | 6.9 | % | | 25.4 | | 7.8 | % | |
| Asia Pacific | 68.0 | | 16.1 | % | | 53.7 | | 14.3 | % | | 45.2 | | 13.9 | % | |
| Other (2) | 24.4 | | 5.8 | % | | 21.2 | | 5.7 | % | | 16.1 | | 5.0 | % | |
| | $ | 423.4 | | | | $ | 374.1 | | | | $ | 324.8 | | | |
| | | | | | | | | | | | | | | | | | | | |
| | | Property, plant and equipment, net | |
| In millions | | 2022 | | 2021 | |
| United States | | $ | 41.6 | | | $ | 46.9 | | |
| United Kingdom | | 32.0 | | | 36.0 | | |
| Canada | | 2.8 | | 3.3 | |
| Rest of Europe | | 1.0 | | | 1.0 | | |
| Asia Pacific | | 0.3 | | | 0.3 | | |
| | | | | | |
| | | $ | 77.7 | | | $ | 87.5 | | |
(1) Net sales are based on the geographic destination of sale.
(2) Other represents Africa, Brazil, Canada, Mexico and Other Americas.
18. Leases
We have operating leases for buildings, vehicles and certain equipment. The Company has applied practical expedients for leases with a fair value of less than $5,000 or a lease term of less than twelve months. The majority of our leases have remaining lease terms of one to five years, with one building having 50 years remaining.
None of our leases were classified as finance leases in any of the years disclosed.
The components of the lease expense is as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions | 2022 | | 2021 | | 2020 | |
| Operating lease cost | $ | 4.2 | | | $ | 3.4 | | | $ | 3.8 | | |
Supplemental cash flow information related to leases was as follows:
| | | | | | | | | | | | | | | | | | | | | | | |
| | Years ended December 31, | |
| In millions | 2022 | | 2021 | | 2020 | |
| Operating cash flows from operating leases | $ | 4.2 | | | $ | 3.4 | | | $ | 3.8 | | |
During the year ended December 31, 2022, there were additional operating leases entered into totaling $17.7 million (2021: $2.3 million, 2020: $0.8 million). These are non-cash items but will impact cash in future years.
Supplemental balance sheet information related to leases was as follows:
| | | | | | | | | | | | | | | | | |
| | December 31, | | December 31, | |
| In millions | 2022 | | 2021 | |
| Operating leases | | | | |
| Operating lease right-of-use asset | $ | 19.8 | | | $ | 12.6 | | |
| | | | | |
| Other current liabilities | 4.7 | | | 3.0 | | |
| Other non-current liabilities | 18.2 | | | 9.8 | | |
| | $ | 22.9 | | | $ | 12.8 | | |
| | | | | |
| Weighted Average Remaining Lease Term (Years) | 12.0 | | 17.2 | |
| Weighted Average Discount Rate | 4.48 | % | | 4.38 | % | |
Maturities of lease liabilities were as follows:
| | | | | | | | | | | | | | | | | |
| In millions | | | 2022 | |
| 2023 | | | $ | 5.1 | | |
| 2024 | | | 5.2 | | |
| 2025 | | | 4.9 | | |
| 2026 | | | 3.9 | | |
| 2027 | | | 1.4 | | |
| Thereafter | | | 9.4 | | |
| Total lease payments | | | $ | 29.9 | | |
| Less imputed interest | | | (7.0) | | |
| Total | | | $ | 22.9 | | |
19. Commitments and Contingencies
Capital commitments
At December 31, 2022, the Company had capital expenditure commitments of $1.4 million (2021: $1.5 million and 2020: $1.1 million) for the acquisition of new plant and equipment.
Committed banking facilities
At December 31, 2022, the Company had committed banking facilities of $100.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of these committed facilities, $31.9 million was drawn at December 31, 2022.
The Company had a separate (uncommitted) facility for letters of credit, which at December 31, 2022, was $2.2 million. $1.8 million of this was utilized at December 31, 2022.
The Company also had a separate (uncommitted) bonding facility for bank guarantees; denominated in GBP sterling totaling £0.5 million ($0.6 million) and £0.1 million ($0.2 million) was utilized at December 31, 2022.
The Company has a separate overdraft facility of $4.0 million, of which none was drawn at December 31, 2022.
Additionally, the Company has various uncommitted transitional banking and foreign exchange lines available for day-to-day operational purposes.
At December 31, 2021 the Company had committed banking facilities of $100.0 million with an additional $50.0 million of uncommitted facilities through an accordion provision. Of the committed facilities, $10.8 million was drawn at December 31, 2021.
The Company had a separate (uncommitted) facility for letters of credit, which at December 31, 2021, was $1.5 million. $0.9 million of this was utilized at December 31, 2021.
The Company also had a separate (uncommitted) bonding facility for bank guarantees; denominated in GBP sterling totaling £0.6 million ($0.9 million) and £0.1 million ($0.2 million) was utilized at December 31, 2021.
The Company has a separate overdraft facility of $4.0 million, of which none was drawn at December 31, 2021.
Additionally, the Company has various uncommitted transitional banking and foreign exchange lines available for day-to-day operational purposes.
Contingencies
In November 2018, an alleged explosion occurred at a third-party waste disposal and treatment site in Grand View, Idaho, reportedly causing property damage, personal injury, and one fatality. We contracted with a service company for removal and disposal of certain waste resulting from the magnesium powder manufacturing operations at the Reade facility in Manchester, New Jersey. We believe this service company, in turn, contracted with the third-party disposal company, at whose facility the explosion occurred, for treatment and disposal of the waste. In November 2020, we were named as a defendant in three lawsuits in relation to the incident – one by the third-party disposal company, one by the estate of the decedent, and one by an injured employee of the third-party disposal company. We believe that we are not liable for the incident, have asserted such, and continue to fully defend the Company against these lawsuits. Therefore, we do not currently expect any eventual outcome in these matters to have a material impact on the Company's financial position or results of operations.
20. Selected Quarterly Data (unaudited)
The following tables present 2022 and 2021 quarterly financial information for continuing operations:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2022 | |
| In millions, except per-share data | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | Full Year | |
| Net sales | | $ | 97.0 | | | $ | 109.5 | | | $ | 100.2 | | | $ | 116.7 | | | $ | 423.4 | | |
| Gross profit | | 24.2 | | | 25.7 | | | 23.2 | | | 21.9 | | | 95.0 | | |
| Operating income | | 10.6 | | | 12.6 | | | 11.6 | | | 10.0 | | | 44.8 | | |
| Net income from continuing operations | | 7.7 | | | 9.6 | | | 8.5 | | | 6.2 | | | 32.0 | | |
| Earnings per ordinary share(1) | | | | | | | | | | | |
| Basic earnings per ordinary share from continuing operations | | $ | 0.28 | | | $ | 0.35 | | | $ | 0.31 | | | $ | 0.23 | | | $ | 1.17 | | |
| Diluted earnings per ordinary share from continuing operations | | 0.28 | | | 0.35 | | | 0.31 | | | 0.23 | | | 1.16 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | 2021 | |
| In millions, except per-share data | | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | Full Year | |
| Net sales | | $ | 85.2 | | | $ | 99.0 | | | $ | 91.2 | | | $ | 98.7 | | | $ | 374.1 | | |
| Gross profit | | 25.2 | | | 25.9 | | | 21.1 | | | 23.8 | | | $ | 96.0 | | |
| Operating income | | 11.1 | | | 11.5 | | | 8.1 | | | 5.5 | | | $ | 36.2 | | |
| Net income from continuing operations | | 8.6 | | | 11.9 | | | 6.0 | | | 3.5 | | | $ | 30.0 | | |
| Earnings per ordinary share(1) | | | | | | | | | | | |
| Basic earnings per ordinary share from continuing operations | | $ | 0.31 | | | $ | 0.43 | | | $ | 0.22 | | | $ | 0.13 | | | $ | 1.08 | | |
| Diluted earnings per ordinary share from continuing operations | | 0.31 | | | 0.42 | | | 0.21 | | | 0.13 | | | 1.07 | | |
(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
During 2022, the Company maintained its 50% investment in the equity of the joint venture, Nikkei-MEL Company Limited. During 2022, the Elektron Segment made $0.6 million of sales to the joint venture (2021: $0.8 million). At December 31, 2022, the gross and net amounts receivable from the joint venture amounted to $0.1 million (2021: $0.1 million).
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 of sales to the joint venture.
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, there were no sales made to or amounts receivable from the associate.
Transactions with other related parties
At December 31, 2022, the directors and key management comprising the members of the Executive Leadership Team owned 233,724 £0.50 ordinary shares (2021: 500,237 £0.50 ordinary shares) and held awards over a further 231,668 £0.50 ordinary shares (2021: 299,021 £0.50 ordinary shares).
During the years ended December 31, 2022, and December 31, 2021, share options held by members of the Executive Leadership Team were exercised.
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
The Company was notified that Néos International Limited, including its subsidiaries Néos Technologies Limited and Néos Superform Limited (collectively, “Néos”) – the purchaser of our Superform U.K. business – filed for administration, a form of bankruptcy protection in the U.K., on or about February 22, 2023. Pursuant to the terms of the sale, Luxfer assigned and underlet (as defined and in accordance with the Landlord & Tenant (Covenants) Act 1995) certain building leases to Néos, recognizing a right of use asset and lease liability in the financial statements. Post year-end, the Company also received a Notice of Default from one Landlord, with respect to Néos’ non-payment of amounts owed under certain of the assigned leases in 2022. As a result of this information, and in accordance with ASC 360 and ASC 855, we have fully impaired the right of use asset, $2.6 million, and recognized this through discontinued operations in the consolidated statements of income in 2022.
On February 28, 2023 the Company agreed to the full buyout of the U.S. pension plan with an insurer. Assets held in the pension plan, plus an additional employer contribution of approximately $3.5 million, will be used to fund the buyout which we expect will be completed in early 2023.