10q10k10q10k.net

What changed in LUXFER HOLDINGS PLC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of LUXFER HOLDINGS PLC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+498 added−235 removedSource: 10-K (2024-02-27) vs 10-K (2023-03-01)

Top changes in LUXFER HOLDINGS PLC's 2023 10-K

498 paragraphs added · 235 removed · 160 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

34 edited+15 added−12 removed34 unchanged
Biggest changeIn recent years, the carbon fiber has experienced periods of tight supply conditions due to increased demand for commercial aerospace, military and clean energy applications. Over time, we have built relationships with our suppliers, providing them predictable requirements and annual contracts that help to ensure procurement of our required volume of carbon fiber.
Biggest changeGas Cylinders Segment Key raw materials used in the Gas Cylinders Segment include high-strength carbon fiber and aluminum. Our main carbon fiber suppliers include Toray and Mitsubishi. In recent years, the carbon fiber has experienced periods of tight supply conditions due to increased demand for commercial aerospace, military and clean energy applications.
This data is used to enhance employment and recruitment practices and is continually improved to ensure that a diverse and talented workforce is maintained. Financial, Physical, and Emotional Well-Being Fair Wages and Competitive Benefits: Luxfer offers competitive base pay and, depending on position, variable incentive pay associated with both Company and individual performance.
This data is used to enhance employment and recruitment practices and is continually improved to ensure that a diverse and talented workforce is maintained. Financial, Physical, and Emotional Well-Being Fair Wages and Competitive Benefits: Luxfer offers competitive base pay and, depending on position, variable incentive pay associated with both individual and Company performance.
We also operate in various geographic areas that are susceptible to bad weather during winter months, such as Calgary, Canada, and various U.S. eastern states. Bad weather can unexpectedly disrupt production and shipments from our manufacturing facilities, which can lead to reduced revenue and operating profit.
We also operate in various geographic areas that are susceptible to bad weather during winter months, such as Calgary, Canada, and various U.S. states. Bad weather can unexpectedly disrupt production and shipments from our manufacturing facilities, which can lead to reduced revenue and operating profit.
Further, we benefit from the growth in the number of our patented products, including many of our alloys and compounds. Diversified customer base with long-standing relationships. We put the customer at the heart of our strategy, and we have long-standing relationships with many of our customers, including global leaders in our key markets. Launch of the Luxfer Business System.
Further, we benefit from the growth in the number of our patented products, including many of our alloys and compounds. Diversified customer base with long-standing relationships. We put the customer at the heart of our strategy, and we have long-standing relationships with many of our customers, including global leaders in our key markets. Luxfer Business System.
Full-time employees and, in some cases, part-time employees who have met the minimum hours of service requirement are eligible to participate in various retirement savings plans, such as the Company’s 401(k) defined contribution plan in the U.S. and various pension schemes available to U.K. employees.
Full-time employees and, in some cases, part-time employees who have met the minimum hours of service requirement are eligible to participate in various retirement savings plans, such as the Company’s 401(k) defined contribution plan in the U.S. and various pension plans available to U.K. employees.
National Institute for Occupational Safety and Health (NIOSH) standards and natural replacement cycles • Asian and European fire services looking to adopt more modern SCBA equipment Military countermeasure flares • Ultra-fine magnesium powders for flares used to protect aircraft from attack by heat-seeking missiles • Military combat and training exercises • Maintenance of countermeasures reserves (shelf-life restrictions) Support of personnel in hazardous conditons • Self-heating meals used by military personnel and emergency-relief agencies • Chemical detection and chemical decontamination kits • Ensuring protection and well-being for military personnel and victims of natural disasters • Military combat and training Medical gases • Portable aluminum and composite cylinders • Demand for lightweight products to upgrade from heavy all-metal cylinders • Growing trend to provide oxygen therapy in the home and to keep patients mobile Orthopedics • Magnesium sheets • Improved mobility through use of easy-to-wear, lightweight braces and trusses Pharmaceuticals • MELsorb® material used in dialysis equipment and enterosorbents • Zirconium compounds as a base material for pharmaceutical applications • New technologies to remove noxious elements from the body 5 General industrial (37% of 2022 sales): Our core technologies serve various industrial markets and applications.
National Institute for Occupational Safety and Health (NIOSH) standards and natural replacement cycles • Asian and European fire services looking to adopt more modern SCBA equipment Military countermeasure flares • Ultra-fine magnesium powders for flares used to protect aircraft from attack by heat-seeking missiles • Military combat and training exercises • Maintenance of countermeasures reserves (shelf-life restrictions) Support of personnel in hazardous conditons • Self-heating meals used by military personnel and emergency-relief agencies • Chemical detection and chemical decontamination kits • Ensuring protection and well-being for military personnel and victims of natural disasters • Military combat and training Medical gases • Portable aluminum and composite cylinders • Demand for lightweight products to upgrade from heavy all-metal cylinders • Growing trend to provide oxygen therapy in the home and to keep patients mobile Orthopedics • Magnesium sheets • Improved mobility through use of easy-to-wear, lightweight braces and trusses Pharmaceuticals • MELsorb® material used in dialysis equipment and enterosorbents • Zirconium compounds as a base material for pharmaceutical applications • New technologies to remove noxious elements from the body 5 General industrial (29% of 2023 sales): Our core technologies serve various industrial markets and applications.
Area of Focus Product End-market drivers Alternative fuels • AF cylinders and systems • Bulk gas storage transportation cylinders and systems • Clean energy initiatives • Availability and pricing of natural gas and hydrogen • Increasing adoption of hydrogen as fuel source for public transport, particularly in Europe • Growing availability of CNG filling infrastructure Environmental catalysis (cleaning of exhaust emissions) • Zirconium compounds used in automotive catalytic converters • Legislation and regulation aimed at reducing emissions from internal combustion engines, including gasoline particulate filtration • Pricing of zirconium compounds compared to the use of precious metals • Increasing demand for gasoline-electric hybrid vehicles Civil and military aerospace • Elektron® aerospace alloys in cast, extruded, and sheet form • Growth in the global aircraft market • Emphasis on reducing the weight of aircraft components to increase fuel efficiency 4 Defense, First Response & Healthcare (32% of 2022 sales): Luxfer offers many products that help to protect people, equipment and property in hazardous conditions, conflicts and emergencies.
Area of Focus Product End-market drivers Alternative fuels • AF cylinders and systems • Bulk gas storage transportation cylinders and systems • Clean energy initiatives • Availability and pricing of natural gas and hydrogen • Increasing adoption of hydrogen as fuel source for public transport, particularly in Europe • Growing availability of CNG filling infrastructure Environmental catalysis (cleaning of exhaust emissions) • Zirconium compounds used in automotive catalytic converters • Legislation and regulation aimed at reducing emissions from internal combustion engines, including gasoline particulate filtration • Pricing of zirconium compounds compared to the use of precious metals • Increasing demand for gasoline-electric hybrid vehicles Civil and military aerospace • Elektron® aerospace alloys in cast, extruded, and sheet form • Growth in the global aircraft market • Emphasis on reducing the weight of aircraft components to increase fuel efficiency 4 Defense, First Response & Healthcare (41% of 2023 sales): Luxfer offers many products that help to protect people, equipment and property in hazardous conditions, conflicts and emergencies.
We have a global presence, operating 13 manufacturing plants in the U.S., the U.K., Canada and China, one of which relates to discontinued operations, and we also have a joint venture in Japan. We employ approximately 1,400 people, including temporary staff, of which fewer than 50 support our discontinued operations.
We have a global presence, operating 12 manufacturing plants in the U.S., the U.K., Canada and China, one of which relates to discontinued operations, and we also have a joint venture in Japan. We employ approximately 1,400 people, including temporary staff, of which fewer than 50 support our discontinued operations.
Production outside of China, however, is significant, including, Dead Sea Magnesium in Israel, RIMA Industrial in Brazil, and smaller producers in Turkey and Russia. We purchase approximately 40% of our magnesium needs from China. We historically used only U.S.-sourced materials for our products sold to the U.S. military, for which U.S. sourcing is mandatory.
Production outside of China, however, is significant, including, Dead Sea Magnesium in Israel, RIMA Industrial in Brazil, and smaller producers in Turkey and Russia. We historically used only U.S.-sourced materials for our products sold to the U.S. military, for which U.S. sourcing is mandatory.
Area of Focus Product End-market drivers General engineering • Magnesium billets, sheets, coil, tooling plates • Zirconium ceramic compounds for hard working components • Need for components to operate in more extreme environments for longer periods, such as underground or in the ocean Hydraulic fracturing or "fracking" • Dissolvable SoluMag ® magnesium alloy • Onshore oil and gas exploration Paper • Bacote™ and Zirmel™, both formaldehyde-free insolubilizers that aid high-quality printing • Elimination of toxic chemicals Graphic arts • Photo-engraving plates • Luxury packaging as part of marketing high-end products Our competitive advantages Focus on innovation and product development for growing specialized end-markets.
Area of Focus Product End-market drivers General engineering • Magnesium billets, sheets, coil, tooling plates • Zirconium ceramic compounds for hard working components • Need for components to operate in more extreme environments for longer periods, such as underground or in the ocean Hydraulic fracturing or "fracking" • Dissolvable SoluMag ® magnesium alloy • Onshore oil and gas exploration Paper • Bacote™ and Zirmel™, both formaldehyde-free insolubilizers that aid high-quality printing • Elimination of toxic chemicals Specialty gases • Cylinders for transportation and / or storage of gases requiring high stability or purity • Demand for electronics and semiconductors Graphic arts • Photo-engraving plates • Luxury packaging as part of marketing high-end products Our competitive advantages Focus on innovation and product development for growing specialized end-markets.
Key product lines include: • Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys for use in aerospace, healthcare and oil and gas applications. • Magnesium powders used in countermeasure flares that protect aircraft from heat-seeking missiles and also for heating pads for self-heating meals used by the military and emergency-relief agencies. • High-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, pharmaceuticals and many other performance products. • Magnesium, copper, and zinc photo-engraving plates for graphic arts and luxury packaging.
Key product lines include: • Advanced lightweight, corrosion-resistant and heat- and flame-resistant magnesium alloys for use in aerospace, healthcare and oil and gas applications. • Magnesium powders used in countermeasure flares that protect aircraft from heat-seeking missiles and also for heating pads for self-heating meals used by the military and emergency-relief agencies. • High-performance zirconium-based materials and oxides used as catalysts and in the manufacture of advanced ceramics, fiber-optic fuel cells, pharmaceuticals and many other performance products.
Thanks to the ingenuity of our own research and development teams, Luxfer has developed a steady stream of new products, most recently including: • Soluble magnesium alloys, branded SoluMag ® , for down-well oil and gas applications; • Ultra-lightweight large composite cylinders, branded G-Stor TM , for containment of CNG, hydrogen, helium and other gases; • AF systems solutions for buses, trucks and bulk gas transportation; • Zirconium catalysts for automotive end-use, including advances in gasoline particulate filtration used in hybrid vehicles; • L7X ® high-strength aluminum alloy and carbon composite gas cylinders; • Luxfer ECLIPSE, a new carbon composite cylinders for firefighter self-contained breathing apparatus (SCBA); and • Unitized Group Ration - Express (UGR-E) heater meals developed to deliver hot meals to multiple soldiers in a combat or training environment.
Thanks to the ingenuity of our own research and development teams, Luxfer has developed a steady stream of new products, most recently including: • Soluble magnesium alloys, branded SoluMag ® , for down-well oil and gas applications; • Ultra-lightweight large composite cylinders, branded G-Stor TM , for containment of CNG, hydrogen, helium and other gases; • AF systems solutions for buses, trucks and bulk gas transportation; • Zirconium catalysts for automotive end-use, including advances in gasoline particulate filtration used in hybrid vehicles; • L7X ® high-strength aluminum alloy and carbon composite gas cylinders; • Luxfer ECLIPSE, a new carbon composite cylinders for firefighter self-contained breathing apparatus (SCBA); • Unitized Group Ration - Express (UGR-E) heater meals developed to deliver hot meals to multiple soldiers in a combat or training environment; and • Improved performance magnesium photoengraving plates including the recently-launched OptiMag ® We believe that our commitment to research and new product development, through dedicated resources and significant use of management's time, forms the core of Luxfer's growth potential.
No other singular customer represented greater than 10% of Gas Cylinders Segment sales. Key product lines include: • Carbon fiber composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other emergency-responders.
Three customers represented 16%, 15% and 11% respectively, of our Gas Cylinders Segment sales. No other singular customer represented greater th an 10% of Ga s Cylinders Segment sales. Key product lines include: • Carbon fiber composite cylinders for self-contained breathing apparatus (SCBA), used by firefighters and other emergency-responders.
As a result, only our Superform U.S. business remains on the balance sheet as held-for-sale at December 31, 2022. Results from the three operations were disclosed as discontinued in the income statement for the corresponding years' of ownership. All information included within this section relates to continuing operations, unless otherwise stated.
As a result, only our Superform U.S. business remains on the balance sheet as held-for-sale at December 31, 2023 and December 31, 2022. Results from the three operations were disclosed as discontinued in the income statement for the corresponding years' of ownership.
Gas Cylinders Segment Our Gas Cylinders Segment manufactures and markets specialized, highly-engineered cylinders using carbon composites and aluminum alloys. In 2022, sales from our Gas Cylinders Segment represented approximately 43% (2021: 48%, 2020: 44%) of our consolidated net sales. Our top ten customers represented 53.9% of segment sales. Two customers represented 12% of our Gas Cylinders Segment sales.
Gas Cylinders Segment Our Gas Cylinders Segment manufactures and markets specialized, highly-engineered cylinders using carbon composites and aluminum alloys. In 2023, sales from our Gas Cylinders Segment represented approximately 46% (2022: 43%, 2021: 48%) of our consolidated net sales. Our top ten customers represente d 59% of s egment sales.
Occupational Health and Safety Luxfer is committed to safeguarding the health and safety of our employees at work. We have well-defined health and safety policies and procedures that are reinforced by ongoing employee training. We conduct annual on-site audits to identify and manage environmental health and safety risks, as well as to evaluate compliance with regulatory requirements and Luxfer policy.
We have well-defined health and safety policies and procedures that are reinforced by ongoing employee training. We conduct annual on-site audits to identify and mitigate environmental health and safety risks, as well as evaluate for compliance with all regulatory requirements and Luxfer policies.
We source premium-grade zircon sand from suppliers in South Africa, Senegal, Indonesia and Australia. We also purchase intermediate zirconium chemicals from suppliers in China. The level of these purchases is based on a number of factors, including required properties and relative market prices. During part of 2022, one of our suppliers of zircon sand had enforced force majeure.
We source premium-grade zircon sand from suppliers in South Africa, Senegal, Indonesia and Australia. We also purchase intermediate zirconium chemicals from suppliers in China. The level of these purchases is based on a number of factors, including required properties and relative market prices. There are 17 rare earth metals that are commonly found in nature.
Elektron Segment Key raw materials used by our Elektron Segment are magnesium, zircon sand and rare earths. The world demand for magnesium is around one million metric tons per year. China provides about 80% of the world supply.
However the outlook remains highly uncertain with both the size and timing of future costs difficult to predict. 2 Elektron Segment Key raw materials used by our Elektron Segment are magnesium, zircon sand and rare earths. The world demand for magnesium is around one and a half million metric tons per year. China provides about 80% of the world supply.
There are 17 rare earth metals that are commonly found in nature. Usually mixed together with other mineral deposits, these rare earths exhibit magnetic and light-emitting properties that make them invaluable to high-technology manufacturers. These rare earth metals are used as ingredients in our zirconium chemical and magnesium alloy products.
Usually mixed together with other mineral deposits, these rare earths exhibit magnetic and light-emitting properties that make them invaluable to high-technology manufacturers. These rare earth metals are used as ingredients in our zirconium chemical and magnesium alloy products. Our largest rare earth requirement is cerium, which we use in automotive catalysis compounds because of its unique oxygen-storage capabilities.
All functional business units report metrics to assess health and safety performance, which are reviewed regularly by executive leadership and management. In fiscal year 2022, the Company had eight Lost Time Accidents and an Incident Frequency Rate of 1.59 with zero work-related fatalities. Professional Growth and Development Providing opportunities for professional growth and development is key to Luxfer’s retention strategy.
All functional business units report a mixture of leading and lagging metrics to assess health and safety performance, which are reviewed regularly by executive leadership and management. In fiscal year 2023, the Company had 4 Lost Time Accidents and an Incident Frequency Rate of 2.46 with no work-related fatalities.
In 2022, our net sales from continuing operations were $423.4 million (2021: $374.1 million, 2020: $324.8 million), and our net income from continuing operations was $32.0 million (2021: $30.0 million, 2020: $20.8 million). Luxfer operates in two business segments - Elektron and Gas Cylinders. Elektron Segment Our Elektron Segment focuses on specialty materials based primarily on magnesium and zirconium.
In 2023, our net sales from continuing operations were $405.0 million (2022: $423.4 million, 2021: $374.1 million), and our net loss from continuing operations was $2.6 million (2022: $32.0 million income, 2021: $30.0 million income). Luxfer operates in three business segments - Elektron, Gas Cylinders and Graphic Arts.
Luxfer maintains talent and succession planning processes, including regular review by the Executive Leadership Team and reports to the Board of Directors. We operate leadership and management development programs, which provide a consistent approach to the development to the Company’s future leaders and managers. With a multi-faceted curriculum, these programs develop critical problem-solving, communication, management, and leadership skills.
We operate leadership and management development programs, which provide a consistent approach to the development to the Company’s future leaders and managers. With a multi-faceted curriculum, these programs assist with developing core competencies which include critical problem-solving, communication, management, and leadership skills.
In 2022, sales from our Elektron Segment represented approximately 57% (2021: 52%, 2020: 56%) of our consolidated net sales from continuing operations. Our top ten customers represented 40% of segment sales. No singular customer represented 10% or more of our Elektron Segment sales.
Elektron Segment Our Elektron Segment focuses on specialty materials based primarily on magnesium and zirconium. In 2023, sales from our Elektron Segment represented approximately 46% (2022: 47%, 2021: 42%) of our consolidated net sales from continuing operations. Our top ten customers represented 50% of segment sales. No singular customer represented 10% or more of our Elektron Segment sales.
Human Capital Management The Company employed approximately 1,400 people as of December 31, 2022, fewer than 50 of whom support our discontinued operations. Of the approximately 1,350 employees associated with continuing operations, approximately 750 are employed in the United States and 600 are employed internationally. Attracting and retaining talent remains a challenge in the post-COVID landscape.
Of the approximately 1,300 employees associated with continuing operations, approximately 700 are employed in the United States and 600 are employed internationally. Attracting and retaining talent remains a challenge in the post-COVID landscape.
While we generally have passed through changes in input costs to our customers, some of our Gas Cylinders Segment contracts contain look-back provisions that result in a lag to our ability to adjust pricing for changes in input costs. 3 Our end-markets Key end-markets for Luxfer products fall into three categories: Transportation (31% of 2022 sales): Many Luxfer products serve a growing need to improve and safeguard the environment in the field of transportation, including our (i) lightweight, high-pressure carbon composite cylinders that contain compressed natural gas and hydrogen; (ii) zirconium-based products that reduce automotive and other emissions; and (iii) lightweight magnesium alloys used in fuel-efficient aerospace and automotive designs.
Due to the nature of the production process, the purchase price of magnesium can take up to 12 months to be fully recognized in the income statement and the business is expected to benefit from these lower costs throughout 2024. 3 Our end-markets Key end-markets for Luxfer products fall into three categories: Transportation (29% of 2023 sales): Many Luxfer products serve a growing need to improve and safeguard the environment in the field of transportation, including our (i) lightweight, high-pressure carbon composite cylinders that contain compressed natural gas and hydrogen; (ii) zirconium-based products that reduce automotive and other emissions; and (iii) lightweight magnesium alloys used in fuel-efficient aerospace and automotive designs.
Informed by data, our human capital management initiatives are supported by local leadership, with significant functional oversight by our local human resource teams. All Luxfer facilities collect data on employee retention, talent acquisition, training, and safety. Metrics are recorded quarterly on our internal scorecard and are reported to executive management regularly.
All Luxfer facilities collect data on employee retention, talent acquisition, training, and safety. Metrics are recorded quarterly on our internal scorecard and are reported to executive management regularly. Occupational Health and Safety Luxfer is committed to safeguarding the health and safety of our employees at work.
We believe that our commitment to research and new product development, through dedicated resources and significant use of management's time, forms the core of Luxfer's growth potential. This commitment reflects our strategy of focusing on high-performance, value-added products and markets as well as leveraging our collaboration with universities.
This commitment reflects our strategy of focusing on high-performance, value-added products and markets as well as leveraging our collaboration with universities.
Such priorities include: (i) ensuring occupational health and safety; (ii) providing opportunities for professional growth and development; (iii) maintaining diverse and inclusive workplaces; and (iv) promoting financial, physical, and emotional well-being. Our Board of Directors and Executive Leadership Team play a key role in setting our human capital management strategy and driving accountability for meaningful progress.
Such priorities include: (i) ensuring occupational health and safety; (ii) providing opportunities for professional growth and development; (iii) maintaining diverse and inclusive workplaces; and (iv) promoting financial, physical, and emotional well-being while trying to enhance the employee experience.
Key patents held by our Gas Cylinders Segment relate to composites and alloys for pressurized hollow bodies. No individual patent or such intellectual property is considered material to either the Elektron or Gas Cylinders Segment.
Key patents held by our Gas Cylinders Segment relate to composites and alloys for pressurized hollow bodies. No individual patent or such intellectual property is considered material to any of our reporting segments. In certain areas, we rely more heavily upon trade secrets and unpatented proprietary know-how than patent protection in order to establish and maintain our competitive advantage.
Magnesium LLC, we do not know when or if we will be able to recommence the magnesium ingot purchases specified under this contract. We purchase and process zircon sand, which is found in heavy-minerals sand, titanium dioxide and other products. Global production of zircon sand is estimated at approximately 1.5 million metric tons.
We generally purchase raw materials from suppliers on a spot basis under previously contracted terms and conditions and have been able to source magnesium from alternate suppliers. We purchase and process zircon sand, which is found in heavy-minerals sand, titanium dioxide and other products. Global production of zircon sand is estimated at approximately 1.5 million metric tons.
Financial Information about Segments and Geographic Areas See Note 17 ("Segment Information") to our consolidated financial statements for further information regarding our operating segments and our geographic areas. Suppliers and raw materials Update on global macro environment and related impact on supply chain disruption.
All information included within this section relates to continuing operations, unless otherwise stated. Financial Information about Segments and Geographic Areas See Note 17 ("Segment Information") to our consolidated financial statements for further information regarding our operating segments and our geographic areas.
In 2022, we purchased approximately 40% of our aluminum from Rio Tinto Alcan and its associated companies. Aluminum represented approximately 35% of Gas Cylinders Segment's raw material costs in 2022. The price of aluminum, and carbon fiber, has been volatile in the past and has increased substantially in 2022.
Over time, we have built relationships with our suppliers, providing them predictable requirements and annual contracts that help to ensure procurement of our required volume of carbon fiber. In 2023, we purchased approximately 45% of our aluminum from Rio Tinto Alcan and its associated companies. Aluminum represented approximately 30% of Gas Cylinders Segment's raw material costs in 2023.
Currently, we expect the impact of material availability and inflation, as well as energy cost inflation and labor and transport constraints to continue through 2023. We also expect to be able to source sufficient material to meet demand and in the majority of cases, we expect to be able to pass on cost increases to our customers.
Currently, our expectation is that the adverse impact of material availability / inflation, energy cost inflation and labor and transport constraints will lessen in 2024 and when costs fall we will in some cases need to reduce prices to customers.
However, given the current force majeure declared by our U.S. supplier of magnesium, we are in the process of qualifying non-U.S.-sourced material for sale to the U.S. military. We generally purchase raw materials from suppliers on a spot basis under previously contracted terms and conditions. We have long-term supply contracts in place with U.S.
However, given the current force majeure declared by our U.S. supplier of magnesium, we have qualified non-U.S.-sourced material for sale to the U.S. military. Given the current force majeure declared by U.S. Magnesium LLC, we do not know when or if we will be able to recommence the magnesium ingot purchases with this supplier.
Removed
Demand from most end-markets we serve has continued to improve following the adverse impact of COVID-19 on volumes.
Added
Graphic Arts Segment Our Graphic Arts Segment is a global leader in magnesium photo-engraving plates, engraving metals and etching chemicals. In 2023, sales from our Graphic Arts Segment represented approximately 8% (2022: 9%, 2021: 11%) of our consolidated net sales. Our top ten customers represented 38% of segment sales.
Removed
This recovery in demand across the global macro environment following the onset of COVID-19 has resulted in supply chain challenges characterized by significant increases in cost of key inputs, including magnesium, aluminum, carbon fiber and energy, material and labor availability issues and transport cost increases.
Added
No singular customer represented 10% or more of our Graphic Arts Segment sales. Key product lines include: • Magnesium, copper, and zinc photo-engraving plates for graphic arts and luxury packaging. • Developer solutions to aide the engraving process. • Solid wrought magnesium slab and sheet.
Removed
Additionally, during 2022 two critical suppliers for our Elektron Segment of magnesium and zirconium, respectively, had enforced force majeure, a standard clause in contracts to remove liability for unexpected and unavoidable catastrophes that interrupt the normal course of business and prevent participants from fulfilling contractual obligations.
Added
We are currently in the process of executing an accelerated and expanded strategic review process, the initial conclusions of which have determined that the Graphic Arts business no longer aligns with Luxfer's value proposition, hence we are initiating a sales process with the intention of divesting this business in 2024.
Removed
The force majeure for magnesium was declared in 2021 and remains in place, impacting our U.S. domestic procurement of this key material. The continuing conflict in Ukraine, which has resulted in punitive sanctions against the Russian Federation, has further exacerbated the availability and price of certain raw materials and energy supplies.
Added
Suppliers and raw materials Margin pressure resulting from supply chain challenges easing We have been experiencing supply chain challenges, which has resulted in higher cost of certain raw materials. In our supply chain, previously described challenges caused by the disruption in our U.S. domestic magnesium supply continued, and overall competitive cost pressures persisted.
Removed
In response to these supply chain disruptions, we have secured alternative sources of supply for key material inputs affected by force majeure and have built additional raw material inventory throughout the year. Furthermore, in the majority of cases, we are able to pass through raw material inflation to our customers.
Added
These issues have been particularly acute in our Graphic Arts segment, where the ability to pass through higher costs to our customers has proved to be constrained. In recent months however, the purchase price of Magnesium has been falling, which will result in lower input cost in 2024.
Removed
However, the outlook remains uncertain with both the size and timing of future cost increases difficult to predict. Impact of conflict in Ukraine The Russian invasion of Ukraine and ongoing military conflict which commenced on February 24, 2022, has resulted in displacement of the Ukrainian population and disruption to the Ukrainian economy.
Added
We have implemented elements of our strategic review in Graphic Arts to reduce costs, including a headcount reduction program. We are also pursuing further actions to improve margins and maintain strong cash flow across the business.
Removed
Wide ranging sanctions have been imposed on the Russian Federation by the international community, targeting individuals, banks, businesses, funds transfers and imports and exports and are expected to have a significant adverse impact on Russia's economy as well as on international businesses active in the region.
Added
In the majority of cases we are able to pass through inflationary costs to our customers, although we are still constrained by a small number of contracts, particularly in the Gas Cylinders segment, the longest running of which is not subject to renewal until mid-2024.
Removed
Currently, we do not expect the impact on Luxfer from these developments to be significant. We hold no direct operations in the region, and our sales to Russia and Ukraine combined represent less than one percent of total revenue by destination. Furthermore, neither country is a critical supplier of our raw materials.
Added
The price of aluminum, and carbon fiber, has been volatile in the past and increased substantially in 2022 and continued through 2023.
Removed
While Russia is a major global exporter of magnesium, we are able to source the metal from various alternative locations, including China, Israel and Turkey. Historically, we also sourced magnesium domestically, however, due to the force majeure declared by U.S. Magnesium LLC, the only U.S. producer of magnesium, in 2021, we currently cannot source from the U.S.
Added
While we generally have passed through changes in input costs to our customers, some of our Gas Cylinders Segment contracts contain look-back provisions that result in a lag to our ability to adjust pricing for changes in input costs. Graphic Arts Segment The key raw material used in the Graphic Arts segment is magnesium.
Removed
Magnesium for raw material purchases of magnesium ingot for both military and commercial applications. The military contract covers magnesium purchases through December 31, 2023, whereas the commercial contract covers purchases through December 2 31, 2023. However, given the current force majeure declared by U.S.
Added
Magnesium purchases in the last two years have been impacted by a sharp rise in prices, as detailed above, which has contributed to the loss in market share outside of the U.S. and reduced performance of the segment.
Removed
Our largest rare earth requirement is cerium, which we use in automotive catalysis compounds because of its unique oxygen-storage capabilities. Gas Cylinders Segment Key raw materials used in the Gas Cylinders Segment include high-strength carbon fiber and aluminum. Our main carbon fiber suppliers are Toray and Mitsubishi.
Added
Consistent with our Elektron segment, magnesium used in U.S. production was previously purchased exclusively from the U.S. but since the force majeure declared by our U.S. supplier, purchases have been sourced from a number of non-U.S. sources.
Removed
In certain areas, we rely more heavily upon trade secrets and unpatented proprietary know-how than patent protection in order to establish and maintain our competitive advantage. We generally enter into non-disclosure and invention assignment agreements with our employees and subcontractors, as well as our customers and vendors.
Added
Magnesium prices for U.S. production peaked in 2022 at approximately four times the historical price before falling back to around one-and-a-half times in recent months.
Added
We generally enter into non-disclosure and invention assignment agreements with our employees and subcontractors, as well as our customers and vendors. Human Capital Management The Company employed approximately 1,400 people as of December 31, 2023, fewer than 50 of whom relate to discontinued operations.
Added
Our Board of Directors and Executive Leadership Team play a key role in setting our human capital management strategy and driving accountability for meaningful progress. Informed by data, our human capital management initiatives are supported by local leadership, with significant functional oversight by our local human resource teams.
Added
Professional Growth and Development Providing opportunities for professional growth and development is key to Luxfer’s retention strategy. Luxfer proactively maintains talent and succession planning processes, including regular review by the Executive Leadership Team and reports to the Board of Directors.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

55 edited+11 added−15 removed144 unchanged
Biggest changeIf our internal controls over financial reporting are not considered adequate, this may adversely affect our ability to report our financial results on a timely and accurate basis, which may result in a loss of public confidence or have an adverse effect on the market price of our ordinary shares, which could then adversely impact our ability to access equity markets and have a material adverse impact on our results of operations, financial position and cash flows.
Biggest changeWe identified a material weakness in our internal control over financial reporting which, if not remediated appropriately or timely, we may be unable to accurately report our financial results or prevent fraud, and could result in the loss of investor confidence and adversely impact our business operations and our stock price.
If our operations fail to obtain, experience delays in obtaining or lose a needed certification or approval, we may not be able to sell our products to our customers, expand into new geographic markets or expand into new product lines. In addition, new or more stringent regulations, if imposed, could result in us incurring significant costs in connection with compliance.
If our operations fail to obtain, experience delays in obtaining, or lose a needed certification or approval, we may not be able to sell products to our customers, expand into new geographic markets or expand into new product lines. In addition, new or more stringent regulations, if imposed, could result in us incurring significant costs in connection with compliance.
The Paris Agreement set a goal of holding the increase in global average temperature to well below 2 degrees Celsius and pursuing efforts to limit the increase to 1.5 degrees Celsius, to be achieved by commitments by the participating countries to set emissions reduction targets, referred to as "nationally determined contributions." The Paris Agreement came into effect on November 4, 2016, after it was ratified the previous month, with implementation efforts beginning from 2018 with reassessment every five years.
The Paris Agreement set a goal of holding the increase in global average temperature to below 2 degrees Celsius and pursuing efforts to limit the increase to 1.5 degrees Celsius, to be achieved by commitments by the participating countries to set emissions reduction targets, referred to as "nationally determined contributions." The Paris Agreement came into effect on November 4, 2016, after it was ratified the previous month, with implementation efforts beginning from 2018 with reassessment every five years.
In addition, we could experience a reduction in sales if any of our customers fail to perform or default on any payment pursuant to our contracts with them. Long-term relationships with customers are especially important for suppliers of intermediate materials and components such as ourselves.
In addition, we could experience a reduction in sales if any of our 10 customers fail to perform or default on any payment pursuant to our contracts with them. Long-term relationships with customers are especially important for suppliers of intermediate materials and components such as ourselves.
While there is an expectation that no further contributions will be required until at least after the next valuation in 2024, there is no guarantee that this will be the case; and no contributions were made during 2022. The Trustee can request additional contributions, and the U.K.
While there is an expectation that no further contributions will be required until at least after the next valuation in 2024, there is no guarantee that this will be the case; and no contributions were made during 2023 and 2022. The Trustee can request additional contributions, and the U.K.
The impact on Luxfer in 2022 was not significant as we have no direct operations in the region, and our sales to Russia and Ukraine combined typically represent less than one percent of total revenue by destination.
The impact on Luxfer in 2022 and 2023 was not significant as we have no direct operations in the region, and our sales to Russia and Ukraine combined typically represent less than one percent of total revenue by destination.
Nevertheless, we cannot assure you that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information.
Nevertheless, we cannot assure that these agreements will provide meaningful protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use, misappropriation or disclosure of such trade secrets, know-how or other proprietary information.
In the event of a significant interruption in the supply of any materials used in our production processes, or a significant increase in their prices, we may have to purchase these materials from alternative sources, build additional inventory of raw materials, increase our prices, reduce our margins or possibly fail to fill customer orders by deadlines required in contracts, which could result in, among other things, contractual penalties.
In the event of a significant interruption in the supply of any materials used in our production processes, or a significant increase in their prices, we may have to purchase these materials from alternative sources, build additional inventory of raw materials, increase our prices, reduce our margins or possibly fail to fill customer orders by deadlines required in contracts, which could result in, amongst other things, contractual penalties.
We have defined benefit pension arrangements in the U.K. and in the U.S., see ITEM 8, Note 14. Our largest defined benefit plan, the Luxfer Group Pension Plan, which closed to new members in 1998, remained open for accrual of future benefits based on career-average salary until April 5, 2016.
We have defined benefit pension arrangements in the U.K. and in the U.S., see ITEM 8, Note 14. Our largest defined benefit plan, the Luxfer Group Pension Plan, ('the Plan') which closed to new members in 1998, remained open for accrual of future benefits based on career-average salary until April 5, 2016.
As regulatory schemes vary by country, we may also be subject to regulations of which we are not presently aware and could be subject to sanctions by a foreign government that could materially and adversely affect our operations in the relevant country. Governments and their agencies have considerable discretion to determine whether regulations have been satisfied.
As regulatory plans vary by country, we may also be subject to regulations of which we are not presently aware and could be subject to sanctions by a foreign government that could materially and adversely affect our operations in the relevant country. Governments and their agencies have considerable discretion to determine whether regulations have been satisfied.
We depend on certain end-markets, including automotive, alternative fuels, self-contained breathing apparatus ("SCBA"), aerospace, defense, healthcare, oil and gas and printing and paper. An economic downturn, or regulatory changes, in any of those end-markets, could reduce sales and profit margins on those end-markets.
Economic and Industry risks We depend on certain end-markets, including automotive, alternative fuels, self-contained breathing apparatus ("SCBA"), aerospace, defense, healthcare, oil and gas and printing and paper. An economic downturn, or regulatory changes, in any of those end-markets, could reduce sales and profit margins on those end-markets.
There is doubt as to the enforceability in England and Wales, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities solely based on the U.S. federal securities laws. 23 Item 1B. Unresolved Staff Comments None.
There is doubt as to the enforceability in England and Wales, in original actions or in actions for enforcement of judgments of U.S. courts, of civil liabilities solely based on the U.S. federal securities laws. 24 Item 1B. Unresolved Staff Comments None.
We are exposed to various risks related to our defined benefit plans, including the risk of loss of market value of the plan assets, the risk of actual investment returns being less than assumed rates of return, the Trustees of the Luxfer Group Pension Plan switching investment strategy (which does require consultation with the employer), and the risk of actual experience deviating from actuarial assumptions for such things as mortality of plan participants.
We are exposed to various risks related to our defined benefit plans, including the risk of loss of market value of the plan assets, the risk of actual investment returns being less than assumed rates of return, the Trustees of the Luxfer Group Pension Plan switching investment strategy (which requires consultation with the employer), and the risk of actual experience deviating from actuarial assumptions for such things as mortality of plan participants.
Our management is required to report on the effectiveness of our internal control over financial reporting, as required annually by Section 404(a), and quarterly by Section 302 of the Sarbanes-Oxley Act, for which we perform system and process evaluation and testing of our internal control over financial reporting.
Management are required to report on the effectiveness of our internal control over financial reporting, as required annually by Section 404(a), and quarterly by Section 302 of the Sarbanes-Oxley Act, for which we perform system and process evaluation and testing of our internal control over financial reporting.
As our consolidated financial statements are reported in U.S. d ollars, we are exposed to fluctuations in those currencies when those amounts are translated to U.S. dollars for purposes of reporting our consolidated financial statements, which may cause declines in results of operations.
As our consolidated financial statements are reported in U.S. dollars, we are exposed to fluctuations in those currencies when those amounts are translated to U.S. dollars for purposes of reporting our consolidated financial statements, which may cause declines in results of operations.
Although we are working to improve our energy efficiency, our manufacturing processes and the manufacturing processes of many of our suppliers and customers are still energy-intensive and use or generate, directly or indirectly, greenhouse gases ("GHGs"). In recent years, current regulatory programs impacting GHG emissions from large industrial plants and other sources include the E.U.
Whilst we are working to improve our energy efficiency, our manufacturing processes and the manufacturing processes of many of our suppliers and customers are energy-intensive and use or generate, directly or indirectly, greenhouse gases ("GHGs"). In recent years, current regulatory programs impacting GHG emissions from large industrial plants and other sources include the E.U.
Any significant reduction in sales or cus tomer payment default could have an adverse material impact on our results of operations, financial position and cash flows. We depend upon our larger suppliers for a significant portion of our raw materials, and a loss of one of these suppliers, or a significant supply interruption could negatively impact our financial performance.
Any significant reduction in sales or customer payment default could have an adverse material impact on our results of operations, financial position and cash flows. We depend upon our larger suppliers for a significant portion of our raw materials, and a loss of one of these suppliers, or a significant supply interruption could negatively impact our financial performance.
For additional information on these risks, and the historical impact on our results, see ITEM 7A. 12 Our defined benefit pension plans historically have had funding deficits, (currently a surplus) and are exposed to market forces that could require us to make increased ongoing cash contributions in response to changes in market conditions, actuarial assumptions and investment decisions These market forces could expose us to significant short-term liabilities if a wind-up trigger occurred in relation to such plans, each of which could have a material adverse impact on our results of operations and financial position.
For additional information on these risks, and the historical impact on our results, see ITEM 7A. 12 Our defined benefit pension plans have historically fluctuated between funding deficits and surpluses and are exposed to market forces that could require us to make increased ongoing cash contributions in response to changes in market conditions, actuarial assumptions and investment decisions These market forces could expose us to significant short-term liabilities if a wind-up trigger occurred in relation to such plans, each of which could have a material adverse impact on our results of operations and financial position.
We often work closely with customers to develop products that meet particular specifications as part of the design of a product intended for an end-user market. The bespoke nature of many of our products could make it difficult to replace lost customers. Our top 10 customers accounted for approximately 31% of our net sales in 2022.
We often work closely with customers to develop products that meet particular specifications as part of the design of a product intended for an end-user market. The bespoke nature of many of our products could make it difficult to replace lost customers. Our top 10 customers accounted for approximately 39% of our net sales in 2023.
These transaction risks principally arise as a result of purchases of raw materials in U.S. dollars, coupled with sales of products to customers in euros. This impact is most pronounced in our exports to continental Europe from the U.K. In 2022, our U.K. operations sold approximately €53 million of goods into the Eurozone .
These transaction risks principally arise as a result of purchases of raw materials in U.S. dollars, coupled with sales of products to customers in euros. This impact is most pronounced in our exports to continental Europe from the U.K. In 2023, our U.K. operations sold approximately €50 million of goods into the Eurozone.
Furthermore, neither country is a critical supplier of our raw material needs, and while Russia is a major global exporter of magnesium, we are able to source the metal from various alternative locations, including China, Israel, Turkey and the United States.
Furthermore, neither country is a critical supplier of our raw material needs, and whilst we continue to source magnesium from Russia, a major global exporter, we are also able to source the metal from various alternative locations, including China, Israel, Turkey and the United States.
Wide ranging sanctions have been imposed on the Russian Federation by the international community, targeting individuals, banks, businesses, funds transfers and imports and exports and are expected to have a significant adverse impact on Russia's economy as well as on international businesses active in the region.
Wide ranging sanctions have been imposed on the Russian Federation by the international community, targeting individuals, banks, businesses, funds transfers and imports and exports and are having a significant impact on Russia's economy as well as on international businesses active in the region.
In addition to benefiting from our research collaboration with universities, we spent $4.9 million, $3.9 million and $3.3 million in 2022, 2021 and 2020, respectively, on our own research and development activities.
In addition to benefiting from our research collaboration with universities, we spent $4.6 million, $4.9 million and $3.9 million in 2023, 2022 and 2021, respectively, on our own research and development activities.
In in the prior year we were faced with two critical suppliers of magnesium and zirconium respectively declaring force majeure, of which the former remains in place.
In 2021 we were faced with two critical suppliers of magnesium and zirconium respectively declaring force majeure, of which the former remains in place.
For example, in March 2021, the U.K. government announced an increase in the statutory rate of Corporation tax from the current 19% to 25%, which will take effect from April 2023, and is expected to increase the future tax burden on earnings from our U.K. operations.
For example, in March 2021, the U.K. government announced an increase in the statutory rate of Corporation tax from the current 19% to 25%, which became effective in April 2023, and is expected to increase the future tax burden on earnings from our U.K. operations.
The Luxfer Group Pension Plan is funded according to the regulations in effect in the U.K. and, as of December 31, 2022, and December 31, 2021, had an accounting surplus of $27.0 million and $13.7 million, respectively.
The Luxfer Group Pension Plan is funded according to the regulations in effect in the U.K. and, as of December 31, 2023, and December 31, 2022, had an accounting surplus of $40.3 million and $27.0 million, respectively.
The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, competitors may infringe our patents and the costs of protecting our patents could be significant.
The patents we own could be challenged, invalidated or circumvented by others and may not be of sufficient scope or strength to provide us with any meaningful protection or commercial advantage. Further, competitors may infringe our patents and the costs of protecting our patents could be significant. We cannot assure that we will have adequate resources to enforce our patents.
F luctuations in exchange rates, particularly between the U.S. dollar and GBP sterling (which has been subject to significant fluctuations, as described above), can have a material effect on our consolidated income statement and consolidated balance sheet. In 2022, movements in the average U.S. dollar exchange rate had a negative impact impact on net sales of $15.6 million.
Fluctuations in exchange rates, particularly between the U.S. dollar and GBP sterling (which has been subject to significant fluctuations, as described above), can have a material effect on our consolidated income statement and consolidated balance sheet. In 2023, movements in the average U.S. dollar exchange rate had a positive impact impact on net sales of $2.8 million.
REACH Regulation has been brought into U.K. law, and REACH, and related legislation, have therefore been replicated in the U.K. In the U.S., there is similar legislation under the Toxic Substance Control Act 1976 ("TSCA") which was substantially amended in 2016.
Following the U.K.’s withdrawal from the E.U. and the subsequent transition period, the E.U. REACH Regulation has been brought into U.K. law, and REACH, and related legislation, have therefore been replicated in the U.K. In the U.S., there is similar legislation under the Toxic Substance Control Act 1976 ("TSCA") which was substantially amended in 2016.
We successfully secured and qualified magnesium from alternative sources to meet requirements for both military and commercial applications for the remainder of 2023.
We successfully secured and qualified magnesium from alternative sources to meet requirements for both military and commercial applications for 2023 and into 2024.
For example, the significant increase in demand for materials and energy stemming from the post-COVID economic recovery and current conflict in Ukraine has resulted in significant constraints on availability of key inputs such as magnesium, aluminum and energy supplies with a consequent spike in prices.
For example, the significant increase in demand for materials and energy has resulted in significant constraints on availability of key inputs such as magnesium, aluminum and energy supplies with a consequent spike in prices.
In addition, we have supply contracts in place with U.S. Magnesium for raw material purchases of magnesium ingot for both military and commercial applications. In 2021 U.S. magnesium entered force majeure and deliveries reduced up until late 2022, when they ceased completely, with an expectation that they would not recommence until the second half of 2023.
In addition, we have supply contracts in place with U.S. Magnesium for raw material purchases of magnesium ingot for both military and commercial applications, although since entering force majeure in 2021, deliveries reduced up until late 2022, when they ceased completely. The current expectation is that they will not recommence until the end of 2024.
The largest risk is from our operations in the U.K., which, in 2022, generated an operating profit of $6.4 million and sales of $176 million.
The largest risk is from our operations in the U.K., which, in 2023, generated an operating profit of $8.4 million and sales of $158.9 million.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Further, we cannot assure that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.
As of December 31, 2022, we had $50.0 million of indebtedness under our senior notes (the "Loan Notes") divided into two equal tranches of $25.0 million due in 2023 and 2026, respectively. There was also a $31.9 million balance on the revolving credit facility ("RCF") as of December 31, 2022. Our indebtedness could have important consequences.
As of December 31, 2023, we had $25.0 million of indebtedness under our senior notes (the "Loan Notes") due in 2026. There was also a $43.1 million and $4.6 million balance on the revolving credit facility ("RCF") and bank overdraft, respectively, as of December 31, 2023. Our indebtedness could have important consequences.
However, this has caused macro-economic disruption which could adversely affect the Company and/or our supply chain, business partners or customers. 10 Due to the fact we have operations in many countries, we are also liable to pay taxes in many fiscal jurisdictions.
This is also evident in the current war in the Middle East that is causing macro-economic disruption which could affect the Company and/or our supply chain, business partners or customers. Due to the fact we have operations in many countries, we are also liable to pay taxes in many fiscal jurisdictions.
Emissions Trading Scheme, the CRC Energy Efficiency Scheme in the U.K. and certain federal and state programs in the U.S., including GHG reporting and permitting rules issued by the U.S.E.P.A and the California Cap and Trade Program.
Emissions Trading Scheme, the CRC Energy Efficiency Scheme in the U.K. and certain federal and state programs in the U.S., including GHG reporting and permitting rules issued by the U.S.E.P.A and the California Cap and Trade Program. There are potential additional costs in order to comply with these increased regulations.
Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows. Our operations rely on a number of large customers in certain areas of our business, and the loss of any of our major customers could negatively impact our results of operations.
Our operations rely on a number of large customers in certain areas of our business, and the loss of any of our major customers could negatively impact our results of operations.
Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems for the foreseeable future.
We are subject to reporting obligations under U.S. securities laws. Our reporting obligations as a public company place a significant strain on our management, operational and financial resources and systems for the foreseeable future.
Future cybersecurity breaches, general information security incidents, further increases in data protection costs or failure to comply with relevant legal obligations regarding protection of data could therefore have a material adverse effect on our results of operations, financial position and cash flows. We could incur future liability claims arising from previous businesses now closed or sold.
Future cybersecurity breaches, general information security incidents, further increases in data protection costs or failure to comply with relevant legal obligations regarding protection of data could therefore have a material adverse effect on our results of operations, financial position and cash flows. See ITEM 1C for further information regarding disclosed our Cybersecurity procedures.
Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks. Any failure to maintain, protect and enforce our intellectual property or the expiry of patent protection could have a material adverse impact on our results of operations, financial position and cash flows.
Any failure to maintain, protect and enforce our intellectual property or the expiry of patent protection could have a material adverse impact on our results of operations, financial position and cash flows.
A substantial portion of our assets, and the assets of such persons, are located outside of the U.S.
Some of our directors and officers reside outside of the U.S., principally in the U.K. A substantial portion of our assets, and the assets of such persons, are located outside of the U.S.
Certain of our operations are highly regulated by different agencies that require products to comply with their rules and procedures and can subject our operations to penalties or adversely affect production. Certain of our operations are in highly regulated industries that require us to maintain regulatory approvals and, from time to time, obtain new regulatory approvals from various countries.
Certain aspects of our operations are highly regulated by different agencies that require products to comply with their rules and procedures and can subject our operations to penalties or adversely affect production.
For additional details of some of our major suppliers (see ITEM 1 - Suppliers and raw materials). We generally purchase raw materials from suppliers on a spot basis under standard terms and conditions. We also enter into supply contracts with Rio Tinto Alcan for a substantial portion of our aluminum requirements.
We rely, to varying degrees, on major suppliers for some of the principal raw materials of our engineered products, including aluminum, zirconium and carbon fiber. We generally purchase raw materials from suppliers on a spot basis under standard terms and conditions. We also enter into supply contracts with Rio Tinto Alcan for a substantial portion of our aluminum requirements.
In 2021 movements in the average U.S. dollar exchange rate had a positive impact on net sales of $9.5 million. Changes in translation exchange rates decreased net assets by $13.2 million in 2022, compared to a decrease of $0.8 million in 2021.
In 2022 movements in the average U.S. dollar exchange rate had a negative impact on net sales of $15.6 million. Changes in translation exchange rates increased net assets by $7.3 million in 2023, compared to a decrease of $13.2 million in 2022.
The E.U. has also passed legislation governing the registration, evaluation and authorization of chemicals, known as REACH, pursuant to which we are required to register 14 chemicals and gain authorization for the use of certain substances. Following the U.K.’s withdrawal from the E.U. and the subsequent transition period, the E.U.
In addition, we are required to comply with U.S. and other export regulations with respect to certain products and materials. The E.U. has also passed legislation 14 governing the registration, evaluation and authorization of chemicals, known as REACH, pursuant to which we are required to register chemicals and gain authorization for the use of certain substances.
The principal markets for our products are located in North America, Europe and Asia, and any financial difficulties experienced in these markets may have a material adverse impact on our businesses.
The principal markets for our products are located in North America, Europe and Asia, and any financial difficulties experienced in these markets may have a material adverse impact on our businesses. For example, the maturity of some of our markets, could require us to increase sales in developing regions, which may involve greater economic and political risks.
It may be difficult to effect service of U.S. process and enforce U.S. legal processes against the directors of Luxfer. Luxfer is a public limited company incorporated under the laws of England and Wales. A number of our directors and officers reside outside of the U.S., principally in the U.K.
We may also lose assets if we do not maintain adequate internal controls. 23 It may be difficult to effect service of U.S. process and enforce U.S. legal processes against the directors of Luxfer. Luxfer is a public limited company incorporated under the laws of England and Wales.
Additionally, the expiry of certain of those patents has reduced, or will reduce, barriers to entry to possible competitors for certain products and end-markets. With respect to our unpatented proprietary technology, it is possible that others will independently develop the same or similar technology or obtain access to our unpatented technology.
To compete, we may need to reduce our prices for those products. Additionally, the expiry of certain of those patents has reduced, or will reduce, barriers to entry to possible competitors for certain products and end-markets.
As a result, our competitors may introduce products using the technology previously protected, and these products may have lower prices than our products, which may negatively affect our market share. To compete, we may need to reduce our prices for those products.
Our patents will only be protected for the duration of the patent. Some of our older key patents have expired, and others will expire over the next few years. As a result, our competitors may introduce products using the technology previously protected, and these products may have lower prices than our products, which may negatively affect our market share.
To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements.
With respect to our unpatented proprietary technology, it is possible that others will independently develop the same or similar technology or obtain access to our unpatented technology. To protect our trade secrets and other proprietary information, we require employees, consultants, advisors and collaborators to enter into confidentiality agreements.
Moreover, any failure of hedging policies could negatively impact our profits, and thus damage our ability to fund our operations and to service our indebtedness. Exchange rate volatility continues to be experienced against a background of the COVID-19 pandemic and U.K. political uncertainty, and continued volatility is to be expected.
Moreover, any failure of hedging policies could negatively impact our profits, and thus damage our ability to fund our operations and to service our indebtedness.
This can involve substantial time and expense. In turn, higher costs of compliance reduce our cash flows from operations. For example, manufacturers of gas cylinders throughout the world must comply with high local safety and health standards and obtain regulatory approvals in the markets in which they sell their products.
For example, manufacturers of gas cylinders throughout the world must comply with high local safety and health standards and obtain regulatory approvals in the markets in which they sell their products. Furthermore, military organizations require us to comply with applicable government regulations and specifications when providing products or services to them directly or as subcontractors.
Regulatory burdens have also proved to be a significant risk, such as the U.K.'s Pension Protection Fund Levy, which was £0.3 million in 2022. Our other defined benefit plans are less significant than the Luxfer Group Pension Plan and, as of December 31, 2022, and December 31, 2021, had aggregate accounting deficits of $4.5 million and $1.9 million, respectively.
Regulatory burdens have also proved to be a significant risk, such as the U.K.'s Pension Protection Fund Levy, which was £0.2 million in 2023. The Company completed a buyout of the U.S. BA Holdings, Inc. Pension Plan in the first quarter of 2023.
Moreover, these strategic purchases increase our working capital needs, thus reducing our liquidity and cash flow. Accordingly, a substantial increase in raw material costs could have a material adverse effect on our results of operations, financial position and cash flows.
We cannot provide any assurances that we will be able to expand sales in these regions. Any of these factors could have a material adverse impact on our results of operations, financial position and cash flows.
Removed
Economic and Industry risks Our results of operations may be negatively impacted by the ensuing effects of the coronavirus disease pandemic, as well as the subsequent adverse impact on availability of key inputs and associated cost inflation. Activity in most of the end markets we serve improved throughout 2021 and continued to improve in 2022 following the global COVID-19 outbreak.
Added
We are not dependent on any one supplier for our primary raw materials, but the business could be impacted by supply constraints. If, in the future, we are unable to obtain sufficient amounts of material on a timely basis, we may not be able to obtain raw materials from alternate sources at competitive prices.
Removed
The sharp recovery in demand across the global macro environment has resulted in supply chain challenges characterized by significant increases in material cost inflation on key inputs (including magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases.
Added
In addition, interruptions or reductions in our supply of raw materials could make it difficult to satisfy our customers’ delivery requirements, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
Removed
Currently, our expectation is that the impact of material and energy cost inflation and labor and transport constraints will continue into 2023.
Added
The Company's other arrangements are less significant than the Plan and, as of December 31, 2023, and December 31, 2022, had aggregate accounting deficits of $0.1 million and $4.5 million, respectively.
Removed
While we aim to pass on cost increases to customers through increased price, there is no guarantee that we will be able to do so in all circumstances (see: We are exposed to fluctuations in the costs of the raw materials that are used to manufacture our products, and such fluctuations could lead us to incur unexpected costs and could affect our margins and / or working capital requirements ) , and failure to do so could have a material adverse impact on our results of operations, financial position and cash flows.
Added
Certain aspects of our operations are in highly regulated industries that require us to maintain regulatory approvals and, from time to time, obtain new regulatory approvals from various countries. This can involve substantial time and expense. In turn, higher costs of compliance reduce our cash flows from operations.
Removed
For example, the maturity of some of our markets, such as the U.S. market for photo-engraving plates, could require us to increase sales in developing regions, which may involve greater economic and political risks. We cannot provide any assurances that we will be able to expand sales in these regions.
Added
We could incur future liability claims arising from previous businesses now closed or sold.
Removed
We rely, to varying degrees, on major suppliers for some of the principal raw materials of our engineered products, including aluminum, zirconium and carbon fi ber. For example, in 2022, we obtained approximately 42% of our aluminum from Rio Tinto Alcan and its associated companies.
Added
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. As disclosed in ltem 9A, "Controls and Procedures" of this 2023 Annual Report on Form 10-K, management identified a material weakness in our internal control over financial reporting.
Removed
Moreover, demand for carbon fiber is increasing, which has led to occasional periods of short supply in recent years with a number of expanding applications competing for the same supply of this specialized raw material. Our largest suppliers of carbon fiber are Toray and Grafil, a subsidiary of Mitsubishi Chemical.
Added
Management identified a lack of controls related to the Company’s accounting for inventory in transit. As a result, management concluded it did not properly design or maintain effective risk assessment control activities to allow for timely reassessment of the risks of financial reporting.
Removed
In the past several years and during 2022, we have made additional purchases of large stocks of magnesium alloys in an effort to delay the effect of potentially increased costs in the future. However, even though such purchases are not made for speculative purposes, there can be no assurance that costs will move as expected.
Added
This material weakness could result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected. However, this material weakness did not result in a misstatement to the annual or interim consolidated financial statements previously filed or included in this Annual Report on Form 10-K.
Removed
The largest of these additional plans is the BA Holdings, Inc. Pension Plan in the U.S., which was closed to further benefit accruals in December 2005, and merged with the much smaller Luxfer Hourly Pension Plan, effective January 1, 2016. In September 2021, we commenced an exercise that we expect to result in a buyout of the U.S. plan liability.
Added
We are actively engaged in remediation activities designed to address the material weakness, but our remediation efforts are not complete and are ongoing. lf our remedial measures are insufficient to address the material weakness, or if additional material weaknesses or significant deficiencies in our internal control are discovered or occur in the future, it may materially adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner. lf we are unable to report our results in a timely and accurate manner, we may not be able to comply with the applicable covenants in our financing arrangements, and may be required to seek additional waivers or repay amounts under these financing arrangements earlier than anticipated, which could adversely impact our liquidity and financial condition.
Removed
An initial lump sum exercise took place in December 2022, with an annuity purchase and full buyout expected in early 2023.
Added
Although we continually review and evaluate internal control systems to allow management to report on the sufficiency of our internal controls, we cannot assure you that we will not discover additional weaknesses in our internal control over financial reporting.
Removed
Furthermore, military organizations require us to comply with applicable government regulations and specifications when providing products or services to them directly or as subcontractors. In addition, we are required to comply with U.S. and other export regulations with respect to certain products and materials.
Added
The next time we evaluate our internal control over financial reporting, if we identify one or more new material weaknesses or are unable to timely remediate our existing weakness, we may be unable to assert that our internal controls are effective. lf we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock and possibly impact our ability to obtain future financing on acceptable terms.
Removed
We cannot assure you that we will have adequate resources to enforce our patents. Our patents will only be protected for the duration of the patent. Some of our older key patents have expired, and others will expire over the next few years.
Removed
If we fail to establish or maintain an effective system of internal controls, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may, therefore, be adversely impacted. We are subject to reporting obligations under U.S. securities laws.
Removed
Over time we may identify and correct deficiencies or weaknesses in our internal controls and, where and when appropriate, report on the identification and correction of these deficiencies or weaknesses. However, the internal control procedures can provide only reasonable, and not absolute, assurance that deficiencies or weaknesses are identified.

… 1 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+2 added−0 removed1 unchanged
Biggest changeDivision Property / Plant Principal products manufactured Ownership Approximate area (square feet) Elektron Manchester, England Magnesium alloys / zirconium chemicals Split Lease / Own 560,000 Madison, IL Magnesium sheet Lease 805,000 Tamaqua, PA Magnesium powders Own 65,000 Lakehurst, NJ Magnesium powders Own 80,000 Flemington, NJ Zirconium chemicals Own 65,000 Cincinnati, OH Magnesium heating pads Lease 150,000 Saxonburg, PA Magnesium powders Own 70,000 Gas Cylinders Nottingham, England Composite and aluminum cylinders Lease 145,000 Calgary, Canada Composite cylinders Lease 65,000 Pomona, CA Composite cylinders Lease 175,000 Riverside, CA Composite cylinders Lease / Own 125,000 Shanghai, China Composite cylinders Lease 15,000 Discontinued operations Riverside, CA Aluminum panels Lease 70,000
Biggest changeDivision Property / Plant Principal products manufactured Ownership Approximate area (square feet) Elektron Manchester, England Magnesium alloys / zirconium chemicals Split Lease / Own 520,000 Tamaqua, PA Magnesium powders Own 65,000 Flemington, NJ Zirconium chemicals Own 65,000 Cincinnati, OH Magnesium heating pads Lease 150,000 Saxonburg, PA Magnesium powders Own 70,000 Gas Cylinders Nottingham, England Composite and aluminum cylinders Lease 145,000 Calgary, Canada Composite cylinders Lease 65,000 Pomona, CA Composite cylinders Lease 175,000 Riverside, CA Composite cylinders Lease / Own 125,000 Shanghai, China Composite cylinders Lease 15,000 Graphic Arts Madison, IL Magnesium Sheet Lease 805,000 Manchester, England Magnesium Sheet Own* 40,000 Discontinued operations Riverside, CA Aluminum panels Lease 70,000 *With the separate disclosure of Graphic Arts reporting segment in 2023, a portion of the Manchester site, owned and previously disclosed within Elektron, has been reclassified as Graphic Arts.
We carry out Elektron manufacturing operations at six plants in the United States and one plant in the United Kingdom. We carry out Gas Cylinders manufacturing operations at two plants in the United States and single plants in each of the United Kingdom, Canada and China. Gas Cylinders also has a sales and distribution office in both Australia and Italy.
We carry out Elektron manufacturing operations at four plants in the United States and one plant in the United Kingdom. We carry out Gas Cylinders manufacturing operations at two plants in the United States and single plants in each of the United Kingdom, Canada and China. Gas Cylinders also has a sales and distribution office in both Australia and Italy.
We have a further plant in the United States which is classified as discontinued operations. Our manufacturing plants comprise both owned and leased properties. We believe that our production facilities are suitable for their purpose and are adequate to support our businesses.
We carry out Graphic Arts manufacturing operations at one plant in the United States and one plant in the United Kingdom. We have a further plant in the United States which is classified as discontinued operations. Our manufacturing plants comprise both owned and leased properties.
Added
We believe that our production facilities are suitable for their purpose and are adequate to support our businesses.
Added
Graphic Arts lease the site from Luxfer MEL Technologies.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

0 edited+0 added−1 removed1 unchanged
Removed
In the opinion of management, the likelihood that the ultimate disposition of these matters will have a material adverse impact is remote.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+1 added−0 removed15 unchanged
Biggest changePurchase of Equity Securities In 2022, the Company purchased 711,572 ordinary shares for a total cost of $11.1 million.
Biggest changePurchase of Equity Securities As part of a weekly share buyback program, in 2023, the Company purchased 210,000 ordinary shares in open-market transactions for a total cost of $2.7 million. The following table shows this by quarter.
Any such U.K. stamp duty or SDRT will generally be payable by the transferee and must be paid (and any relevant transfer document stamped by HMRC) before the transfer can be registered in the books of Luxfer Holdings PLC. 25 In the event that ordinary shares which have left the DTC clearance service, other than into another clearance service or depository receipt system, are subsequently transferred back into a clearance service or depository receipt system, such transfer, or agreement to transfer, may, subject to any available exemption or relief, be subject to U.K. stamp duty or SDRT at a rate of 1.5% of the consideration for such transfer (or, where there is no such consideration, 1.5% of the value of such ordinary shares).
Any such U.K. stamp duty or SDRT will generally be payable by the transferee and must be paid (and any relevant transfer document stamped by HMRC) before the transfer can be registered in the books of Luxfer Holdings PLC. 28 In the event that ordinary shares which have left the DTC clearance service, other than into another clearance service or depository receipt system, are subsequently transferred back into a clearance service or depository receipt system, such transfer, or agreement to transfer, may, subject to any available exemption or relief, be subject to U.K. stamp duty or SDRT at a rate of 1.5% of the consideration for such transfer (or, where there is no such consideration, 1.5% of the value of such ordinary shares).
Dividends During the years ended December 31, 2021 and 2020, and in February 2022, the Company paid quarterly dividends of $0.125 per ordinary share. In the final three quarters of 2022, the Company paid quarterly dividends of $0.13 per ordinary. This equated to $14.2 million paid in 2022 and $13.6 million in 2021 and 2020 respectively.
Dividends During the years ended December 31, 2021, and in February 2022, the Company paid quarterly dividends of $0.125 per ordinary share. In the final three quarters of 2022 and throughout 2023, the Company paid quarterly dividends of $0.13 per ordinary share. This equated to $14.0 million paid in 2023, $14.2 million in 2022 and $13.6 million in 2021 respectively.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange and is traded under the symbol "LXFR." As of December 31, 2022, the Company had 19 shareholders of record.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our common stock is listed on the New York Stock Exchange and is traded under the symbol "LXFR." As of December 31, 2023, the Company had 17 shareholders of record.
The following graph sets forth the cumulative total shareholder return on our ordinary shares for the last five years, assuming an investment of $100 on December 31, 2017, and the reinvestment of all dividends since that date to December 31, 2022.
The following graph sets forth the cumulative total shareholder return on our ordinary shares for the last five years, assuming an investment of $100 on December 31, 2018, and the reinvestment of all dividends since that date to December 31, 2023.
A further dividend of $3.6 million was declared and paid in the first quarter of 2023.
A further dividend of $3.5 million was declared and paid in the first quarter of 2024.
Added
Total number of shares purchased Average price paid per share January 1 - April 2 48,000 $ 16.15 April 3 - July 2 52,000 15.48 July 3 - October 1 52,000 12.69 October 2 - December 31 58,000 9.47 Total 210,000 In January 2024, the Board of Directors authorized the repurchase of 50,000 of our ordinary shares in the first quarter of 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

55 edited+35 added−47 removed40 unchanged
Biggest changeOperating objectives and trends In 2023, we expect the following operating objectives and trends to impact our business: • Continuing high activity on revenue growth initiatives with particular focus on increasing volumes; • Actions to ensure continuity of supply of critical materials and services while safeguarding margins; • Execution of productivity improvements and increases in selling prices to mitigate and pass through current cost pressure; • Further improvements in ESG standing through investment in new projects; • Focus on recruiting, developing and maintaining talent, through our new leadership development programs, while driving a high-performance culture; and • Continued emphasis on operating cash generation and maintaining strong working capital performance. 28 CONSOLIDATED RESULTS OF OPERATIONS The consolidated results of operations from continuing operations of Luxfer were as follows: Years ended December 31, % / point change In millions 2022 2021 2020 2022 v 2021 2021 v 2020 Net sales $ 423.4 $ 374.1 $ 324.8 13.2 % 15.2 % Cost of sales (328.4) (278.1) (243.9) 18.1 % 14.0 % Gross profit 95.0 96.0 80.9 (1.0) % 18.7 % % of net sales 22.4 % 25.7 % 24.9 % (3.3) 0.8 Selling, general and administrative expenses (43.1) (47.3) (39.8) (8.9) % 18.8 % % of net sales 10.2 % 12.6 % 12.3 % (2.4) 0.3 Research and development (4.9) (3.9) (3.3) 25.6 % 18.2 % % of net sales 1.2 % 1.0 % 1.0 % 0.2 — Restructuring charges (1.9) (6.2) (8.9) (69.4) % (30.3) % % of net sales 0.4 % 1.7 % 2.7 % (1.3) (1.0) Acquisition and disposals costs (0.3) (1.5) — (80.0) % n/a % of net sales 0.1 % 0.4 % — % (0.3) 0.4 Other income — 0.2 — (100.0) % n/a % of net sales — % 0.1 % — % (0.1) n/a Other charges — (1.1) (0.4) (100.0) % 175.0 % % of net sales — % 0.3 % 0.1 % (0.3) 0.2 Operating income 44.8 36.2 28.5 23.8 % 27.0 % % of net sales 10.6 % 9.7 % 8.8 % 0.9 0.9 Net interest expense (3.9) (3.1) (5.0) 25.8 % (38.0) % % of net sales 0.9 % 0.8 % 1.5 % 0.1 (0.7) Defined benefit pension credit 0.1 2.3 4.3 (95.7) % (46.5) % % of net sales — % 0.6 % 1.3 % (0.6) (0.7) Income before income taxes and equity in net income of affiliates 41.0 35.4 27.8 15.8 % 27.3 % % of net sales 9.7 % 9.5 % 8.6 % 0.2 0.9 Provision for income taxes (9.0) (5.4) (6.9) 66.7 % (21.7) % Effective tax rate 22.0 % 15.3 % 24.8 % 6.7 (9.5) Income before equity in net income of affiliates 32.0 30.0 20.9 6.7 % 43.5 % % of net sales 7.6 % 8.0 % 6.4 % (0.4) 1.6 Equity in loss of unconsolidated affiliates (net of tax) — — (0.1) — % (100.0) % % of net sales — % — % — % — — Net income from continuing operations $ 32.0 $ 30.0 $ 20.8 6.7 % 44.2 % % of net sales 7.6 % 8.0 % 6.4 % (0.4) 1.6 29 Net sales Adjusting for foreign exchange headwinds of $13.9 million, consolidated net sales have increased by 16.9% in 2022 from 2021.
Biggest changeOperating objectives and trends In 2024, we expect the following operating objectives and trends to impact our business: • Addressing general macro uncertainty and building resilience into the outlook, especially in our General Industrial end-market; • Execution of actions identified upon completion of the recently-announced expanded and accelerated strategic review, including the divestiture of Graphic Arts; • Completion of long-term agreement renewals in Gas Cylinders enabling pass through of inflationary costs; • Ongoing focus on cost control, new product launches and productivity improvements across the business; • Execution of selected capital investment projects to support our strategy of profitable growth while maintaining our infrastructure; • Continued emphasis on operating cash generation and maintaining strong working capital performance; • Further improvements in ESG standing through focus on sustainability and on our values of teamworking and accountability; and • Focus on recruiting, developing and maintaining talent, including our new leadership development programs, while driving a high-performance culture. 31 CONSOLIDATED RESULTS OF OPERATIONS The consolidated results of operations from continuing operations of Luxfer were as follows: Years ended December 31, % / point change In millions 2023 2022 2021 2023 v 2022 2022 v 2021 Net sales $ 405.0 $ 423.4 $ 374.1 (4.3) % 13.2 % Cost of sales (328.4) (328.4) (278.1) — % 18.1 % Gross profit 76.6 95.0 96.0 (19.4) % (1.0) % % of net sales 18.9 % 22.4 % 25.7 % (3.5) (3.3) Selling, general and administrative expenses (48.7) (43.1) (47.3) 13.0 % (8.9) % % of net sales 12.0 % 10.2 % 12.6 % 1.8 (2.4) Research and development (4.6) (4.9) (3.9) (6.1) % 25.6 % % of net sales 1.1 % 1.2 % 1.0 % (0.1) 0.2 Restructuring charges (6.4) (1.9) (6.2) 236.8 % (69.4) % % of net sales 1.6 % 0.4 % 1.7 % 1.2 (1.3) Impairment charges (12.7) — — n/a n/a % of net sales 3.1 % — % — % 3.1 — Acquisition and disposals costs — (0.3) (1.5) (100.0) % (80.0) % % of net sales — % 0.1 % 0.4 % (0.1) (0.3) Other income — — 0.2 n/a (100.0) % % of net sales — % — % 0.1 % — (0.1) Other charges — — (1.1) n/a (100.0) % % of net sales — % — % 0.3 % — (0.3) Operating income 4.2 44.8 36.2 (90.6) % 23.8 % % of net sales 1.0 % 10.6 % 9.7 % (9.6) 0.9 Net interest expense (6.3) (3.9) (3.1) 61.5 % 25.8 % % of net sales 1.6 % 0.9 % 0.8 % 0.7 0.1 Defined benefit pension (charge) / credit (7.6) 0.1 2.3 n/a (95.7) % % of net sales (1.9) % — % 0.6 % (1.9) (0.6) (Loss) / income before income taxes (9.7) 41.0 35.4 n/a 15.8 % % of net sales (2.4) % 9.7 % 9.5 % (12.1) 0.2 Credit / (provision) for income taxes 7.1 (9.0) (5.4) n/a 66.7 % Effective tax rate 73.2 % 22.0 % 15.3 % 51.2 6.7 Net (loss) / income from continuing operations $ (2.6) $ 32.0 $ 30.0 n/a 6.7 % % of net sales (0.6) % 7.6 % 8.0 % (8.2) (0.4) 32 Net sales Adjusting for foreign exchange headwinds of $0.3 million, consolidated net sales have decreased by 4.3% in 2023 from 2022.
To indicate the sensitivity of results to this assumption, a 0.1% per annum increase in the discount rate for our U.K. plans would reduce the value of the liabilities and therefore increase the pension surplus by approximately $2.4 million and increase the projected 2023 income statement credit by approximately $0.1 million.
To indicate the sensitivity of results to this assumption, a 0.1% per annum increase in the discount rate for our U.K. plans would reduce the value of the liabilities and therefore increase the pension surplus by approximately $2.0 million and increase the projected 2023 income statement credit by approximately $0.2 million.
Please read the sections "Business," "Risk factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K for a more complete discussion of the factors that could affect our performance and the industries in which we operate, as well as those discussed in other documents we file or furnish with the SEC. 27 About Luxfer Luxfer Holdings PLC ("Luxfer," "the Company," "we," "our") is a global industrial company innovating niche applications in materials engineering.
Please read the sections "Business," "Risk factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," of this Annual Report on Form 10-K for a more complete discussion of the factors that could affect our performance and the industries in which we operate, as well as those discussed in other documents we file or furnish with the SEC. 30 About Luxfer Luxfer Holdings PLC ("Luxfer," "the Company," "we," "our") is a global industrial company innovating niche applications in materials engineering.
The last month in which we may draw funds from the RCF is September 2026. 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. Interest rates and fees.
The last month in which we may draw funds from the RCF is September 2026. 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, 2023. Interest rates and fees.
Amounts unutilized under the RCF (or, if the case, under the revolving portion of the accordion) are allocated to ancillary facilities available under the Senior Facilities Agreement in connection with overdraft facilities, bilateral loan facilities and letter of credit facilities. As of December 31, 2022, we had drawn down $1.8 million under the ancillary facilities (December 31, 2021: $2.2 million).
Amounts unutilized under the RCF (or, if the case, under the revolving portion of the accordion) are allocated to ancillary facilities available under the Senior Facilities Agreement in connection with overdraft facilities, bilateral loan facilities and letter of credit facilities. As of December 31, 2023, we had drawn down $2.2 million under the ancillary facilities (December 31, 2022: $1.8 million).
These factors include, but are not limited to, factors identified in "Business," "Risk factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," or elsewhere in this Annual Report, as well as: • general economic conditions, or conditions affecting demand for the services offered by us in the markets in which we operate, both domestically and internationally, being less favorable than expected; • worldwide economic and business conditions and conditions in the industries in which we operate; • post-pandemic impact of COVID-19 and future pandemics; • fluctuations in the cost and / or availability of raw materials, labor and energy, as well as the ability to pass on cost increases to customers; • currency fluctuations and other financial risks; • our ability to protect our intellectual property; • the amount of indebtedness we have incurred and may incur, and the obligations to service such indebtedness and to comply with the covenants contained therein; • relationships with our customers and suppliers; • increased competition from other companies in the industries in which we operate; • changing technology; • our ability to execute and integrate new acquisitions; • claims for personal injury, death or property damage arising from the use of products produced by us; • the occurrence of accidents or other interruptions to our production processes; • changes in our business strategy or development plans, and our expected level of capital expenditure; • our ability to attract and retain qualified personnel; • restrictions on the ability of Luxfer Holdings PLC to receive dividends or loans from certain of its subsidiaries; • climate change regulations and the potential impact on energy costs; • regulatory, environmental, legislative and judicial developments; and • our intention to pay dividends.
These factors include, but are not limited to, factors identified in "Business," "Risk factors," and "Management's Discussion and Analysis of Financial Condition and Results of Operations," or elsewhere in this Annual Report, as well as: • general economic conditions, or conditions affecting demand for the services offered by us in the markets in which we operate, both domestically and internationally, being less favorable than expected; • worldwide economic and business conditions and conditions in the industries in which we operate; • our ability to execute our strategic review, including our Graphic Arts business, to safeguard margins and reduce costs; • post-pandemic impact of COVID-19 and future pandemics; • fluctuations in the cost and / or availability of raw materials, labor and energy, as well as our ability to pass on cost increases to customers; • currency fluctuations and other financial risks; • our ability to protect our intellectual property; • the amount of indebtedness we have incurred and may incur, and the obligations to service such indebtedness and to comply with the covenants contained therein; • relationships with our customers and suppliers; • increased competition from other companies in the industries in which we operate; • changing technology; • our ability to execute and integrate new acquisitions; • claims for personal injury, death or property damage arising from the use of products produced by us; • the occurrence of accidents or other interruptions to our production processes; • changes in our business strategy or development plans, and our expected level of capital expenditure; • our ability to attract and retain qualified personnel; • restrictions on the ability of Luxfer Holdings PLC to receive dividends or loans from certain of its subsidiaries; • climate change regulations and the potential impact on energy costs; • regulatory, environmental, legislative and judicial developments; and • our intention to pay dividends.
Loan Notes 2023 and 2026 The Note Purchase Agreement contains customary covenants and events of default, in each case with customary and appropriate grace periods and thresholds. In addition, the Note Purchase Agreement requires us to maintain compliance with a minimum interest coverage ratio and a leverage ratio.
Loan Note 2026 The Note Purchase Agreement contains customary covenants and events of default, in each case with customary and appropriate grace periods and thresholds. In addition, the Note Purchase Agreement requires us to maintain compliance with a minimum interest coverage ratio and a leverage ratio.
We have been in compliance with the covenants under the Senior Facilities Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2022. 38 The Senior Facilities Agreement is governed by English law. For more information see ITEM 8, Note 11.
We have been in compliance with the covenants under the Senior Facilities Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2023. The Senior Facilities Agreement is governed by English law. For more information see ITEM 8, Note 11.
We have included the Note Purchase Agreement and a form of the Loan Notes due 2023 and 2026 as exhibits to this Annual Report and refer you to the exhibits for more information on the Note Purchase Agreement and the Loan Notes due 2023 and 2026.
We have included the Note Purchase Agreement and a form of the Loan Note due 2026 as exhibits to this Annual Report and refer you to the exhibits for more information on the Note Purchase Agreement and the Loan Note due 2026.
Our critical accounting estimates include the following: Impairment of goodwill and other identifiable intangible assets Goodwill Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable tangible net assets and identifiable intangible assets purchased and liabilities assumed.
Our critical accounting estimates include the following: Impairment of goodwill and identifiable intangible assets Goodwill Goodwill represents the excess of the cost of acquired businesses over the net of the fair value of identifiable net assets purchased and liabilities assumed.
We have been in compliance with the covenants under the Note Purchase Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2022. 37 The Loan Notes due 2023 and 2026 and the Note Purchase Agreement are governed by the law of the State of New York.
We have been in compliance with the covenants under the Note Purchase Agreement throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2023. The Loan Note due 2026 and the Note Purchase Agreement are governed by the law of the State of New York.
The expected rate of return on our U.S. plans was 4.70% in 2022, 2.50% in 2021 and 5.00% in 2020. The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns.
The expected rate of return on our U.S. plans was 4.70% in 2022 and 2.50% in 2021. The expected rate of return is designed to be a long-term assumption that may be subject to considerable year-to-year variance from actual returns.
Discount rate The discount rate used represents the annualized yield based on a cash flow matched methodology with reference to an AA corporate bond spot curve and having regard to the duration of the Plan’s liabilities. This yield produced a weighted-average discount rate for our U.K. plans of 4.80% in 2022, 1.90% in 2021 and 1.40% in 2020.
Discount rate The discount rate used represents the annualized yield based on a cash flow matched methodology with reference to an AA corporate bond spot curve and having regard to the duration of the Plan’s liabilities. This yield produced a weighted-average discount rate for our U.K. plans of 4.50% in 2023, 4.80% in 2022 and 1.90% in 2021.
To indicate the sensitivity of results to the CPI assumption, a 0.1% per annum decrease in all CPI-linked assumptions, (including pension increases) for our U.K. plan, would reduce the value of the liabilities and therefore increase the pension surplus at December 31, 2022 by approximately $2.4 million and increase the projected 2023 income statement credit by approximately $0.1 million.
To indicate the sensitivity of results to the CPI assumption, a 0.1% per annum decrease in all CPI-linked assumptions, (including pension increases) for our U.K. plan, would reduce the value of the liabilities and therefore increase the pension surplus at December 31, 2022 by approximately $1.0 million and increase the projected 2024 income statement credit by approximately $0.1 million.
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.
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.
We meet these requirements primarily through cash flows from operating activities, cash deposits and borrowings under the Revolving Credit Facility ("RCF") and accompanying ancillary hedging facilities and the Loan Notes due 2023 and 2026.
We meet these requirements primarily through cash flows from operating activities, cash deposits and borrowings under the Revolving Credit Facility ("RCF") and accompanying ancillary hedging facilities and the Loan Note due 2026.
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 purchase of new plant and equipment. Committed banking facilities The Company refinanced in October 2021, see Note 11 for details of the refinance.
COMMITMENTS AND CONTINGENCIES Capital commitments At December 31, 2023, the Company had capital expenditure commitments of $2.3 million (2022: $1.4 million and 2021: $1.5 million) for the purchase of new plant and equipment. Committed banking facilities The Company refinanced in October 2021, see Note 11 for details of the refinance.
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.
The Company had contracted with a service company for removal and disposal of certain waste resulting from the magnesium powder manufacturing operations at the Reade facility in Manchester, New Jersey. The Company believes 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.
The discount rate on our U.S. plans was 5.10% in 2022, 2.70% in 2021 and 2.30% in 2020. There are no known or anticipated changes in our discount rate assumption that will impact our pension expense in 2023.
The discount rate on our U.S. plans was 5.10% in 2022 and 2.70% in 2021. There are no known or anticipated changes in our discount rate assumption that will impact our pension expense in 2024.
Years ended December 31, In millions except per share data 2022 2021 2020 Net income from continuing operations 32.0 30.0 20.8 Accounting charges relating to acquisitions and disposals of businesses: Amortization on acquired intangibles 0.7 0.9 0.7 Acquisitions and disposals cost 0.3 1.5 — Defined benefit pension credit (0.1) (2.3) (4.3) Restructuring charges 1.9 6.2 8.9 Other charges — 1.1 0.4 Share-based compensation charges 2.5 2.8 2.8 Other non-recurring tax items — (1.9) — Income tax on adjusted items 0.1 (2.1) (0.4) Adjusted net income from continuing operations 37.4 36.2 28.9 Adjusted earnings per ordinary share from continuing operations Diluted earnings per ordinary share 1.16 1.07 0.74 Impact of adjusted items 0.20 0.22 0.29 Adjusted diluted earnings per ordinary share (1) 1.36 1.29 1.03 (1) For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding during the financial year has been adjusted for the dilutive effects of all potential ordinary shares and share options granted to employees.
Years ended December 31, In millions except per share data 2023 2022 2021 Net (loss) / income from continuing operations (2.6) 32.0 30.0 Accounting charges relating to acquisitions and disposals of businesses: Amortization on acquired intangibles 0.8 0.7 0.9 Acquisitions and disposals cost — 0.3 1.5 Defined benefit pension credit 7.6 (0.1) (2.3) Restructuring charges 6.4 1.9 6.2 Impairment charges 12.7 — — Other charges — — 1.1 Share-based compensation charges 2.8 2.5 2.8 Tax impact of defined benefit pension settlement (4.9) — — Other non-recurring tax items — — (1.9) Income tax on adjusted items (6.4) 0.1 (2.1) Adjusted net income from continuing operations 16.4 37.4 36.2 Adjusted earnings per ordinary share from continuing operations Diluted earnings per ordinary share (0.10) 1.16 1.07 Impact of adjusted items 0.70 0.20 0.22 Adjusted diluted earnings per ordinary share (1) 0.61 1.36 1.29 (1) For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding during the financial year has been adjusted for the dilutive effects of all potential ordinary shares and share options granted to employees.
The Loan Notes due 2023 and 2026 are denominated in U.S. dollars, which creates a natural partial offset between the dollar-denominated net assets and earnings of our U.S. operations and the dollar-denominated debt and related interest expense of the notes.
The Loan Note due 2026 is denominated in U.S. dollars, which creates a natural partial offset between the dollar-denominated net assets and earnings of our U.S. operations and the dollar-denominated debt and related interest expense of the notes.
We have recognized a loss contingency of $3.3 million, for which we have engaged with external experts to assist with the valuation of these liabilities. 42
We have recognized a loss contingency of $3.0 million, for which we have engaged with external experts to assist with the valuation of these liabilities. 44
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.
The Company believes that we are not liable for the incident, have asserted such, and, in conjunction with our insurers, 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.
We may use amounts drawn under the RCF for our general corporate purposes and certain capital expenditures, as well as for the financing of permitted acquisitions and reorganizations. As of December 31, 2022, $68.1 million (net of $31.9 million drawn down) was available under the RCF.
We may use amounts drawn under the RCF for our general corporate purposes and certain capital expenditures, as well as for the financing of permitted acquisitions and reorganizations. As of December 31, 2023, $81.9 million (net of $43.1 million drawn down) was available under the RCF.
Leverage Margin (% per annum) Greater than 2.5:1 2.75 Less than or equal to 2.5:1, but greater than 2.0:1 2.50 Less than or equal to 2.0:1, but greater than 1.5:1 2.25 Less than or equal to 1.5:1, but greater than 1.0:1 2.00 Less than or equal to 1.0:1 1.75 As of December 31, 2022, we had drawn down $31.9 million under the RCF (December 31, 2021: $10.8 million).
Leverage Margin (% per annum) Greater than 2.5:1 2.75 Less than or equal to 2.5:1, but greater than 2.0:1 2.50 Less than or equal to 2.0:1, but greater than 1.5:1 2.25 Less than or equal to 1.5:1, but greater than 1.0:1 2.00 Less than or equal to 1.0:1 1.75 As of December 31, 2023, we had drawn down $43.1 million under the RCF (December 31, 2022: $31.9 million).
Of the committed facilities, $10.8 million was drawn at December 31, 2021. 39 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.
Of the committed facilities, $31.9 million was drawn at December 31, 2022. 41 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.
However, investors should not consider adjusted net income and adjusted earnings per share in isolation as an alternative to net income and earnings per share when evaluating Luxfer's operating performance or measuring Luxfer's profitability.
However, investors should not consider adjusted net income from continuing operations, adjusted earnings per share from continuing operations, adjusted EBITA from continuing operations and adjusted EBITDA from continuing operations in isolation as an alternative to net income and earnings per share when evaluating Luxfer's operating performance or measuring Luxfer's profitability.
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.
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. The three lawsuits were administratively consolidated and, to date, two lawsuits remain ongoing.
To indicate the sensitivity of results to the life expectancy assumption, a one year increase in assumed life expectancy on the U.K. plan could increase the value of the liabilities and therefore decrease the pension surplus at December 31, 2022 by approximately $7.2 million. 41 Expected rate of return Our expected rate of return on plan assets for our U.K. plans was 5.60% in 2022, 3.30% in 2021 and 3.00% in 2020.
To indicate the sensitivity of results to the life expectancy assumption, a one year increase in assumed life expectancy on the U.K. plan could increase the value of the liabilities and therefore decrease the pension surplus at December 31, 2023 by approximately $8.0 million. 43 Expected rate of return Our expected rate of return on plan assets for our U.K. plans was 4.80% in 2023, 5.60% in 2022 and 3.30% in 2021.
Dividends We paid dividends in 2022 of $14.2 million (2021: $13.6 million), or $0.515 (2021: $0.50) per ordinary share. Any payment of dividends is also subject to the provisions of the U.K.
Dividends We paid dividends in 2023 of $14.0 million (2022: $14.2 million), or $0.52 (2022: $0.515) per ordinary share. Any payment of dividends is also subject to the provisions of the U.K.
Life expectancy The life expectancies of male and female members aged 65 on 31 December 2022 are assumed to be 21.2 and 23.0 years, respectively, with the life expectancies of male and female members aged 65 on 31 December 2042 assumed to be 22.5 and 24.5 years, respectively.
Life expectancy The life expectancies of male and female members aged 65 on 31 December 2023 are assumed to be 21.2 and 23.1 years, respectively, with the life expectancies of male and female members aged 65 on 31 December 2043 assumed to be 22.5 and 24.6 years, respectively.
At December 31, 2022 the Senior Facilities Agreement provided $100 million of committed debt facilities in the form of a multi-currency (GBP sterling, U.S. dollars or euros) RCF and an additional $50 million of uncommitted facilities through an accordion clause.
At December 31, 2023 the Senior Facilities Agreement provided $125 million of committed debt facilities in the form of a multi-currency (GBP sterling, U.S. dollars or euros) RCF and an additional $25 million of uncommitted facilities through an accordion clause. The facilities mature in October 2026.
We made net drawdowns on our borrowing facilities of $24.8 million (2021: net drawdowns of $6.4 million) and dividend payments of $14.2 million (2021: $13.6 million), equating to $0.515 per ordinary share (2021: $0.50 per ordinary share). In 2022, the Company spent $11.1 million repurchasing approximately 700,000 shares, (2021: $6.4 million repurchasing approximately 300,000 shares).
We made net drawdowns on our borrowing facilities of $10.2 million (2022: net drawdowns of $24.8 million) and dividend payments of $14.0 million (2022: $14.2 million), equating to $0.52 per ordinary share (2022: $0.515 per ordinary share). In 2023, the Company spent $2.7 million repurchasing approximately 200,000 shares, (2022: $11.1 million repurchasing approximately 700,000 shares).
Years ended December 31, In millions 2022 2021 2020 Adjusted net income from continuing operations $ 37.4 $ 36.2 $ 28.9 Add back: Other non-recurring tax items — 1.9 — Income tax on adjusted items (0.1) 2.1 0.4 Provision for income taxes 9.0 5.4 6.9 Adjusted income from continuing operations before income taxes $ 46.3 $ 45.6 $ 36.2 Adjusted provision for income taxes 8.9 9.4 7.3 Adjusted effective tax rate from continuing operations 19.2 % 20.6 % 20.2 % SEGMENT RESULTS OF OPERATIONS The summary that follows provides a discussion of the results of operations of each of our two reportable segments (Gas Cylinders and Elektron).
Years ended December 31, In millions except per share data 2023 2022 2021 Adjusted net income from continuing operations 16.4 37.4 36.2 Add back: Tax impact of defined benefit pension settlement 4.9 — — Other non-recurring tax items — — 1.9 Income tax on adjusted items 6.4 (0.1) 2.1 Income tax expense (7.1) 9.0 5.4 Net finance costs 6.3 3.9 3.1 Adjusted EBITA from continuing operations 26.9 50.2 48.7 Depreciation 11.9 12.9 14.7 Adjusted EBITDA from continuing operations 38.8 63.1 63.4 35 Years ended December 31, In millions 2023 2022 2021 Adjusted net income from continuing operations $ 16.4 $ 37.4 $ 36.2 Add back: Tax impact of defined benefit pension settlement 4.9 — — Other non-recurring tax items — — 1.9 Income tax on adjusted items 6.4 (0.1) 2.1 Provision for income taxes (7.1) 9.0 5.4 Adjusted income from continuing operations before income taxes $ 20.6 $ 46.3 $ 45.6 Adjusted provision for income taxes 4.2 8.9 9.4 Adjusted effective tax rate from continuing operations 20.4 % 19.2 % 20.6 % SEGMENT RESULTS OF OPERATIONS The summary that follows provides a discussion of the results of operations of each of our three reportable segments (Gas Cylinders, Elektron and Graphic Arts).
We have been in compliance with the covenants under the Loan Notes and the RCF throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2022.
We have been in compliance with the covenants under the Loan Notes and the RCF throughout all of the quarterly measurement dates from and including September 30, 2011, to December 31, 2023. In January 2023, the Company increased the capacity of its existing RCF to $125.0 million, an increase of $25.0 million.
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.
At December 31, 2023 the Company had committed banking facilities of $125.0 million with an additional $25.0 million of uncommitted facilities through an accordion provision. Of these committed facilities, $43.1 million was drawn at December 31, 2023. The banking facilities expire in October 2026.
Luxfer conducts all of its operations through its subsidiaries, joint ventures and affiliates. Accordingly, Luxfer's main cash source is dividends from its subsidiaries. The ability of each subsidiary to make distributions depends on the funds that a subsidiary receives from its operations in excess of the funds necessary for its operations, obligations or other business plans.
The ability of each subsidiary to make distributions depends on the funds that a subsidiary receives from its operations in excess of the funds necessary for its operations, obligations or other business plans.
Differences in actual experience or changes in assumptions can have a material impact on the pension and other post-retirement obligations and future expense.
These assumptions are updated annually and are disclosed in ITEM 8, Note 14 to the Notes to Consolidated Financial Statements. Differences in actual experience or changes in assumptions can have a material impact on the pension and other post-retirement obligations and future expense.
Settlements from sale of business In October 2022, the Company agreed a final settlement of $1.0 million to the purchasers of the previously disposed aluminum gas cylinder business. The settlement was a reduction to the original consideration paid.
Proceeds from sale of property, plant and equipment In May 2022, the Company sold a previously held-for-sale building in the Elektron segment for $3.7 million. Consideration was paid in full upon sale. Settlements from sale of business In October 2022, the Company agreed a final settlement of $1.0 million to the purchasers of the previously disposed aluminum gas cylinder business.
Due to commercial, competitive and external economic factors, however, we cannot guarantee that we will generate sufficient cash flows from operations or that future working capital will be available in an amount sufficient to enable us to service our indebtedness or make necessary capital expenditures. 36 Cash Flows from Continuing Operations Operating activities Cash provided by operating activities was $15.8 million and $26.0 million in 2022 and 2021 respectively, which includes approximately $10.0 million and $4.0 million of cash spent on restructuring activities in those years.
Due to commercial, competitive and external economic factors, however, we cannot guarantee that we will generate sufficient cash flows from operations or that future working capital will be available in an amount sufficient to enable us to service our indebtedness or make necessary capital expenditures.
Both segments comprise various product offerings that serve multiple end-markets. Adjusted EBITDA, which is our segment income metric, represents operating income adjusted for restructuring charges, other charges, acquisitions and disposals cost, depreciation and amortization, and share-based compensation charges. A reconciliation to net income and taxes can be found in ITEM 8, Note 17.
Adjusted EBITDA, which is our segment income metric, represents net income from continuing operations adjusted for share-based compensation charges, restructuring charges, impairment charges, other charges, acquisitions and disposals costs, net interest expenses, defined benefits pension credit, provision for taxes and depreciation and amortization.. A reconciliation to net income can be found in ITEM 8, Note 17.
It was primarily related to net income from operating activities, net of the following non-cash items: (i) depreciation and amortization; (ii) share-based compensation charges; (iii) pension adjustments and (iv) net changes to assets and liabilities. In 2022, the Company has increased its working capital balances, predominantly as a result of inventory build to try and reduce inflationary price rises.
Cash was primarily related to the net loss / net income from operating activities, net of the following non-cash items: (i) depreciation and amortization; (ii) share-based compensation charges; (iii) pension adjustments (iv) impairment charges and (v) net changes to assets and liabilities.
In January 2023, we increased the RCF to $125 million and a subsequent reduction in the uncommitted facility to $25 million. The facilities mature in October 2026. As of December 31, 2022, we had drawn down $31.9 million under the Revolving Credit Facility (December 31, 2021: $10.8 million). Availability. The facility is used for loans and overdrafts.
As of December 31, 2023, we had drawn down $43.1 million under the Revolving Credit Facility (December 31, 2022: $31.9 million). 39 Availability. The facility is used for loans and overdrafts.
Inherent in these valuations are assumptions, including: (i) discount rates; (ii) inflation rates; (iii) pension increases; and (iv) life expectancy. These assumptions are updated annually and are disclosed in ITEM 8, Note 14 to the Notes to Consolidated Financial Statements.
The amounts recognized in our consolidated financial statements related to our defined-benefit pension and other post-retirement plans are determined from actuarial valuations. Inherent in these valuations are assumptions, including: (i) discount rates; (ii) inflation rates; (iii) pension increases; and (iv) life expectancy.
The net sales and adjusted EBITDA for Gas Cylinders were as follows: Years ended December 31, % / point change In millions 2022 2021 2020 2022 v 2021 2021 v 2020 Net sales $ 183.7 $ 178.3 $ 141.9 3.0 % 25.7 % Adjusted EBITDA 12.8 22.7 21.3 (43.6) % 6.6 % % of net sales 7.0 % 12.7 % 15.0 % (5.7) (2.3) Net sales The 3.0% increase in Gas Cylinders sales in 2022 from 2021 was primarily the result of increased demand for composite cylinders used in aerospace, partially offset by $7.8 million of foreign exchange headwind and a reduction in CNG alternative fuel and SCBA cylinder sales.
The net sales and adjusted EBITDA for Gas Cylinders were as follows: Years ended December 31, % / point change In millions 2023 2022 2021 2023 v 2022 2022 v 2021 Net sales $ 186.4 $ 183.7 $ 178.3 1.5 % 3.0 % Adjusted EBITDA 16.7 12.8 22.7 30.5 % (43.6) % % of net sales 9.0 % 7.0 % 12.7 % 2.0 (5.7) Net sales The 1.5% increase in Gas Cylinders sales in 2023 from 2022 was primarily the result of: • Higher sales of SCBA cylinders; • Increased volume of our medical cylinders; and • Price increases throughout the segment as contracts are renegotiated.
ELEKTRON The net sales and adjusted EBITDA for Elektron were as follows: Years ended December 31, % / point change In millions 2022 2021 2020 2022 v 2021 2021 v 2020 Net sales $ 239.7 $ 195.8 $ 182.9 22.4 % 7.1 % Adjusted EBITDA 50.3 40.7 32.6 23.6 % 24.8 % % of net sales 21.0 % 20.8 % 17.8 % 0.2 3.0 Net sales The 22.4% increase in Elektron sales in 2022 from 2021 was heavily impacted by the passing through of material cost-inflation.
ELEKTRON The net sales and adjusted EBITDA for Elektron were as follows: Years ended December 31, % / point change In millions 2023 2022 2021 2023 v 2022 2022 v 2021 Net sales $ 187.1 $ 201.0 $ 155.7 (6.9) % 29.1 % Adjusted EBITDA 26.6 42.5 34.1 (37.4) % 24.6 % % of net sales 14.2 % 21.1 % 21.9 % (6.9) (0.8) Net sales The 6.9% decrease in Elektron sales in 2023 from 2022 was negatively impacted by adverse volume and mix, while price increase contributed an additional $9.6 million.
Net interest expense Net interest expense of $3.9 million in 2022 increased from $3.1 million in 2021 due to a combination of increased interest rates and higher drawings. Net interest expense of $3.1 million in 2021 decreased from $5.0 million in 2020 largely due to the $25 million early repayment in December 2020 of the Loan Notes due in 2021.
Net interest expense Net interest expense of $6.3 million in 2023 increased from $3.9 million in 2022 due to the continued combination of increased interest rates and higher drawings on the revolving credit facility.
Gross profit The 3.3 percentage point decrease in gross profit as a percentage of sales in 2022 from 2021 was primarily the result of increased material and labor costs and other supply chain investments to overcome disruption, not fully covered by price increases, particularly in the Gas Cylinders Division.
Gross profit The 3.5 percentage point decrease in gross profit as a percentage of sales in 2023 from 2022 was primarily the result of adverse sales mix and higher materials costs relative to price increases.
Contractual obligations The following summarizes our significant contractual obligations that impact our liquidity: Payments Due by Period In millions Total Less than 1 year 1 – 3 years 3 – 5 years After 5 years Contractual cash obligations Loan Notes due 2023 25.0 25.0 — — — Loan Notes due 2026 25.0 — — 25.0 — Revolving Credit Facility 31.9 — — 31.9 — Obligations under operating leases 29.9 5.1 10.1 5.3 9.4 Capital commitments 1.4 1.4 — — — Interest payments 13.2 4.0 6.6 2.6 — Total contractual cash obligations $ 126.4 $ 35.5 $ 16.7 $ 64.8 $ 9.4 Off-balance sheet measures At December 31, 2022, we had no off-balance sheet arrangements other than the three bonding facilities as described above.
Authorized shares Our authorized share capital consists of 40.0 million ordinary shares with a par value of £0.50 per share. 40 Contractual obligations The following summarizes our significant contractual obligations that impact our liquidity: Payments Due by Period In millions Total Less than 1 year 1 – 3 years 3 – 5 years After 5 years Contractual cash obligations Loan Notes due 2026 25.0 — 25.0 — — Revolving Credit Facility 43.1 — 43.1 — — Bank overdraft 4.6 4.6 — — — Obligations under operating leases 26.0 5.4 9.2 2.7 8.7 Capital commitments 2.3 2.3 — — — Interest payments 11.1 4.2 6.9 — — Total contractual cash obligations $ 112.1 $ 16.5 $ 84.2 $ 2.7 $ 8.7 2022 compared with 2021 For a discussion comparing our net cash activities (operating, investing and financing) for the year ended December 31, 2022, with the year ended December 31, 2021, refer to Part II, Item 7.
The passing through of material cost inflation, where not constrained by contract, accounted for approximately 75.0% of this increase.
The adverse impact of volume and mix has accounted for a $43.1 million reduction in sales, while the passing through of material cost inflation, where not constrained by contract, has partially offset this decrease by $25.0 million.
The following investing activities impacted our cash flow: Capital expenditures Capital expenditures in 2022 was $8.3 million compared to $9.1 million in 2021. 2021 included additional spend as we delayed some projects in the prior year in response to COVID-19.
The following investing activities impacted our cash flow: Capital expenditures Capital expenditures in 2023 was $9.4 million compared to $8.3 million in 2022. We anticipate capital expenditures for 2024 to be between $11 million and $14 million as we increase investment in order to grow the business.
The 3.0 percentage point increase in adjusted EBITDA for Elektron as a percentage of net sales in 2021 from 2020 was primarily the result of productivity improvements as volumes recovered from the Covid-19 affected prior year, as well as favorable product sales mix. 35 LIQUIDITY AND CAPITAL RESOURCES Our liquidity requirements arise primarily from obligations under our indebtedness, capital expenditures, acquisitions, the funding of working capital and the funding of hedging facilities to manage foreign exchange and commodity purchase price risks.
High fixed costs and the lowering of pricing to slow sales decline had a negative impact on margins. 37 LIQUIDITY AND CAPITAL RESOURCES Our liquidity requirements arise primarily from obligations under our indebtedness, capital expenditures, acquisitions, the funding of working capital and the funding of hedging facilities to manage foreign exchange and commodity purchase price risks.
This was primarily due to the combined effect on the U.K. plan of lower projected asset returns and a higher post-2030 inflation projection in the U.K., partially offset by a fall in the discount rate. 31 Provision for income taxes The 6.7 percentage point increase in the effective tax rate in 2022 from 2021 was primarily due to the impact in the prior year of the U.K. tax rate change enacted (from 19% to 25%) which increased the valuation of the U.K. related net deferred tax asset (largely related to the U.K. defined benefit pension plan).
Provision for income taxes The 51.2 percentage point increase in the effective tax rate in 2023 from 2022 was primarily due to the impact of increase tax credits in relation to U.K. incentives and the U.K. rate change from 19% to 25%, partially offset by the jurisdictional mix of income. 2022 compared with 2021 For a discussion comparing our consolidated operating results for the year ended December 31, 2022, with the year ended December 31, 2021, refer to Part II, Item 7.
Management carried out its qualitative review on the last day of the third quarter of 2022 and 2021, which showed no indicators of impairment. As a result, the Company concluded its review and was not required to perform a quantitative review. Identifiable intangible assets Our primary identifiable intangible assets include: (i) customer relationships and technology; and (ii) traded related assets.
Management carried out its qualitative review on the last day of the third quarter in 2023 and 2022. Our qualitative review showed no indicators of impairment in segments carrying goodwill.
Restructuring charges The $1.9 million restructuring charges in 2022 includes: • A further $1.7 million in relation to the closure of Luxfer Gas Cylinders France; and • $0.2 million relating to one-time employee termination benefits in the Elektron division in relation to the consolidation of production facilities in the Magnesium Powders operations.
Restructuring charges The $6.4 million restructuring charges in 2023 includes: • $3.0 million of asset impairments and $2.3 million asset relocation, restructuring and other costs in relation to the rationalization of our North American Gas Cylinders businesses to reduce our fixed cost base; • An additional $0.4 million in relation to the closure of Luxfer Gas Cylinders France; • $0.2 million of further redundancies within our Gas Cylinders division; • $0.5 million of waste clean up costs and $0.2 million of asset impairments in the Elektron division in relation to the consolidation of production facilities in the Magnesium Powders operations; and • $0.2 million credit in relation to the closure of our Elektron Division's Canadian facility. 33 Acquisition and disposals costs There were no acquisition or disposals costs in 2023.
Removed
Key trends and uncertainties regarding our existing business Update on ongoing challenging global macro environment and related impact on supply chain disruption Demand from most end-markets we serve has continued to improve following the adverse impact of COVID-19 on volumes, notably in 2020.
Added
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. Luxfer is a global industrial company innovating niche applications in materials engineering.
Removed
This sharp recovery in demand across the global macro environment has resulted in supply chain challenges characterized by significant increases in material cost inflation on key inputs (including magnesium, aluminum and carbon fiber), labor availability issues and energy and transport cost increases.
Added
Key trends and uncertainties regarding our existing business Margin pressure resulting from supply chain challenges easing We have recently experienced supply chain challenges, which resulted in higher cost of certain raw materials. In our supply chain, previously described challenges caused by the disruption in our U.S. domestic magnesium supply continued, and overall competitive cost pressures persisted.
Removed
Additionally, during 2022, we were faced with two critical suppliers of magnesium and zirconium respectively declaring force majeure, of which the former remains in place. The continuing conflict in Ukraine which has resulted in punitive sanctions against the Russian Federation has further exacerbated the availability and price of certain raw materials and energy supplies.
Added
These issues have been particularly acute in our Graphic Arts segment, where the ability to pass through higher costs to our customers has proved to be constrained. In recent months however, the purchase price of Magnesium has been falling, which will result in lower input cost in 2024.
Removed
In response to the supply chain disruption, we have been successful in securing alternative sources of supply for key material inputs affected by force majeure. Furthermore, in the majority of cases, we are able to pass through inflation to our customers.
Added
We have implemented elements of our strategic review in Graphic Arts to reduce costs, including a headcount reduction program. We are also pursuing further actions to improve margins and maintain strong cash flow across the business.
Removed
Currently, our expectation is that the impact of material availability / inflation and energy cost inflation and labor and transport constraints will continue into 2023; that we will be able to source sufficient material to meet demand and that in the majority of cases we expect to be able to pass on cost increases.
Added
In the majority of cases we are able to pass through inflationary costs to our customers, although we are still constrained by a small number of contracts, particularly in the Gas Cylinders segment, the longest running of which is not subject to renewal until mid-2024.
Removed
However the outlook remains highly uncertain with both the size and timing of future cost increases difficult to predict. Impact of conflict in Ukraine The Russian invasion of Ukraine and ongoing military conflict which commenced on February 24, 2022, has resulted in massive displacement of the Ukrainian population and huge disruption to its economy.
Added
However, our expectation is that the adverse impact of material availability / inflation, energy cost inflation and labor and transport constraints will lessen in 2024 and when costs fall we will look to share cost savings with customers through lower pricing. However the outlook remains highly uncertain with both the size and timing of future cost increases difficult to predict.
Removed
Wide ranging sanctions have been imposed on the Russian Federation by the international community, targeting individuals, banks, businesses, funds transfers and imports and exports and are expected to have a significant adverse impact on Russia's economy as well as on international businesses active in the region.
Added
While sales in our General Industrial and Transportation end markets have decreased by 23.9% and 10.2% respectively, our sales in our Defense, First Response and Healthcare end market has increased by 23.9%.
Removed
The impact on Luxfer is not expected to be significant as we have no direct operations in the region, and our sales to Russia and Ukraine combined typically represent less than one percent of total revenue by destination.
Added
Overall sales have been negatively impacted by: • Decreased demand for photo-engraving plates, particularly outside the North American market due to competitive pressure from increased raw material costs; • Lower sales of SoluMag ® in the Oil and Gas industry; • Reduction in sales of magnesium powders for commercial use; and • Lower demand for AF cylinders, coupled with industrial cylinders' sales being weaker in the year.
Removed
Furthermore, neither country is a critical supplier of our raw material needs, and while Russia is a major global exporter of magnesium, we are able to source the metal from various alternative locations, including China, Israel, Turkey and the United States.
Added
These decreases were partially offset by: • Increased sales of our SCBA and medical cylinders; • Increase in demand for zirconium products, particularly those used in pharmaceutical applications; • Significant increase in sales of chemical response kits; and • Strong demand for our new unitized ration product ("UGR-E") in quarter two.
Removed
Furthermore, there was benefit in the year from: • Increased sales of magnesium powders used in commercial and military applications; • Higher demand for composite cylinders used in aerospace and medical applications, although constrained by historical contractual prices; • Increased sales of magnesium alloys, especially those used in the aerospace market; • Higher demand for our zirconium products, particularly in industrial applications; and • An additional contribution to net sales in Luxfer Gas Cylinders of $7.1 million due to the acquisition of Structural Composites Industries LLP ("SCI") at the end of the first quarter 2021, which primarily impacted sales of cylinders used in aerospace and alternative fuels applications.
Added
These issues have been particularly acute in our Graphic Arts Division where the ability to pass through higher costs to our customers has proved to be constrained with the emergence of lower cost competition. However, cost recovery and margin has improved throughout the year in the Gas Cylinders Division as fixed-priced contracts continue to be renegotiated.
Removed
These increases were partially offset by: • Unfavorable foreign exchange variances as highlighted above; • Softening sales of flameless ration heaters ("FRH") due to lower levels of troop deployment and of Chemical detection kits due to supply chain constraints, and • Reduced sales of CNG alternative fuel cylinders.
Added
Selling, general and administrative expenses ("SG&A") SG&A costs as a percentage of sales have increased by 1.8 percentage points in 2023 from 2022, largely due to the $5.9 million of legal costs expensed in the Elektron Division. These predominantly relate to the case described in Note 19 and are not expected to recur in 2024.
Removed
The 15.2% increase in consolidated net sales across most major product groups in 2021 from 2020 was primarily due to the acquisition of SCI, as well as the recovery in volumes adversely impacted by COVID-19 in the prior year.
Added
Research and development costs Research and development costs as a percentage of sales declined marginally in 2023 when compared to 2022 although overall spend of $4.6 million continues to show our commitment to new product development.
Removed
The most significant factors were: • An additional contribution of $24.9 million due to the acquisition of SCI; • Increased sales of SCBA cylinders used by first responders and of cylinders used for gas calibration and other industrial applications; • Increased sales in Luxfer MEL Technologies of zirconium automotive catalysis products; • Increased sales of military powders used in countermeasure flares; • Increased sales of Luxfer Graphic Arts magnesium photo-engraving plates; and • Favorable foreign exchange variances of $10.3 million or 3.2%.

… 57 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

7 edited+274 added−0 removed11 unchanged
Biggest changeDecember 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 43 Commodity price risk We are exposed to commodity price risks in relation to the purchases of our raw materials.
Biggest changeDecember 31, 2023 Sales hedges U.S. dollars Euros Canadian Dollars Japanese Yen Contract totals/£m 23.5 3.4 0.3 0.2 Maturity dates 01/24 to 02/24 01/24 to 03/24 01/24 to 02/24 01/24 to 02/24 Exchange rates $1.2159 to $1.2760 €1.1432 to €1.1494 $1.6843 ¥179.3673 to ¥185.6455 Purchase hedges U.S. dollars Euros Canadian dollars Australian dollars Chinese yuan Contract totals/£m 0.4 0.8 11.0 0.9 1.4 Maturity dates 02/24 to 03/24 01/24 01/24 to 02/24 01/24 01/24 Exchange rates $1.2155 to $1.2614 €1.1577 to €1.1535 $1.7199 to $1.6840 $1.8719 ¥9.0433 to ¥9.0440 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 01/24 Exchange rates $1.1207 to $1.2083 €1.1234 to €1.1468 $1.632 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 45 Commodity price risk We are exposed to commodity price risks in relation to the purchases of our raw materials.
However, we remain exposed over time to rising prices in these markets, and therefore rely on the ability to pass on any major price increases to our customers in order to maintain our levels of profitability especially for for carbon fiber wrapped composite cylinders, zirconium, and magnesium-based products.
However, we remain exposed over time to rising prices in these markets, and therefore rely on the ability to pass on any major price increases to our customers in order to maintain our levels of profitability especially for carbon fiber wrapped composite cylinders, zirconium, and magnesium-based products.
Changes in the fair value of all derivatives are recognized immediately in income unless the derivative qualifies as a hedge of future cash flows.
Changes in the fair value of all derivatives are recognized immediately in the income statement unless the derivative qualifies as a hedge of future cash flows.
As a result of this exposure, we have in the past hedged interest payable under our floating rate indebtedness based on a combination of forward rate agreements, interest rate caps and swaps. There were no fixed or variable rate interest hedge agreements in place as of December 31, 2022, and December 31, 2021.
As a result of this exposure, we have in the past hedged interest payable under our floating rate indebtedness based on a combination of forward rate agreements, interest rate caps and swaps. There were no fixed or variable rate interest hedge agreements in place as of December 31, 2023, and December 31, 2022.
The price of high-grade aluminum, which is actively traded on the LME, has fluctuated significantly in recent years. Interest rate risk As of December 31, 2022, we had both fixed rate and variable rate debt outstanding on our consolidated balance sheet.
The price of high-grade aluminum, which is actively traded on the LME, has fluctuated significantly in recent years. Interest rate risk As of December 31, 2023, we had both fixed rate and variable rate debt outstanding on our consolidated balance sheet.
There is no financial market to hedge magnesium, zirconium raw materials or carbon fiber, and prices for these raw materials have been volatile in recent years, with substantial increases in the second half of 2021 and throughout 2022.
There is no financial market to hedge magnesium, zirconium raw materials or carbon fiber, and prices for these raw materials have been volatile in recent years, with substantial increases in the second half of 2021 and throughout 2022, with price fluctuations throughout 2023.
It has also used fixed rate debt within its financing structure to mitigate volatility in interest rate movements as disclosed in Notes 11 and 12 in the Notes to the Consolidated Financial Statements. 44
It has also used fixed rate debt within its financing structure to mitigate volatility in interest rate movements as disclosed in Notes 11 and 12 in the Notes to the Consolidated Financial Statements. 46 /Item 8.
Added
Financial Statements and Supplementary Data Luxfer Holdings PLC Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm (PCAOB ID: 876) 48 Consolidated Statements of Income 50 Consolidated Statements of Comprehensive Income 51 Consolidated Balance Sheets 52 Consolidated Statements of Cash Flows 53 Consolidated Statements of Changes in Equity 54 Notes to Consolidated Financial Statements 55 47 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of Luxfer Holdings PLC Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Luxfer Holdings PLC and its subsidiaries (the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements of income, comprehensive income, changes in equity and cash flows, for each of the three years in the period ended December 31, 2023, including the related notes (collectively referred to as the “consolidated financial statements”).
Added
We also have audited the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Added
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023 in conformity with accounting principles generally accepted in the United States of America.
Added
Also in our opinion, the Company did not maintain, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because a material weakness in internal control over financial reporting existed as of that date, as the Company’s management did not properly design or maintain effective risk assessment control activities to allow for timely reassessment of the material risks of misstatement in financial reporting due to a lack of controls related to the accounting for inventory in-transit.
Added
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
Added
The material weakness referred to above is described in Management's Annual Report on Internal Control over Financial Reporting appearing under Item 9A.
Added
We considered this material weakness in determining the nature, timing, and extent of audit tests applied in our audit of the 2023 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion on those consolidated financial statements.
Added
Basis for Opinions The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in management's report referred to above.
Added
Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits.
Added
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
Added
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Added
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.
Added
Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
Added
Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances.
Added
We believe that our audits provide a reasonable basis for our opinions. 48 Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.
Added
A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Added
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Added
Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.
Added
The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
Added
Valuation of Pension Benefit Obligations As described in Notes 1 and 14 to the consolidated financial statements, the Company had pension benefit obligations of $234.0 million as of December 31, 2023. As disclosed by management, the amounts in the consolidated financial statements related to the pension benefit obligations are determined from actuarial valuations.
Added
The valuation of the pension benefit obligations requires estimation in determining appropriate assumptions including: (i) discount rates; (ii) inflation rates; (iii) pension increases; and (iv) life expectancy. Differences in actual experience or changes in these assumptions can have a material impact on the determination of the liabilities in the Company’s pension schemes.
Added
The principal considerations for our determination that performing procedures relating to the valuation of the pension benefit obligations is a critical audit matter are (i) the significant judgment and assumptions made by management, including the use of management’s specialists, when determining the pension benefit obligations; (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management's significant assumptions related to discount rates, inflation rates, pension increases, and life expectancy; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Added
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the pension benefit obligations.
Added
These procedures also included, among others, testing the completeness, accuracy and relevance of the underlying data used in the valuation of the pension benefit obligations.
Added
Professionals with specialized skill and knowledge were used to assist in (i) testing management’s process for estimating the pension benefit obligations, (ii) evaluating the reasonableness of the assumptions used in calculating the pension benefit obligations, including the discount rates, inflation rates, pension increases, and life expectancy assumptions; and (iii) assessing the appropriateness of management’s methodology in line with the requirements of ASC 715 Compensation — Retirement Benefits. /s/ PricewaterhouseCoopers LLP Manchester, United Kingdom February 27, 2024 We have served as the Company’s auditor since 2015. 49 LUXFER HOLDINGS PLC CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, In millions, except share and per-share data 2023 2022 2021 Net sales $ 405.0 $ 423.4 $ 374.1 Cost of sales (328.4) (328.4) (278.1) Gross profit 76.6 95.0 96.0 Selling, general and administrative expenses (48.7) (43.1) (47.3) Research and development (4.6) (4.9) (3.9) Restructuring charges (6.4) (1.9) (6.2) Impairment charges (12.7) — — Acquisitions and disposals costs — (0.3) (1.5) Other income — — 0.2 Other charges — — (1.1) Operating income 4.2 44.8 36.2 Net interest expense (6.3) (3.9) (3.1) Defined benefit pension (charge) / credit (7.6) 0.1 2.3 (Loss) / income before income taxes (9.7) 41.0 35.4 Credit / (provision) for income taxes 7.1 (9.0) (5.4) Net (loss) / income from continuing operations (2.6) 32.0 30.0 Net gain on disposition of discontinued operations — — 6.6 Income / (loss) from discontinued operations, net of tax 0.7 (5.1) (6.7) Net (loss) / income $ (1.9) $ 26.9 $ 29.9 (Loss) / earnings per share (1) Basic from continuing operations (0.10) 1.17 1.08 Basic from discontinued operations 0.03 (0.19) — Basic $ (0.07) $ 0.99 $ 1.08 Diluted from continuing operations (0.10) 1.16 1.07 Diluted from discontinued operations 0.03 (0.19) — Diluted $ (0.07) $ 0.98 $ 1.07 Weighted average ordinary shares outstanding Basic 26,897,556 27,304,847 27,698,691 Diluted 27,020,959 27,541,202 28,032,506 (1) Th e calculation of earnings per share is performed separately for continuing and discontinued operations.
Added
As a result, the sum of the two in any particular year may not equal the earnings-per-share amount in total.
Added
See accompanying notes to consolidated financial statements 50 LUXFER HOLDINGS PLC CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended December 31, In millions 2023 2022 2021 Net (loss) / income $ (1.9) $ 26.9 $ 29.9 Other comprehensive income / (loss) Net change in foreign currency translation adjustment 7.3 (13.2) (0.8) Pension and post-retirement gains, net of $7.5, $3.1 and $10.6 of tax, respectively 14.2 8.8 31.6 Other comprehensive income / (loss) net of tax 21.5 (4.4) 30.8 Total comprehensive income $ 19.6 $ 22.5 $ 60.7 See accompanying notes to consolidated financial statements 51 LUXFER HOLDINGS PLC CONSOLIDATED BALANCE SHEETS December 31, In millions, except share and per-share data 2023 2022 Current assets Cash and cash equivalents $ 2.3 $ 12.6 Restricted cash 0.3 0.3 Accounts and other receivables, net of allowances of $0.7 and $0.4, respectively 59.9 67.8 Inventories 95.9 111.1 Current assets held-for-sale 8.9 9.3 Other current assets 1.5 — Total current assets 168.8 201.1 Non-current assets Property, plant and equipment, net 63.8 77.7 Right-of-use assets from operating leases 15.4 19.8 Goodwill 67.5 65.6 Intangibles, net 12.0 12.5 Deferred tax assets 3.9 3.0 Pensions and other retirement benefits 40.3 27.0 Investments and loans to joint ventures and other affiliates 0.4 0.4 Total assets $ 372.1 $ 407.1 Current liabilities Current maturities of long-term debt and short-term borrowings $ 4.6 $ 25.0 Accounts payable 26.5 37.8 Accrued liabilities 20.9 29.4 Taxes on income — 1.8 Current liabilities held-for-sale 3.9 5.0 Other current liabilities 8.9 11.2 Total current liabilities 64.8 110.2 Non-current liabilities Long-term debt 67.6 56.2 Pensions and other retirement benefits 0.1 4.5 Deferred tax liabilities 10.2 9.9 Other non-current liabilities 16.8 19.0 Total liabilities $ 159.5 $ 199.8 Commitments and contingencies (Note 19) Shareholders' equity Ordinary shares of £0.50 par value; authorized 40,000,000 shares for 2023 and 2022; issued and outstanding 28,944,000 shares for 2023 and 2022 $ 26.5 $ 26.5 Additional paid-in capital 223.5 221.4 Treasury shares (22.9) (20.4) Company shares held by ESOP (0.9) (1.0) Retained earnings 104.3 120.2 Accumulated other comprehensive loss (117.9) (139.4) Total shareholders' equity $ 212.6 $ 207.3 Total liabilities and shareholders' equity $ 372.1 $ 407.1 See accompanying notes to consolidated financial statements 52 LUXFER HOLDINGS PLC CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, In millions 2023 2022 2021 Operating activities Net (loss) / income $ (1.9) $ 26.9 $ 29.9 Net (income) / loss from discontinued operations (0.7) 5.1 0.1 Net (loss) / income from continuing operations (2.6) 32.0 30.0 Adjustments to reconcile net loss from continuing operations to net cash provided by operating activities Depreciation 11.9 12.9 14.7 Amortization of purchased intangible assets 0.8 0.7 0.9 Amortization of debt issuance costs 0.4 0.5 0.5 Share-based compensation charge 2.8 2.5 2.8 Deferred income taxes (0.6) 8.7 (1.6) Loss on disposal of business — 1.0 — Asset impairment charges and non-cash restructuring charges 15.9 — — Defined benefit pension expense / (credit) 7.9 0.1 (1.9) Defined benefit pension contributions (2.3) (0.4) (18.2) Changes in assets and liabilities, net of effects of business acquisitions Accounts and notes receivable 16.6 (27.2) (9.8) Inventories 16.6 (25.0) (15.3) Current assets held-for-sale 1.0 (3.3) (2.9) Other current assets (1.5) — 1.3 Accounts payable (19.0) 21.3 11.4 Accrued liabilities (9.2) 2.4 7.5 Current liabilities held-for-sale 0.5 0.9 (1.8) Other current liabilities (4.3) (8.8) 8.4 Other non-current assets and liabilities (8.7) (2.5) — Net cash provided by operating activities - continuing 26.2 15.8 26.0 Net cash provided by operating activities - discontinued 0.1 0.1 0.1 Net cash provided by operating activities 26.3 15.9 26.1 Investing activities Capital expenditures (9.4) (8.3) (9.1) Proceeds from sale of property, plant and equipment — 3.7 — Proceeds from sale of businesses — — 23.4 Settlements from sale of businesses — (1.0) — Acquisitions, net of cash acquired — — (19.3) Net cash used for investing activities - continuing (9.4) (5.6) (5.0) Net cash used for investing activities - discontinued (0.1) (0.1) (0.1) Net cash used for investing activities (9.5) (5.7) (5.1) Financing activities Repayment of loan notes (25.0) — — Drawdown of bank overdraft 4.6 — — Net drawdown of of long-term borrowings 10.2 24.8 6.4 Debt issuance costs (0.2) — (1.0) Dividends paid (14.0) (14.2) (13.6) Share-based compensation cash paid (0.4) (1.4) (1.5) Repurchase of deferred shares — (0.1) — Repurchase of ordinary shares (2.7) (11.1) (6.4) Net cash used for financing activities (27.5) (2.0) (16.1) Effect of exchange rate changes on cash and cash equivalents 0.4 (1.7) — Net (decrease) / increase (10.3) 6.5 4.9 Cash, cash equivalents and restricted cash; beginning of year 12.9 6.4 1.5 Cash, cash equivalents and restricted cash; end of year $ 2.6 $ 12.9 $ 6.4 Supplemental cash flow information: Interest payments $ 6.1 $ 4.0 $ 3.2 Income tax payments 3.3 0.6 5.3 See accompanying notes to consolidated financial statements 53 LUXFER HOLDINGS PLC CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY In millions, Ordinary shares Deferred shares Additional paid-in capital Treasury shares Number Treasury shares Amount Company shares held by ESOP Number Company shares held by ESOP Amount Retained earnings Accumulated other comprehensive loss Total shareholders' equity At January 1, 2021 $ 26.6 $ 149.9 $ 70.6 (0.4) $ (4.0) (1.0) $ (1.4) $ 91.2 $ (165.8) $ 167.1 Net income for the year — — — — — — — 29.9 — 29.9 Other comprehensive income, net of tax — — — — — — — — 30.8 30.8 Dividends declared and paid — — — — — — — (13.6) — (13.6) Share-based compensation — — 2.8 — — — — — — 2.8 Utilization of treasury shares to satisfy share-based compensation — — (0.1) — 0.1 — — — — Utilization of shares from ESOP to satisfy share-based compensation — — (1.8) — — 0.2 0.3 — — (1.5) Repurchase of ordinary shares — — — (0.3) (6.4) — — — — (6.4) Cancellation of ordinary shares (0.1) — (0.6) 0.1 0.7 — — — — — At December 31, 2021 $ 26.5 $ 149.9 $ 70.9 (0.6) $ (9.6) (0.8) $ (1.1) $ 107.5 $ (135.0) $ 209.1 Net income for the year — — — — — — — 26.9 — 26.9 Other comprehensive loss, net of tax — — — — — — — — (4.4) (4.4) Dividends declared and paid — — — — — — — (14.2) — (14.2) Share-based compensation — — 2.5 — — — — — — 2.5 Utilization of treasury shares to satisfy share-based compensation — — (0.7) — 0.3 — — — — (0.4) Utilization of shares from ESOP to satisfy share-based compensation — — (1.1) — — 0.1 0.1 — — (1.0) Repurchase of ordinary shares — — — (0.7) (11.1) — — — — (11.1) Cancellation of ordinary shares — (149.9) 149.8 — — — — — — (0.1) At December 31, 2022 $ 26.5 $ — $ 221.4 (1.3) $ (20.4) (0.7) $ (1.0) $ 120.2 $ (139.4) $ 207.3 Net loss for the year — — — — — — — (1.9) — (1.9) Other comprehensive income, net of tax — — — — — — — — 21.5 21.5 Dividends declared and paid — — — — — — — (14.0) — (14.0) Share-based compensation charges — — 2.8 — — — — — — 2.8 Utilization of treasury shares to satisfy share-based compensation — — (0.3) — 0.2 — — — — (0.1) Utilization of shares from ESOP to satisfy share-based compensation — — (0.4) — — 0.1 0.1 — — (0.3) Repurchase of ordinary shares — — — (0.2) (2.7) — — — — (2.7) At December 31, 2023 $ 26.5 $ — $ 223.5 (1.5) $ (22.9) (0.6) $ (0.9) $ 104.3 $ (117.9) $ 212.6 See accompanying notes to consolidated financial statements 54 LUXFER HOLDINGS PLC NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1.
Added
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.
Added
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 three reportable segments being Gas Cylinders, Elektron and Graphic Arts.
Added
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.
Added
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").
Added
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 and that of its U.K. subsidiaries is GBP, being the most appropriate currency for those particular operations.
Added
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 income / loss from discontinued operations on the consolidated statements of income. Fiscal year Our fiscal year ends on December 31.
Added
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.
Added
Significant estimates include our assessment of property, plant and equipment, right of use asset valuations and impairment, goodwill for impairment, loss contingencies, 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.
Added
Actual results could differ from our estimates. 55 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.
Added
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.
Added
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 performing a qualitative evaluation which could then lead to a quantitative assessment.
Added
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.
Added
On the last day of the third quarter in 2023, management carried out the qualitative review on all reporting units with a goodwill balance. No indicators of impairment were identified in these reporting units, therefore the Company concluded its review at this point and was not required to perform a quantitative review.
Added
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.
Added
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.
Added
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 56 1.
Added
Summary of Significant Accounting Policies (continued) 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 2023, 2022 and 2021 was $11.9 million, $12.9 million and $14.7 million, respectively.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
During the Company's recently commenced strategic review, in December 2023, the Company determined that the Graphic Arts business no longer aligns with the overall Luxfer strategy and have initiated a process to divest the Graphic Arts business in 2024.
Added
As a result of such decision and its impact on the Company's hold period, a $12.7 million impairment charge has been recognized in 2023, disclosed as impairment charges in the consolidated statement of income, relating to right of use assets,$1.6 million and property, plant and equipment, $11.1 million, in our Graphic Arts segment.
Added
There was also $3.2 million of asset impairments recognized within restructuring charges predominantly relating to rationalization of our North American Gas Cylinders businesses.
Added
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 being building leases retained on sale of Superform U.K.
Added
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. 57 1. Summary of Significant Accounting Policies (continued) Revenue recognition A performance obligation is a promise in a contract to transfer a distinct good or service to the customer.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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. 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.
Added
Restricted cash is recognized separately in the Consolidated Balance Sheets. Restricted cash balances were $0.3 million at December 31, 2023, and $0.3 million at December 31, 2022. The amounts held in escrow were held in relation to a payment received for a historic doubtful debt in our Elektron division and workers' compensation insurance.
Added
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.
Added
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.
Added
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.
Added
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. 58 1.
Added
Summary of Significant Accounting Policies (continued) 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.
Added
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.
Added
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.
Added
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.
Added
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.

… 201 more changes not shown on this page.

Other LXFR 10-K year-over-year comparisons